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

Profit reinvestment, which means overseas investors channel profits earned in China into further local investments, has emerged as a new trend in attracting foreign capital, and it is strengthening the city's position as a preferred hub.

China's finance, taxation, and commerce authorities on June 30 unveiled a tax incentive that grants foreign investors a 10 percent corporate income tax credit on direct domestic investments funded by dividends from Chinese resident companies.

The policy, effective from Jan 1, 2025 to Dec 31, 2028, allows unused credits to be carried forward.

In Shanghai, foreign-invested enterprises have enjoyed over 114 billion yuan ($16.1 billion) in reinvestment tax incentives since 2021.

Among investors from 32 countries and regions reinvesting 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.

Additionally, the tax policy encourages profit reinvestment by foreign investors in sectors such as advanced manufacturing, modern services, and new technologies.

According to Huang Feng, head of the Shanghai Foreign Investment Association, the tax deferral and credit policies for reinvestment not only lower costs of foreign-funded enterprises but also boost industrial upgrade and technological advancement.

He added that the measures strengthen the confidence of foreign investors who plan to deepen their presence in China.

Source: Wenhui Daily