VI. Projects wanting foreign investment

Infrastructure, chemicals, pharmaceutical industry, metallurgy, machinery, electronics, light industry, foodstuff, and building materials.

VII. Favorable policies for foreign investment

Regulations on encouraging foreign investment promulgated by the People’s Government of Shaanxi Province

Article 1 The provisions are formulated according to the relevant stipulations on foreign investment of the state and the situations of Shaanxi.

Article 2 The provisions shall apply to the projects of Sino-foreign joint ventures, Sino-foreign cooperative enterprises, and foreign-owned enterprises within Shaanxi.

Article 3 Foreign investors are preferentially treated when collected land-use fee according to the following:

(1) Foreign invested enterprises (FIEs) engaged in export, hi-tech industry, agricultural development, energy, transportation, and social welfare enjoy exemption of land-use fee.

(2) FIEs of production nature are exempt from land-use fee within half of their contracted period, after which, they are levied according to the defined in the contracts.

(3) FIEs contracted before the provisions are issued are taxed according to their contracts.

Article 4 FIEs are favored to the rights of land use, development, utilization and management with the longest period of 70 years. The right of land use can be legally transferred, released, mortgaged, and handed over. The procedures must go through with the land management departments and procedure fees are discounted.

Article 5 Foreign investors can choose the following forms of investment:

(1) Sino-foreign joint ventures, Sino-foreign cooperative enterprises, and wholly foreign-owned enterprises.

(2) Compensation trade, material processing, processing with supplied samples, assembling with supplied parts, and cooperative production.

(3) Contracting and leasing state-owned and collective industrial and commercial enterprises.

(4) Purchasing small state-owned, collective, and private-owned enterprises.

(5) Other cooperative forms allowed by laws and regulation.

Article 6 FIEs in the fields of export, advanced technology, agriculture, forestry, animal husbandry, energy, transportation and public welfare will be exempted from local income tax, city housing and land tax, and car license tax, while ordinary productive FIEs in Xi'an can do so within 60 percent of the operation period. Beyond the exemption period, FIEs can continue to enjoy tax reduction in case of economic difficulty, which is only allowed with approval of taxation departments.

Article 7 FIEs are allowed to accelerate the fixed asset depreciation for special reasons with the approval of the concerned taxation bureau.

Article 8 FIEs may achieve balance between foreign exchange receipts and payments by product exporting. In case of transient imbalance, FIEs which introduce by foreign currency projects of up-dated technology, facilities of agriculture, energy, transportation, and telecommunications shall submit manifest and can purchase China-made products for exports with RMB with approval of the Shaanxi Provincial Department of Foreign Trade and Cooperation. Foreign investors are encouraged to invest in the infrastructure facilities and other projects in the economic and development zones and hi-tech development zones. FIEs can be served with foreign exchange service by the relevant foreign exchange department.

Article 9 Priority is given to FIEs in the utilization of public facilities, water, electricity, transport, and telecommunications.

Article 10 FIEs pay the same amount of money as state-owned enterprises for the needed materials, telephone installation, water, electricity, transport, designing, consultation and medical care. When purchasing the above-mentioned with foreign currency within China, the charge is based on the FOB (free on board) price.

Article 11 FIEs have the rights to turn down the fees and taxes other than those in the defined list of law and regulations.

Article 12 A special card or a certificate issued by the Shaanxi Provincial Department of Foreign Trade and Cooperation to staff and workers from Hong Kong, Macao, and Taiwan as well as from foreign countries in FIEs shall enjoy the same national treatment concerning accommodation, travel and medical care in Shaanxi and the charges can be settled in RMB.

Article 13 FIEs are allowed to get loans preferentially for the needed production fund with approval of the banks of their deposits and local banks.

Article 14 If the domestic freight of the products by FIEs is higher than that in coastal areas, the exceeding amount can be properly subsidized by the Chinese side. The amount of subsidy shall be specified by the concerned parties in the contract.

Article 15 Foreign investors can entrust their Chinese relatives and friends as their agency in China. They can recommend their relatives and friends to work in their invested enterprises. For the invested project involving investment over US$200,000 one of relatives and friends of the outside investors can work in the enterprise and change his or her status from agricultural to non-agricultural one. For the investment over US$400,000 two can enjoy this policy. More than three are not allowed for any project.

Article 16 Enterprises established by people with freely convertible currency from their foreign business relatives and friends, with foreign share over 25 percent, shall be treated as foreign invested enterprises and enjoy the preferential policies thereof.

Article 17 The go-betweens of FIEs successfully introducing foreign investors into Shaanxi are awarded in ratio to the introduced investment with RMB free of the income tax and individual income regulation tax:

(1) After the operation of FIEs, the go-betweens are awarded with 0.1-0.3 percent of the actual foreign investment by FIEs within one month.

(2) The go-betweens of the compensation trade projects are paid with 0.1-0.3 percent of the actual contracted volume.

Article 18 Foreign investors are not subject to purchasing restrictions and can buy cars and daily-use articles through concerned departments.

Article 19 Foreign investors have the rights to make an appeal to the local governments and relevant superior departments in case of any infringement act.

Article 20 The procedures of examination and approval of the contract and the feasibility study report of the establishment of FIEs cannot exceed ten days each and the license will be issued within seven days. FIEs have the right to send their employees abroad and go through required formalities with the Shaanxi Provincial Department of Foreign Trade and Economic Cooperation.

Article 21 These provisions are also applied to the enterprises established by overseas Chinese and investors from the regions of Hong Kong, Taiwan and Macao.

Article 22 The right of interpretation of these provisions belongs to the Shaanxi Provincial Department of Foreign Trade and Economic Cooperation.

Note: In case of differences of interpretation, the text in the English language should be considered as the text of reference.

(China Development Gateway December 23, 2009)