China rolls out tax incentives to win back foreign investors amid EU, US trade tensions

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China has stepped up efforts to attract foreign investors, as policymakers look to bolster the domestic economy and safeguard its position in global supply chains amid negotiations with major trade partners.

New tax breaks unveiled this week aim to encourage foreign firms to reinvest profits locally – part of a broader effort to restore confidence and signal openness as challenging trade talks continue with the European Union and United States.

The Ministry of Commerce, the Ministry of Finance and the State Taxation Administration jointly announced the new incentives in a statement on Monday.

Foreign companies that choose to reinvest profits earned in China back into local operations will be able to deduct their onshore tax by an amount equivalent to 10 per cent of the reinvested sum. Any unused credits can also be carried forward until the end of 2028.

Eligible reinvestments include capital injections into domestic firms, such as establishing new entities or acquiring equity from non-affiliated parties – though purchases of publicly listed shares are excluded.

Foreign investors can also apply retroactively for qualifying reinvestments made since January 1, 2025.