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New rules to boost private investment

By Song Shengxia (Global Times)

08:10, June 08, 2012

China has issued new rules on offering preferential tax rates for private investment, a move that analysts said yesterday will lower the costs for private investors in entering the country's State-dominated sectors and help boost the slowing economy.

The new rules to encourage private investment cover six major tax categories - value-added-tax, consumption tax, sales tax, corporate income tax, housing property tax and import tariffs - and involve a total of 33 items that are entitled to preferential tax treatment, the State Administration of Taxation (SAT) said in a statement released Wednesday.

The sectors included in the policy range from infrastructure and public utilities to financial services and affordable housing, the statement said. The SAT did not specify what preferential tax rates it would offer.

"The new rules are an extension of the government's drive to encourage private investment and are especially important at this stage when the economy is facing pressure and when private capital is playing a greater role," Zhang Bin, director of the taxation office at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences, told the Global Times.

In the first four months, private investment in fixed assets reached 4.7 trillion yuan ($739 billion), up 27.3 percent from a year earlier, accounting for 62 percent of the country's total investment in fixed assets, data from the National Bureau of Statistics of China showed.

"It will help reduce the costs for private investors and attract them into the education, healthcare and public utilities sectors, which used to be financed by the government," he said.

The move came after the State Council reiterated last month that the country will encourage private capital to enter the railways, utilities, energy, telecommunications, education and healthcare sectors. The State Council also required relevant sectors to draw up detailed rules to implement the policy for encouraging private investment, which was issued in 2010 and is known as the "New 36 Clauses."

On Tuesday, Li Pumin, a spokesman for the National Development and Reform Commission, the country's top economic planner, urged that all detailed rules for the "New 36 Clauses" should be completed by the end of the month.

So far, eight government agencies, including the Ministry of Railways, China Banking Regulatory Commission, China Securities Regulatory Commission and the SAT, have drafted detailed rules to support private investment. Sectors such as education, telecommunications and energy have yet to work out the detailed rules.

"Speaking of private investment, we do not lack encouraging policies. What we lack is the legal support to protect the interests of private investors when they enter the State-dominated sectors," He Jun, an analyst with Beijing-based consulting firm Anbound, told the Global Times.

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