With transformation that began in the 1970s, China is today the world's largest manufacturing economy and exporter of goods and is also on track in becoming the world’s largest economy. With a population of about 1.4 billion, China is known for its large labour force and fast growing consumer market making it the second-largest importer of goods in the world. China is playing a prominent role in international trade, having recently engaged in trade organisations and treaties.
The agriculture, services, and manufacturing sectors are the largest in the Chinese economy, employing most of its labour force and making the largest contribution to GDP.
Foreign Direct Investment remains a strong element in China’s rapid expansion in world trade. The increase in consumption spending represents a major opportunity for foreign businesses that are capable to target their services and products to the Chinese consumers. Foreign businesses are encouraged to invest in key areas such as advanced manufacturing, sustainable energy, environmental protection, and advanced technologies.
What are the key countries responsible for FDI business in China?
The top three countries responsible for FDI investment into China are Hong Kong (SAR, China), Singapore and South Korea in 2019.
Hong Kong has invested around US$ 963 Million which takes up 68.2% of the total foreign investment in China. Singapore has contributed US$ 75.9 Million and the Republic of Korea has invested US$ 55.4 Million, which respectively represent 5.4% and 3.9% of the total foreign investment in China.
Are there publicly funded incentives available for FDI businesses in China?
Before China adopted the open-door policy for foreign investors, the tax laws were primarily designed for local enterprises. After opening-up the Chinese economy, the government introduced specific income tax regulations for foreign enterprises in the 1980s, which included an array of tax incentives to encourage foreign investment. It has, however, been widely expected that the tax systems for domestic and foreign invested enterprises would be harmonised. In March 2007 the National People’s Congress passed the new Corporate Income Tax (CIT) Law, under which the standard rate of CIT for both domestic and foreign enterprises was revised to 25% with effect from 1 January 2008.
There is a wide range of incentives for foreign investors depending on the industry type and location, which are usually granted on a case-by-case basis.