by the Governments of the United States of America and the People's Republic of China

“ In the accompanying exchange of notes, the United States agrees to amend the treaty with China to include a
"tax sparing credit" if such a provision is ever included in a United States tax treaty with another country. Presently,
the United States does not permit a "tax sparing" credit, i.e. a foreign tax credit for the statutory full amount of the
foreign tax even if, in fact, that tax has been reduced or waived as an incentive. It is a firm element of U.S. policy
that a foreign tax credit be given only for foreign income taxes actually paid. ”

“ THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to the Senate for advice
and consent to ratification, the Agreement between the Government of the United States of America and the
Government of the People's Republic of China for the Avoidance of Double Taxation and the Prevention of Tax
Evasion with Respect to Taxes on Income, together with a supplementary protocol and exchange of notes, which
you signed at Beijing on April 30, 1984.
The agreement is the first complete income tax treaty to be signed with the People's Republic of China. ”

“ Insofar as the tax law of a Contracting State provides with respect to a specific industry that the profits to be
attributed to a permanent establishment are to be determined on the basis of a deemed profit, nothing in paragraph 2
shall preclude that Contracting State from applying those provisions of its law, provided that the result is in
accordance with the principles contained in this Article.
5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent
establishment of goods or merchandise for the enterprise. ”