(Xinhua)
Updated: 2007-01-19 14:13

Preferential rates will also be granted to sectors such as shipbuilding, equipment and machinery sectors, banks, insurance, logistics, and traditional labor-intensive service sectors.

Companies like Guangzhou Shipyard, Dongfang Electric, Shanghai Electric, Harbin Power and China Infrastructure Machinery will be winners under the new tax policy.

But prospects are less optimistic for companies located in the High-tech Development Zone that belong to traditional industries. These companies currently enjoy a 15 percent preferential corporate income tax. But when the preferential tax is canceled, their future profit is likely to be squeezed.

The future is less clear for property developers, as it is difficult to predict whether they will benefit from the new tax policy. And while investors focus on the unification of the corporate income tax rate, the government also plans to abolish some fees.

"This means not all of the positive news has been factored in by the market," according to a Merrill Lynch report. In addition to the expected tax rate cut, fees charged by the government will be abolished, including city construction and education fees that account for about 3 to 5 percent of domestic firms' tax bills. But this change will have no impact on foreign-invested companies, which do not pay these fees.

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