China Offers Tax Incentives to Persuade U.S. Companies to Stay
BEIJING — China said on Thursday that it would temporarily exempt foreign companies from paying tax on their earnings, a bid to
keep American businesses from taking their profits out of China following Washington’s overhaul of the United States tax code.
The move would “promote the growth of foreign investment, improve the quality of foreign investment
and encourage overseas investors to continuously expand their investment in China,” the ministry said.
The newly approved tax incentives in the United States could appeal to companies
that are frustrated by China’s rising labor costs, ambitious local competitors and tangled legal systems, or those that would rather spend their money at home or elsewhere.
Because the United States already offers a large and wealthy domestic market, relatively light workplace regulation and large amounts of venture capital, lower tax rates had been one lever
that other countries had used in an effort to lure companies.
Asian and European officials have speculated that some of the measures in the revamped tax code
could help encourage United States companies produce goods domestically for exporting.
But ministers, officials and analysts in much of the rest of the world have said it could create an uneven playing field
and set off a race among countries to cut corporate taxes.
There is, however, a catch: To be eligible, foreign companies must invest those earnings in sectors encouraged by China’s government — including railways, mining, technology
and agriculture — according to a statement from the Finance Ministry.