Experts agree that the tax change is actually a commitment to the WTO for equal treatment to enterprises, which can only strengthen China's responsible role and make it more attractive to foreign investment.

Joseph Lee, a tax and business advisory partner of Ernst & Young Beijing, is sure that a ten-percent tax increase will not crush out the zest of foreign investment.

"What weighs in their decision is China's huge market potential. The appeals are not only confined to preferential tax policies," said Lee, who has provided 20 years of consulting service on taxes for multinationals.

Carlson Wagonlit Travel (CWT), the second largest travel management company in the world, has just declared an ambitious plan of expanding business in China. The past five years has witnessed its sales volume up by an annual rate of 34 percent, higher than any of its branches in other places.

"Tax rate does not top our concerns," said CWT president Hubert Joly, adding that what he cares most is how to raise the ration of Chinese companies among his customers from the current two percent.

A research report from the World Bank analyzed that stable political situation, sound economic development, broad market, rich labor sources as well as increasingly upgraded business infrastructure and government service in China are the major factors attracting foreign investment.

Tax incentives are usually considered less important than transparent taxation and indiscriminate government policies, said the report.

1

2