In 2025, the Chinese government has introduced a suite of policies shifting focus from attracting new foreign investment to facilitating the retention and expansion of existing Foreign Invested Enterprises (FIEs). Key measures are structured as follows:

1. Tax Credit for Profit Reinvestment

* Foreign companies reinvesting distributed profits in projects listed in the Catalogue of Encouraged Industries between 1 January 2025 and 31 December 2028 can claim a non-refundable tax credit equivalent to 10% of the reinvested amount against their Corporate Income Tax (CIT) liability.
* The investment must be maintained for a minimum holding period of 60 months.
* Example: Reinvesting RMB 10 million yields an immediate CIT saving of RMB 1 million, potentially increasing the project's Internal Rate of Return (IRR) by approximately 1.8 percentage points over five years.

2. Reinvestment Support Toolkit (National Development and Reform Commission)

* Eligible projects can access a dedicated Reinvestment Project Library, linked to the Major FDI Project List, offering:
   * Flexible land-use arrangements ("lease first then grant") with leases up to 20 years, reducing upfront land acquisition costs by 15-25%.
   * A "Green Channel" for financing (e.g., Panda bonds, shareholder loans) with a target approval timeline under 30 working days, shortening licensing cycles by approximately 40 days.

3. Liberalization of Market Access and Financial Regulations

* Sector Opening: Full foreign ownership is now permitted in sectors including telecommunications Value-Added Services (VAS), biotech Contract Manufacturing Organizations (CMOs), and private hospitals.
* Financing Ease: Removal of the ceiling for onshore RMB loans for FIE investment companies funding equity deals, allowing substitution of high-cost offshore debt with lower-cost local financing.
* FX Reform: A streamlined foreign exchange reporting system merges seven legacy reports into a single portal. Pre-investment FX registration is eliminated for qualified entities, with cross-border financing approval times reduced by ~50% to around 10 days.

4. Actionable Recommendations for FIEs

1. Model the financial impact of the reinvestment tax credit on project returns and effective tax rates.
2. Apply for inclusion in local "Reinvestment Project Libraries" to access fast-track approvals and support.
3. Utilize onshore RMB-denominated loans to minimize currency conversion needs and funding costs.
4. Align internal systems with the State Administration of Foreign Exchange's (SAFE) consolidated digital reporting requirements.
5. Engage proactively with provincial-level "Invest in China" teams to secure localized incentives such as tax rebates and R&D subsidies.

Conclusion

The 2025 policy suite provides substantive fiscal incentives, operational simplifications, and market access liberalization, systematically reducing expansion barriers and enhancing the long-term investment environment for foreign enterprises in China.

(Provided by SINOVEST CONSULTING. Originally published on WeChat Service Account. For informational purposes only. Specific actions should be taken based on official policies and professional advice.)