Investment & Developmen

Chinese (GB) Chinese (Big 5)

	Introduction Preferential Policy Projects for Foreign Investment

Jiading District, located in the northwest suburb of Shanghai proper, sits at the intersection of China's golden coastal line and golden waterway. It faces the Pacific Ocean and behind it lies the economic region of the Yangtse Delta with its huge potential for development. It covers a total area of 450 square kilometers, and now has jurisdiction over 18 towns with a total population of 480,000. With a smooth terrain and a mild climate, the area sees a frost-free period of at least 222 days and a total precipitation of 1,073 mm each year, which belongs to the typical subtropical climate.

Well-known for its rich scientific and technological resources, Jiading was declared a scientific satellite town by Shanghai Municipal People's Government in 1958. The city has so far housed a large number of scientific and technological units including Shanghai University of Science and Technology, Shanghai Administration Cadres, Institute of Science and Technology. State-level research institutes and factories of atomic-nucleus, computer, space technology and silicate, which gather personnel of over 4,000.

Jiading is also noted fot its auto industry, which witnessed the mainland China's first localized automobile being manufactured in the district's Anting Town, the location of Shanghai Volkswagen, one of China's leading auto providers. In this area, a group of auto industrial enterprises with large production capacity has become the mainstay of Jiading's economy.

When improving its industrial distribution, the district has so far formed its six pillar industries of auto manufacturing, electric lighting source, packaging, communication cable, refined chemicals and new materials.

Aged-long culture is another thing that has enhanced Jiading's fame. Since it was officially declared as a county in 1217(during the South Song Dynasty), Jiading has cultivated a large number of diplomats, literary masters and industrialists. Many well-preserved relics such as the Confucian Temple, Autumn Glow Garden and Guyi Garden have made the district more attractive.

Communication lines both on land and on water are well-developed in Jiading. Hujia Expressway runs 30 kilometers from the downtown Shanghai to Jiading, which is 25 kilometers away from Hongqiao International Airport, Shanghai Railway Station and Wusong Habour. Highway No.204 and NO.312, Huning Expressway and Railway, and outer-ring of Huhang Railway all go through the district. A crisscross network of rivers is passable for 100-ton ships.

The district also has rish energy resources and strong communications. Shidongkou Power Plant and East China Electric Network both guarantee the consumption of manufacturing and living in the district. Foreign economy and trade organs in the district provide satisfactory and timely services of customs, commodity inspection, finance, consultation and transportation. The district government is authorised to approve the establishment of overseas-funded enterprises with an investment of below US$10 million.

Warm greetings from the people in Jiading await all visitors from home and abroad. You are welcome to cooperate with us in all fields.

In order to make better absorption and use of foreign investment, to speed up the step of opening to the outside world, in accordance with the State's industrial policy and the overall plan on the development of Shanghai's economy and society, referred to the list of business sectors and projects for foeign invetsment in Shanghai as guided by Shanghai Municipality, we publish the relevant principles for guiding foreign investment in Jiading District to facilitate investors to make right choice or intent to invest.

I.Principles on encouraging foreign investment:

1.Industrial construction projects urgently needed by the State for transportation, supply of energy resources and important raw materials; projects for the construction of municipal infrastructure and those engaged in the development of agricultural technology.

2.Hi-tech sectors and projects that meet the needs of domestic and international markets.

3.Projects that can renovate existing enterprises through introducing advanced technology, improving product performance, saving energy and raw materials, and increasing profits for the enterprises, projects that produce new machinery or materials which can fill the gaps in the domestic market.

4.Projects that can upgrade products to meet the needs of international market and increase foreign exchanges earning through increased export.

Projects in manufacturing sectors that can make appropriate and comprehensive use of natural and recycled resources by means of new technology or equipment.

II.Principles on Restricting Foreign Investment:

1.Projects which have been already developed and put into production in China, or have introduced advanced technology; but the projects will be permitted for foreign investment if they utilize the existing enterprises or rely on existing production conditions for technical renovation, they can increase export and will not pose contradictions to original exports, and can meet the export requirement of over 70% of the products.

2.Projects that can not introduce adavnced technology, that are of high energy consumption, that are lacking competitiveness, that are unable to balance foreign exchange ot that only run simple assembly, and most of their products are mainly for domestic market.

3.Projects engaged in finance, insurance, commercial retail and wholesales, or foreign trade business and entertainment facilities in the areas other than specifed by the State.

4.Projects that are restricted by the State.

III.Principles on Forbidding Foreign Investment :

1.Projects that cause pollution on natural environment, damage natural resources, impair public health or produce effluents that fail to meet the standards for environment protection.

2.Projects that involve broadcast station, television station, publishing house, news agency, post and telecommunications, or affect national safety or are detrimental to the economic and social development of our country.

3.Projects that involves gambling and sexual activities.

4.Projects that are forbidden by the State.

IV.Projects whose products are subject to export quotas or export licences imposed by the State must secure approval from relevant administrative departments before setting up.

I.In Taxation

1.Enterprise Income Tax

The income tax on the manufacturing enterprise with foreign investment establishing in Jiading District shall be levied at the reduced rate of 24%.

Any enterprise with foreign investment of a production nature, with its operation period of more than 10 years, shall, from the year beginning to make profit, be exempt from income tax in the first and second years and allowed a fifty per cent reduction(12%) from the third to the fifth year.

The income tax on the foreign-invested production enterprises engaged in the following projects shall be levied at the reduced rate of 15%:

a.A technology-intensive and/or knowledge intensive projects;

b.A project with a foreign investment of USD 30 million or more and with a long period of investment return;

c.Project in energy, communication and harbour construction.

With export enterprise invested and set up by foreign investor, after the expiration of the period for the reduction of exemption of enterprise income tax in accordance with the provision of Tax Law, if their value of export products in the year amounts to 70 per cent or more of the value of their products for that year, may pay their enterprise stax at one half the rate stipulated in the Tax Law; but the export enterprises that have already paid their enterprise income tax at a rate of 15% and which comply with the foregoing conditions, shall pay enterprises income tax at a rate of 10%.

With technological advanced enterprises invested and set up by foreign investor, if they are still technologically advanced after the expiration of the period for reduction or exemption of enterprise income tax in accordance with the provisions of the Tax Law, technologically advanced enterprises made by foreign investment, may extend three year the preferential treatment of enterprise income tax at a rate reduced by one half in accordance with the tax rate stipulated in the Tax Law.

Any foreign invetsors of an enterprise with foreign investment which reinvest its share of profits obtained from the enterprise directly in that enterprise by increasing its registered capital to establish other foreign invested enterprises to operate for a period not less than five years, upon approval by the tax authorities of an application filled by the invetsor, shall be refunded 40% percent of the total amount of enterprise income tax already paid on the reinvested amount. If foreign investors who reinvest the profits distributed to them by their enterprises in order to establish or expand export enterprises of technologically advanced enterprises for a period of operation of not less than 5 years, after application to and approval by the tax authorities, shall be refunded the total amount of enterprise income tax already paid on the invested portion.

The profit derived by foreign investor from an enterprise with foreign investment shall be exempt from income tax.

Losses incurred in a tax year by any enterprise with foreign investment and by an establishment or a place set up in China by a foreign enterprise to engage in production or business operations may be made up by the income of the following tax year. Should the income of the following tax year be insufficient to make up for the said losses, the balance may be made up by its income of the further subsequent year and so on, over a period not exceeding five years.

If an enterprise with foreign investment goes into operation in the middle of a year and makes profit in that year, and if the actual period of production or business operation is less than 6 months, it can choose the following year to start to calculate the period for reduction or exemption of enterprise income tax, but it shall pay income tax for the profit obtained in that year in accordance with tthe provisions of the Tax Law.

II. Local Income Tax

Any enterprise shall be exempt from the local income tax during the period of the exemption from enterprise income tax in accordance with the provisions of the State.

An export enterprise may be exempt from local income tax while being exempt from income tax. After the expiration of exemption period, the enterprises may be exempt from local income tax for another three years and pay local income tax at a rate reduced by one half in the following three years.

After the expiration of exemption period for local income tax in accordance with the rules, export enterprises whose value of export products in that year amounts to 70% or more of the value of their products for that year, may still be exempt from local income tax.

Value-added Tax

If an enterprise with foreign investment goes into the following business in China: to sell or supply processing repair and assembly, labor services and to import products, should pay the value-added tax in accordance with the provisions.

If the enterprise with foreign investment sells or imports the following products shall pay tax at a rate of 13%.
a.grain, edible vegetable oil;
b.running water, central heating, air-cooling system, hot water, gas, liquid petroleum gas, natural gas, biogas, coal products for the residents;
c.books and pictures, newspaper, magazines;
d.fodder, chemical fertilizer, pesticide, agricultural machinery, agricultural film.

The products exported by the enterprise with foreign investment , need not pay the tax.

Except the above stipulations, the products sold or imported by the enterprise should pay the tax at the rate of 17%.

If an enterprise with foreign investment sells products and supplies labor services that would pay the tax, should pay the value-added tax that is the remaining sum of that the income item amount of tax to be paid offsets of deducts from the sales and the labor services supplied with.

The income item of tax to be paid points to the amount of value-added tax of paying or bearing from buying in the products or receiving the labour services paid tax.

After going through the formalities for export at the customs, an enterprise with foreign investment whose export products applies to the tax at a rate of zero, can declare the drawback to the tax authority for this export products on monthly relying on the customs form or the other vouchers concerned.

Consumer Tax

The following 11 kinds of products should pay the consumer tax:tobacco, wine and alcohol, cosmetics, skin-care products and hair moisturizers, precious jewelry and jade, firecrackers and fireworks, gasoline, diesel oil, tyres for automobile, motorcycles and cars.

The above said consumer goods to be directly exported which should pay the tax could be exempt from consumer tax(besides that of being provided for by the Sate Council).

Transaction Tax

Those who are engaged in the following business: the communication and transportation; building, finance and insurance; postal and telecommunications service; cultural establishments and physical training; entertainment; services and that of transfering the possessions of the incorporeal property or selling the immovable property, should pay the transaction tax according to the Tax Law.

II:In Land Use

Export enterprises and technologically advanced enterprises shall be exempt from land use fees for three years after their establishment, and beginning from the fourth year, the fees shall be paid at a 5% rate; the land use fees of encouraged foreign invested project may be reduced subject to the approval of application for that, depending upon the circumstances.

III.In Balance of Foreign Exchange

For the purpose of facilitating enterprises with foreign investment to balance their foreign exchange accounts, subject to approval of their appliction, those production enterprises that have run into temporary difficulties may apply, within a certain period of time, for the purchase and export of domestic products(except those subject to unified state control).

Foreign invested enterprises are allowed to sell their products to the special economic zone, the economic and technologically development zone and the other enterprises with foreign investment and to settle their accounts in foreign currency. The products that can serve as import substitutes are also allowed to settle the account in foreign exchanges for part or whole of the products with approval of foreign exchange administration authorities.

Others

Export enterprises and technologically advanced enterprises shall be exempt from payment to the State of all subsidies to staff and workers, except for the payment of or allocation of funds for labor insurance, welfare costs and housing subsidies for Chinese staff and workers in accordance with the provisions of the state; projects that are of encouraged foreign invested project, may also be reduced or exempt from taxation accordingly.

Water, electricity and gas needed by foreign invested enterprises for their production are placed on the plan of Jiading District and supplied preferentially.

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