The Chinese government approved a new law on Value Added Tax (VAT) on Wednesday, which will come into full force on January 1, 2026.
The move aims to overhaul the existing VAT system and strengthen regulations for the country's largest source of revenue, which contributed 38% of tax revenue in 2023.
By granting tax exemptions to key sectors such as agriculture, research equipment, and welfare services, China hopes to stimulate its slowing economic recovery.
At the same time, the new tax incentives pave the way for attracting more foreign investment to the country.
However, is this move limited to China or will it also affect Malaysia?
If China's economy recovers, Malaysia's exports, especially in the technology, palm oil, and natural gas sectors, could potentially benefit greatly.
On the other hand, with initiatives attracting foreign investment to China, competition for investment could pose a major challenge for Malaysia, which also relies on foreign investment to grow.
Is this an opportunity for Malaysia to capitalize on China's recovery, or is it a sign of a new threat that requires a more aggressive economic strategy?
