China’s generous financial incentives, regarding export and import, are an eye-opening subject. The country which had a closed economy for years, have now opened their gates to allow foreign investment at a cumulative rate.  The temping export and import incentives by national government of China are of no comparison with the incentive offered by local and provincial government. The export incentives provided by the provincial and local governments are of great importance in boosting the country’s foreign investment. 

China’s government, which is famed for its system of decentralization, shows an increase in the incentives in the interior of China than its coastlines. The generosity observed in incentive granting has brought about a steep competition among the domestic firms. 

A look into the central China shows lucrative incentives offered by state government. Foreign Invested Enterprises or FIEs enjoy a complete business tax waiving. Besides, those FIEs engaged in transfer of technology are allowed to apply for 100 % business tax refund, in case it is already paid. 

If the above story of FIE is an example of provincial government’s financial incentive, then municipal governments of China has a better tale to tell. The case study of the city of Zhengzhou (a metropolis of about 4.4 million people in central China) will offer a great insight in this regard. The measures taken within the city of Zhengzhou is remarkable in offering leverage to the indigenous companies. Among the myriad incentives export incentives seem to be the most rewarding one. 

Export Incentives 

The municipal government has set certain codes for eligibility for export incentive. An enterprise is designated as "Zhengzhou City Advanced Foreign Exchange Generating Export Enterprise" if they qualify the following terms and conditions

(i) A yearly volume of export of at least 10 million US dollars or more. Moreover the enterprise must have its actual export growth more than 25% over the last year,
(ii) A yearly export volume of such an enterprise must have at least 5 million US dollars. Its actual export growth must be more than 40% over the last year, and it must have inward remittances earned from exports of at least 80%. 

If a company qualifies the above conditions then the municipal government grants it a hefty amount of 30,000 RMB (approximately $3,500 US dollars). This grant is awarded if not an enterprise is tried for any grave regulatory violation during the year of granting. 

Such aggressive measures of granting export incentives by China’s local governments give a promise to uplift the economy. The benefits of export incentive on an economy are manifold. The native companies, as they expand through incentives, will require workers which will reduce unemployment to a large extent. The economic activity within the frontiers of China will definitely increase through export incentives pushing up the GDP. Above all, the country will be able to develop its infrastructural facilities through expansion of companies. Needless to say, that this development is a sure call for foreign investments in China.

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