1. Interim Provisions and Guide Catalogue
   In order to make foreign investment further meet the national industrial development direction and avoid blind investment, in June 1995, China government formulated and published Interim Provisions for Directing Overseas Investment and Guide Catalogue of Industries for Foreign Investment, announcing the industrial policies of attracting foreign investment in the form of regulations, and lightened the transparency of policies. The provisions and list divide industrial items into four kinds including the encouraged-the permitted the restricted and the forbidden, making investors clear at first sight.
   
   According to the development of our economy, in DECEMBER 1997, the State planning Commission the State Economy and Trade Commission and the Administration of Foreign Trade and Economic Co-operation jointly revised the Master list for Foreign Investment Industries. The revised list has broaden the scope of foreign investment encouraged by the state, Laying stress in key industrial points, further meeting the demands of industrial structure adjustment and the principle of favoring absorbing advanced technologies, and fully embodied the policies of encouraging foreign investors to invest in the middle-and-western regions. The revised list encourages foreign investors to set up export enterprises and has put the permitted items 100 per cent of whose products are for export into the encouraged items.
   
   The newest version amended in 2007 is available at:
   http://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations
   /MinisterialRulings/P020071121358108121219.pdf
   
   
2. Items in which foreign investment is encouraged
   Current items of this kind mainly include: items in new agricultural technology, comprehensive agricultural development, energy, transportation and important taw and semi-finished materials industry; items with high technology; export-oriented items; items in comprehensive utilization of resources and renewable resources, environmental pollution protection; items which can exploit the advantages of the middle-and-western regions to the full, etc. Positively guide foreign investment to the technical transformation of traditional industries and old industrial bases, and further develop labor-intensive items in accord with industrial policies.
   
   
3. For the foreign investment utilization in the field of service trade, experiments should be made first. On the base of experiments, we sum up the experience, formulate laws and regulations, normalize the development and expand gradually.
   
   At present, the fields such as business, foreign trade, finance, insurance, transportation, international transportation agency, legal service, tourism, advertisement, medical health, accountancy, property valuation, education, leasing, engineering design, consultation, real estate and so on have been opened to foreign investors in varying degrees; the opening of service has formed an entire structure initially.

Regional Policies
China's opening-up endeavor began first in the eastern coastal region, and moved to interior regions gradually in phases and tiers. The eastern region enjoys a fairly favorable investment environment and many preferential policies. That is why most reform measures were initiated in the eastern region, which is home to the five special economic zones, 14 coastal open cities and the Pudong New Area in Shanghai. So, to date, the overwhelming majority of overseas-funded enterprises have been established in the region. In contrast, foreign companies have launched fewer investment projects in China's central and western region.

In recent years, with the strategic focus of China's economic development shifting gradually westward, the Chinese Government has formulated relevant policies on assistance regarding the central and western region, vigorously increased investment in the region, and speeded up construction of infrastructure such as water conservancy, transport and telecommunications there. Meanwhile, it has been encouraging foreign companies to invest in the region.

In order to direct the foreign investment to the central and western parts, the State Development and Planning Commission and Ministry of Foreign Trade and Economic Cooperation have jointly formulated List of Advantageous Industries for Foreign Investment in Provinces, Autonomous Regions and Municipalities Directly under the Central Government in the Central and Western Parts on June 16, 2000 for implementation. The List provides the advantageous industries in the central and western parts respectively for 20 provinces. The List is focusing on areas such as processing of farming and animal husbandry products, development of tourist, forestation, exploitation of mineral resources, construction of communications and infrastructures, and development and manufacturing of new-type electronic components, where foreign investment is encouraged. Projects in the List that utilize foreign investment enjoy preferential policies such as exemption of duties for self-use equipment imported within the total volume of investment and import-linked value-added tax.

The current policies encouraging foreign investors to invest in the middle-and-western region mainly are as follows.

1. The middle-and-western regions may choose really advantageous industries and items, enjoy the policy for the encouraged items stipulated in the Master List with the government approval; establishment conditions and market opening degree for the restricted items and items in which foreign stock proportion is restricted may be wider to some degree than in eastern regions.
2. Properly increase domestic supporting fund loan for the middle-and-western regions to draw foreign investment, loans from foreign government and preferential loan from in serration financial administrations and mainly pa put into items of great basic facilities and environmental protection construction;
3. For the state-encouraging foreign investment enterprises in the middle-and-western regions, during the three years after the expiration of current preferential tax policy, their business income tax may be collected at the lower rate of 15 percent;
4. Encourage the foreign investment enterprises in the eastern regions to reinvest to the middle-and-western regions; the items in which foreign funds amount to over 25 per cent may enjoy relevant treatment to foreign investment enterprises;
5. Permit the foreign investment enterprises in the coastal regions to go to the middle-and-Ivestern regions to contract and operate foreign investment enterprises and national-funded enterprises;
6. Permit the middle-and-eastern provinces, autonomous regions, municipalities directly under the Central Government may choose a built development zone, in their capital cities to apply for a national-grade economic and technical development zone;
7. The state will priory allow a batch of items in agriculture, water conservancy, transportation, energy, raw and semi finished materials and environment protection to draw foreign investment in the middle-and-western regions, and tighten the support for item supporting funds and relevant measures.

Tax Policy
China implements a low-lax policy for foreign investment enterprises and implements preferential tax policies in the industries and regions where investment is encouraged by the state. At present, taxes for foreign investment enterprises and foreign individuals (including compatriots in Hong Kong, Macao and Taiwan): business income tax, Personal income tax, turnover tax (value-added tax, Consumption tax and business tax included) ,tariff, land increment tax,, resource tax, urban real estate tax. etc.

1. Income tax
   (1) Income tax rate: The government collect business in come tax from foreign investment enterprises at the rate of 33 per cent, but only 15 percent from enterprises in special economic zones, the national hi-tech industrial zones and national-grade economic and technical development zones: 24 percent from enterprises in open coastal regions and capital cities of local provinces.
   
   (2) Reducing-tax policy: Foreign investment enterprises may enjoy the treat meat of which business income tax may not be collected during the first two years after their beneficial year and half collected during the next three years; for foreign investment enterprises encouraged by the state in the middle-and-western regions, after the expiration of 5 years' tax collection reduction or exemption, the government con prolong for another 3 years to collect half income tax. For advanced technology enterprises established by foreign funds, their income tax may be exempted For two yens and half collected for later six years; for export enterprises, apart from the preferential treatment of two years' exemption and three-year half reduction, if their yearly export value amounts to over to per cent of gross enterprise sales, they may enjoy the preferential treat meat that half of business in come tax is reduced; if foreign investment purchase domestic device in the range of investment sum, and if this kind of import device belongs to the list of device whose tax is exempted, their business income tax may be of credit.
   
   
2. Turnover tax
   (1)Since January 1, 1994, we have implemented value-added tax, consumption tax and business tax for foreign in vestment enterprises in accordance with domestic enterprises, exempted business tax for the technical transformation of foreign enterprises and foreign investment enterprises, If foreign investment enterprises purchase domestic device in the range of total investment and the device belongs to the list among which import tax of goods can be exempts the value-added tax of dogmatic device can be completely given back.
   
   
3. Import tax
   (1) Tariff rate: Chinese government has reduced import tariff rate for eight times since 1991, The current tariff rate is down to 16.5 per cent.
   
   (2) Duty exemption of import device: At present, if device needs importing for foreign investment and domestic investment items encouraged and supported by the state, the tariff and import value-added tax can be exempted.