"But it is inevitable that they be treated equally, given that China has opened nearly all of its market to foreign players by the fifth anniversary of the country's WTO accession."

"The reform of the corporate income tax is expected to optimise China's investment environment," he said. "The revised tax rate will put all market players, both domestic and foreign, on an equal footing."

Hu added that the regulations will be phased in over a five-year period, meaning that foreign investors still have another five years to adapt to the changes.

If the bill is adopted by the NPC plenary session in March 2007, it is expected to take effect in 2008.

Meanwhile, foreign-invested companies could enjoy a preferable 15 per cent income tax rate in some high-tech sectors.

The country's policies encouraging foreign direct investment (FDI) focus more on quality than quantity, experts said.

The government intends to attract more technologies than capital from foreign investors. The hope is that service industry enterprises and research and development centres will boost the development of domestic industries.

Elizabeth Knup, governor of AmCham China, told China Daily in early December that while the inflow of FDI might not drop, its distribution would probably change. He believes that the reform would redirect much FDI from manufacturing sectors to service sectors and mergers and acquisitions.

The proposed 25 per cent tax rate is low compared to most other countries. Statistics show that the average corporate income tax rate in 159 foreign countries and regions was 28.6 per cent last fiscal year.

1

2

3

(For more biz stories, please visit Industry Updates)