Improved legal control over Chinese tax incentives: anything to learn from EU State aid?

Diheng Xu


Since the “reform and opening‑up” policy in 1978, Chinese tax incentives have experienced fluctuations. China has tailored its tax incentives to create a level playing field in the market, especially after China’s accession to the World Trade Organization (WTO). However, China still has a state‑oriented attitude towards the granting of tax incentives. This can be witnessed from conflicts between certain Chinese tax incentives and the WTO’s subsidy rules. China tends to treat tax incentives as instruments to achieve policy goals, but they often lack the necessary legal control.

The European Union (EU) is a comparable power as to China in the world. The ultimate objective of the EU is the establishment of an internal market, which is based on market economy and free trade. State aid law, as a part of EU competition law, aims to limit the negative effects of state aid measures, thus creating a level playing field for all member states. In recent years, it plays an increasing role in restricting the harmful effects of tax incentives in the internal market.

How can China improve the legal control over its tax incentives? Are there any inspirations for China from the experiences of EU State aid law? This article makes suggestions to an improved legal control over Chinese tax incentives against the background of EU State aid.


Chinese tax incentives; EU State aid; Legal Control; Fair competition; Ex-ante and ex-post assessment

DOI: 10.6092/issn.2036-3583/9441


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