Guidance has been issued by several government ministries to encourage overseas investors to expand investments in China.
The Ministry of Finance, State Administration of Taxation, National Development and Reform Commission, and Ministry of Commerce on 28 December 2017 jointly released Caishui  88 (known in English as “notice on the issue that foreign investors' direct investment through distribution of profits will be tentatively exempt from China withholding tax” or Circular 88) and relevant interpretations, which provide foreign investors with a withholding tax deferral incentive for profit reinvestments in China.
Profits derived by a foreign investor from resident companies in China will be entitled to a tax deferral incentive and temporally will not trigger withholding tax, provided that the profits are reinvested in “encouraged projects” and that other conditions are met.
Circular 88 specifies the applicable conditions, procedures and obligations, follow-up administration, departmental coordination mechanism, tax treatment for investment withdrawals, and period of execution regarding to this preferential tax policy.
Read a December 2017 report prepared by the KPMG member firm in China
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.