In order to coordinate economic development in different areas, the Chinese government is encouraging foreign investment in central and western China. Key measures being taken are as follows.
1). The state has approved and issued the Catalogue of Advantageous Sectors for Foreign investment in Central and Western Regions. Projects included in this catalogue enjoy the same policy as offered to projects of encouraged category in the Industrial Catalogue for Foreign Investment, and favorable tax policy applies to the import of necessary equipment, parts, spares and technology used in such projects.
2). There will be fewer restrictions in investment fields, and on the conditions for establishment of foreign-invested enterprises in central and western China, as well as on the proportion of shares owned by the foreign contingent of the foreign-invested enterprises in these areas.
3). Encouraged Projects in central and western China shall pay income tax at the reduced rate of 15 percent for three years on expiry of the current favorable tax period.
4). If foreign-invested enterprises reinvest in central and western China with foreign capital accounting for 25 percent or more of the project, the new project will enjoy policies offered to enterprises with foreign investment.
5). Trial projects approved by the central government should, in principle, be carried out simultaneously in eastern, central and western China. On approval from the state government, provincial and autonomous regional capitals and municipalities may open the fields of commerce, foreign trade and banking to foreign investment on a trial basis. Foreign-funded banks in western China may embark on RMB business gradually. Foreign investors may invest in telecommunications and tourism insurance in accordance with relevant regulations, and set up Sino-foreign joint venture accounting firms, engineering design companies, railway and highway freight transport and public utility companies, and other fields open to foreign investment.
6). Provinces, municipalities and autonomous regions in central and western China may select a built-up development area in the provincial or regional capital and apply for the status of a national economic and technological development zone.
7). Enterprises with foreign investment engaged in energy and transportation infrastructure will pay income tax at the reduced rate of 15 percent with approval from the State Bureau of Taxation.
8). In the interests of protecting the ecological environment, income from special products reverting cultivated land to forestry and grassland is exempt from special agricultural product tax for a period of ten years.
9). There are also preferential policies for land use and mineral resource exploration, promoting forest farming and grass planting on barren mountain slopes and fields, and the reverting of cultivated land to forest and grassland. Those who revert cultivated land to forest and grassland enjoy land use rights, as well as rights of ownership of forest or grassland. Economic entities and individuals may apply to utilize barren mountain slopes and fields according to legal procedures, plant trees and grass, and practice ecological environmental protection. Alternatively, they can be granted the land use rights directly from the state, in which case the land utilization fee will be either exempted or reduced. Land use rights will remain unchanged for a period of 50 years. On expiration of this period, application may be made for renewal of these rights. The granted rights of land use may be inherited, or transferred on payment of a transfer fee. The government supports activities involving mineral resource exploration, evaluation, rational utilization and protection.
10). Foreign investment is encouraged in agriculture, water conservancy, transportation, energy, ecological and environmental protection, tourism, mining, municipal engineering and other infrastructure projects in western China. The establishment of foreign-invested research and development centers are also encouraged, and will be given support in terms of funding for accessory projects and pertinent policies.
11). Trials in western China to utilize foreign capital through BOT and TOT methods are encouraged. The state supports enterprises in the encouraged and permitted categories in the west to attract foreign investment through assignment of operation right, offering equity interests and enterprise merger and reorganization.
