Published by: THE WORLD UYGHUR NETWORK NEWS October 27, 1997

10/21/97, Reuters

URUMQI -- China's remote westernmost region of Xinjiang (see map) is to introduce tax breaks to try to lure foreign investors to do business in China's gateway to Central Asia, local officials said.

"We want (Xinjiang's capital) Urumqi to become an economic and financial center for Central Asia," Liu Yusheng, head of the Foreign Affairs Office of the Xinjiang regional Foreign Affairs Bureau, said in an interview at the weekend.

To attain that goal, the government of this region of wild deserts, mountains and fertile oases plans to unveil a new blueprint of tax breaks and favorable policies aimed at boosting foreign investment, Liu said.

The region hopes to use geography -- long its greatest weakness due to its distance from Beijing -- to transform itself into a bridge between the economies of central Asia, Pakistan and even the Middle East and China's booming coastal provinces.

Still one of the poorest regions of China and a three-day train journey from Beijing, the restive and mostly Moslem region of Xinjiang that borders Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan and Pakistan has set for itself an ambitious goal.

However, as an autonomous region it has the power to set policies separate from those of Beijing and is using this status to set tax holidays for foreign investors, possibly among the most generous and far-reaching in China.

Foreign investors will be allowed to lease, buy, take part in or fully own any type of Chinese enterprise in Xinjiang, including long-protected state industries, officials said.

The region will open its ferrous and non-ferrous metals sectors to exploration and development by foreign investors, with Australia's Western Mining Corp. already planning to invest $29 million to prospect for gold.

"We are going to offer tax concessions and open policies that are more attractive than those offered by interior provinces," Liu said.

Foreign joint ventures to be set up for at least 10 years will pay 13 percent tax compared with the usual 15 percent.

Those established in development zones with central government approval will enjoy income tax holidays while those in regional-level development zones will be eligible for refunds on their income tax.

No tax will be charged in the first year after they make a profit and in the third to the fifth year they will pay only half.

The region will offer similar tax breaks in many other districts to encourage both productive and non-productive enterprises, with special holidays for enterprises engaged in transport and agriculture.

Foreign companies that reinvest their profits in Xinjiang will enjoy yet more generous tax breaks and refunds while export-oriented businesses will be eligible for tax rebates.

The region is already the first in China to allow foregners to lease land for agricultural use and plans to encourage such projects with new tax holidays.

"Foreign investors who come here can decide their own methods of management, they can be capitalist," said Liu. "It's up to them to set salaries, to hire and fire. The state will not interfere."

Foreign investment is still tiny in Xinjiang, totaling just $265 million at the end of 1996, although cooperative projects soared by 22 percent last year and Liu said the region was seeing a new surge after foreign interest slowed from 1992 to 1994.