Chengdu China Exclusive: Tax Breaks and Preferential Policies Push Western Investment

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By Lianna Brinded | November 21, 2012 5:10 AM EST

Apartments for Tianfu Software Park employees in Chengdu, China (Photo: Lianna Brinded)

Chengdu government officials have unveiled a number of tax breaks and preferential policy incentives to bring more major Western companies to the capital of Sichuan province.

Government officials told IBTimes UK that a number of incentives were being introduced to drive Fortune 500 companies towards the city in an effort to retain its position as one of the world's fastest growing cities.

"We are really llooking to become the hub of the technology, manufacturing, information technology and pharmaceuticals [sectors] in the world and in order to drive investment, the government has supported a number of incentives that makes Chengdu the ideal place for a Fortune 500 company to do business," said Liu Xuezheng, director of Chengdu Municipal Development and Reform Commission.

Other Chengdu government chiefs from the Chengdu Investment Promotion Commission (CIPC) confirmed that major companies that headquartered in the city and were in industries that were "actively encouraged by the government" would receive a 15 percent corporate income tax rate, compared with the 25 percent levied in eastern China.

The tax breaks would be applicable for up to 10 years and will be available until 31 December 2020, said a chief from the CIPC.

Companies would also be exempt from import VAT among other sweeteners.

"Every company that looks for these breaks will be subject to a criteria to qualify but it would still be relaxed in comparison to companies setting up in eastern China," said Ren Ruihong, division chief for the Chengdu Municipal Financial Work Office. 

"The companies have to be in an industry where the government is actively trying to encourage growth, such as in the technology or pharmaceuticals. Other preferential policies may apply, depending on the size and the amount of jobs they will be creating for Chengdu. It is negotiable and dependent on a case-by-case basis," he adds.

In addition to the tax breaks, the Chinese government has already granted a number of other incentives to bring more Western companies to Chengdu and the rest of the country as part of the West China Development Strategy.

Chengdu's annual average GDP growth since 2006 stands at 15.2 percent and accounts for 32.6 percent of Sichuan's total.

It also accounts for 8 percent of the total GDP of western China and 1.4 percent of China's overall GDP.

Some 229 Fortune 500 companies have a base in Chengdu and in 2011 alone, 160 multinationals set up a major base here. IBM has moved its HQ to Chengdu.

In October, the world's largest analog circuit component manufacturer and leading semiconductor company Texas Instruments (TI) formally signed an agreement with Chengdu Tianfu Software Park to locate its research and development  and sales functions. The Tianfu Software Park is capturing such a large number of technology companies that it is tipped to rival Silicon Valley in the US.

Other major companies that have located or relocated to Chengdu include Wal-Mart, Home Depot, Microsoft, Cisco and Disney.

European and UK companies include Roche, Novartis, AstraZeneca, BHP Billiton and GSK.

For more special coverage on Chengdu China, check out IBTimes UK for more in-depth articles.

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