Last Updated: 15 October 2026 | Reviewed by Out2China Quick Answer Foreign employers can support employee retention in C...
China's 2025 Encouraged Catalogue offers foreign companies a 15% corporate income tax rate across Western China and Hainan, a 10% tax credit on reinvested onshore profits, and industrial land pricing as low as 70% of national benchmarks — making this the most financially transparent foreign investment framework China has released to date.
The 2025 Catalogue operates on a dual-layer structure: a National Catalogue covering sectors like AI, biopharmaceuticals, and advanced manufacturing — valid across all of China — plus three Regional Catalogues for Central & Western China, Northeast China, and Hainan. Hainan alone adds 102 additional encouraged sectors on top of the national list, combining its 15% tax rate with zero-tariff and simplified tax administration frameworks.
Real-world impact: Shanghai-based Kelon reported tax savings exceeding RMB 3 million from a single factory investment under the profit-reinvestment credit. For global founders evaluating China entry, understanding which region aligns with your industry is the critical first step — and this guide maps each of the three regional propositions in detail.
With the release of the Encouraged Catalogue for Foreign Investment Industries (2025 Edition), China has sent a clear and confident message to the global market: its commitment to opening up is not slowing down—it is becoming more targeted, more strategic, and more focused on high-quality growth. The new Catalogue is far more than an update to an existing policy list. It functions as a practical investment roadmap, guiding international capital toward industries critical to China’s next phase of economic transformation, while also directing investment into regions with untapped development potential. The Encouraged Catalogue is one of China’s most important policy instruments for shaping foreign investment. It combines industry priorities with regional development objectives, helping investors align commercial strategy with national policy direction. The 2025 revision adopts a dual-layer structure: This structure reflects three core policy goals: Against a backdrop of global economic restructuring, China is using clearer and more transparent policy tools to reinforce predictability and long-term confidence for international investors. The National Catalogue defines sectors encouraged nationwide—such as biopharmaceuticals, advanced manufacturing, and artificial intelligence—steering foreign capital toward innovation-driven growth. The Regional Catalogues, covering Central & Western China, Northeast China, and Hainan, build on the national list by adding region-specific industries that qualify for stackable incentives, including preferential corporate income tax rates (notably 15% in Western China and Hainan). These catalogues are designed to leverage local strengths, promote orderly industrial relocation, and rebalance China’s economic geography. For global companies pursuing long-term growth, understanding this regional differentiation is essential to capturing the next wave of “China opportunities.” The defining feature of the 2025 Catalogue is its philosophy of “national alignment with regional differentiation.” While baseline incentives apply across regions, each area brings its own strategic advantages. Central and Western China serve as China’s manufacturing and energy heartland, positioned to absorb industrial relocation while offering strong cost and resource advantages. The 2025 Catalogue encourages foreign investment in areas such as: Key incentives include: This region is particularly attractive for manufacturing scale-up, supply-chain relocation, and cost-sensitive expansion strategies. As China’s traditional industrial base, Northeast China’s policy focus is on industrial upgrading and diversification, while unlocking the value of its distinctive climate, ecological, and cultural assets. In addition to strengthening core equipment manufacturing, the 2025 Catalogue introduces new encouraged sectors such as: This marks a shift from a singular focus on industrial revitalisation toward a more diversified model that integrates manufacturing, tourism, and seasonal economies. While the 15% corporate income tax rate does not generally apply across the Northeast, investors can still benefit from: Hainan occupies a unique position as China’s largest Free Trade Port and its most ambitious testing ground for institutional openness. The province is being positioned as a gateway for global companies entering the China and Asia-Pacific markets. Beyond the National Catalogue, Hainan adds 102 additional encouraged sectors, with a strong focus on: Hainan combines a 15% corporate income tax with its signature framework of zero tariffs, low tax rates, and simplified tax administration. More importantly, the deepening of its “first-line liberalisation, second-line control” customs model—together with increasingly seamless cross-border flows of capital and talent—creates unmatched platform value for trading, R&D, and regional headquarters operations. In preparation for full island-wide customs closure, Hainan has also launched the Cross-Border Finance Services Plan for the Hainan Free Trade Port, integrating banks, investment institutions, and insurers into a one-stop, end-to-end financial services ecosystem. For international companies, this functions as a practical navigation chart and toolkit for operating in a high-openness environment. Regardless of location, projects listed in the Encouraged Catalogue are eligible for a core set of national incentives: Policy awareness is only the starting point. Speed and execution determine success. As a local partner, we recommend a phased approach: For global companies, entering China today is not just about preferential policies—it is about a strategic window that is unlikely to repeat. From interpreting local implementation rules to designing optimal investment pathways and building compliant, high-performing teams, every step matters. As your trusted local partner, we provide not only policy navigation, but also end-to-end solutions spanning company setup, employment and payroll management, benefits design, and ongoing compliance advisory. Contact us to turn China’s regional opportunities into the next growth engine of your global strategy. Eligible foreign-invested enterprises operating in encouraged industries in Western China, most Central provinces, and Hainan qualify for a preferential 15% corporate income tax (CIT) rate, compared to the standard 25% rate. Northeast China does not generally extend the 15% rate, though other incentives apply. For the full breakdown of which provinces qualify, see Section II of this guide. When an overseas investor reinvests onshore profits back into China — through capital increases, establishing a new entity, or acquisitions — they may receive a 10% tax credit against payable CIT. This applies nationwide to all encouraged-catalogue projects. A documented case: Shanghai-based Kelon claimed over RMB 3 million in tax reductions from a single factory investment via this mechanism. Details are in Section III. Hainan combines the 15% CIT rate with 102 additional encouraged sectors beyond the national list — the most extensive regional supplement in the 2025 Catalogue. It also operates under a zero-tariff, low-tax framework and a "first-line liberalisation, second-line control" customs model, making it China's primary hub for international trading companies, regional headquarters, and cross-border finance operations. See Section II.3 for the full Hainan proposition. The National Catalogue prioritises sectors central to China's economic transformation, including biopharmaceuticals, artificial intelligence, advanced manufacturing, and modern services. These sectors qualify for incentives across all of China, regardless of region. Regional catalogues then add locally relevant industries on top — for example, ice-and-snow equipment manufacturing in Heilongjiang and tropical agriculture in Hainan. Full sector details are in Section I. Yes. Encouraged-catalogue projects in both Western/Central China and Northeast China can access industrial land at as low as 70% of the national benchmark transfer price. Flexible tenure arrangements — including long-term leasing and lease-first-then-transfer models — are also available to reduce upfront capital requirements. This incentive applies nationwide for intensive-use industrial projects. See Section III for the full incentives overview. The National Catalogue defines encouraged industries valid across all of China, while Regional Catalogues layer on additional, location-specific encouraged sectors for three zones: Central & Western China, Northeast China, and Hainan Free Trade Port. Projects qualifying under both catalogues simultaneously can access stackable incentives — meaning both national incentives (tariff exemptions, land discounts, reinvestment credits) and regional benefits (notably the 15% CIT) apply at once. The dual-layer structure is explained in Section I.A Regional Investment Guide for Global Companies
I. Why the Catalogue Matters: Policy Logic and Strategic Intent
II. Regional Strategy in Focus: Three Distinct Investment Value Propositions
1. Central & Western China: Cost Efficiency Meets Resource Depth
2. Northeast China: Industrial Upgrading and the Rise of the “Cold Economy”
3. Hainan: China’s Highest-Level Experiment in Institutional Opening
III. Nationwide Incentives: What All Encouraged Projects Can Access
Imported self-use equipment within the approved investment amount is exempt from customs duties (except items explicitly excluded by regulation).
For intensive-use industrial projects, land transfer prices may be reduced to as low as 70% of national benchmarks, with flexible options such as long-term leasing or lease-then-transfer to reduce upfront capital pressure.
Overseas investors reinvesting onshore profits into China—through capital increases, new entities, or acquisitions—may receive a 10% tax credit against payable corporate income tax.
In practice, this has delivered material savings: for example, Shanghai-based Kelon reported tax reductions exceeding RMB 3 million for a new factory investment.
Major foreign investment projects benefit from dedicated taskforces, fast-track approval channels, and streamlined reinvestment procedures, significantly lowering hidden transaction and compliance costs.IV. A Practical Action Checklist for Entering China
Phase 1: Strategic Positioning
Align your business line with the region’s “core advantage”:
cost and scale in Central/Western China,
industrial foundations and niche resources in the Northeast,
or global connectivity and policy openness in Hainan.
Work with finance and advisory teams to model the real impact of the 15% tax rate, 10% reinvestment credit, and land and tariff savings on your specific project.Phase 2: Establishment and Acceleration
Assess whether to establish a new entity or expand via profit reinvestment. The latter can unlock immediate tax benefits and accelerate asset growth in China.
Use professional support to complete company registration, banking, and tax setup efficiently—while leveraging any local “green channel” mechanisms.
Combine direct hiring for core roles with outsourced or flexible staffing for non-core functions. This balances control, agility, and early-stage compliance risk.Phase 3: Long-Term Growth
Tap into China’s complete industrial ecosystem by establishing R&D centres or deepening local sourcing to enhance responsiveness and resilience.
Collaborate with universities, research institutes, and industrial parks to translate local market demand into product and technology innovation.V. Why Now?
From the full removal of foreign ownership limits in manufacturing to transparent policy tools like the Encouraged Catalogue, China’s opening framework is becoming clearer and more stable.
China’s vast market is evolving into multiple high-value niches—from pet healthcare to ice-and-snow tourism to intelligent manufacturing—each offering new growth narratives.
As global supply chains are reshaped, establishing a strategic footprint in China embeds your business in the world’s most complete and responsive industrial system.Frequently Asked Questions
What is the corporate income tax rate for foreign companies under China's 2025 Encouraged Catalogue?
How does the 10% reinvestment tax credit work for foreign investors in China?
What makes Hainan different from other regions in China's 2025 investment catalogue?
What industries does China's 2025 Encouraged Catalogue cover at the national level?
Can foreign companies get reduced industrial land prices in China under the 2025 Catalogue?
What is the difference between China's National Catalogue and the Regional Catalogues for foreign investment?
Last Updated: 15 October 2026 | Reviewed by Out2China Quick Answer Foreign employers can support employee retention in C...
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