Chinese Regions Still Offering Investment Incentives

by Mary Swire, Tax-News.com, Hong Kong

02 January 2003

Although the Chinese government has been making noises about reducing the incentives offered to foreign investors, regional development zones are continuing to push their offerings with enthusiasm, and the Shaoxing Paojiang Industrial Zone (SPIZ), which is one of the largest development zones in China, is one of them.

Shaoxing, located in the Changjiang Yangtze River Delta, is one of the top 30 cities in China for foreign investment. It is close to Shanghai, and just 20 kms away from Xiao Shan International Airport. The development zone was set up in 2000.

Shaoxing covers an area of 8,256 square kilometers with a population of 4.32 million people. Infrastructure facilities such as roads, power, telecommunications, cable TV, water supply, and sewage are available in the development zone.

Foreign-funded enterprises in SPIZ pay corporation tax of 26.4%, against a national rate of 33%. Foreign-funded enterprises in SPIZ are totally exempt from income tax for two years when profits begin to be earned, and pay 50% of the nominal rate (13.2%) in the following 3 years. The municipal proportion of income tax and VAT is 100% refunded to enterprises in the zone for the first two years, and 50% refunded for the next three years.

The SPIZ Administrative Committee offers a capital bounty of 0.5% of capital invested for foreign-funded enterprises. Exports, and imported equipment used to produce them, are largely tax- and tariff-free.

Shaoxing says it is rich in labor resources and it is easy to recruit people. The salary for laborers is low: 600-800 Yuan/ month(US$72.3-96.4 per month) for skilled workers and 800-1500 Yuan/ month(US$96.4-180.1 per month) for management staff.

Shaoxing itself is a state-approved 'Excellent Tourism' and 'Environmental Protection' City. Top-quality apartments cost about 3000-6000 Yuan per sq m (US$361.4-722.9 per sq m ).

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