China’s localities need ‘profound reform’ to draw investment, state newspaper says
A Chinese newspaper has called for localities to alter their strategies to win investment, saying past methods are no longer viable
China’s localities should reduce their dependence on land and tax incentives and instead strengthen industrial chains and improve their business environments to attract investment, a state-owned newspaper has urged in a front-page commentary.
“China’s vast market, with its enormous scale and growth potential, remains a significant advantage and a solid foundation for navigating changing circumstances,” it said.
“However, persistent issues like local protectionism and market fragmentation continue to hinder high-quality economic development.”
To correct these issues, the traditional model requires “profound reform”, it said, including limits on financial incentives, tax rebates and land grants, as well as eliminating illegal policy concessions.
To pull in investors, Chinese localities have traditionally offered a wide range of benefits such as tax exemptions or reductions during their first years of operations, as well as loans repayable over several months or years. Some would even throw in rent-free offices or production facilities.
But the central government began to discourage these entreaties in recent years, as the differing standards that formed between regions were considered harmful to the formation of a unified domestic market – a goal considered crucial as containment efforts from the West intensify.