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China State Council issues guidelines in bid to increase foreign investment

Hazy day in Beijing

People look at the skyline of the central business district (CBD), on the day of the opening session of the National People’s Congress (NPC), during a hazy day in Beijing, China, March 5, 2021. REUTERS/Thomas Peter/File photo

BEIJING, Aug 13 (Reuters) – China’s State Council issued guidelines on Sunday that it said would further optimize the country’s foreign investment environment and attract more foreign investment.

The State Council said in a document containing 24 guidelines that authorities should increase protection of the rights and interests of foreign investors, including strengthening enforcement of intellectual property rights.

The document also announced guidelines to increase fiscal support and tax incentives for foreign-invested enterprises, such as temporarily exempting withholding income tax for foreign investors’ reinvestment of their profits into China.

The State Council said it would explore a “convenient and secure management mechanism” for cross-border data flows. The proposal comes amid tensions between authorities and international enterprises, including global accounting firms, over data security.

China has sought to court foreign capital as its economic recovery from the COVID pandemic slows in the face of weak export demand from key trade partners and ongoing tumult in the country’s property market.

However, Beijing has so far struggled to attract foreign enterprises and investors, which are wary of political risk in an environment that increasingly prioritises national security measures, and concerned about the impact of deteriorating relations between China and many Western countries on their operations.

Reporting by Andrew Hayley and Ethan Wang; Editing by Andrew Heavens and Bernadette Baum

Our Standards: The Thomson Reuters Trust Principles.

Andrew reports on energy and energy policy in China. He previously worked in investment banking in London, covering European high-yield debt transactions. Andrew speaks Mandarin and is learning Russian.

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