Tax breaks offered for energy industry
By Fu Jing (China Daily)
Updated: 2005-12-22 06:22

China's determination to remove energy bottlenecks is reflected in tax breaks and incentives offered to the industry yesterday.

Investors are encouraged to channel capital to building hydro- and nuclear-power stations, improving electricity grids around the country, and exploring for coal, oil, gas and uranium.

"All the projects should enjoy preferential tax breaks and loan guarantees as they are encouraged by the government," said Liu Zhi, director of the industry department of the National Development and Reform Commission (NDRC).

But he did not elaborate on what the benefits would be at yesterday's press conference during which the government unveiled an updated investment catalogue to channel capital into sectors where investment is encouraged.

In addition to energy, the "encouraged" projects range from improving productivity of barren farm land, airport construction, used-steel treatment and research on vaccines against contagious diseases to low-emission small-engine cars.

In the catalogue, the government also slammed the door in some areas which are "energy-consuming, environmentally harmful or technologically less advanced."

Liu said the catalogue is aimed to help China achieve stable economic and social development at a minimum cost of resources and to the environment.

"We will update the catalogue annually in line with ground realities," Liu told China Daily.

The State Council yesterday also made public a regulation governing industry restructuring objectives, processes and norms which decided the "encouraged," "limited" and "forbidden" sectors.

Liu said the final catalogue, which can be found at the commission's official website www.ndrc.gov.cn, took shape after factoring in inputs from various sectors, including private businesses and foreign investors.

"Even in developed countries, it's common practice for the government to guide industry investment," said Liu, adding that such a catalogue is specially necessary in a country which is redoubling its efforts to develop the economy but suffers from a shortage of resources and energy.

Lin Yueqin, a researcher with the Institute of Economics Research of the Chinese Academy of Social Sciences, said the rate of energy consumption was higher than economic growth in recent years, which means there is still much potential for saving energy and raising the efficiency of energy use.

Premier Wen Jiabao has warned that China's economy rides excessively on investment and material input. The inefficient growth pattern, in conflict with the environment, "can no longer continue," the premier said.

(China Daily 12/22/2005 page1)