China Offers Tax Incentives to Persuade U.S. Companies to Stay


But ministers, officials and analysts in much of the rest of the world have said it could create an uneven playing field and set off a race among countries to cut corporate taxes.

What’s in the Final Republican Tax Bill

The legislation would cut taxes for corporations. American taxpayers, in large part, would also get cuts, though most of the changes affecting them would expire after 2025.


European leaders have raised the specter of a trade battle and implied they may challenge the overhaul before the World Trade Organization.

Beijing has its own concerns. Many American and European companies, which have had to navigate tricky laws and been subject to forced technology transfers, have complained in recent years that China is becoming an increasingly difficult place to do business. And despite the country’s reputation as a low-cost manufacturing hub, it charges high levels of taxes.

China, which has been targeted by Mr. Trump for its trade practices, imposes a standard corporate rate of 25 percent. On top of that, companies have to make social security contributions that increase their tax burden beyond that in many other countries.

So the tax changes in the United States have fueled concerns in Beijing that American companies will move their operations outside China, or repatriate much of their earnings. Officials worry that a significant repatriation of foreign earnings could set off a broader capital flight, and weaken the country’s currency, the renminbi. A sharp fall in the renminbi could spark a vicious cycle with even more companies — and possibly individuals — looking to minimize losses by moving their money out of China.

Business lobbying groups said it was unlikely that the government’s latest measures would be significant enough to keep many American companies from repatriating profits.

Jake Parker, vice president for China operations at the U.S.-China Business Council, said some of his member companies had already said that they would seek to repatriate China earnings to the United States with the tax code change, and were considering doing so quickly to minimize the risk of being subject to capital controls.

“Some are concerned that China may impose foreign exchange controls if these repatriations mount up and lead to capital outflow pressures, like we saw early this year and last year,” said Mr. Parker.

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