China is responding to Washington’s tax overhaul by offering foreign companies a break on Chinese taxes in a bid to retain investment.The measure announced late Thursday is Beijing’s first major reaction to the U.S. decision to cut corporate tax rates. It follows a flurry of promises by communist leaders to spur growth in the slowing, state-dominated economy by opening more industries wider to foreign companies.
Foreign companies will be exempt from withholding taxes on profits they re-invest in industries specified by Beijing, the Finance Ministry and tax agency announced. It is retroactive to Jan. 1, 2017, meaning companies would receive a refund on taxes paid this year. Beijing wants to “attract foreign investors after a host of countries unveiled similar measures to lure foreign and domestic investment,” the officials said.
The exemption will apply to companies that re-invest profits in industries cited in government investment catalogues, the announcement said. Those include solar and wind power, “green farming” and other fledgling fields in which Beijing is trying to develop technology. Supporters of the U.S. changes enacted this month say it will encourage investment in the United States. Governments including Canada and private sector analysts have warned that could draw money away from their economies.