An Analysis On Financial Incentive Policy Of Foreign Direct Investment

Though the law of enterprises` income tax failed to be put the discussion of the Congress this year, we believe that the pace of adjustment on financial incentive policies will never stop. Nowadays, there are heated competitions among countries for attracting foreign direct investment. But, firstly, these too favorable policies will cause foreign firms to squeeze domestic firms and distract our international trade profits. If we keep offering foreign investments these "super national treatment", this will decease the positive welfare effect which FDI brings to our nation. Secondly, according to the study of UN, tax incentive policy is not an effective way to attract FDI. It will cut down the government revenue instead. Finally, what the foreign investors are interested more in is the openness of region and the correlation degree of industries of that region rather than these favorable policies. Thus, step by step, we should transit our financial incentive policies from "super national treatment" to enhancing the correlation and cluster effects of foreign firms and gain more and more profits as possible as we can.