2021 started with some good news for China’s international business community, as the country has opened a host of industries to foreign investments. Practically speaking, it will enable foreign-owned companies to enjoy a more widespread access to more sectors in China. And if your business qualifies to be included in the “Catalogue of Industries for Encouraging Foreign Investment”, you might be able to derive benefit from financial incentives.
Foreign investments in China
For four decades China has had measures in place to interest and incentivize international companies investing in China’s economy, especially if such investments contribute to China’s tech sector’s growth. This expansion of the Foreign Investments Encouraged Catalogue, amongst other things, has further creaked the door open to foreign investment by creating a preferential path for various international businesses to enter the Chinese market. And with 2020 behind us, we can see definitively that China was the largest recipient of foreign direct investment in 2020, as shown in the chart below.
Read more about starting a business in China
The Foreign Investments Encouraged Catalogue
The “Catalogue” details the industries and sectors that will enjoy preferential policy treatment by the Chinese government. It is comprised of the National Catalogue and the Regional Catalogue (that covers China’s central, western and northeastern regions).
Every year the Chinese authorities review and revise the previous year’s catalogue. The new catalogue that came into effect in January 2021 presents an increase in the items listed, thus continuing a consistent trend of expanding China’s “open door” policy, as can be seen in the following chart:
The catalogue’s most up-to-date version reflects China’s current agenda, as published in its new 5-year-plan. In other words, the additional industries that have been opened up to foreign investors are part of China’s innovation-driven strategy and include the likes of:
- High-end manufacturing
- Automation services
- Artificial intelligence
- 5G technologies
- Environmental protection
- Blockchain technology
- Advanced services in China’s central, western and northeastern regions
Here is an overview of the special policies companies listed in the new catalogue will be able to enjoy:
- Tariff & other tax exemptions on imported equipment for self-use
- Reduced CIT rate – from 25% to 15%
- Discounted prices for land use (which might serve as a great incentive for those setting up manufacturing in China).
Whether or not your business is engaged in one of the listed industries, we would be glad to help you prepare for your China market entry, and to maximize your efficiency and growth potential.
Good luck, PTL Group’s team