China's Encouraged Industries

May 2006 China Briefing

In this issue we deal with applying for Encouraged Industry status in China and identify which industry sectors can claim benefits from investing in the PRC. Being a foreign investor with "encouraged" status can bring you a number of advantages. Notably, these are the ability to obtain VAT and custom duty exemption on imported equipment, VAT refunds on domestic-made equipment and increased tax holidays or turnover tax refunds. Here we consider these in detail, which industries are encouraged, the differences between these and "permitted", "restricted" and "prohibited" industries in China, with examples in addition to the regulatory framework governing these definitions. Written by Dezan Shira & Associates, the article also explains and details the "Catalogue for the guidance of foreign invested industries in China" with the thirteen industry sectors covering all main industries in the PRC as follows: China farming, forestry, animal husbandry & fishery industries; China mining and quarrying industries, China manufacturing industries, China production and supply of power, gas and water; China water resources management, Chinese communication, transportation, storage, post and telecommunication services, Chinese wholesale, retail and trading industries, China's real estate industry, China social services industry, China’s public health, sports and social welfare industries, Chinese education, culture and arts, broadcasting, film and television industries, China scientific research and poly-technical services, in addition to the "Catalogue of Priority Industries for Foreign Investment in China". Procedures for applying for Encouraged Industry Status in China are also identified and explained in full.