To what extent the laws on foreign invested enterprises in China have Essay

To what extent the laws on foreign invested enterprises in China have transformed in line with China' WTO membership - Essay Example Moreover, the ‘dual tax system’ has led towards imposition of different tax rates that are applicable to FIEs and Chinese enterprises. FIEs in China possess favourable tax treatment in comparison to domestic Chinese enterprises. The FIEs are also facilitated with special tax rates as well as deduction of taxes along with tax holidays 1(LI 2008). The People’s Republic of China (PRC) Enterprise Income Tax Law, from the beginning of the year 2008 has developed a unified tax system that is applicable for both domestic Chinese enterprise and FIEs. In accordance with the revised PRC law, it has been viewed that an income tax charge of 25 percent is applicable for all business enterprises of China2. In December 2001, China acceded towards significant World Trade Organisation (WTO) that deals with trade regulations between different nations, ultimately changed the scenario of the business law environment of China3. In this regard, WTO had devised significant reforms for d ifferent FIEs in China that emphasised upon minimising tariff rates as well as opening new sectors for foreign investment. Moreover, WTO has also reformed the legal system which includes protection of intellectual property as well as control of foreign exchange4. The discussion intends to emphasize upon examining the historic background, development and features of Chinese law governing the forms of organisation belonging to FIEs. Moreover, the WTO impact upon the transformation of Chinese business law will also be portrayed in the discussion. Main Body Historic Background and Development of FIEs The historic background and the development of Chinese law governing the forms of organisations of FIEs can be segregated into three phases that have been discussed hereunder. The Initial Stage (1979-1986) In the year 1979, a law on Chinese-Foreign Joint Ventures was approved and it was the first law of the State Council of China that is related to foreign investment consumption. The Chines e State Council from the year 1979 to 1980 had provided favourable as well as flexible policies with regard to foreign investments. In order to develop the Chinese economy as compared to Soviet Union, China developed a legal system based on Soviet Union legal framework. In this similar context, it was viewed that Hong Kong as well as Macao was regarded to be the major foreign investors in China and investments were mainly made in manufacturing units as well as hotels which are mainly labour intensive5. Steady Development Stage (1987-1991) In the year 1986, the State Council instigated a law relating to the development of foreign investments for the motive of minimising issues between domestic Chinese enterprises and FIEs. Moreover, the law helped in eliminating the problem of currency exchange for foreign investors and it also facilitated the foreign investors and export businesses to reap significant benefits. During this stage, foreign investments increased in export enterprises a s well as manufacturing industries along with high technology industries and its expansion in many business areas was also been observed 6. Accelerated Development Stage (1992-1999) In the year 1993, it has been observed that the amount of foreign inve