[lbo-talk] China: round-tripping

Doug Henwood dhenwood at panix.com
Mon May 28 08:04:36 PDT 2007

<http://siteresources.worldbank.org/CHINAEXTN/Resources/ 318949-1121421890573/cqu_07_en.pdf>

> End December, the government submitted to the National People's
> Congress' standing committee a draft new corporate tax law
> containing one unified tax rate for domestic and foreign funded
> enterprises (FFEs) and uniform treatment of tax deductibles and tax
> base. The new unified rate of 25 percent would imply a significant
> increase for FFEs operating in special economic zones, which now
> pay 15 percent (other FFEs now pay 24 percent). The new rate will
> be a decrease for domestic firm, which now pay a statutory rate of
> 33 percent. The move is likely to make investment in domestic
> enterprises—which are in general more oriented on the domestic
> market—more attractive. Also, it is likely to end the so-called
> "round tripping" of domestic capital disguised as foreign, and thus
> reduce measured FDI, although not genuine FDI.

I wonder how much of those "foreign ownership" stats that Marvin quoted reflect this sort of round-tripping.


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