China, the world's second-largest energy consumer, will this year begin offering corporate income tax preferences to overseas investors in natural gas processing, marketing and construction of urban gas pipelines in a move to use more of the clean energy source.

Overseas companies investing in these fields will be exempted from the corporate income tax during their first two years of profitability, according to China's tax laws, the State Administration of Taxation said.

Over the following three years they will be charged half of the tax.

When the preference ends, overseas firms investing in construction of urban gas pipelines will pay a tax of just 15 percent.

China now levies a 17 percent corporate income tax on overseas companies, compared with 33 percent on domestic firms.

However, according to a new corporate income tax law passed in March, charges on both overseas and domestic companies will be 25 percent next year.

Zhang Deyong, a researcher from the institute of finance and trade economics under the Chinese Academy of Social Sciences, said the government expects to bring more foreign capital and advanced technologies in the natural gas sector by providing the tax preferences.

"Natural gas is in short supply in China. The sector needs a governmental boost badly," Zhang told China Daily.

China plans to amplify natural gas consumption as part of its drive to cut pollution and alleviate heavy dependence on coal.

According to a government plan revealed in April, the ratio of natural gas in the country's total energy consumption will rise to 5.3 percent a year in 2010, up from 2.8 percent in 2005.

Meanwhile, the proportion of coal will decline to 66.21 percent from 69.1 percent.

Natural gas production in China will reach 92 billion cubic meters a year in 2010, up from 47.9 billion cubic meters in 2005, according to the program.

Last month, the nation's natural gas output climbed by 16.7 percent year-on-year to 5.35 billion cubic meters, according to industry data.

China is determined to cut major pollutant emissions per unit of gross domestic product by 10 percent during the period.

(China Daily June 19, 2007)