China Feels The Trump Tax Cut Squeeze – Offers Incentives To U.S. Companies Not To Leave

There’s a reason why a business man is better in the oval office than a politician and now China understands that better than anyone. It seems those pesky tax cuts are enticing companies to come back home, and now China is scrambling to keep them overseas. Interesting how that works.

The New York Times has the latest:

China said on Thursday that it would temporarily exempt foreign companies from paying tax on their earnings, a bid to keep American businesses from taking their profits out of China following Washington’s overhaul of the United States tax code.

There is, however, a catch: To be eligible, foreign companies must invest those earnings in sectors encouraged by China’s government — including railways, mining, technology and agriculture — according to a statement from the Finance Ministry. The measure is retroactive from Jan. 1 this year, the ministry said.

The move would “promote the growth of foreign investment, improve the quality of foreign investment and encourage overseas investors to continuously expand their investment in China,” the ministry said. It did not elaborate.

This is exactly why Trump overhauled the tax code:

… Asian and European officials have speculated that some of the measures in the revamped tax code could help encourage United States companies produce goods domestically for exporting. European leaders, for their part, have raised the specter of a trade battle and implied they may challenge the overhaul before the World Trade Organization.

China, meanwhile, has had its own concerns.

Many American and European companies have complained in recent years that the country is becoming an increasingly difficult place to do business. Firms say they have had to navigate tricky new laws, been subject to forced technology transfers, and have complained that the authorities curtail their access to Chinese consumers.

This thing was well thought out before being executed. China better get used to it.

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