RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/W/241 
27 October 2004 
 (04-4568) 
Council for Trade in Services Original:   English 
  
 
COMMUNICATION FROM JAPAN  
 
Transitional Review Mechanism in  connection with Paragraph 18 of
 
the Protocol on the Accession of the People's Republic of China  
 
 
 The following communication, dated 25 Octobe r 2004, from the delegation of Japan, is being 
circulated to Members of the Council for Trade in Services.  
_______________ 
 
 
- Questions and Comments of Japan on the Implementation by China  
of its Commitments on Trade in Services - 
  
1. During the last three years, after its acc ession to WTO, the Chinese economy has made an 
enormous development by a high grow th rate and has made a great c ontribution to the development of 
the world economy. Especially, the liberalization of the services trade has been attracted with a 
special importance. At the end of this year, a la rge number of China's commitments enter into an 
implementation phase. At this critical juncture, Chin a is further invited to take necessary steps to 
ensure regular and effective application of pub lic comments procedures, well-in-advance publication 
of laws and regulations, avoidan ce of abrupt regulatory change, cl ear demarcation of departmental 
responsibilities, improvement in inter-departmental and central-provincial c oordination etc. In a 
transitional period of evolving regulations, the importa nce of transparency, pred ictability, stability and 
consistency is paramount. Japan is confident that this trans itional review mechanism will be 
meaningful for making those efforts by China more efficient and productive. 
2. In accordance with paragraph 18 of the Protocol  on the Accession of the People's Republic of 
China, which states that "China shall provide releva nt information to each subsidiary body in advance 
of the review" and in the spirit of cooperation to render the TRM process in a most efficient and 
effective manner, Japan requests Ch ina to provide in advance of the Regular Session Meeting of the 
Council for Trade in Services responses and relevant  information to the following questions and 
comments. 
3. With respect to Japan's questions and comment s on insurance and insurance-related services 
and banking services, please refer to the documents that has been sent to the Committee on Trade in 
Financial Services.  
I. GENERAL 
4. The delay of the remittance of foreign curre ncy and exchange of "renmin-bi" constitute 
substantial barriers for supplying services in China. Th is raises concerns in the context of Article XI 
of the GATS.  Japan hopes that China will take  concrete steps to improve the situation. S/C/W/241 
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II. PROFESSIONAL SERVICES 
5. According to "Regulations on Administrati on of Foreign-Invested Construction and  
Engineering Design Enterprises" and "Regulati ons on Management of Foreign founded Urban 
Planning Services Enterprises" (Decree No.114 and 116 of the Ministry of Construction), foreign 
construction service enterprises and architectural a nd engineering design service enterprises need to 
clear qualification requirements by the Chinese authority, such as minimum capital, number of engineers and foreign–engineer-ratio. Some of such requirements raise doubts concerning their 
consistency with Article XVII of the GATS and China's Schedule. Japan considers that these 
requirements are more burdensome than necessary a nd Japan requests China to ease or abolish these 
requirements.   For architectural, engineering, integrated  engineering and urban planning services, 
Japan continued to be interested in the wholly  foreign-owed enterprises will be permitted under 
reasonable conditions as set out in China's Schedule. 
III. COMPUTER AND RELATED SERVICES 
6. Japan has a keen interest in  China's compliance for its accession commitments in computer 
and related services and would like China to ensu re the compliance with such commitments when 
introducing and applying its regulations for the services closely related to computer and related 
services.  Japan would also like to ask China to ensu re the transparency in accordance with Article III 
of the GATS, in the scope of computer and relate d services so that service suppliers can be fully 
informed of such regulations. 
IV. COMMUNICATION SERVICE S: TELECOMMUNICATION  
7. A "Telecommunications Act" which is a ba sic law on operating telecommunication business 
is yet to be constituted. Unfortunately, due to lack  of such a law, telecommunication operators are 
facing difficulties in entering into and expanding  their businesses in the Chinese market despite 
China's commitment.  Japan urg es the Chinese authority to enact a "Telecommunications Act", which 
is consistent with WTO rules and commitments as soon as possible. 
8. Telecommunication business in China is facing diffi culties due to the lack of transparency, in 
particular in licensing, authorization requirements an d procedures.  Therefore, Japan requests China to 
establish and disclose clear standards for licensing and authorization (including for the establishment 
of joint ventures).  For such purposes, it is suggest ed to introduce a "manual for market entry into 
Chinese telecommunication market" as a comprehensive guidance for market entry. 
9. Japan understands that Chinese authority a pproves licenses only to newly established 
enterprises although Chinese laws do not prescribe li censing criteria. Such requirements could cause 
inconsistency with Article XVI:2:(e) of the GATS.  Therefore, Japan seeks the abolishment of this 
requirement and requests that authorization shoul d be given to all enterprises including already 
established enterprises. 
10. Japan understands that the resale of telecomm unication services is not permitted in China, 
while there is no reservation in China's Schedule.  Japan requests the abolition of this requirement.  
11. Regarding the International Gateway for pr oviding the international telecommunication 
services, the construction, operation and maintenanc e are permitted only for the Chinese state-owned 
enterprises, while there is no reservation in China' s Schedule.  Japan requests the abolition of this 
requirement.   S/C/W/241 
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 12. Japan hopes that under rapidly evolving regulatory and business environments in China, 
China will not introduce new standards, which are irre levant to the objectives and principles of WTO.   
V. CONSTRUCTION AND RELATED SERVICES 
13. After the establishment of "Regulations on Admi nistration of Foreign-Invested Construction 
Enterprises" (Decree No.113 of the Ministry of Cons truction) and the abolition of "the Tentative 
Measures on Administration of Foreign Enterprise Qu alifications for Contracting for Construction 
Projects" (Decree No.32 of the Ministry of Constr uction), Japan considers that higher barriers for 
foreign construction enterprises to provide  services in  China have been introduced.  Japan would like 
to know China's view on this point. 
14. Only 4 types of construction projects are allowe d to be undertaken by wholly foreign-owned 
enterprises as set out in China's Schedule.  In add ition to this limitation, according to "Regulations on 
Administration of Foreign-Invested Construction En terprises", which came into force in December 
2002, the foreign construction enterprises needed to  be qualified by the Chinese authority, and are 
subject to requirements such as minimum capital and number of engineers.  Japan understands these 
requirements constitute substantial barriers to foreig n construction enterprises.  Japan seeks easing, or 
abolition of these requirements.  Japan would like to know China’s view on how these requirements 
are compatible with the GATS Article VI:5 and the GATS Article XVII. 
Ⅵ. DISTRIBUTION SERVICES 
15. The liberalization of distribution services is an i ssue of great interest to Japan.  Japan hopes 
the phase–in commitments in China's Schedule are duly implemented according to the provision of 
"Measures for the Administration of Foreign Investment in Commercial Fields", promulgated on 16 April 2004 and took effect on 1 June 2004.  Japan  seeks China’s assurance on this point.  Regarding 
the "Measures for the Administration of Foreign Investment in Commercial Fields", Japan has 
information that China is preparing for the regul ations or guidelines to implement these "Measures". 
If this is the case, Japan would like to know the details of such regulations or guidelines and its 
consistency with China's commitments. 
16. According to Article 17 of "Measures for the Administration of Foreign Investment in 
Commercial Fields", a relevant regulation is to be p ublished in the fields of automobiles.  From the 
view point of monitoring the implementation of co mmitments, Japan would like to ask for China’s 
clarifications when the regulation will be issued. 
17. According to China's Schedule, in  the automobile sector, Japan understands that wholly 
foreign-owned enterprises will be permitted to enga ge in retailing services after the date of 11 
December 2004 except for such "chain stores which sell products of different types and brands with 
more than 30 outlets".  Japan seeks China's assuranc e on this point.  For the purpose of clarifying this 
commitment, Japan has a great interest to the definiti ons of "brand", "type" and "chain store".  Japan 
would like to make sure whether each brand of di fferent Chinese partners with the same Japanese 
manufacturer may be recognized as an individual bra nd.  In this connection, Japan would like to 
confirm the definition of the terms on mode 3 in re tail services: "chain stores", "different types" and 
"different brands". 
18. At "the follow-up meeting of the Japan-China Economic Partnership Consultation" in June 
2004, China clearly stated that the "Auto Industry Development Policy" which took effect on and after 1 June 2004 does not prohibit any dealer s from selling both Chinese-made and imported 
automobiles in China.  In light of Article XVII of the GATS, Japan would like to urge China to 
confirm that the Chinese government's statement mean s that dealers are always allowed to sell both S/C/W/241 
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 Chinese-made and imported automobiles without any co nditions and to confirm that there is no sales 
discrimination, in any fashion, between Chinese-made and imported automobiles. 
19. With regards to "Market Management Measur es on Automobile Brand Names", China has 
given the opportunity for comments in advance.  Japan has already posed the comments to the 
Ministry of Commerce and hopes the regulations on automobile brands and automobile distribution 
network will be formed in a manner consistent with WTO rules.   
20. On franchising, Japan would like to confirm that China will implement its commitment to 
"within three years after Chin a's accession to the WTO, none" in Mode 3 on MA and NT. 
VII. TOURISM AND TRAVEL RELATED SERVICE 
21. In China, the limitation of the establishment of foreign travel enterprise' branch offices 
constitutes barriers to services supply in China. Japan requests faithful and early, if possible, 
implementation of the commitments.  Please explain the current preparation status. 
VIII. TRANSPORT SERVICE (MARITIME TRANSPORT SERVICES AND AUXILIARY 
SERVICES) 
22. A wholly owned foreign shipping company is prohibited in China (not included in China's 
Schedule).  Japan would like to know the informati on of the further liberalization in these fields.   
According to China's Schedule, the list of Article II exemption states: “The parties concerned may, 
through bilateral agreements, establish entities to e ngage in usual business in China either as joint 
venture or wholly-owned subsidiaries subjects to the Chinese laws on joint venture and on foreign 
enterprises for ships owned or operated by carriers of  the parties concerned.  Indeed, if there is a 
bilateral agreement with China, "The interim provisions on  examination and approval of wholly-
foreign-owned shipping companies" provides a sp ecial arrangement for the establishment of the 
wholly owned foreign shipping company under the special conditions, including: "more than 15 years experience as a marine transport enterprise", "more than  3 years as representatives in China" or "there 
is a scheduled entering a port where the wholly ow ned foreign shipping company is located".  The 
third condition constitutes barriers to supplying services for customers who reside in the inner part of 
China.  Japan would like to know the view of Ch ina on this point.  And Japan understands that under 
“The interim provisions on examin ation and approval of wholly-fore ign-owned shipping companies”, 
some wholly owned foreign shipping companies are permitted.  However, in case of the enterprises of 
some countries, special conditions mentioned abov e were eased or not applied and wholly owned 
foreign shipping companies are permitted under the cond ition of bilateral agreement.  In this context, 
Japan requests China to provide fu rther information on this point, including the name of the countries 
to which China provides more favorable treatment by  bilateral agreements, to what extent favorable 
treatment has been given by such agreements.  
23. On freight forwarding agency services, where th e current commitments provide that within 
four years after accession, wholly-foreign-owned su bsidiaries will be permitted, Japan would like to 
know the plan and schedule for the implementation of this phase-in commitment. 
24. The Regulations on International Maritime Transportation, which is administered by Ministry 
of Communications, provides that a non vessel operating common carrier (NVOCC) needs to pay as the surety bond a sum of RMB 800,000 Yuan (Article 8).  Japan seeks China’s justification of this 
sum of surety bond in the light of GATS Article VI:5, particularly for being not more burdensome 
than necessary to ensure the qualit y of the services.  Japan would like to know whether there is any 
plan of revision, easing or abolition of this requirement.  S/C/W/241 
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 25. In China, the Regulations on International Mar itime Transportation administered by Ministry 
of Communications cover NVOCC, while "Regul ations concerning Foreign Investment in 
International Freight Forwarding Operations" admini stered by Ministry of Commerce covers freight 
forwarding agency services. When services supplie rs are not operating vessels themselves, but 
through carriage contracts with other vessel operators including as a part of multimodal transport, the regulatory status is not quite ev ident between these two regulations.
* This unclear implementation of 
the two regulations is causing the confusion and concer ns in light of Article VI:1 of the GATS.  Japan 
requests China to introduce and explain clear demarc ations of the scope of the two regulations, and 
which Ministry is in charge of the said services. 
IX. OTHERS 
26. Japan understands that the "Foreign Trade Law"  was amended and came into force in July 
2004.  Japan requests China to present the relevant information regarding the plan or schedule of 
preparing laws, regulations, guide lines concerned for implementati on of the law.  Japan requests 
China to administer the Act consistently with  the China’s commitments upon accession to the WTO.  
 
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*  Paragraph 3 of note to the Draft Schedule on Maritime Transport Services: "person on whose behalf the 
bill of lading/any other document evidencing a contract of carriage of goods is issues and who is responsible for 
the carriage of goods pursuant to the contract of carriage".