Shanghai recorded 5,169 newly established foreign-invested enterprises from January to October this year, representing a 3.1 percent year-on-year increase.

Profit reinvestment, which refers to foreign investors reinvesting profits earned in China into further local investments rather than remitting them overseas, has emerged as a new trend in attracting foreign capital.

In June, China's finance, taxation, and commerce authorities jointly unveiled a tax incentive policy that grants foreign investors a 10 percent tax credit on eligible new domestic investments made between 2025 and 2028 using profits distributed by resident companies in China, with unused credits allowed to be carried forward.

The tax policy also encourages foreign investors to reinvest in key sectors such as advanced manufacturing, modern services and new technologies.

Together with the tax deferral policy introduced in 2018, this year's tax credit policy forms a comprehensive tax incentive framework for foreign investors' profit reinvestment. The combined measures help guide industrial upgrading and promote technological progress, while reducing the tax burden on foreign-funded enterprises.

During the 14th Five-Year Plan period (2021-25), foreign-invested enterprises in Shanghai have enjoyed more than 114 billion yuan ($16.19 billion) in reinvestment-related tax incentives.

Among investors from 32 countries and regions that have reinvested profits in the city, those from the United States, Japan, Germany, and the United Kingdom have each reinvested more than 1 billion yuan.

Business services, computing and communications, and automotive manufacturing have each attracted over 2 billion yuan in reinvested capital.

Source: Wenhui Daily