China gives tax breaks to chip firms as US tensions shift to tech

China gives tax breaks to chip firms as US tensions shift to tech

29/05/19

Luke Foddy, Communications Manager

China’s decision to give tax breaks to domestic high-tech manufacturers indicates how the ongoing US-China tensions are increasingly shifting from a trade war to a tech war.

Beijing announced last week that it will give a five-year tax break to its home-grown semiconductor makers and software developers in a bid to bolster the industries as the trade war ‘shifts to an assault on Chinese technology,’ the South China Morning Post reported.

The country’s finance ministry said that integrated circuit makers and software companies will be exempt from paying corporate taxes for two years, starting in 2019. Additionally, their tax payments will be halved, from 25 per cent to 12.5 per cent, for the following three years.

The move followed Washington’s decision to add Chinese telecoms giant Huawei to a US blacklist, effectively banning US companies from doing business with the Chinese firm, Reuters reported.

China will need to reduce its reliance on imports of tech components by increasing domestic production, and the tax breaks are clearly designed to achieve that aim. They not only indicate that China anticipates tech to be the battleground in future US tensions – they also reflect Beijing’s belief that the tensions are likely to endure for the considerable future.

Meanwhile, Shenzhen – one of China’s key tech hubs and home of Huawei – has announced that it will cut income tax for selected overseas professionals to 15 per cent in order to attract talent and boost innovation.

The role of technology in global trade, including US-China rivalry in the tech space, will be explored across a number of upcoming Asia House events.

Find out more.