China is stepping up efforts to attract foreign investors with new policies that encourage multinationals to reinvest profits locally through tax breaks, faster approvals, and better business services.
During the “14th Five-Year Plan,” China secured US$708.7 billion in foreign investment and added 229,000 new foreign enterprises. To build on this, the NDRC, Ministry of Finance, and Ministry of Commerce introduced the “Measures to Encourage Foreign-Invested Enterprises to Reinvest in China,” reinforcing its commitment to long-term investment growth.
What Does “Reinvestment” Mean in China?
In practical terms, reinvestment means foreign companies taking the profits they’ve earned in China and putting them back into the local market to grow further.
This can involve:
- Launching new ventures to enter fast-growing industries.
- Expanding capital in existing operations to increase production and market reach.
- Acquiring shares or assets in Chinese companies to deepen integration and access local resources.
The goal is to create a “profit-retention and reinvestment loop”—a cycle where earnings stay in China, fueling expansion and unlocking policy benefits such as tax incentives and streamlined approvals.
Key Incentives for Foreign Investors
The new policy includes 12 concrete measures designed to make reinvestment easier and more attractive:
- Faster project approvals and simplified paperwork
- Flexible land-use options such as lease-before-purchase
- Tax credits of up to 10% for reinvested profits
- Easier foreign exchange and financing support
- Priority entry into high-tech and strategic industries
“These measures are a timely boost,” said Yuan Shenglong of the Chinese Academy of Macroeconomic Research. “They reduce costs, improve efficiency, and give investors greater confidence at a time of global uncertainty.”
Global Companies Are Taking Action
Major multinationals are already responding to these incentives:
- Lexus completed a new energy project in Shanghai in less than five months.
- Vandewiele (Belgium) opened its largest manufacturing base in Jiangsu.
- Weidmann Electrical Insulation launched a US$91 million plant in Wuhan, focusing on advanced transformer materials.
Executives are bullish on China’s market prospects:
- “China is our key market,” said Wilmar’s Changming Tu, noting how streamlined approvals sped up their expansion plans.
- Lily Luo, CEO of Otis China, added: “A 10% tax credit on reinvested profits is a practical incentive that supports our growth strategy.”
- Fabrice Megarbane, CEO of L’Oréal North Asia, commented: “These policies are helping us accelerate R&D and expand our manufacturing footprint.”
High-Tech and R&D Lead the Way
China’s focus on innovation is drawing reinvestment into fast-growing sectors:
- High-tech industries accounted for 34.6% of foreign investment in 2024, up six points since 2020.
- R&D centers and regional headquarters are being established by more multinationals to support local product development.
- Innovation clusters in cities like Shanghai, Shenzhen, and Wuhan are fueling growth in biotech, manufacturing, and digital services.
Examples abound: CJ Group is ramping up R&D in healthy foods for Chinese consumers; KONE is expanding elevator modernization projects tied to urban renewal; and Kärcher has opened a flagship store in Shanghai Hongqiao Station, backed by fast-track approvals.
Tax Breaks, Financing, and Policy Support
China’s reinvestment framework offers a range of tangible financial benefits designed to make local expansion more attractive and cost-effective for foreign companies.
- Tax credits for reinvested profits help reduce overall operating expenses, freeing up capital for further growth and innovation.
- Flexible land-use and industrial upgrade policies provide access to prime locations and infrastructure, helping companies scale production efficiently.
- Streamlined foreign exchange and financing services simplify cross-border transactions and improve cash flow, ensuring reinvestment processes are faster and less cumbersome.
Companies are already seizing these advantages. Otis plans to leverage tax incentives and financing support to accelerate elevator modernization projects across China. L’Oréal’s investment in Veminsyn shows how reinvestment drives green manufacturing and sustainable cosmetics, strengthening China’s high-value appeal.
Experts See Growing Investor Confidence
Reinvestment policies are resonating with global investors.
“These measures directly address the issues foreign companies care about—tax, compliance, and financing,” said Liu Sirui, Partner at DeHeng Law Offices. “They reinforce confidence that China remains committed to creating a predictable and supportive environment for business.”
Børge Brende, President of the World Economic Forum, echoed this sentiment: “China’s ongoing opening-up is unlocking more opportunities for multinational cooperation and long-term growth.”
Why Now Is the Time to Reinvest
With tax incentives, faster approvals, and dedicated support for key industries, China is solidifying its position as a premier long-term growth hub for global companies. The country’s focus on innovation, infrastructure, and industrial upgrading creates an environment where foreign investors can scale quickly and operate efficiently.
Reinvesting now not only helps businesses reduce operational costs and accelerate expansion, but also provides access to booming sectors such as high-tech, green energy, advanced manufacturing, and digital services. Companies that move early will secure a stronger foothold, build local partnerships, and benefit from China’s rapidly evolving consumer and industrial markets.
In an economy driven by innovation and growth, the message is clear: this is the moment for multinationals to reinvest and grow alongside China’s future.