China official slams foreign investment spree
(Reuters)
Updated: 2006-03-07 22:09

"NO MORE PREFERENTIAL POLICIES"

For example, foreign companies had already taken a sizable share of China's beer market -- Coca-Cola Co. had occupied much of China's drink market - while many supermarkets had fallen into the hands of foreign ownership, he said.

Of multinationals that had already acquired Chinese firms, about 30 percent were U.S. firms, 27 percent were from Europe and the rest came from Japan and other Asian countries, he said.

Li said China must stop giving "preferential policies", notably tax breaks that been used to attract foreign investors.

"We should grant the national treatment to both domestic and foreign companies under the World Trade Organisation rules."

China's parliament said on Saturday it would consider a tax law to equalise tax on local and foreign companies this year.

Many firms with foreign ownership in China enjoy preferential income tax rates set by local governments as low as 15 percent, while domestic firms are typically taxed at 33 percent.

China has been drafting a controversial anti-monopoly law for more than a decade to contain domestic and multinational companies' market dominance, and parliament said in December it would consider the legislation this year.

But multinationals and foreign business associations have voiced misgivings about the law and and contend it could be used to force them to give up valuable technology and markets.

China's accession to the World Trade Organisation in late 2001 cemented its role as the workshop of the world, and foreign direct investment has since poured in at the rate of $1 billion a week to take advantage of its cheap, industrious labour.

In all of 2005, China drew $60.3 billion in actual FDI, just shy of the 2004 record of $60.6 billion.

Beijing faces persistent calls from Washington to let the yuan rise faster since its 2.1 percent revaluation in July, largely because of China's large bilateral trade surplus.