Tax amendments could hurt Chinese food industry, says expert

By Neil Merrett

- Last updated on GMT

Related tags: Investment

A possible move by the Chinese government to repeal tax incentives
for foreign investors could prove a massive setback to the
country's food industry, warns an expert on Asian affairs.

Dr Willem Van Der Geest, director of the European institute for Asian Studies told​ that any potential move to review or change current tax rules could decrease stability across the entire market. "China's point of view is of great concern,"​ he said. "The possibility of removing these incentives could throw further doubt over the sustainable growth ofChina's economy and business." ​ Any potential cessation of tax breaks will be particularly significant to the food industry, which as one of the biggest investors in the country has played a significant part in driving economic success in China. According to Lyndsey Anderson, a senior analyst with Business Monitor International, China's food industry is one of the country's most dynamic sectors for both foreign and domestic investors. "Multinational food and drink firms are investing so heavily inChinabecause there is simply no other opportunity like it at present,"​ she said. "Strong economic growth is rapidly expanding the size of the country's middle class, which can now afford to spend its improved disposable incomes on non-essential food and drink items." ​ Van Der Geest suggests that any moves to restrict incentives, besides setting back enthusiasm amongst foreign investors, could also have a negative impact on domestic food companies in china as well. China saw its stocks drop by nine per cent during the course of last month, and the added uncertainty over future investment could continue to hinder the industry and the wider economy. "Any moves by the government to decrease liberalism on investors will only serve to reduce the attractiveness and growth of the country's markets,"​ he said. "Discouraging foreign investment counters the officially stated policy of open door trading and technological transfer." ​ The comments come amidst speculation within the local media, that authorities may look abolish the current incentive plans at China's annual legislature session to be held this week. The issue has been driven by criticism from local companies that tax breaks offers an unfair advantage to foreign companies and needs to be changed. Despite fears over the possibility of economic decline in the country, some parties at the talks see the removal of tax breaks as an important part of increasing the security of domestic food production in China. "The country needs improved legislative oversight to manage foreign mergers and acquisitions in order to guard against monopolies by overseas companies,"​ said Ma Jinquan, a National People's Congress deputy speaking to the Xinhua News Agency.

Related topics: Policy, East Asia, Industry growth, China

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