Vice-premier says overseas firms still enjoying preferential policies

BEIJING - Foreign enterprises doing business in China are enjoying many preferential investment policies compared with their domestic counterparts, said Vice-Premier Wang Qishan on Monday.

"In many sectors, the treatment provided for foreign businesses are still better than those for Chinese domestic companies," said Wang, responding to complaints by foreign companies about the investment environment in China. "If there was anything the Chinese government could improve, it could be market access."

Over the last three decades, foreign businesses have enjoyed preferential policies including lower taxes and cheaper land and resources compared with domestic players, Wang told member companies of the China Association of Enterprises with Foreign Investment.

"China is in a transition period, changing the super national treatment to the national treatment on a gradual basis," said Wang.

Starting December 2010, China began to levy a surtax for municipal maintenance and construction and an education surtax for foreign enterprises, which signaled unification of the tax system among companies from home and abroad.

But in line with a regulation to encourage foreign investment issued by the State Council in April 2010, some foreign-funded firms still enjoy preferential treatment ranging from lower land prices to more favorable policies for setting up high-tech companies.

Despite their complaints, Wang said foreign enterprises are more and more concerned about the soft business environment in China, including its "legal system and governance, fairness and transparency".

"Intellectual property rights protection is the biggest concern for all," said Wang, adding that China has been committed to creating a favorable environment for them.

Last October, the State Council launched a six-month campaign to combat pirated goods, the most comprehensive effort the Chinese government has taken to promote copyright protection in recent years.

Last week, the Chinese government said it plans to make copyright protection a long-term task by setting up an office to oversee its efforts.

US Secretary of Commerce John Bryson said it is "a step in the right direction".

"We have established our own rules and regulations for copyright protection, but the problem lies in enforcement," said Wang.

Chen Deming, minister of commerce, said at the meeting of the China Association of Enterprises with Foreign Investment that China will "do a better job in copyright protection, as it is in the interest of companies both home and abroad".

In regards to government procurement, Wang said that China, especially its local governments, have purchased quite a lot of goods from either joint ventures in China or companies from overseas.

Li Xiaogang, director of the Foreign Investment Research Center at the Shanghai Academy of Social Sciences, agreed.

"Many foreign companies are highly protected by the local governments, and they prefer to purchase from foreign companies rather than domestic ones, despite the higher price," Li said.

So far, China has absorbed an accumulative foreign direct investment (FDI) worth $1.2 trillion, and more than 730,000 foreign enterprises have set up a presence in China.

China has been the most attractive destination for foreign businesses among developing nations for 19 years, and global FDI inflow will continue to grow, said Chen.

"China's stable policies and political environment, and the huge market potential, will help it maintain its appeal to foreign businesses," he said.

From January to October, China's FDI surged by 15.8 percent to $95 billion, almost equal to all of last year.

In April 2010, the State Council launched new FDI development guidelines, saying that China encourages foreign companies to invest in sectors including service, high-tech and new energy, as well as in the nation's central and western areas.

Chen Keyu contributed to this story.