China's new corporate income tax law won't reduce the country's appeal to foreign investors, Minister of Commerce Bo Xilai has said.

"Foreigners investing in China are not only attracted by tax preferences, but also other factors like infrastructure, science and technology, labor quality, industrial support, financing and social stability, which weigh heavier with investors," Bo was quoted as saying in Monday's China Securities Journal.

"What's more, foreign enterprises will still enjoy a favorable tax rate of 15 percent in sectors like high technology," said Bo.

The new corporate income tax law adopted by the country's legislature last week sets a unified income tax rate for domestic and foreign companies at 25 percent and will come into effect on Jan. 1 next year.

Currently, the actual average income tax burden on Chinese companies is 25 percent, while that on foreign enterprises is 15 percent.

Bo's opinion has been echoed by international accounting firm Deloitte, which stressed the new tax law was lower than the average tax rates of neighboring countries.

The average company income tax rate is 28.6 percent in 159 countries and regions and 26.7 percent in China's 18 neighboring countries and regions.

The new tax policy would also help reduce the practice of "round tripping", whereby domestic enterprises take advantage of the incentives to foreign-funded enterprises by transferring domestic capital overseas and then making inward investments, according to Deloitte Greater China.

"The new law follows the rule of fair competition and will push China's use of foreign capital into a higher level," said Bo.

China used 9.71 billion U.S. dollars of foreign capital from January to February, 13.04 percent up from last year, according to the Ministry of Commerce

The country chalked up a trade surplus of almost 24 billion U.S. dollars in February, a growth of almost 50 percent month-on-month and a record for February.

Bo attributed the soaring surplus to the rush of exports in anticipation of lower tax rebates and appreciation of the Renminbi.

It would take some time for China to change the trade imbalance, while policies aimed at boosting imports and cutting exports still needed time to take effect, said Bo.

Source: Xinhua