Analysts and officials don't expect that foreign direct investment (FDI) in China will shrink much in years to come, because the preferential tax regime is not the only boon for enterprises coveting China.

Executives from major international companies in China, including 3M, Pepsico International, General Motors and Johnson & Johnson refused to accept telephone interviews with China Daily about the unified tax system, with many citing the same reason: "It is too sensitive a topic to say anything right now."

However, both the American Chamber of Commerce in China (AmCham-China) and the European Union Chamber of Commerce in China (European Chamber) suggested a grandfather period before the transformation, which cannot take effect until 2008.

"While we see tax system unification as an inevitable trend, AmCham-China cautions against implementing a tax system that fails to continue providing incentives to new and ongoing investment," James Zimmerman, chairman-elect of AmCham-China, told China Daily.

"AmCham-China's recommendation is to grandfather the existing preferential treatment for foreign companies when reforming the tax systems for initial and recurring investment."

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