> 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. ========================= The Beijng study was notably silent on the matter.
My own understanding is that, despite the well-publicized and substantial presence of the world's big multinationals in China, the bulk of FDI is in small- and medium-sized enterprises, much of which originates from China's "near abroad" in Taiwan, Hong Kong, and Singapore. It is probably fairly easy for mainland entrepreneurs, especially those with family or other connections, to set up or partner small or shell companies across the straits to send their capital back into the special economic zones at the preferential rate.
This would certainly be more consistent with the view, reported in the financial press almost daily, that - far from Chinese economy being thoroughly dominated by foreign capital - there are large and growing national champions in strategic sectors which are beginning to take market share from the established multinationals or partnering with them to expand at home and abroad. The Beijing study was posted on the Marxmail list in response to my observation that "autonomous Chinese development is also now very much on display in auto parts, heavy equipment, aircraft production, and other industries, and especially in wireless communications, magnetic levitation transport, missile and space technology, nanotechnology, and other advanced sectors."
Anyway, I've bumped up against the posting limit, so out to get some fresh air...