China offers tax break to woo investors after U.S. overhaul

BEIJING — China is responding to Washington’s tax overhaul by offering foreign companies a break on Chinese taxes in a bid to retain investment.

The measure announced late Thursday is Beijing’s first major reaction to the U.S. decision to cut corporate tax rates. It follows a flurry of promises by communist leaders to spur growth in the slowing, state-dominated economy by opening more industries wider to foreign companies.

Foreign companies will be exempt from withholding taxes on profits they reinvest in industries specified by Beijing, the Finance Ministry and tax agency announced. It is retroactive to Jan. 1, 2017, meaning companies would receive a refund on taxes paid this year.

Beijing aims to “attract foreign investors after a host of countries unveiled similar measures to lure foreign and domestic investment,” the official Xinhua News Agency said. The exemption will apply to companies that reinvest profits in industries cited in government investment catalogs, the announcement said. Those include solar and wind power, “green farming” and other fledgling fields in which Beijing is trying to develop technology.

Supporters of the U.S. changes enacted this month say it will encourage investment in the United States. Governments including Canada and private sector analysts have warned that could draw money away from their economies.

It was unclear whether China’s tax break was significant enough to influence investment decisions in emerging industries in which foreign companies complain they are shut out of promising areas or face pressure to hand over technology to potential Chinese competitors.

China has long been among the top global destinations for investment, but foreign enthusiasm is cooling. Surveys by business groups show companies are shifting emphasis to other Asian economies seen as more profitable or less restrictive.