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SCMP Reporter

The mainland is studying the possibility of extending an exemption on capital goods import tariffs to state-owned enterprises involved in hi-tech development, a source close to the State Planning Commission said.

 The source said the move was aimed at boosting the poorly performing state sector, encouraging it to move into hi-tech areas and maintaining the state policy of offering similar conditions to local and foreign investors.

 The tax break, previously given to foreign invested projects to lure foreign capital, was scrapped in April last year in an effort to create a level playing field.

 However, Vice-Premier Zhu Rongji last month said the mainland would resume preferential treatment to foreign investment in the hi-tech sector.

 The source said various ministries were studying the details of a possible resumption of the tariff exemption.

 'Allowing the state-owned sector to enjoy the same tariff exemption is on the agenda,' he said.

 'The central government decided to scrap the preferential treatment that used to be granted to foreign investors in the aim of adopting a 'National Treatment' policy,' he said.

 National Treatment means applying the same terms to foreign and domestic investors. 'If foreign investment can enjoy import tariff exemption, then our own [state-owned] sector should enjoy it too,' the source said.

 When the mainland cancelled the import tariff exemption on capital goods for foreign-funded ventures it resulted in a fall in new foreign investment contracts.

 The source said the comparative drop in this year's new contracts was because of high levels achieved last year.

 Contracts signed in the first three months of last year increased sharply - before the deadline for preferential treatment on March 31.

 Beijing has yet to start collecting tariffs from foreign enterprises' capital imports due to a grace period, which ends in December.

 The source did not rule out the possibility that foreign-funded projects approved after the scrapping of the exemption could seek a tariff rebate if the government did resume the preferential treatment.

 'But only those in the hi-tech sector would be able to apply for an exemption.' 



Import tariff exemption hope for hi-tech state enterprises