October 29, 2007 -- Hebei Aoxing Pharmaceutical Group Co. Ltd. announced that has received approval to become eligible for preferential enterprise income tax treatments on October 22. The company is an operating subsidiary of China Aoxing Pharmaceutical Company, Inc. It is eligible for a preferential tax rate of 15 percent.

"Aoxing can enjoy the tax concession for five profitable years," Zhang Zhihua, a representative from the China Council for the Promotion of International Trade told Emerging China. But in the future, such concessions will be impossible. A new uniform tax rate [for foreign-invested and Chinese state-owned enterprises] of 25 percent was enacted on March 16, 2007. Aoxing Pharmaceutical was granted tax concessions because the new law had not yet been launched; it goes into effect January 2008.

"The concession was the result of negotiation between the company and the relevant tax bureau," David Shao, CEO of Aoxing, told Emerging China. The concessions are in keeping with China's previous tax policy, which granted favorable tax rates to FIEs to attract foreign capital. From 1978 until recently FIEs were granted three years tax free, followed by a two-year 50 percent tax discount in most provinces. By comparison, Chinese state-owned enterprises (SOEs) were taxed at a rate 33 percent. According to Zhang, FIEs also received preferable policies such as free land for industry construction.

"State-owned companies have certain advantages in the market, such as close relationships with the national and local governments, that may provide them with certain competitive benefits compared to multinationals," says Matthew Chervenek, founder and president of General Biologic, a research group focusing on the pharmaceutical industry in China.

Hebei Aoxing Pharmaceutical Group Co. Ltd. became a publicly traded company in the US in April 2006. The company is an operating subsidiary of China Aoxing Pharmaceutical Company, Inc., which specializes in research, development, manufacturing and distribution of a variety of narcotics and pain management products. Hebei Aoxing Pharmaceutical manufactures several drugs, including Oxycodone, Pholcodine, Naloxone and Tilidine. The company expects to be profitable by 2008.