By Zhang Wenkui, Enterprise Research Institute, DRC & Ma Xiangdong, Training School of Beijng Municipal Party Committee

Research Report, No.141, 2021 (Total 6206) 2021-6-1

Abstract: China’s local governments are inclined to adopt preferential policies for investors in the fields of finance and taxation, land, supporting facilities, financial services, State-owned capital inputs, among others. These policies have attracted investment to some extent, but at the same time they also aroused worries about whether they would go against fair competition or even induce cut-throat competition between governments. Actually, the U.S., Japan, Germany and some other countries also adopted preferential policies for attracting investment, some even offered government subsidies. However, in providing preferential policies, these countries focus more on the quantity and quality of newly added jobs, and pay great attention to supporting small and medium-sized companies in their research and development. Given the facts that China’s economy is getting integrated with the global system, that global trade rules are currently defined by developed countries, and that China also takes the initiative to straighten out and adjust related policies, China needs to take steps to regulate these preferential policies. In regulating relevant policies, China needs to shift preferential policies toward social policies while implementing structural and inclusive preferential policies in a bid to narrow the scope of one-to-one preferential policies. Besides, preferential policies need to be kept open and basically transparent.

Keywords: investment attraction, preferential policies, local governments