China has fulfilled almost all its commitments to the World Trade Organization (WTO) since joining it more than five years ago. And it will meet one of its last pledges next year if the ongoing session of the National People's Congress (NPC) approves a draft.

The long awaited law on new corporate income tax is expected to take effect in 2008, changing China's existing rates for domestic firms (33 percent) and overseas-invested companies (15 percent) to a unified 25 percent. That will provide domestic and overseas-funded firms with a level playing field for the first time since the economic reforms began in the 1980s.

Overseas firms that have invested in sectors such as high-tech manufacturing and services will, however, continue to enjoy the favorable treatment.

Companies from abroad have been enjoying the favorable tax structure since they first tapped the Chinese market.

The government granted them the favor because they faced various investment restrictions in some industries and sharing of stakes, says investment researcher at the University of International Business andEconomicsLu Jinyong. "But we cannot grant them preferential treatment forever. They have to be treated equally now, given that China has opened nearly all its markets to foreign players."

In fact, the proposed 25 percent tax is low compared to most other countries. Government data show the average corporate income tax rate in 159 counties and regions was 28.6 percent in 2005-06, with the average rate in the Chinese mainland's 18 neighboring countries and regions being 26.7 percent.