Tuesday, March 21, 2006

FDI - it's time to remain or time to decline?

The Chinese Ministry of Commerce expects Foreign Direct Investments (FDI) into China to remain at the last year level. However, some experts suppose that in the country's 11th Five-Year Plan (2006-2010) total foreign investment into China could decline. It could affect the level of FDI generated by the British Virgin Islands companies, however such decline should not differ from decline of any other foreign investor country. There are no serious legislative or economical changes that should make an impact on FDI from offshore tax havens.

It is expected that China's legislature - the National People's Congress - will discuss a revision of the tax law. A unified business tax rate will be introduced in the tax law this year. Until that foreign companies in China will continue enjoying an income tax rate of 15%, while domestic companies are taxed at 33%.

A vice-director in the research office of the State Council Jiang Xiaojuan suggested that in the coming years China might experience a decline in FDI, but the country would become a more important overseas investor.

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