The State Council on Monday steered China’s investment-promotion machinery away from subsidy-and-incentive competition toward a model built on business environment, industrial ecosystem and high-quality government services, while passing a draft revision of the Tax Administration Law that officials say will advance tax fairness and improve fiscal governance.

Presiding over the executive meeting, Premier Li Qiang said regulating investment promotion is a key component of building a unified national market. The meeting called for clearly defining what local governments should encourage and prohibit in attracting investment, and for shifting the emphasis of investment promotion toward optimizing the business environment, cultivating industrial ecosystems and providing high-level government services.

“Local governments must strengthen positive guidance and binding constraints,” the meeting concluded, adding that authorities should refine mechanisms for communicating with enterprises, proactively help companies resolve practical difficulties, and create fairer and more dynamic market conditions for development.

Xiao Hongwei, director of the Policy Simulation Laboratory at the State Information Center of the National Development and Reform Commission, noted that with the unified national market initiative advancing in depth, investment promotion has shifted “from competing on preferences and subsidies to competing on business environment, services and ecosystem.” He urged localities to cultivate the “internal strength” of institutional supply and innovation, and to empower high-quality development through high-quality investment attraction.

In a parallel move, the meeting discussed and approved in principle the draft revision of the Tax Administration Law of the People’s Republic of China, deciding to submit the draft to the Standing Committee of the National People’s Congress for deliberation. The revised law emphasizes organizing tax collection and administration in accordance with the law, standardizing tax enforcement, improving taxpayer services, and strengthening protection of taxpayers’ legitimate rights and interests — all aimed at promoting tax fairness and improving fiscal governance.

Experts noted that this marks the first major revision of the Tax Administration Law in over two decades. The draft is expected to require digital platforms, financial institutions and relevant administrative agencies to share tax-related information with tax authorities, thereby laying the informational foundation for “governing taxation with data” and smart tax administration. At the same time, it tightens procedural constraints on tax enforcement and enhances protections for taxpayers’ rights to statement and defense.

The meeting also reviewed and approved the draft revision of the Implementation Regulations of the Audit Law of the People’s Republic of China.

Taken together, Monday’s decisions signal a coherent policy direction: as China builds a high-standard socialist market economy, the tools of regional competition are being reset. Preferential tax breaks and subsidized land deals that fueled a “race to the bottom” among localities are being replaced by an institutional framework that rewards places offering superior business environments, stronger property-rights protection and more predictable tax administration.

For foreign investors, the message is twofold. On one hand, the removal of asymmetric incentives means location decisions will increasingly hinge on genuine competitiveness factors — rule of law, talent pools, infrastructure and industrial clustering. On the other, the new tax administration framework promises more standardized, transparent and internationally-aligned enforcement, reducing the uncertainty that has long complicated cross-border compliance.