| ’s national government offers a tempting | | | | administration will provide one-to-one matching |
| variety of financial incentives designed to lure | | | | funds for the international market development |
| inbound foreign investment, some of which were | | | | funds of small and medium-sized export |
| introduced by this author in the article | | | | enterprises that are supervised at the provincial |
| “Investing in China: Tax | | | | level (whether an enterprise is supervised at the |
| Incentives”. However, additional incentives | | | | provincial level or the national level depends on |
| offered by provincial and local governments | | | | how much money has been invested in the |
| significantly sweeten the investor’s overall | | | | enterprise, i.e., its “Registered |
| incentive package. These incentives tend to | | | | Capital”). |
| become more generous as one moves westward | | | | Anti-Dumping Insurance Zhengzhou will assist FIEs |
| from the investment-saturated coastal provinces | | | | in responding to anti-dumping initiatives, and will |
| to China’s heavily populated interior, | | | | also subsidize expenses arising from participation |
| allowing the investor to cash in on China’s | | | | by exporting enterprises in anti-dumping |
| fierce domestic competition. | | | | responses, as long as these initiatives are not |
| Central China’s Henan province, for | | | | otherwise subsidized by national and provincial |
| example, offers manufacturing-oriented Foreign | | | | authorities (which they often are). It may seem |
| Invested Enterprises (FIEs) 100% waivers of | | | | strange for an American company to establish a |
| business tax and a variety of local administrative | | | | subsidiary in China, be sued for dumping by the |
| fees. Furthermore, FIEs engaged in technology | | | | United States, and then receive subsidies from |
| transfer, development work, and related | | | | the Chinese government for the expenses |
| consulting may apply for a full refund of business | | | | necessary to defend against the suit, but |
| tax already paid. | | | | it’s possible. |
| Municipal governments, however, are often even | | | | Interest Subsidies for Loans Secured by Tax |
| more generous than provincial governments. | | | | Refund Accounts. Zhengzhou will subsidize an |
| Although various incentives are offered by | | | | amount equal to 70% of the interest due on |
| Chinese municipal governments, the city of | | | | loans secured by a tax refund account. If the FIE |
| Zhengzhou (a metropolis of about 4.4 million | | | | has no such loans, Zhengzhou will grant a subsidy |
| people in central China) makes a good case study, | | | | equal to 50% of the interest that would have |
| if for no reason other than that the author is | | | | been paid on such a loan had it been taken out |
| more familiar with its policies. | | | | – the Zhengzhou municipal government will |
| Zhengzhou rewards local FIEs in various ways: | | | | even provide the fund from which the interest is |
| Tax Breaks for Local Reinvestment of Profits | | | | subsidized. Enterprises with an export volume of |
| Local FIEs that reinvest their profits within | | | | five million US dollars or more in the previous year |
| Zhengzhou will receive a 30% refund of the locally | | | | that are verified by the National Tax Bureau to |
| retained portion of corporate income tax actually | | | | have increased tax refunds due for the current |
| paid on these reinvested profits (the national | | | | year will enjoy a 100% interest subsidy. |
| government offers an even bigger tax refund | | | | Export Incentives An export enterprise with |
| applicable to the nationally retained portion). | | | | either (i) a yearly export volume of at least ten |
| Investment in “Pillar” Industries and | | | | million US dollars or more and actual export |
| State-owned Enterprises Zhengzhou offers a | | | | growth of more than 25% over the previous |
| three-year, 50% refund of the locally retained | | | | year, or (ii) a yearly export volume of at least |
| portion of corporate income tax paid on FIE funds | | | | five million US dollars, actual export growth of |
| invested in certain designated “pillar | | | | more than 40% over the previous year, and |
| industries”. It also offers a financial | | | | inward remittances from exports of at least |
| incentive for investing in and reorganizing | | | | 80%, will be designated a “Zhengzhou City |
| provincially administrated state-owned enterprises, | | | | Advanced Foreign Exchange Generating Export |
| and this incentive is magnified if the FIE retains a | | | | Enterprise” and awarded 30,000 RMB |
| certain percentage of the enterprise’s | | | | (roughly $3,500 US dollars) as long as it has not |
| original employees after reorganization. | | | | committed any serious regulatory violations during |
| Inward Remittance of Export Earnings Zhengzhou | | | | the same year. |
| offers export incentives in the form of cash | | | | Although a few of the foregoing incentives |
| payouts of approximately 0.2% to 0.5% of every | | | | represent relatively small payouts, they are |
| dollar of hard currency export earnings remitted | | | | numerous and can make a significant difference |
| inward (the highest payouts are reserved for the | | | | when combined with the broad range of |
| export of technologically advanced products). | | | | incentives offered by the national government. |
| Matching Funds The Zhengzhou municipal finance | | | | |