China will modify import tariffs on production machinery for foreign-funded processing and assembly projects in a bid to halt investment drainage.
Guangzhou Municipal Commission of Foreign Economic Relations and Trade director Tan Kecheng said the policy was approved recently by the General Administration of Customs and the Ministry of Foreign Trade and Economic Co-operation.
Under the new measures, approved foreign-funded processing and assembly projects will not pay import tariffs on production machinery this year, and will start paying in installments only over the next five years. The preferential policy will apply only to machinery not classified as an 'investment'.
Mr Tan said Guangdong would introduce the preferential policy but he was not sure if it would become a national policy.
'It is an important measure for Guangzhou and Guangdong, because the processing and assembling business is a pillar sector to the region's economic development,' he said.
At the end of 1996, a total of 8,423 processing and assembly factories were registered in Guangzhou - 598 more than in 1995.
Growth has slowed since China cancelled duty exemptions for foreign investors who applied for capital goods imports after April 1, 1996.