in Renewable Energy Business Partnerships in China China is a huge country with rich renew- PIX04172, Credit: William Wallace able energy resources including wind, solar, Foreign investment is encouraged Shangdu in biomass, hydro, and geothermal assets. It in the following areas: is also the second largest coal consumer in , People’s ■ new agricultural technologies the world. Due to both environmental and Republic of China. economic pressures, China is seeking ways to ■ comprehensive agricultural restructure its energy supply. In the future, development technology renewable energy will undoubtedly become a ■ energy crucial tool for enabling sustainable develop- ment. Due to the gigantic market potential ■ transportation and incentive policies for foreign-funded ■ important raw and semi enterprises, China has attracted large foreign finished materials industry investments, up to 300 billion U.S. dollars ■ high technology (USD), during the past 10 years. ■ export-oriented items China’s Policy for Attracting Foreign Investment ■ comprehensive resource and renewable resource utilization The four basic forms of foreign direct ■ environmental pollution protection investment in China are: ■ Wholly foreign-owned enterprises ■ China-foreign joint ventures ■ China-foreign cooperative enterprises Foreign investment enterprises will be termi- ■ Cooperative development nated at the end of the specified time limit. If investors want to prolong the time of opera- Procedure for Establishing tion, they may apply to approving authorities Foreign Investment Enterprises for permission at least 180 days before the To establish China-foreign joint ventures enterprise is terminated. and co-operative enterprises, four steps are generally required: Limits of Approval Powers 1. Submit item propositions for establish- The provinces, municipalities directly under ing enterprises; after approval by relevant the central government, autonomous regions, departments, investors may embark on and singly-planned cities have the power work based on a feasibility study. to approve investments valuing no more 2. Submit reports on the feasibility study. than 30 million USD. Investments that fall After approval, investors may negotiate within a restricted class, as well as those valu- and sign documents such as contracts ing more than 30 million USD, should be and statutes of establishing enterprises. approved by the Foreign Trade and Economic 3. Submit contracts and statutes of estab- Cooperation Administrations. lishing enterprises. 4. After obtaining a license from the China’s Favorable Taxation Policy approving authorities, investors may begin formalities with industrial and China encourages foreign investment commercial administrations. through a combination of income tax and value-added tax (VAT) incentives. Time Limits The time limit for foreign investment enter- Income tax: The government collects busi- prises (usually 10-30 years) may be negoti- ness income tax from foreign investment ated by investors according to national regu- enterprises at the rate of 33%, but collects lations for specific industries and items. If only 15% from enterprises in special eco- approved by the State Council, requirements nomic zones, the national hi-tech industrial for stipulating a time limit may be waived. zones, and national-grade economic and technical development zones. Continues > NREL International Programs • www.nrel.gov/international Renewable Energy Business Partnerships in China Foreign investment enterprises may also be exchanged for working capital. The amount eligible for a business income tax waiver exceeding this maximum should be put in the during the first two years after they begin appointed bank or be exchanged to Chinese to make a profit and for a partial waiver (CNY). The Foreign Currency Exchange during the next three years. Additionally, Management Regulations, which went into foreign investment enterprises in less devel- effect on April 1, 1996, stipulate that a Foreign oped regions may apply to the relevant State Currency Exchange Annual Audit Report

Council tax authority for a favorable tax pol- conducted by a nationally certified account- Tsuo Simon Credit: PIX01963, icy after the initial tax exemption and reduc- ing firm is required for all foreign investment Developing markets for tion period. After approval, they can enjoy enterprises. solar home systems can a 15-30% reduction in income tax over the Renewable Energy Joint next ten years. Enterprises in the biogas and foster local business wind energy fields are eligible for an income Ventures in China opportunities, such tax rate of 15%. China has engaged in several successful joint as this manufacturing ventures with companies in other countries. facility for PV controllers VAT and VAAT: The following table compares For example, the U.S. company Tang Energy general VAT and VAAT rates with those for Group, Ltd., helped establish ZhongHang in China. biogas and wind enterprises. (Baoding) Huiteng Windpower Equipment CO., Ltd. in China in 2001. Since then, For more information on tax incentives, “Baoding” has captured a dominant share of see the fact sheet Renewable Energy Policy: the Chinese market for blades and Financial Incentives. covers for 600 kW to 750 kW generators. While to date Baoding has sold Items Value-Added VAAT Tax (Value-Added Annex Tax) only to Chinese wind farms, it is preparing to General 17% 8% of VAT export blades to other Asian wind farms. Biogas 13% 8% of VAT Contacts Wind* 8.5% 8% of VAT * The VAT on was issued in September 2001. Wei Lin Import Duties Director of International Relations Department Chinese Renewable Industries Association Although no governmental policy specifically No.A2106 Wuhua Plaza, states that low import duties are applied to A4 Che Gong Zhuang Dajie renewable energy products, many of the main Xicheng District, Beijing 100044, P.R.China components of wind turbines, the turbines Tel: +86-10-68002617/18 themselves, and Photovoltaics modules enjoy Fax: +86-10-68002674 favorable import duties compared with the Email: [email protected] average rate of 23%.

In the 1980s and early 1990s, China approved efforts to reduce or exempt imported wind turbines and related equipment from import The following fact sheets on renewable duty so that the actual duties paid were very energy in China are available on the National low. However, this policy cannot always be Renewable Energy Laboratory’s China Web site applied to all bio-energy equipment. Import (www.nrel.gov/china). duty exemption depends on whether the ■ WB/GEF Renewable Energy equipment is considered to be a high-tech Development Project product. For example, some bio-energy equip- ■ Grid Connected National Renewable ment, like a power generator for biogas, is ■ Renewable Energy Policy in China: Overview Energy Laboratory classified as high-tech and therefore is exempt ■ Renewable Energy Policy in China: Financial 1617 Cole Boulevard from import duty. Incentives Golden, Colorado 80401-3393 ■ Township Electrification Program 303-275-3000 • www.nrel.gov Foreign Currency Exchange ■ China’s Plan for Renewable Energy Operated for the U.S. Depart- Foreign investment enterprises can freely ■ Brightness Rural Electrification Program ment of Energy Office of Energy ■ Renewable Energy Business Partnerships exchange foreign currency in appointed Efficiency and Renewable Energy in China banks (Bank of China and other authorized by Midwest Research Institute • These fact sheets were prepared by DOE/NREL local monetary and financial institutions) Battelle without an administrative certificate. and the China Renewable Energy Industries Association under the US/China Protocol They are, however, required to make known NREL/FS-710-35785 • April 2004 for Cooperation in the Fields of Energy to the bank their working capital and fixed Efficiency and Renewable Energy Technology Printed with biodegradable ink capital. There are also limits placed on Development and Utilization. the total amount of currency that can be on paper containing at least 50% wastepaper, including 20% post consumer waste. NREL International Programs • www.nrel.gov/international