Foreign Investors Paid $11.25Bn In Tax To China Last Year

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

05 September 2006

Foreign investors paid US$11.25 billion in taxes to the Chinese government last year as revenues and profits made by foreign companies operating in the country soared, new figures have revealed.

According to a report by the China News Service, tax revenues from foreign investors grew 30% last year, contrasting sharply with the previous year when no growth in tax revenues was reported.

Joint ventures between foreign and Chinese businesses in the automotive industry feature prominently in the list of top taxpayers, with Faw-VW Automobile Co, a partnership between China's First Automotive Works and Germany's Volkswagen at the top of the list. The Guangzhou Honda Automobile was second on the list.

57 foreign-invested manufacturing enterprises are listed among the top 100 taxpayers, contributing a total of US$6.25 billion to the Chinese state last year.

Meanwhile, research by the Chinese Enterprise Confederation (CEC) has shown that profits earned by China's top 500 companies (349 of which are state-owned) soared by 23% in 2005 to $80.4 billion on combined sales of $1.8 trillion.

Sinopec, the oil firm, was the most profitable, with profits of US$2.8 billion last year, followed by State Power Grid, China National Petroleum, Industrial and Commercial Bank of China and China Mobile.

However, despite the phenomenal growth of the Chinese economy, Feng Bing, CEC's executive vice-chairman, said that only 23 of China's top 500 companies would qualify for the Fortune Global 500 in terms of revenue.

China also continues to lag behind in terms of Research & Development investment which accounted for just 1.45% of gross sales revenues at 411 of the 500 firms, compared to the 5% international standard.

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