G/SCM/Q2/CHN/100  
 
27 April 2021 
(21-3537) Page: 1/2 
Committee on Subsidies and Countervailing Measures  Original: English  
 
  
SUBSIDIES  
REPLIES TO THE SECOND SET OF FOLLOW -UP QUESTIONS1 POSED BY THE UNITED STATES  
REGARDING THE 2017 NEW AND FULL NOTIFICATION OF CHINA2 
The following communication, dated  and received on  26 April 2021, is being circulated at the request 
of the delegation of China . 
 
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Question 1  
The United States originally asked this question : "It appears that none of the sub -central 
legal measures referenced in the sub -central section of China's notification have been 
published in the MOFCOM Gazette . Does China agree that normative documents that 
establish or implement a subsidy program at the sub -central level of government must be 
published in the MOFCOM Gazette pursuant to China's Protocol of A ccession? " In 
response, China stated : "China has been committed to enhancing transparency in 
practice ." W hat is the meaning of this answer?  The United States considers China 's 
transparency obligations under its Protocol of Accession to be critically import ant. Does 
China accept its obligation to publish the legal measures that establish and implement its 
subsidy programs at all levels of government?  
Reply : 
 
Ministry of Commerce, P.R.C published 80 issues of China Foreign Trade and Economic Cooperation 
Gazette annually. The Gazette can be subscribed through mail and is published on the website of 
MOFCOM, with over 3.9 million page views annually.  
 
Question 2  
With respect to the National Integrated Circuit Investment Fund (IC Fund)  China state s 
that the shareholders vote according to the proportion of equity held.  China does not deny 
that the shareholders of the IC Fund are nearly all government entities.  Given these facts, 
does China agree that the government controls the IC Fund?  If not, plea se explain.  
Reply : 
 
The National Integrated Circuit Investment Fund (IC Fund) has one government department 
shareholder (the Ministry of Finance) and several shareholders of state -owned enterprises and 
private enterprises, and is not controlled by the government. The IC Fund operates in accordance 
with the Company Law and other relevant laws, and has established corporate governance systems 
such as the general meeting of shareholders, the board of directors, and the board of supervisors. 
The general meeting of shareholders is the highest authority of the IC Fund. The board of directors 
implements the resolutions of the general meeting of shareholders and decides related major 
matters in accordance with the law. The board of directors is also responsible for hiring senior 
 
1 G/SCM/Q2/CHN/87 ( follow -up questions); G/SCM/Q2/CHN/ 94 (replies to follow -up questions ); 
G/SCM/Q2/CHN/98 (second set of follow -up questions) . 
2 G/SCM/N/315/CHN.  G/SCM/Q2/CHN/100  
 
- 2 - 
 
  execut ives and IC Fund 's daily operation and management. The board of supervisors supervises the 
performance of directors and senior executives. The IC Fund has been operating in accordance with 
professional management and market -oriented operation, and carrying  out independent investment.  
 
Question 3  
What has been the rate of return of the IC Fund since its inception?  
Reply : 
 
Not available.  
 
Question 4  
Please describe the "rigid investment yields and exit methods " of the IC Fund 's 
decision -making committee.  What are the investment yields used?  
Reply : 
 
It is understood that the IC Fund sets different investment threshold yields depending on the types, 
operation, and risks of industries to be invested in, and carries out commercial negotiations with the 
companies that have investment intentions accordingly. Regarding investment exit methods, in the 
equity investment industry, there are usually two main types: First, if the invested company is a 
listed company or has IPO before the fund exit, the share s held in the stock market will be reduced 
and exited. Second, if the invested company is not listed, the shares held will be generally 
repurchased by the company 's major shareholders or transferred to a third party. It is understood 
that the IC Fund has w ithdrawn part of investment funds through the above two methods.  
 
Question 5  
In response to a question regarding China 's equity investments into its state -owned 
enterprises, China states "as the state is a shareholder of state -owned enterprise s, it is 
fulfilling the rights and obligations of a shareholder  increas ing the capital in the invested 
enterprise by injecting the capital from the state -owned capital management budget " and 
that therefore,  "it should not be regarded as a subsid y." Is it C hina's position that 
regardless of the terms and conditions under which the Government of China invests in a 
state -owned enterprise s and regardless of the financial health and prospects of the 
state -owned enterprise into which the Government of China invests , that such an 
investment can never be considered a subsidy under Article 1 of the Agreement on 
Subsidies and Countervailing Measures?  
 
Reply : 
 
As the State is a shareholder of state -owned enterpri ses, it is fulfilling the rights and obligations of 
a shareholder increasing the capital in the invested enterprise by injecting the capital from state -
owned capital management budget. This is identical with other shareholders increasing capital in 
enterpr ises, not inconsistent with the usual practices of private investors. Therefore, it should not 
be regarded as a subsidy.  
 
 
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