On December 28, 2020, China’s National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) issued the 2020 edition of the Catalogue of Encouraged Industries for Foreign Investment (the Catalogue), it will be effective on January 27, 2021.
The Catalogue is a part of the attractive policies to foreign direct investment (FDI). It has increased the items of encouraged industries and expanded the scope of encouragement, which enjoy preferential policies on FDI, along with the 2020 negative list, which shortened the restrictions or prohibitions on FDI.
The Catalogue includes two lists. One for all over the nation and the other one for the central, western, and northeastern regions in the nation. It identifies industries where FDI is welcome and treated with favorable policies.
What are the Favorable Treatments?
The following treatments are in place for foreign invested enterprises (FIE) engaging in the listed industries in the Catalogue:
1.Lowered Corporate Income Tax (CIT)
For FIEs that engages the encouraged industries in the central, western, and northeastern regions that meet the requirements, the CIT rate can be reduced from normally 25% to 15%.
2.Tariff Exemptions on Imported Self-use Equipment
For encouraged foreign-invested projects, the import of self-use equipment within the total investment can be exempted from customs duties.
3.Discounted Land Prices and Preferential Land Supplies
The land-use fee can be determined no less than 70% of the national lowest price for the industrial land corresponding to the same class of the local land;
land can be preferentially supplied for encouraged foreign-funded projects with intensive land use.
What are the Changes in the Catalogue?
The Catalogue calls for more FDI in three main areas in China, high-end manufacturing, modern service industries and China’s central, western, and northeastern provinces.
1.High-end Manufacturing
The Catalogue encourages foreign investment in high-end manufacturing to enhance the resilience of important industrial chains and supply chains.
In fields of tech manufacturing, it added and modified the list in AI, integrated circuits, items such as integrated circuit packaging and testing equipment manufacturing, laser projection equipment, ultra-high-definition televisions, ventilators, ECMO, AI auxiliary medical equipment, etc.
In the field of new materials, it added and modified items such as high-purity electronic grade hydrofluoric acid, etc.
It calls for foreign investment in the field of green environmental protection, new items have been added for the construction of port reception and disposal facilities and equipment manufacturing for ship pollutants, the construction of emergency facilities for port hazardous chemicals and oil products, and equipment manufacturing, etc.
2.Modern Service Industries
The Catalogue further encourages foreign investment in modern service industries to improve the development quality of service industry.
In the field of R&D and design, it added or modified items such as 5G mobile communication technology R&D, blockchain technology development, and sewage treatment facility design.
In the field of business services, new items has been added for high-end equipment maintenance, digital production line transformation and integration, and industrial service network platforms.
In the field of modern logistics, items such as bulk commodity import and export distribution centers and community chain distribution have been added or modified.
In the field of information services, new items such as online education, online medical care, and online office have been added.
3.China’s Central, Western, and Northeastern Provinces.
The Catalogue encourages foreign investment in advantageous industries in the central and western regions to promote coordinated regional development.
In provinces of Heilongjiang and Yunnan, new items such as agricultural product processing and tourism development have been added.
In Henan, Shaanxi, Guangxi and other provinces, new items such as medical equipment, epidemic prevention and protection products, and raw material medicine production have been added.
In Hubei, Sichuan, Chongqing and other provinces, new items such as semiconductor materials and industrial ceramics have been added.
In Anhui and Shanxi, vocational college entries have been added.
In Hainan, commerce, shipping, finance, tourism and other related items to support the construction of Hainan Free Trade Port have been added.
文/刘奕杉律师
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