Tibet and Xinjiang have become a draw for China’s wealthy... in search of low taxes

Tibet and Xinjiang have become China’s answer to the British Virgin Islands, as celebrities such as Zhao Wei and Fan Bingbing as well as tycoons scramble to set up companies in areas with preferential tax terms.

The practise has come under the spotlight after actress Zhao Wei raised eyebrows with her 3 billion yuan (US$440 million) bid for a Shanghai-listed animation company. The venture involved in the later-abandoned takeover, called Longwei Culture & Media, was based in Lhasa, the capital city of Tibet.

Renowned as the spiritual centre at the foot of Himalayas, Lhasa, however, is seen as one of the lowest-income places in China with its economy heavily dependent on agriculture. For decades, few of the country’s affluent would consider investing in the remote inland city isolated from China’s cosmopolitan centre on the east coast.

But as Beijing struggles to lift Tibet and Xinjiang, two inner areas occasionally troubled by acts of ethnic violence, out of poverty, the regions have been assigned preferential tax policies in an effort to entice affluent investors.

“They have virtually become China’s version of British Virgin Islands,” said Shen Meng, executive director with boutique investment bank Chanson & Co. in Beijing, referring to the Caribbean tax haven.