RESTRICTED  WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  WT/ACC/SPEC/CHN/1/Rev.4 
25 October 2000 
 (00-4438) 
Working Party on the 
Accession of China Original:   English/ 
 anglais/ 
 inglés 
  
DRAFT REPORT OF THE WORKING PARTY 
ON THE ACCESSION OF CHINA TO THE WTO
1 
 
Revision  
  Following the Chairman's remarks at the conclu sion of the Twelfth Meeting of the Working 
Party on 28 September 2000, this further revision of  the Draft Report of the Working Party on the 
Accession of China to the WTO is being circulat ed on the Chairman's own responsibility.  This 
revision attempts to take into account developments during the Twel fth Meeting and is submitted to 
the Working Party for the purpose of facilitating further discussions. 
 
 Groupe de travail de 
l'accession de la Chine 
 
PROJET DE RAPPORT DU GROUPE DE TRAVAIL DE 
L'ACCESSION DE LA CHINE À L'OMC
1 
 
Révision  
 
 Suite aux remarques formulées par le Président  à l'issue de la douzième réunion du Groupe de 
travail le 28 septembre 2000, cette nouvelle révisi on du projet de rapport du Groupe de travail de 
l'accession de la Chine à l'OMC est distribuée sous la responsabilité du Président.  Cette révision vise 
à tenir compte des faits nouveaux intervenus au cour s de la douzième réunion du  Groupe de travail et 
est soumise au Groupe pour faciliter la suite des débats.   
 
Grupo de Trabajo sobre la 
Adhesión de China 
 
PROYECTO DE INFORME DEL GRUPO DE TRABAJO 
SOBRE LA ADHESIÓN DE CHINA A LA OMC1 
 
Revisión  
 
 Como consecuencia de las observaciones form uladas por el Presidente al concluir la 
duodécima reunión del Grupo de Trabajo del 28 de septiembre de 2000, se distribuye esta nueva revisión del proyecto de informe del Grupo de Trabaj o sobre la Adhesión de China a la OMC bajo la 
responsabilidad del Presidente.  La presente revisi ón tiene por objeto tener en cuenta los nuevos 
acontecimientos que se han producido durante la duodécima reunión y se somete al Grupo de Trabajo 
con el fin de facilitar la continuación de los debates. 
 
 
                                                     
 
1 In English only./En anglais seulement./En inglés solamente.  WT/ACC/SPEC/CHN/1/Rev.4 
 Page i 
 
 
TABLE OF CONTENTS  
 
I. INTRODUCTION ................................................................................................................ ....1 
1. Documentation provided...................................................................................................... ....1 
2. Introductory statements ..................................................................................................... ......1 
II. ECONOMIC POLICIES.......................................................................................................... 3 
1. Non-discrimination (includi ng national treatment)...............................................................3 
2. Monetary and Fiscal Policy.................................................................................................. ....6 
3. Foreign Exchange and Payments ............................................................................................7 4. Balance-of-Payments Measures.............................................................................................10 
5. Investment Regime........................................................................................................... .......11 
6. State-Owned and State- Invested Enterprises.......................................................................12 
7. Pricing Policies ............................................................................................................ ............13 
8. Competition Policy.......................................................................................................... ........15 
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES ....................................16 
1. Power of Executive, Legislative and Judicial Branches of Government............................16 
2. Authority of Sub-Central Governments ...............................................................................16 3. Uniform Administration  of the Trade Regime.....................................................................16 
4. Judicial Review ............................................................................................................. ..........16 
IV. POLICIES AFFECTIN G TRADE IN GOODS ...................................................................16 
A. TRADING
 RIGHTS .................................................................................................................16 
B. IMPORT  REGULATION.........................................................................................................16 
1. Ordinary Customs Duties..................................................................................................... ..16 
2. Other Duties and Charges.................................................................................................... ..18 
3. Rules of Origin ............................................................................................................. ...........18 
4. Fees and Charges fo r Services Rendered..............................................................................19 
5. Application of Internal Taxes to Imports .............................................................................19 
6. Tariff Exemptions ........................................................................................................... ........20 
7. Tariff Rate Quotas .......................................................................................................... ........21 
8. Quantitative Import Restrictions, including Prohibitions and Quotas..............................21 9. Import Licensing............................................................................................................ .........21 
10. Customs Valuation.......................................................................................................... ........23 
11. Other Customs Formalities.................................................................................................. ..24 
12. Preshipment  Inspection..................................................................................................... .....24 
13. Anti-Dumping, Countervailing Duties ..................................................................................25 14. Safeguards ................................................................................................................. ..............25 
C. EXPORT
 REGULATIONS ......................................................................................................25 WT/ACC/SPEC/CHN/1/Rev.4 
Page ii  
 
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of 
Internal Taxes to Exports...................................................................................................... .25 
2. Export Licensing and Export Restrictions ...........................................................................25 3. Export Subsidies ............................................................................................................ .........27 
D. INTERNAL
 POLICIES  AFFECTING  FOREIGN  TRADE  IN GOODS..................................28 
1. Taxes and Charges Levied on Imports and Exports ...........................................................28 2. Industrial Policy, including Subsidies ...................................................................................28 3. Technical Barriers to Trade................................................................................................. ..28 
4. Sanitary and Phytosanitary Measures ..................................................................................28 5. Trade-Related Investment Measures ....................................................................................29 
6. State Trading Entities...................................................................................................... .......30 
7. Special Economic Areas ...................................................................................................... ...32 
8. Government Procurement...................................................................................................... 34 
9. Transit..................................................................................................................... .................35 
10. Agricultural Policies ...................................................................................................... .........35 
11. Trade in Civil Aircraft.................................................................................................... ........36 
12. Textiles ................................................................................................................... ..................36 
13. Measures Maintained  Against China....................................................................................37 
14. Transitional Safeguards .................................................................................................... .....38 
15. Transitional Review Mechanism ...........................................................................................38 V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME.......................................38 
VI. POLICIES AFFECTING TRADE IN SERVICES..............................................................38 
VII. OTHE R ISSUES .............................................................................................................. .......38 
1. Notifications............................................................................................................... ..............38 
2. Special Trade Arrangements .................................................................................................3 8 
3. Transparency ................................................................................................................ ..........38 
VIII. CONC LUSIONS .............................................................................................................. .......38 
  WT/ACC/SPEC/CHN/1/Rev.4  
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I. INTRODUCTION 
1. At its meeting on 4 March 1987, the Council established a Working Party to examine the 
request of the Government of the People's Re public of China ("China" ) (L/6017, submitted on 
10 July 1986) for resumption of its status as a GATT contracting party, and to submit to the Council 
recommendations which may include a Draft Protocol  on the Status of China.  In a communication 
dated 7 December 1995, the Government of Ch ina applied for accession to the Agreement 
Establishing the World Trade Organization ("WTO Ag reement") pursuant to Article XII of the WTO 
Agreement.  Following China's application and pur suant to the decision of the General Council on 
31 January 1995, the existing Working Party on China's Status as a GATT 1947 Contracting Party 
was transformed into a WTO Accession Working Pa rty, effective from 7 December 1995.  The terms 
of reference and the membership of the Working Party are reproduced in document 
WT/ACC/CHN/2/Rev.8.   
2. The Working Party on China's Status as a C ontracting Party met on 20 occasions between 
1987 and 1995 under the Chairmanship of H.E. Mr. Pierre-Louis Girard (Switzerland).  The Working 
Party on China's Accession to the WTO Agreement met on _________________ and _________________ under the same Chairman.   
1. Documentation provided 
3. The Working Party had before it, to serve as a basis for its discussion, a Memorandum on 
China's Foreign Trade Regime (L/6125) and questions  posed by members of the Working Party on the 
foreign trade regime of China, together with repli es of the Chinese authorities thereto.  In addition, the 
Government of China made available to the Work ing Party a substantial amount of documentation, 
which is listed in document WT/ACC/CHN/23.  
2. Introductory statements 
4. In statements to the GATT 1947 Working Party and subsequently to the Working Party on 
China's Accession to the WTO, the representative of Ch ina stated that China's consistent efforts to 
resume its status as a contracting party to GATT and accession to the WTO were in line with its 
objective of economic reform to establish a socia list market economy as well as its basic national 
policy of opening to the outside world.  China believed that its WTO accession would increase its economic growth and enhance its economic and trade rela tions with WTO Members. 
5.  Members of the Working Party welcomed Chin a's accession to the WTO and considered that 
its accession would contribute to a strengthening of  the multilateral trading system, enhancing the WT/ACC/SPEC/CHN/1/Rev.4 
Page 2  
 
universality of the WTO, bringing mutual benefits  to China and to the other Members of the WTO, 
and ensuring the steady development of the world economy. 
6. The representative of China said that China had a territory of 9.6 million square kilometres 
and, at the end of 1998 a popul ation of 1.25 billion.  Since 19 79, China had been progressively 
reforming its economic system, with the objective of  establishing and improving the socialist market 
economy.  The reform package introduced in 1 994, covering the banking, finance, taxation, 
investment, foreign exchange ("forex") and foreign trade sectors, had brought about major 
breakthroughs in China's socialist market economy.  State-owned enterprises had been reformed by a 
clear definition of property rights and responsibiliti es, a separation of government from enterprise, 
and scientific management.  A modern enterprise system had been created for the state-owned sector, and the latter was gradually getting on the track of growth through independent  operation, responsible 
for its own profits and losses.  A nation-wide unifi ed and open market system had been developed.  
An improved macroeconomic regulat ory system used indirect means and market forces to play a 
central role in economic management and the allocati on of resources.  A new tax and financial system 
was functioning effectively.  Financial policy had been separated from commercial operations of the 
central bank, which now focussed on financial regulation and supervisi on.  The exchange rate of the 
Chinese currency Renminbi (also "RMB") had been un ified and remained stable.  The Renminbi had 
been made convertible on current account.  Further liberalization of pricing policy had resulted in the 
majority of consumer and producer products being subject to market prices.  The market now played a 
much more significant role in boosting supply and meeting demand.  
7. The representative of China further noted that  as a result, in 1999, the Gross Domestic 
Product (GDP) of China totaled RMB 8.2054 trillion yuan (approximately US$ 990 billion).  In 1998, 
the net per capita income for rural residents was RMB 2,160 yuan (approximately US$ 260), and the 
per capita dispensable income for urban dwellers  was RMB 5,425 yuan (approximately US$ 655).  In 
recent years, foreign trade had grown substantially.   In 1999, total imports  and exports of goods 
reached US$ 360.65 billion, of which exports stood at US$ 194.93 billion, and imports, US$ 165.72 
billion. Exports from China in 1998 accounted  for 3.4% of the world's total.  
8. The representative of China stated that although important achievements had been made in its 
economic development, China was s till a developing country and therefore should have the right to 
enjoy all the special and preferential treatment ac corded to developing country Members pursuant to 
the WTO Agreement. 
9. Some members of the Working Party indicated that because of the significant size, rapid 
growth and transitional nature of the Chinese ec onomy, a pragmatic approach should be taken in  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 3 
 
 
determining China's need for recourse to transitiona l periods and other special provisions in the WTO 
agreements available to developing country WTO Me mbers.  Each agreement and China's situation 
should be carefully considered and specifically addressed. 
10. At the request of interested members of the Wo rking Party, the represen tative of China agreed 
that China would undertake bilateral market a ccess negotiations with respect to industrial and 
agricultural products, and initial commitments in services.  
11. Some members of the Working Party stated th at in addition to undertaking market access 
negotiations in goods and services, close attenti on should also be paid to China's multilateral 
commitments, in particular China's future oblig ations under the Multilateral Agreements on Trade in 
Goods and the General Agreement on Trade in Servi ces ("GATS").  This was of vital importance to 
ensure that China would be able to take full be nefit of WTO membership as quickly as possible, as 
well as to ensure that the value of any market access conditions undertaken were not adversely 
affected by inconsistent measures such as some types of non-tariff measures. 
12. The representative of China stated that the achievement of balance between rights and 
obligations was the basic principle in its negotiation of WTO accession. 
13. Some members of the Working Party expressed  concern over discrepancies in statistical 
information supplied by the Government of Ch ina on trade volume/value.  Members and China 
pursued this issue separatel y in an Informal Group of Experts on Export Statistics. 
14. The Working Party reviewed the foreign trad e regime of China.  The discussions and 
commitments resulting therefrom are contained in pa ragraphs … below and in the Draft Protocol of 
Accession ("Draft Protocol") and in China's Schedules annexed to the Draft Protocol.   
II. ECONOMIC POLICIES 
1. Non-discrimination (including national treatment) 
15. Some members expressed concern regarding the application of the principle of non-
discrimination in relation to foreign individuals a nd enterprises (whether wholly or partly foreign 
funded).  Those members stated that China shoul d enter a commitment to accord non-discriminatory 
treatment to all foreign individuals and enterpri ses and foreign-funded enterprises in respect of the 
procurement of inputs and goods and services neces sary for production of goods and the conditions 
under which their goods were produced, marketed or so ld, in the domestic market and for export.  In 
addition, those members said that China should also enter a commitment to guarantee non-discriminatory treatment in respect of the prices  and availability of goods and services supplied by WT/ACC/SPEC/CHN/1/Rev.4 
Page 4  
 
national and sub-national authorities and public or state enterprises, in areas including transportation, 
energy, basic telecommunications, other utilities and factors of production. 
16. Some members of the Working Party also raised concerns over China's practice of 
conditioning or imposing restri ctions upon participation in the Chinese economy based upon the 
nationality of the entity concerned.  Those members in  particular raised concerns over such practices 
in relation to the pricing and pr ocurement of goods and services, a nd the distribution of import and 
export licences.  Members of the Working Party requ ested that China enter into a commitment not to 
condition such practices on the nationa lity of the entity concerned.   
17. In response, the representative of China emph asized the importance of the commitments that 
the government was undertaking on non-discriminati on.  The representative of China noted, however, 
that any commitment to provide non-discriminat ory treatment to Chinese enterprises, including 
foreign-funded enterprises, and foreign enterprises and individuals in China, would be subject to other 
provisions of the Draft Protocol and, in partic ular, would not prejudice China's rights under the 
GATS, China's Schedule of Specific Commitments or  commitments undertaken in relation to trade-
related investment measures. 
18. The representative of China further confirmed that  China would provide the same treatment to 
Chinese enterprises, including foreign-funded enterpri ses, and foreign enterprises and individuals in 
China.  China would eliminate dual pricing practic es as well as differences in treatment accorded to 
goods produced for sale in China in comparison to  those produced for export.  The Working Party 
took note of these commitments.   
19. The representative of China confirmed that, cons istent with China's rights and obligations 
under the WTO Agreement and the Draft Protocol, China would provide non-discriminatory treatment 
to all WTO Members, including Members of the WT O that were separate customs territories.  The 
Working Party took note of this commitment. 
20. Members of the Working Party expressed concer n about certain provisions of Chinese laws, 
regulations, administrative notices and other requirement s which could, directly or indirectly, result in 
less favourable treatment of imported products in  contravention of Article III of the General 
Agreement on Tariffs and Trade ("GATT 1994").  Such requirements included product registration 
and certification, internal taxation, price and prof it controls and all distinct forms of licensing for 
imports, and distribution or sale of imported goods.  Even where such requirements existed in relation 
to domestically produced goods, Members re-iterated that any de facto  or de jure less favourable 
treatment of imported goods had to be eliminated in order to ensure full conformity with the principle 
of national treatment.  WT/ACC/SPEC/CHN/1/Rev.4  
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21. Some members of the Working Party drew Chin a's attention to the variety of types of 
requirements which could contravene GATT Articl e III. Specific reference was made to the 
procedures, charges and conditions for granting of bu siness licences, whether to import, distribute, re-
sell or retail goods of non-Chinese origin.  Referenc e was also made to taxes and fiscal provisions 
whose impact depended, directly or indirectly, upon the Chinese or non-Chinese origin of the goods 
imported or traded.  Those members drew the atten tion of China to its obligation to ensure that 
product testing and certification requirements, including procedures for in situ  inspections, posed no 
greater burden – whether financial or practical - on goods of non-Chinese origin than on domestic 
goods.  Those members underlined that conformity  assessment procedures and standards, including 
safety and other compliance requirements, had to  respect the terms of the WTO Agreement on 
Technical Barriers to Trade ("TBT Agreement") as well as GATT Article III. 
22. The representative of China confirmed that the full respect of all laws, regulations and 
administrative requirements with the principle of  non-discrimination between domestically produced 
and imported products would be en sured and enforced by the date of China's accession to the WTO 
unless otherwise provided in the Draft Protocol or Dr aft Report.  The representative of China declared 
that, by accession, China would repeal and cease to a pply all such existing laws , regulations and other 
measures whose effect was inconsistent with WTO rules on national treatment.  This commitment was 
made in relation to final or interim laws, administrative measures, rules and notices, or any other form of stipulation or guideline. The Working Party took note of these commitments.  
23. In particular, the representative of China confir med that measures would be taken at national 
and subnational level, including repeal or modificat ion of legislation, to provide full GATT national 
treatment in respect of laws, regulations and othe r measures applying to internal sale, offering for 
sale, purchase, transportation, distribution or use of the following: 
- After sales service
 (repair, maintenance and assistance), including any conditions applying to 
its provision, such as the MOFTEC 3rd Decree of 6 September 1993, imposing mandatory 
licensing procedures for the supply of after- sales service on various imported products; 
- Pharmaceutical  products, including regulations, noti ces and measures which subjected 
imported pharmaceuticals to distinct procedures and formulas for pricing and classification, 
or which set limits on profit margins attainab le and imports, or which created any other 
conditions regarding price or local content which could result in less favourable treatment of imported products; 
- Cigarettes
, including unification of the licensing requirements so that a single licence 
authorized the sale of all cigarettes, irrespectiv e of their country of origin, and elimination of WT/ACC/SPEC/CHN/1/Rev.4 
Page 6  
 
any other restrictions regarding points of  sale for imported products, such as could be 
imposed by the China National Tobacco Corporation ("CNTC"). It was understood that in the 
case of cigarettes, China could avail itself of a tr ansitional period of tw o years to fully unify 
the licensing requirements.  Immediately upon accession, and during the two year transitional 
period, the number of retail outlets selling imported cigarettes would be substantially 
increased throughout the territory of China; 
- Spirits
, including requirements applied under Chin a's "Administrative Measures on Imported 
Spirits in the Domestic Market", and other provisions which imposed distinct criteria and 
licensing for the distribution and sale of different categories of spirits, including unification of the licensing requirements so that a single licence authorized the sale of all spirits irrespective 
of their country of origin; 
- Chemicals
, including registration procedures applicab le to imported products, such as those 
applied under China's "Environmental Control Regulations for Initial Imports of Chemical 
Products and Imports a nd Exports of Toxic Chemical Products"; 
- Boilers and pressure vessels , including certification and inspection procedures which had to 
be no less favourable than those applied to goods of Chinese origin, and fees applied by the 
relevant agencies or administrative bodies, whic h had to be equitable in relation to those 
chargeable for like products of domestic origin. 
The representative of China stated that in the cases of pharmaceuticals, spirits and chemicals cited 
above, China would reserve the right to use a tran sitional period of one year from the date of 
accession in order to amend or repeal the relevant le gislation.  The Working Party took note of these 
commitments.  
2. Monetary and Fiscal Policy 
24. The representative of China stated  that through the reform and opening up in the last two 
decades, China had established a fiscal management sy stem which was compatible with the principles 
of a market economy.  With respect to fiscal revenue , a taxation system with a value-added tax as the 
main element had been established since the taxa tion reform in 1994. With respect to fiscal 
expenditure, over recent years the government had, in line with the public fiscal requirement generally 
exercised by market economies, strengthened its adju stment of the structure of expenditure and given 
priority to public needs so as to ensure  the normal operations of the government. 
25. The representative of China further stated that in  recent years, while pursuing proactive fiscal 
policy, China had implemented proper monetary poli cy and had taken a series of adjusting and reform  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 7 
 
 
measures which included lowering the interest rate for loans from financial institutions, improving the 
system of required deposit reserves and lowering th e ratio of required reserves, positively increasing 
the input of base money and encouraging th e commercial banks to expand their credit. 
26. In respect of future fiscal policy, the Governme nt of China would further improve its taxation 
system and would continue to improve the effici ency of fiscal expenditure through implementing 
reform measures such as sectoral budget, centralized  payment by the national treasury and zero base 
budget, as well as improving management of fiscal expenditure. With respect to future monetary 
policy, the central bank would continue to pursue a prudent policy, maintain the stability of RMB, 
promote interest rate liberalization and establish a modern commercial banking system. 
3. Foreign Exchange and Payments 
27. Some members of the Working Party raised concerns about China's use of forex controls to 
regulate the level and composition of trade in goods a nd services.  In response, the representative of 
China stated that its system of forex had undergon e rapid change and that China was now a member 
of the International Monetary Fund ("IMF").  Sign ificant moves had been taken to reform, rationalize 
and liberalize the forex market.  The practice of mu ltiple exchange rates in swap centres had been 
abolished.  China had already unified its forex market  and removed many of the restrictions on the use 
of forex.  
28. Outlining the historical development of China' s forex reform, the representative of China 
stated that the purpose of China's forex reform wa s to reduce administrative intervention and increase 
the role of market forces.  From 1979, a forex rete ntion system was applied in China, although forex 
swap was gradually developing.  In early 1994, o fficial RMB exchange rates were unified with the 
market rates. The banking exchange system was adopted and a nationwide unified inter-bank forex 
market was established, with c onditional convertibility of the Renm inbi on current accounts.  Since 
1996, foreign investment enterprises ("FIEs") were also permitted into the banking exchange system, 
and the remaining exchange restrictions on curre nt accounts were eliminated. On 1 December 1996, 
China had formally accepted the obligations of Ar ticle VIII of the IMF's Articles of Agreement, 
removing exchange restrictions on current account  transactions.  Accordingly, since then the 
Renminbi had been fully convertible on current acc ounts.  It was confirmed by the IMF in its Staff 
Report on Article IV Consultations with China in 2000 that China had no existing forex restrictions 
for current account transactions. 
29. The representative of China stated that th e State Administration of Foreign Exchange 
("SAFE") was under the auspices of the People's Bank of China ("PBC"), and was the administrative 
organ empowered to regulate forex.  Its main f unctions were to monitor and advise on balance-of-WT/ACC/SPEC/CHN/1/Rev.4 
Page 8  
 
payments and forex matters.  SAFE was also require d to draft appropriate regulations and monitor 
compliance.  He further noted that domestic and fo reign banks, and financial institutions could engage 
in forex business, with the approval of the PBC.  
30. In response to requests from members of the Working Party for further information, the 
representative of China added that for forex pa yments under current accounts, domestic entities 
(including FIEs) could purchase forex at market exch ange rates from designated banks or debit their 
forex accounts directly upon presentation of valid do cuments.  For payments such as pre-payment, 
commission, etc., exceeding the proportion or lim it, the entities could also purchase forex from the 
banks upon meeting the bona fide  test administered by SAFE.  Forex for personal use by individuals 
could be purchased directly from the banks upon pr esentation of valid documents (within a specified 
limit).  For amounts exceeding the limit, individuals able to prove their need for additional forex 
could purchase it from the banks.  He also noted that current account forex receipts owned by 
domestic entities had to be repatriated into China, so me of which could be retained and some sold to 
the designated banks at market rates.  A verifica tion system for forex payment (imports) and forex 
receipt (exports) had also been adopted. 
31. Concerning the exchange rate regime in partic ular, the representative of China noted that 
since the unification of exchange rates on 1 Janua ry 1994, China had adopted a single and managed 
floating exchange rate regime based on supply an d demand.  PBC published the reference rates of 
RMB against the US dollar, the HK dollar and Japan ese yen based on the weighted average prices of 
forex transactions at the interbank forex market during the previous day's trading. The buying and 
selling rates of RMB against the US dollar on the inte r-bank forex market could fluctuate within 0.3% 
of the reference rate. For the HK dollar and Japanes e yen, the permitted range was 1%.   Designated 
forex banks could deal with their clients at an agreed  rate.  Under such contracts the exchange rate of 
the US dollar was required to be within 0.15% of  the reference rate, whereas for the HK dollar and 
Japanese yen, the permitted range was 1%.  The ex change rates for other foreign currencies were 
based on the rates of RMB against the US dollar a nd cross-exchange rates of other foreign currency 
on the international market. The permitted margin between the buying and selling rate could not 
exceed 0.5%. 
32. The representative of China further noted that since 1 January 1994, designated forex banks 
had become major participants in forex transactions .  On 1 April 1994, the China Foreign Exchange 
Trading System was set up in Shanghai and branches were opened in dozens of cities.  The Shanghai 
Foreign Exchange Trading System had adopted a system of membership , respective quotation, 
concentrated trading and forex market settlement .  Designated forex banks  dealt on the inter-bank 
market according to the turnover position limit on ba nking exchange stipulated by SAFE and covered  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 9 
 
 
the position on the market. Depending on its macro- economic objectives, the PBC could intervene in 
the forex open market in order to regulate market su pply and demand, and maintain the stability of the 
RMB exchange rate.  
33. The representative of China noted that since 1 July 1996, forex dealing of the FIEs was 
carried out through the banking exchange system.  He further noted that to encourage foreign direct investment, China had granted national treatment to FIEs in exchange administration.  Accordingly, 
FIEs were allowed to open and hold forex settle ment accounts to retain receipts under current 
accounts, up to a maximum amount stipulated by SA FE.  Receipts in excess of the maximum amount 
were required to be sold to desi gnated forex banks.  No restrictions  were maintained on the payment 
and transfer of current transactions by FIEs, a nd FIEs could purchase fore x from designated forex 
banks or debit their forex accounts for any paym ent under current transactions, upon the presentation 
of valid documents to the designa ted forex banks or SAFE for the bona  fide test.  FIEs could also 
open forex accounts to hold foreign-invested cap ital, and they could sell from these accounts upon the 
approval of SAFE.  FIEs could also borrow fore x directly from domestic and overseas banks, but 
were required to register with SAFE afterwards, and obtain approval by SAFE for debt repayment and 
services.  FIEs could make payments from their fo rex accounts or in forex purchased from designated 
forex banks after liquidatio n, upon approval by SAFE according to law.   
34. The representative of China further noted that  the laws and regulations mentioned above 
were:  Law of the People's Republic  of China on Chinese-Foreign Equi ty Joint Venture;  Law of the 
People's Republic of China on Chinese-Foreign Cont ractual Joint Venture;  Regulations on the 
Exchange System of the People's Republic of China;  and Regulations on the Sale and Purchase of and 
Payment in Foreign Exchange.  
35. Some members of the Working Party stated that China should undertake appropriate 
commitments on its reform of forex. 
36. In response, the representative of China stated  that China would implement its obligations 
with respect to forex matters in accordance with the provisions of the WTO Agreement and related 
declarations and decisions that concerned the IM F.  The representative further confirmed China's 
acceptance of the obligations of Article VIII of the IMF's Articles of Agreement, which provided that 
"no member shall, without the approval of the F und, impose restrictions on the making of payments 
and transfers for current international transactions ".  He stated that, in accordance with these 
obligations, and unless otherwise provided for in th e IMF's Articles of Agreement, China would not 
resort to any laws, regulations or other measu res, including any requirements with respect to 
contractual terms, that would restrict the availa bility to any individual or enterprise of forex for WT/ACC/SPEC/CHN/1/Rev.4 
Page 10  
 
current international transactions within its customs territory to an amount related to the forex inflows 
attributable to that individual or enterprise.  He stated, moreover, that China would not subject 
individual requests for forex for the making of payments and transfers  for current international 
transactions, including the issuance of credit or cred it guarantees for current international transactions 
(e.g., letters of credit; direct loans; guarantees of loans by financial institutions or other entities; or 
insurance of financing by financial institutions or ot her entities), to any form of approval or restriction 
(including a requirement for the presentation of an  invoice), in a manner inconsistent with its 
obligations under the IMF's Articles of Agreemen t.  The Working Party took note of these 
commitments.  
37. In addition, the representative of China stat ed that China would provide information on 
exchange measures as required under Article VIII, S ection 5 of the IMF's Articles of Agreement, and 
such other information on its exchange measur es as was deemed necessary in the context of the 
transitional review mechanism.  The Working Party took note of this commitment.  
4. Balance-of-Payments Measures 
38. Some members of the Working Party stated that China should apply balance-of-payments 
("BOPs") measures only under the circumstances provided for in the WTO Agreement and not as a 
justification for imposition of restrictions on imports  for other protectionist purposes.  Those members 
stated that measures taken for BOPs reasons should have the least trade disruptive effect possible and 
should be limited to temporary import surcharges, import deposit requirements or other equivalent 
price-based trade measures, and those measures shou ld not be used to provide import protection for 
specific sectors, industries or products. 
39. Those members further stated that any such  measures should be notified pursuant to the 
Understanding on the Balance-of-Payments Provi sions of the GATT 1994 ("BOPs Understanding") 
and to the General Council not later than the im position of the measures, together with a time 
schedule for their elimination and a programme of external and domestic policy measures to be used 
to restore BOPs equilibrium.  Those members also stat ed that following deposit of such a notification, 
the Committee on Balance-of-Payments Restrictions  ("BOPs Committee") should meet to examine 
the notification.  It was noted that paragraph 4 of the BOPs Understanding would be available to 
China in the case of "essential products".  Some members stated that the BOPs Committee should 
review the operation of any BOPs measures taken by China, if so  requested by China or a WTO 
Member.  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 11 
 
 
40. Some other members considered that, in resp ect of measures taken for BOP purposes, China 
should enjoy the same rights as those accorded to  other developing country WTO Members, as 
provided in GATT Article XVIII:B and the BOPs Understanding.   
41. In response, the representative of  China stated that China considered that it should have the 
right to make full use of WTO BOPs provisions to protect, if necessary, its BOPs situation.  He confirmed that China would fully comply with the provisions of the GATT 1994 and the BOPs 
Understanding.  Further to such compliance, China would give preference to application of price-
based measures as set forth in the BOPs Understanding.   If China resorted to measures that were not 
price-based, it would transform such measures in to price-based measures as soon as possible.  Any 
measures taken would be maintained strictly in accordance with the GATT 1994 and the BOPs 
Understanding, and would not exceed what was necessar y to address the particular BOPs situation.  
The representative of China also confirmed that measures taken for BOPs reasons would only be 
applied to control the general leve l of imports and not to protect specific sectors or industries.  The 
Working Party took note of these commitments. 
5. Investment Regime 
42. The representative of China stat ed that since the inception of  the reform and opening up 
policy in the late 1970's, China had carried out a series of reforms of its investment regime. The 
highly centralized investment administration under the planned economy had been progressively 
transformed into a new pattern of diversification of investors, multi-channelling of capital sources and 
diversification of investment modalities. The govern ment encouraged foreig n investment into the 
Chinese market and had uninterruptedly opened and expanded the scope for investment. At the same 
time, the Government of China also encouraged  the development of the non-state-operated economy 
and was speeding up the opening of areas for non-stat e investment. With China's programme in the 
establishment of its market economy, the construc tion projects of various enterprises utilizing free 
capital and financed by the credit of the enterprise would be fully subject to the decision-making of 
the enterprise concerned and at their own risk. Th e commercial banks' credit activities to all kinds of 
investors would be based on their own evaluation and decision-making, and would be at their own 
risk.  The business activities of interm ediate investment agencies would be fully subject to the market 
and would provide service at the instruction of the investors. These agencies would break up their administrative relations with government agen cies and the service activities financed by the 
government would also be subject to the terms a nd conditions agreed in the contracts concerned. 
43. The representative of China further stated that  China had promulgated investment guidelines 
and that the Government of China was in the pr ocess of revising and completing these guidelines.  
Responding to concerns raised by certain members of the Working Party, he confirmed that these WT/ACC/SPEC/CHN/1/Rev.4 
Page 12  
 
investment guidelines and their implementation would be in full conformity with the WTO 
Agreement. 
6. State-Owned and State-Invested Enterprises 
44. The representative of China stated that th e state-owned enterprises of China basically 
operated in accordance with rules of market econom y.  The government would no longer directly 
administer the human, finance and material res ources, and operational activities such as production, 
supply and marketing.  The prices of commodities produced by state-owned enterprises were decided 
by the market and resources in operational areas we re fundamentally allocated by the market.  The 
state-owned banks had been commercialized an d lending to state-owned enterprises took place 
exclusively under market conditions.  China was fu rthering its reform of state-owned enterprises and 
establishing a modern enterprise system. 
45. In light of the role that state-owned and state- invested enterprises played in China's economy, 
some members of the Working Party expressed con cerns about the continuing governmental influence 
and guidance of the decisions and activities of such  enterprises relating to the purchase and sale of 
goods and services. Such purchases and sales should be based solely on commercial considerations, 
without any governmental influence or application of discriminatory measures.  In addition, those 
members indicated the need for Chin a to clarify its understanding of the types of activities that would 
not come within the scope of Article III:8(a) of  GATT 1994.  For example, any measure relating to 
state-owned and state-invested enterprises importing materials and machinery used in the assembly of 
goods, which were then exported or otherwise made available for commercial sale or use or for non-
governmental purposes, would not be considered to be  a measure relating to government procurement. 
46. The representative of China emphasized the e volving nature of Ch ina's economy and the 
significant role of FIEs and the private sector in the economy.  Given the increasing need and 
desirability of competing with private enterprises in  the market, decisions by state-owned and state-
invested enterprises had to be  based on commercial considerations as provided in the WTO 
Agreement.    
47. The representative of China further confirmed th at China would ensure that all state-owned 
and state-invested enterprises would make pur chases and sales based solely on commercial 
considerations, e.g. price, quality, marketability an d availability, and that the enterprises of other 
WTO Members would have an adequate opportunity  to compete for sales to and purchases from these 
enterprises on non-discriminatory terms and conditions.  In addition, the Government of China would 
not influence, directly or indirectly, commercial deci sions on the part of state-owned or state-invested 
enterprises, including the quantity, value or country of origin of any goods purchased or sold, except  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 13 
 
 
in a manner consistent with the WTO Agreemen t.  The Working Party took note of these 
commitments.   
48. The representative of China confirmed that, w ithout prejudice to China's rights in future 
negotiations in the Government Pr ocurement Agreement, all laws, regulations and measures relating 
to the procurement by state-owned and state- invested enterprises of goods and services for 
commercial sale, production of goods or supply of services for commercial sale, or for non-
governmental purposes would not be considered to be laws, regulations and measures relating to 
government procurement. Thus, such purchases or sales would be subject to the provisions of 
Articles II, XVI and XVII of the GATS and Article III of the GATT 1994.  The Working Party took note of this commitment.  
49. Certain members of the Working Party expressed concern about laws, regulations and 
measures in China affecting the transfer of technolog y, in particular in the context of investment 
decisions.  Moreover, these members expressed con cern about measures conditioning the receipt of 
benefits, including investment a pprovals, upon technology transfer.  In their view, the terms and 
conditions of technology transfer, particularly in the context of an investment, should be agreed 
between the parties to the investment without go vernment interference.  The government should not, 
for example, condition investment approval upon technology transfer.  
50. The representative of China confirmed that Chin a would only impose, apply or enforce laws, 
regulations or measures relating to the transfer  of technology, production processes, or other 
proprietary knowledge to an individual or enterprise in  its territory that were not inconsistent with the 
WTO Agreement on Trade-Related Aspects of Intell ectual Property Rights ("TRIPS Agreement") and 
the Agreement on Trade-Related I nvestment Measures ("TRIMs Agreem ent").  China confirmed that 
the terms and conditions of technology transfer, production processes or othe r proprietary knowledge, 
particularly in the context of an investment, woul d only require agreement between the parties to the 
investment.  The Working Party took note of these commitments. 
7. Pricing Policies  
51. Some members of the Working Party noted th at China had made extensive use of price 
controls, for example in the agricultural sector .  Those members request ed that China undertake 
specific commitments concerning its system of state pr icing.  In particular, those members stated that 
China should allow prices for traded goods and servi ces in every sector to be determined by market 
forces, and multi-tier pricing practices for such goods and services should be eliminated.  Those 
members noted, however, that Chin a expected to maintain price controls on the goods and services 
listed in Annex 4 to the Draft Protocol, and stated th at any such controls should be maintained in a WT/ACC/SPEC/CHN/1/Rev.4 
Page 14  
 
manner consistent with the WTO Agreement, in pa rticular Article III of the GATT 1994 and Annex 2, 
paragraphs 3 and 4, of the Agreement on Agri culture.  Those members noted that except in 
exceptional circumstances, and subject to notificati on to the WTO Secretariat, price controls should 
not be extended to goods or services beyond those list ed in Annex 4, and China should make its best 
efforts to reduce and eliminate those controls.  They  also asked that China publish in the appropriate 
official journal the list of goods and services subject to state pricing and changes thereto.  
52. Members expressed the view that price controls and state pricing in China also encompassed 
"guidance pricing" and  regulation of the range of profits that enterprises could enjoy.  Such policies 
and practices would also be subject to China's comm itments.  In their view, price controls should be 
adopted only in extraordinary circumstances and should be removed as soon as the circumstances 
justifying their adoption were addressed. 
53. The representative of China said that China curre ntly applied a mechanism of market-based 
pricing under macro-economic adjustment.  He noted that national treatment wa s applied in the areas 
of government pricing for all imported goods.  There were presently three types of prices:  government price, government guidance price and ma rket-regulated price.  The government price was 
set by price administration authorities and could not be changed without the approval of these 
authorities. Products and services subject to government  pricing were those having a direct bearing on 
the national economy and the basic needs of the people's livelihood, including those products that were scarce in China.   
54. He added that the government guidance price mechan ism was a more flexible form of pricing.  
The price administration authorities stipulated either a basic price or floating ranges. The floating range of guidance pricing was generally 5% to 15 %.  Enterprises could, within the limits of the 
guidance and taking into account the market situati on, make their own decisions on prices.  With 
market-regulated prices, enterprises were free to se t prices in accordance with supply and demand to 
the extent permitted by generally applicable laws, regulations a nd policies concerning prices.   
55. The representative of China stated that in fo rmulating government prices and government 
guidance prices, the following criteria were taken in to account:  normal production costs, supply and 
demand situation, relevant government policies and prices of related products. When fixing prices of 
consumer goods, consideration was given to the lim its of consumers' purchasing power.  He noted 
that due to the continued reform of China's price system, the share of government prices had dropped substantially and that of market-regulated prices had increased;  of social retailing products, the share 
of government prices was about 4%, that of governme nt guidance prices 1.2%, and that of market-
regulated prices 94.7%.  For agricultural produc ts, the share of government prices was 9.1%,  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 15 
 
 
government guidance prices 7.1%, and market-regulated 83.3%.  For production inputs, the share of 
government prices was 9.6%, that of government gu idance prices 4.4%, and market-regulated prices 
86%.  The share of directly government-controlled prices had been much reduced.  The Government 
of China considered that Chin a's price system was becoming increasingly rationalized, creating a 
relatively fair marketplace for all ente rprises to compete on an equal footing. 
56. The representative of China recalled that Annex 4 of the Draft Protocol contained a 
comprehensive listing of all products and services presently subject to government guidance pricing 
and government pricing. 
57. The representative of China confirmed that it w ould publish in the official journal the list of 
goods and services subject to state pricing and changes thereto, together with price-setting mechanisms and policies.  The Working Party took note of these commitments. 
58. The representative of China confirmed that the official journal providing price information 
was the Pricing Monthly of the People's Republic of  China, published in Beijing.  It was a monthly 
magazine listing all products and services priced by th e State.  He further stated that China would 
continue to further its price reform, adjusting the catalogue subject to state pricing and further 
liberalize its pricing policies. 
59. The representative of China further confirmed th at price controls would not be used for 
purposes of affording protection to domestic industries or services providers.  The Working Party took note of this commitment. 
60. In addition, the representative of China confir med that China would apply its current price 
controls and any other price controls from the en try into force of the Draft Protocol in a WTO-
consistent fashion, and would ta ke account of the interests of exporting WTO Members as provided 
for in Article III:9 of the GATT 1994.  The Working Party took note of these commitments. 
8. Competition Policy 
61. The representative of China noted that the Gove rnment of China encouraged fair competition 
and was against acts of unfair competition of all ki nds. The Law of the People's Republic of China on 
Combating Unfair Competition, promulgate d on 2 September 1992 and implemented on 
1 December 1992, was the basic law to maintain the order of competition in the market. In addition, 
the Price Law, the Law on Tendering and Bidding, th e Criminal Law and other relevant laws also 
contained provisions on anti-m onopoly and unfair competition. Chin a was now formulating the Law 
on Anti-Monopoly. WT/ACC/SPEC/CHN/1/Rev.4 
Page 16  
 
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES 
1. Power of Executive, Legislative and Judicial Branches of Government 
 [To be completed] 
 
2. Authority of Sub-Central Governments 
 [To be completed] 
 
3. Uniform Administration of the Trade Regime 
 [To be completed] 
 4. Judicial Review 
 [To be completed] 
 
IV. POLICIES AFFECTING TRADE IN GOODS 
A. TRADING
 RIGHTS 
 [To be completed] 
 B. IMPORT
 REGULATION 
1. Ordinary Customs Duties 
62. Members of the Working Party welcomed China' s decision to bind tariffs for all products in 
its schedule on market access for goods.  This acti on would increase the certainty and predictability of 
this aspect of China's trade regime.  Members also noted the substantial unila teral tariff reductions 
made in many sectors by China in recent years. 
63. The representative of China provided members of the Working Party with a copy of the 
Customs Import and Export Tariff of the People's Republic of China ("Customs Tariff") and related 
laws and regulations.  He noted that the Custom s Tariff of China was a charge imposed on imported 
goods. The purpose of levying tariffs was twofold:  (a) to regulate imports so as to promote and 
support domestic production;  and (b) to serve as an important source of revenue for the treasury of 
the central government.  China's tariff policy w as to promote economic reform and opening of the 
economy.  The basic principles for establishing duty  rates were as follows.  Duty-free or low duty 
rates were applied to imported goods which were needed for the national economy and the people's 
livelihood but which were not produced sufficiently  domestically.  Import duty rates on raw materials 
were generally lower than those on semi-manufact ured or manufactured products.  For parts or 
components of machinery, equipment and instrument s which were not produced domestically, or at a 
sufficiently high standard, the import duty was lower than the duty on finished products.  Higher duty rates were applied to products which were produ ced domestically or which were considered non- WT/ACC/SPEC/CHN/1/Rev.4  
 Page 17 
 
 
essential for the national economy and the people's livelihood.   A higher duty was applied to 
imported products, the equivalent of which were produced domestically and the local manufacturer of 
which needed protection. 
64. The representative of China said that Ch ina had adopted the Harmonized Commodity 
Description and Coding System (HS) as from 1 Janua ry 1992 and joined the International Convention 
on the Harmonized Commodity Description and Codi ng System in the same year.  There were 
21 sections, 97 chapters and 7062 eight-digit tariff he adings based on the six-digit HS'96 version in 
the Customs Tariff for the year 2000.  Tariff rates we re fixed by the State Council. Partial adjustment 
to the duty rates was subject to deliberation and final decision by the State Council Tariff 
Commission.  The simple average of China's import duties in 2000 was 16.4%.  Among the 7062 tariff headings, tariff rates for 525 headings were  below 5%, 1488 were between 5% (inclusive) and 
10% (exclusive), 2022 between 10% (inclusive) and 15% (inclusive) and 3027 were above 15%.  
Information on tariff rates for specific products and import statistical data for recent years had been 
provided to the Working Party.   
65. He also noted that currently there were two columns of import duty rates: general rates and 
preferential rates.  The preferential rates applied to  imports originating in countries and regions with 
which China had concluded reciprocal tariff agreem ents, whereas the general rates applied to imports 
from other sources. 
66. The representative of China confirmed that up on accession China would participate in the 
Information Technology Agreement ("ITA") and would eliminate tariffs on all information 
technology products as set out in China's sche dule.  Furthermore, upon accession, China would 
eliminate all other duties and charges for ITA pr oducts.  The Working Party took note of these 
commitments. 
67. Certain members of the Working Party expressed particular concerns about tariff treatment in 
the auto sector.  In response to questions about the tariff treatment for kits for motor vehicles, China 
confirmed that it had no tariff lines for completely  knocked-down kits for motor vehicles or semi-
knocked down kits for motor vehicles.  If China created  such tariff lines, the tariff rates would be no 
more than 10%.  The Working Party took note of this commitment. 
68. China undertook bilateral market access negotiati ons on goods with members of the Working 
Party.  The results of those negotiations were  contained in the Schedule of Concessions and 
Commitments on Goods and formed Annex 10 to the Draft Protocol.  WT/ACC/SPEC/CHN/1/Rev.4 
Page 18  
 
2. Other Duties and Charges 
69. The representative of China confirmed that Chin a had agreed to bind at zero other duties and 
charges in its Schedule of Concessions and Commitments, pursuant to Article II:1(b) of the GATT 
1994.  The Working Party took note of that commitment. 
3. Rules of Origin 
70. Some members of the Working Party requested information about the adoption and 
application of rules of origin in China, whether in  the context of free trade agreements or otherwise, 
and also requested China to confirm that its rules of origin for both preferential and non-preferential 
trade complied fully with the WTO Agreement on Rules of Origin. 
71. The representative of China noted that the criteri a for making the determination of substantial 
transformation was:  (a) change in tariff classificati on of a four-digit tariff line in the Customs Tariff; 
or (b) the value-added component was 30% or more in the total value of a new product. 
72. He further noted that under current arrangements , and in accordance with the criteria outlined 
above, when an imported product was processed and manufactured in several countries, the country of 
origin of the product was determined to be the last  country in which the pr oduct underwent substantial 
transformation.  The rules of origin applied for statistical purposes were the same.  However, for 
statistical purposes, the General Customs Administ ration ("Customs") also recorded countries of 
consumption and trading countries. 
73. The representative of China stated  that China's rules of origin for import and export were non-
preferential rules of origin.  Once the internationa l harmonization of non-preferential rules of origin 
was concluded, China would fully adopt and appl y the internationally harmonized non-preferential 
rules of origin.  A mechanism that met the requi rements of Articles 2(h) and 3(f), and Annex II, 
paragraph 3(d) of the Agreement, which require d provision upon request of an assessment of the 
origin of an import or an export and outlined th e terms under which it would be provided, would be 
established in China's legal framework by the date  of accession.  The Working Party took note of 
these commitments. 
74. The representative of China further stated that China would not use the rules of origin as an 
instrument to pursue trade objectives directly or indi rectly.  He also confirmed that China would apply 
rules of origin equally for all purposes.  The Working Party took note of these commitments. 
75. The representative of China confirmed that fro m the date of accession, China would ensure 
that its laws, regulations and other measures relating to rules of origin would be in full conformity  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 19 
 
 
with the WTO Agreement on the Rules of Origin a nd that it would implement such laws, regulations 
and other measures in full conformity with that Ag reement.  The Working Party took note of this 
commitment. 
4. Fees and Charges for Services Rendered 
76. Members of the Working Party noted that as a condition of accession, China should undertake 
a commitment to ensure conformity of Customs fees and charges with Article VIII of the GATT 1994.  The representative of China confirmed that China would comply with Article VIII of GATT 1994 in this regard.  The Working Party took note of this commitment. 
5. Application of Internal Taxes to Imports 
77. Some members of the Working Party expressed c oncern that some internal taxes applied to 
imports, including a value-added tax ("VAT") were  not administered in conformity with the 
requirements of the GATT 1994, particularly Article III.  Those members of the Working Party noted 
that China appeared to permit the application of di scriminatory internal taxes and charges to imported 
goods and services, including taxes and charges applie d by sub-national authorities.  Those members 
requested that China reaffirm that all such internal taxes and charges would be in conformity with the 
requirements of the GATT 1994.   
78. In response, the representative of China noted that there were three major types of taxes 
levied on products and services:  (a) VAT levied  on goods and services for processing, maintenance 
and assembling;  (b) the Consumption Tax on some selected consumer products;  and (c) the Business 
Tax on providing services, transferring intangible assets and selling real estate.   Both the VAT and 
the Consumption Tax were applicable to entities importing goods.  VAT a nd the Consumption Tax on 
imported goods were collected by Customs at the point  of entry.  He noted that VAT was  reimbursed 
once goods were exported.  Exported goods we re exempted from the Consumption Tax. 
79. He further noted that the State Council determin ed all policies concerning the levying of VAT 
and the Consumption Tax, adjustment of tax typ es and tax rates (tax value), as well as the tax 
exemption of VAT, the Consumption Tax and the Bu siness Tax.  The laws and regulations were 
interpreted and implemented by the Ministry of Finance and the State Administration of Taxation. VAT and the Consumption Tax were levied and admi nistered by the State competent departments of 
taxation, while the Business Tax was collected and administered by the local competent departments 
of taxation.  
80. The representative of China confirmed that fro m the date of accession, China would ensure 
that its laws, regulations and othe r measures relating to internal taxes and charges levied on imports WT/ACC/SPEC/CHN/1/Rev.4 
Page 20  
 
would be in full conformity with its WTO oblig ations and that it would implement such laws, 
regulations and other measures in full conformity with those obligations.  The Working Party took 
note of this commitment. 
6. Tariff Exemptions 
81. The representative of China stated that the ta riff exemption policy of China was developed 
and implemented in accordance with the Customs Law of the People's Republic of China and the 
Regulations of the People's Republic of China on Im port and Export Duties. The coverage of specific 
tariff reduction or exemption was provided for by the State Council. All the tariff reductions and 
exemptions were applied on an MFN basis. 
82. The representative of China noted that in accordance with international practices and 
provisions of China's Customs Law, import duty re ductions or exemptions were available for the 
following goods: 
 (a) A consignment of goods, on which customs duties were estimated below 
RMB 10 yuan; 
 (b) advertising articles and samples,  which were of no commercial value; 
 (c) goods and materials, which were rendered gratis by international organizations or 
foreign governments; 
(d) fuels, stores, beverages and provisions fo r use en route loaded by any means of 
transport, which were in transit across the border; 
 (e) exported goods being replaced;  (f) goods damaged prior to Customs release; 
 (g) goods covered by international treaties providing for tariff reductions and exemptions 
which China had entered into or acceded to; 
 (h) goods temporarily imported;  (i) goods imported under inward processing programmes;  (j) goods imported at zero cost for replacement purposes; 
 (k) domestic- or foreign-funded projects encouraged by China;  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 21 
 
 
 (l) articles for scientific research, education and the disabled. 
He noted that goods so imported were required to be put under Customs supervision and control. The 
Customs duty was required to be recovered if such  goods were sold, transferred or used for other 
purposes during the time period of  supervision and control. 
83. Some members of the Working Party expressed c oncerns over the availability and application 
of tariff reductions and exemptions for a variet y of enterprises and other entities, including state 
trading enterprises, state-owned enterprises, forei gn-invested enterprises and not-for-profit entities.  
Similar concerns also existed for exemptions from application of other duties, taxes and charges.  
These members noted the negative effect such reduc tions or exemptions co uld have on revenues and 
predictability and certainty in applica tion of tariff and other trade measures. 
84. The representative of China confirmed that upon en try into force of the Draft Protocol, China 
would adopt and apply tariff reducti ons and exemptions so as to en sure MFN treatment for imported 
goods.  The Working Party took note of this commitment. 
7. Tariff Rate Quotas 
 [To be completed] 
 
8. Quantitative Import Restrictions, including Prohibitions and Quotas 
 [To be completed] 
 
9. Import Licensing 
85. The representative of China confirmed that th e list of all entities responsible for the 
authorization or approval of imports  would be updated and republishe d in the official journal, the 
MOFTEC Gazette, within one month of any change th ereto.  The Working Party took note of this 
commitment. 
86. In response to requests for additional information about its system of import licensing, the 
representative of China said that the import licensing  system was administered without discrimination 
among countries or regions.  In 1984, the State Coun cil had promulgated the "I nterim Regulations on 
Licensing System for Import Commodities", and MO FTEC and Customs had issued "Detailed Rules 
for the Implementation of the Interim Regulations on Licensing System for Import Commodities".  
The Interim Regulations were unifo rmly implemented throughout China.  In 1999, of the total import 
value of US$ 165.7 billion, imports subject to licen sing represented 8.45%, covering US$ 14 billion.  
MOFTEC determined which products should be subject  to import licensing according to the relevant 
provisions of the "Foreign Trade Law".   WT/ACC/SPEC/CHN/1/Rev.4 
Page 22  
 
87. The representative of China further stated that in 1993, China had applied import restrictions 
to 53 product categories.  By 1999, the number had been reduced to 35.  Products covered were (1) 
Processed oil; (2) Wool;  (3) Polyester fibre;  (4) Acrylic fibres;  (5) Polyester fillet;  (6) Natural 
rubber;  (7) Vehicles tyres;  (8) Sodium cyanide;  (9) Sugar;  (10) Fertilizer;  (11) Tobacco and its products;  (12) Acetate tow;  (13) Cotton;  (14) Motor vehicles and their key parts;  (15) Motorcycles and their engines and chassises; (16) Colour tele vision sets and TV kinescope;  (17) Radios, tape 
recorders and their main parts;  (18) Refrigerators  and their compressor;  (19) Washing machines;  
(20) Recording equipment and its key parts;  ( 21) Cameras and their bodies (without lenses);  (22) 
Watches;  (23) Air conditioners and their comp ressor;  (24) Audio and video tape duplication 
equipment;  (25) Crane lorries and their chassises;  (26) Electronic microscopes;  (27) Open-end spinning machines;  (28) Electronic colour scanners;  (29) Grain;  (30) Vegetable oil;  (31) Wine;  
(32) Colour sensitive material;  (33) Chemical under supervision and control that were used for 
chemical weapon;  (34) Chemicals used to produce narcotics;  and (35) Laser disc production facilities.  He also noted that in 1999, there were 13 commodity categories which were imported by the foreign trade companies designated by MO FTEC. These categories were as follows:  (1) 
Processed oil;  (2) Fertilizer; (3) Tobacco; (4) Vegeta ble oil; (5) Grain; (6) Natural rubber; (7) Wool; 
(8) Acrylic fibers; (9) Sugar; (10) Cotton; ( 11) Crude oil; (12) Steel; and (13) Plywood. 
88. Concerning the granting and administration of import licences, the representative of China 
said that the examination and approval of the licence  took two to three working days.  Applications 
for import licences could be submitted to the Quota and Licence Administrative Bureau of MOFTEC, 
or Special Commissioner Offices in 16 provinces, or Commissions of Foreign Economic Relations 
and Trade of various provinces, autonomous regi ons, and municipalities dir ectly under the central 
government and those with indepe ndent budgetary status. Licensing ag encies authorized by MOFTEC 
could issue import licences on the basis of import documents submitted by the applicants,  approved 
by the competent departments. A licence could not be bought, sold or transferred, and was valid for 
one calendar year.  Import licences could be extended once for up to three months.    
89. Some members of the Working Party expressed c oncern that China's Provisional Procedures 
for the Administration of Automatic Registration for the Import of Special Commodities 
(13 August 1994), in particular the criteria for a pproval of registration, would act as a restraint on 
imports.  The representative of China emphasized that the purpose of the registration system was only to gather statistical information.  He confirmed that China would bring its automatic licensing system 
into conformity with Article 2 of the Agreem ent on Import Licensing Procedures upon entry into 
force of the Draft Protocol.  The Working Party took note of this commitment.    WT/ACC/SPEC/CHN/1/Rev.4  
 Page 23 
 
 
90. Some members of the Working Pa rty noted that enterprises and individuals seeking to import  
products subject to tariff quota administration requi rements had to go through extensive procedures to 
receive a quota allocation and that the quota certificate would indicate whether the subject good was 
to be imported through a state trading enterprise or a non-state trading enterprise and would be valid for a certain period of time.  Moreover, the entity importing the good would need trading rights.  In the light of these multiple requirements, a quota allocation certificate should satisfy any import 
licensing requirement that might apply. 
91. The representative of China confirmed that China would not require a separate import licence 
approval for goods subject to a TRQ allocation re quirement but would provide any necessary import 
licence in the procedure that granted a quota allocati on.  If quota were reallocated pursuant to China's 
TRQ administration commitments, the provisions rela ting to licensing of such reallocated quantities 
would apply.  The Working Party took note of this commitment. 
10. Customs Valuation 
92. Some members expressed concern regarding the methods used by China to determine duty-
paying value of goods, in particular regarding the practice of using minimum or reference prices for 
certain goods, which would be incons istent with the Agreement on Im plementation of Article VII of 
the GATT 1994 ("Customs Valuation Agreement").  Other WTO-consistent means were available to 
Members doubting the veracity of declared transaction values. 
93. In response, the representative of China stated  that China had ceased to use and would not 
reintroduce minimum or reference prices as a means to  determine customs value.  The Working Party 
took note of this commitment. 
94. The representative of China considered that ther e would not be situations where the "normal 
transaction value" could not be "ascertained" since the Customs Valuation Agreement provided 
several methods for valuation. 
95. The representative of China recalled that the overwhelming majority of China's customs 
duties were ad valorem  duties.  The customs or duty-paying value of imported goods was assessed 
according to the c.i.f. price based on the transac tion value, as defined in the Customs Valuation 
Agreement.  If the transaction value of importe d goods could not be dete rmined, the duty-paying 
value was determined based on othe r means provided for in the Customs Valuation Agreement.  He 
also noted that the Customs Law provided for app eal procedures. In the event of a dispute over 
calculation of duty paid or payable with the Cu stoms, the dissatisfied importer could apply to WT/ACC/SPEC/CHN/1/Rev.4 
Page 24  
 
Customs for a reconsideration of the case. If the app eal was rejected the importer could sue at the 
People's Court.   
96. The representative of China confirmed that, from the entry into force of the Draft Protocol, 
China would apply fully the Customs Valuati on Agreement, including the customs valuation 
methodologies set forth in Articles 1 through 8 of th e Agreement.  In addition, China would apply the 
provisions of the Decision on the Treatment of Inte rest Charges in Customs Value of Imported Goods, 
and the Decision on the Valuation of Carrier Media Bearing Software for Data Processing Equipment, 
adopted by the WTO Committee on Customs Valuati on (G/VAL/5).  In accordance with these latter 
provisions, only the cost of the carrier medium itself would be accounted for in determining the 
customs value of carrier media bearing softwa re.  The Working Party took note of these 
commitments.   
11. Other Customs Formalities 
97. The representative of China said that China jo ined the International Convention on the 
Simplification and Harmonisation of Customs Sy stem in 1988 and on 15 June 2000 signed the 
Protocol on the Amendment of the Internationa l Convention on the Simplification and Harmonisation 
of Customs System.  The Customs authorities of Ch ina had only adopted such customs formalities as 
declaration, examination, levying of duties and re lease which were consiste nt with international 
practices. 
12. Preshipment Inspection 
98. The representative of China stated that, curren tly, there were trade and commerce inspection 
agencies (including joint-venture agencies) enga ged in preshipment inspection.  China committed 
itself to comply with the Agreement on Preshipment Inspection, and would regulate the existing trade 
and commerce inspection agencies and permit the qua lified agencies to be engaged in preshipment 
inspection in line with the government mandate or the terms and conditions of commercial contracts. 
99. Some members of the Working Party request ed information on whether China used the 
services of a private preshipment inspection entity.  The representative of China confirmed that China 
would ensure that, upon accession, any laws and regula tions relating to preshipment inspection by any 
inspection agency, including private entities, would be  consistent with releva nt WTO agreements, in 
particular, the Agreement on Preshipment Inspect ion and the Customs Valuation Agreement.  
Moreover, any fees charged in connection with su ch preshipment inspection would be commensurate 
with the service provided, in conformity with Ar ticle VIII:1 of the GATT 1994.  The Working Party 
took note of these commitments.  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 25 
 
 
13. Anti-Dumping, Countervailing Duties 
 [To be completed] 
 
14. Safeguards  
100. The representative of China stated that upon accession, China would implement its 
Regulation on Safeguard by which the future safe guard measures would be regulated.  The drafting 
work of this regulation was still under way.  The contents of this new re gulation would be fully 
consistent with the Agreement on Safeguards.  He noted that, at present, China was in the process of 
drafting safeguard legislation in accordance with Article 29 of the Foreign Trade Law and the 
Agreement on Safeguards.  The Working Party took note of this commitment.  
C. EXPORT  REGULATIONS 
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of Internal Taxes 
to Exports 
101. Some members of the Working Party raised  concerns over taxes and charges applied 
exclusively to exports.  In their view, such tax es and charges should be eliminated unless applied in 
conformity with GATT Article VIII or lis ted in Annex 6 to the Draft Protocol. 
102. The representative of China noted that the majority of products were free of export duty, 
although 36 items, including tungste n ore, Ferrosilicon and some aluminum products, were subject to 
export duties.  He noted that the duty-paying valu e of exported goods was the F.O.B. price of the 
goods.  
2. Export Licensing and Export Restrictions 
103. The representative of China confirmed that th e list of all entities responsible for the 
authorization or approval of expor ts would be updated a nd republished in the official journal, the 
MOFTEC Gazette, within one month of any change th ereto.  The Working Party took note of this 
commitment. 
104. The representative of China said that China a pplied its export licence system to certain 
agricultural products, resource products and chem icals. China's export licencing system was 
administered in accordance with the "Interim Pr ocedures for the Export Licencing System". In 1992, 
there were 143 categories of products subject to export licencing which accounted for 48.3% of the 
total value of the China's exports, but by 1999,  the total number of products subject to export 
licensing had been reduced to 58 categories and 73 ite ms with an export value of US$ 18.5 billion, 
taking up only 9.5% of total exports. Export licences for these products were issued according to the stipulated commodity scope respectively by th e Administrative Bureau of Quota and Licence WT/ACC/SPEC/CHN/1/Rev.4 
Page 26  
 
(ABQL), the Special Commissioner Offices (SCO) locat ed in 16 provinces and the Commissions of 
Foreign Economic Relations a nd Trade (COFTEC) of various provinces, autonomous regions, 
municipalities directly under the central government and those with independent budgetary status.  
The main criteria used in determining whether a product was subject to export licensing, as set down 
in the Foreign Trade Law, were:  (1) maintenan ce of national security or public interests;  
(2) protection against shortage of supply in the dom estic market or exhaustio n of natural resources;  
(3) limited market capacity of importing countries or  regions;  or (4) obligations stipulated in 
international treaties.  Export licensing was also used for statistical purposes. 
105. He further noted that an application for an export licence had to be submitted to the licence 
issuing institutions authorized by MOFTEC, togeth er with documents approving the export by the 
competent departments, and other relevant material s (such as the Export Qualification Certificate for 
the enterprises, export contract and so on). The pr ocedures were the same for all export destinations. 
A decision on the request for an export licence normally took three working days. Licences were valid 
for six months and could be extended once.  FIEs  engaged in exporting products not produced by 
them were required to obtain export licences if the products to be exported were subject to the 
licensing requirement.  If the products were not s ubject to licensing, customs clearance would be 
given after examination by Customs on the basis of  export contracts and ot her relevant documents. 
106. Certain members of the Working Party noted the conditions in the GATT 1994 in regard to 
non-automatic licensing and export restrictions.  They pointed out that export prohibitions, restrictions 
and non-automatic licensing could only temporarily be applied under Article XI of the GATT 1994 to 
prevent or relieve critical shortages of foodstuffs  or other products essential to an exporting WTO 
Member.  Article XX of the GATT 1994 also allowed fo r restrictive export measures, but only if such 
measures were made effective in conjunction w ith restrictions on domestic production or 
consumption. 
107. Members of the Working Party welcomed the steady reduction in the number products subject 
to export licensing in China.  Certain members reiterated their request for the submission of a 
complete list of restrictions presently applied.   These members expressed concern that the remaining 
number was still high, covering about 10 per cent of e xport trade, and requested that they be either 
reduced further or eliminated by the date of a ccession in order to achieve full compatibility with 
GATT requirements.  Some members expressed partic ular concern about export restrictions on raw 
materials or intermediate products that could be subject to further processi ng, such as tungsten ore 
concentrates, rare earths and other metals.  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 27 
 
 
108. The representative of China confirmed that Chin a would abide by WTO rules in respect of 
non-automatic export licensing and export restrictions.  The Foreign Trade Law would also be 
brought into conformity with GATT requirements.  Moreover, export restrictions and licensing would 
only be applied, after the date of accession, in  those cases where this was justified by GATT 
provisions.  The representative of China further conf irmed that export restrictions on tungsten ore 
concentrates would be eliminated upon entry into force of the Draft Protocol.  The Working Party 
took note of these commitments. 
109. The representative of China stat ed that China prohibited expor t of narcotic drugs, poisons, 
materials containing State secrets, precious and rare animals and plants. 
110. Some members of the Working Party expressed c oncern about China's restrictions on exports 
of silk.  Certain other members expressed concer n about export restrictions on other goods, in 
particular raw materials or intermediate products th at could be subject to further processing, such as 
tungsten ore concentrates, rare earths and other me tals.  Members of the Working Party urged China 
to ensure that any such restrictions that were im posed or maintained complied with the terms of the 
WTO Agreement and the Draft Protocol. 
111. The representative of China confirmed that upo n entry into force of the Draft Protocol, 
restrictions on exports would be eliminated unless they could be justified under the WTO Agreement 
or the Draft Protocol.  The Working Party took note of this commitment. 
3. Export Subsidies 
112. Some members of the Working Party noted that China had provided a list of prohibited 
subsidies falling within the scope of Article 3 of the SCM Agreement and a timetable for their 
elimination, in Annex 5b of the Draft Protocol.  T hose members considered this list to be incomplete. 
113. The representative of China confirmed that it woul d eliminate all export subsidies, within the 
meaning of Article 3.1(a) of the SCM Agreement, by the time of accession, including fiscal or other financial measures referred to in  Article 1 of the SCM Agreement which were contingent upon export 
performance.  To this end, China would, by accession, cease to maintain all pre-existing export 
subsidy programmes and, upon accession, make no further payments  or disbursements, nor forego 
revenue or confer any other benefit, under such  programmes.  This commitment covered subsidies 
granted at all levels of government, including tax exemptions, reductions, deferrals or forgiveness to 
enterprises, which were contingent, in law or in  fact, upon an obligation to export.  The Working 
Party took note of this commitment. WT/ACC/SPEC/CHN/1/Rev.4 
Page 28  
 
114. On the same basis, the represen tative of China confirmed that China would eliminate, upon 
accession, all subsidies contingent upon the use of  domestic over imported goods, within the meaning 
of Article 3.1(b) of the SCM Agreement.  Th e Working Party took note of this commitment. 
D. INTERNAL
 POLICIES  AFFECTING  FOREIGN  TRADE  IN GOODS 
1. Taxes and Charges Levied on Imports and Exports 
115. Some members of the Working Party expressed concern about the application of the VAT and 
additional charges levied by sub-central government s on imports.  Non-discriminatory application of 
the VAT and other internal taxes was deemed essential. 
116. The representative of China confirmed that from the entry into force of the Draft Protocol, 
China would ensure that its laws and regulations relating to all fees, charges or taxes levied on 
imports and exports would be in full conformity with its WTO obligations, including Articles I, III:2 
and 4, and XI:1 of the GATT 1994, and that it would al so implement such laws and regulations in full 
conformity with these obligations.  The Work ing Party took note of this commitment. 
2. Industrial Policy, including Subsidies 
 [To be completed] 
 
3. Technical Barriers to Trade 
 [To be completed] 
 
4. Sanitary and Phytosanitary Measures 
117. Sanitary and Phytosanitary Measures Some  members of the Working Party expressed 
concerns in relation to the use by China of sanita ry and phytosanitary ("SPS") procedures as non-tariff 
barriers and raised specific instances where they cons idered that China's measures were not consistent 
with the WTO Agreement on the Application of  Sanitary and Phyto sanitary M easures ("SPS 
Agreement").  These members sought assurances that  China would not use SPS measures to restrict 
trade, that SPS measures would only be imposed to the extent necessary to protect human, animal or 
plant life or health, and that such measures w ould be based fully on scientific principles.  
118. The representative of China stated that pursuan t to the provisions of the SPS Agreement, 
China applied SPS measures only to the extent necess ary to protect the life and health of human 
beings, animals and plants.  He also noted that most of China's SPS measures were equivalent to 
international standards, guidelines and recommenda tions.  China would not apply SPS measures in a 
manner which would act as a disguised restriction on  trade.  In accordance with the SPS Agreement,  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 29 
 
 
China would ensure that SPS measures would not be maintained without sufficient scientific 
evidence.  The Working Party to ok note of these commitments.  
119. Members expressed the view that China should apply the SPS Agreement from the date of 
China's accession and should ensure  conformity with the SPS Agreemen t of all its laws, regulations 
and practices relating to SPS measures.  In response,  the representative of China confirmed that China 
would fully apply the SPS Agreement from the da te of accession and would ensure the conformity 
with the SPS Agreement of all of its laws, regulat ions and practices relating to SPS measures.  The 
Working Party took note of these commitments.  
120. Members of the Working Party noted that China' s notification of laws, regulations and other 
SPS measures, referred to in the Draft Protocol, was provided in document WT/ACC/CHN/33.  Members of the Working Party agreed that this notif ication did not prejudge the legal status under the 
WTO Agreement of the nature or effects of the no tified laws, regulations and other measures.  The 
representative of China also submitted an ac tion plan for implementation of China's SPS 
commitments, circulated to the Working Party in WT/ACC/CHN/XX.  The action plan outlined the 
steps that China was taking to ensure full implem entation of the SPS Agreement, including revision of 
its laws, regulations and other measures.  
121. The representative of China said that China ha d set up an SPS notification authority and an 
SPS enquiry point which would be notified to the SP S Committee.  Laws, regulations, rules, standards 
and procedures relating to SPS measures, including inspection, had been published in publications 
such as the MOFTEC Gazette.  Information coul d also be gathered from the SPS notification 
authority or from China's SPS enquiry point.  
5. Trade-Related Investment Measures 
122. The representative of China confirmed that upon accession, as set forth in the Draft Protocol, 
China would comply fully with the TRIMs Agreement, without recourse to Article 5 thereof, and would eliminate foreign-exchange balancing an d trade balancing requirements, local content 
requirements and export performance requirements. Chinese authorities would not enforce the terms 
of contracts containing such requirements.  The allocation, permission or rights for importation and 
investment would not be conditional upon performan ce requirements set by national or sub-national 
authorities, or subject to secondary conditions covering, for example, the conduct of research, the provision of offsets or other forms of industrial compensation including specified types or volumes of 
business opportunities, the use of local inputs or the transfer of technology.  Permission to invest, 
import licences, quotas and tariff rate quotas would be granted without regard to the existence of 
competing Chinese domestic suppliers.  The Work ing Party took note of this commitment. WT/ACC/SPEC/CHN/1/Rev.4 
Page 30  
 
123. In the context of discussions on the government's  Industrial Policy for the Automotive Sector, 
the representative of China confirmed that this polic y would be amended to en sure compatibility with 
WTO rules and principles.  The Working Party took note of this commitment. 
124. The representative of China added that amendments would be made to ensure that all 
measures applicable to motor vehicle producers restricting the categories, types or models of vehicle permitted for production, would grad ually be lifted.  Such measures would be completely removed 
two years after accession, thus ensuring that motor vehicle producers would be free to choose the 
categories, types and models they produced.  Howe ver, it was understood that category authorizations 
by the government could continue to distinguish be tween trucks and buses, light commercial vehicles, 
and passenger cars (including multi-purpose vehicles a nd sport utility vehicles).  The Working Party 
took note of this commitment. 
125. The representative of China confirmed that China also agreed to raise the limit within which 
investments in motor vehicle manufacturing could be approved at provincia l government level only, 
from the current level of US$ 30 million, to US$ 60 million one year after accession, US$ 90 million two years after accession, and US$ 150 million four years after accession.  The Working Party took 
note of this commitment. 
126. With respect to the manufacture of motor vehi cle engines, the representative of China also 
confirmed that China agreed to  remove the 50% foreign equity limit for joint-ventures upon 
accession.  The Working Party took note of this commitment. 
6. State Trading Entities 
127. Some members of the Working Party expressed concern that the activities of China's state 
trading enterprises were not sufficiently tran sparent and were not in accordance with WTO 
obligations.  The representative of China indicated, ho wever, that China's state trading enterprises had 
full management autonomy and responsibility for th eir own profits and losses and that China had 
undertaken broad and significant commitments to improve the transparency of state trading 
enterprises' operation and the measures relating to such operation.  
128. The same members of the Working Party also st ated that China should ensure that the import 
purchasing practices and procedures of state tradi ng enterprises were fully transparent, and in 
compliance with the requirements of the WTO Agreem ent.  They considered that China should also 
refrain from taking any measure to influence or di rect state trading enterp rises as to the quantity, 
value, or country of origin of goods purchased or  sold, except in accordance with the requirements of 
the WTO Agreement.  Those member s also stated that as part of  China's notification under the  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 31 
 
 
GATT 1994 and the Understanding on the Interpreta tion of Article XVII of the GATT 1994, China 
should notify information on state trading, including, in the case of state trading of exported goods, 
domestic procurement prices, contract terms fo r delivery and financing terms and conditions. 
129. In response, the representative of China stat ed that its state trading enterprises had full 
management autonomy and responsibility for their ow n profits and losses.  However, some members 
of the Working Party again stated that China shoul d undertake a commitment to  ensure that all state 
trading enterprises complied with the requirement s of the WTO Agreement.  The representative of 
China noted that a list of products subject to state tr ading had been provided in Annex 2a of the Draft 
Protocol.  He also confirmed that information on state trading enterprises, as required by the Draft 
Protocol, would be supplied, but stated that such  notification should be without prejudice to the 
commercial interests of the state trading enterprises.  
130. Members of the Working Party took note of th e specific arrangements that would apply for 
fertilizers and crude and processed oil.  A key feat ure of those arrangements related to the annual 
allocation of import quantities.  The differences in  the regimes that would apply to those products 
were noted, in particular in regard to the obliga tion on state enterprises trading in fertilizers to carry 
over to the next year any unused import quantities.  
131. Some members of the Working Party requested  assurances that, for oil products, quantities 
reserved for non-state traders would be allocated in such a manner that they would be fully utilized.  
In this respect, the representativ e of China confirmed that imports allocated to non-state traders of 
crude and processed oil, as specified in Annex 2a of the Draft Protocol, would be carried over to the 
next year if they were not fully utilized.  In add ition, the representative of China agreed that China 
would publish, on a quarterly basis, the requests fo r imports that had been made by non-state traders, 
as well as the licences granted, and would supply in formation relevant to such traders upon request.  
The Working Party took no te of these commitments. 
132. Some members of the Working Party noted that  prior to accession, some enterprises in China 
were permitted to import goods for their prod uction purposes, including those goods included in 
Annex 2a.  The representative of China confirmed th at, notwithstanding section 5, paragraph 1, of the 
Draft Protocol, non-state trading enterprises, includi ng private enterprises, would still be permitted to 
import such goods for production purposes and that national treatment would be provided to such 
imports.  The Working Party took note of these commitments.  
133. Some members of the Working Party expressed c oncerns about supplies of raw materials in 
the textiles sector, and particularly in regard to s upplies of silk, in the light of China's position as the 
major world supplier of silk, currently subject to state trading rights concerning exports. WT/ACC/SPEC/CHN/1/Rev.4 
Page 32  
 
134. In this regard, the representative of China c onfirmed that China would progressively abolish 
the system of state trading in respect of silk by measures increasing and extending trading rights, with 
the result that China would remove completely the silk products set out in numbers 10 and 11 of 
Annex 2a-2 to the Draft Protocol (list of products  subject to state trading on exports) and grant the 
right to trade in such products to all individuals  and enterprises no later than 1 January 2005.  Pending 
the implementation of this right, China undertook no t to introduce any changes of a more restrictive 
nature to the existing structures in place for the su pply of silk.  The representative of China further 
confirmed that access to supplies of raw materials in  the textiles sector would remain at conditions no 
less favorable than for domestic users, and gave hi s assurance that access to supplies of raw materials 
as enjoyed under existing arrangements would not be adversely affected following China's accession 
to the WTO.  The Working Party took note of these commitments. 
135. Members of the Working Party noted that dom estic prices for most agricultural commodities 
in China were higher than world prices, and this di fferential allowed China's state trading enterprises 
to import at low prices and then mark up the pr ice when selling the product to wholesalers and 
end-users. Some members expressed concern that th is practice could become more widespread when 
access opportunities were created under TRQs.  Those members were particularly concerned that 
mark-ups could be used to reduce the competitiv eness of imported products and limit the range of 
qualities and grades available to end-users in China.  The representative of China stated that currently 
state trading enterprises did not mark up imported products; instead, they only charged a nominal 
transaction fee.  Consequently, China claimed that its practice was consistent with WTO obligations, 
did not result in any trade-distorting effect, and th at under China's law limits existed on the fees that 
could be charged by state trading enterprises. 
136. The representative of China stated  that China would ensure that no price increase in respect to 
imports, in particular by state trading enterprises, would result in protection beyond that allowed in its 
Schedule of Concessions and Commitments on Goods or  that was not otherwise justified under WTO 
rules.  The Working Party took note of this commitment. 
7. Special Economic Areas 
137. Members of the Working Party noted that th ere was insufficient information available 
concerning special economic areas within China’s cu stoms territory, including border trade regions 
and minority autonomous areas, Special Economic Z ones (“SEZs”), open coastal cities, economic and 
technical development zones and other areas where sp ecial regimes for tariffs, taxes and regulations 
had been established (collectively referred to as “spec ial economic areas”), in particular their names, 
geographic boundaries, and relevant laws, regul ations and other measures relating thereto.  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 33 
 
 
138. In response, the representative of China st ated that since 1979 China had established a 
number of special economic areas where more open po licies were applied.  They included five SEZs, 
14 open coastal cities, six open cities along the Ya ngtze River, 21 provincial capital cities and 13 
inland boundary cities.  Those speci al economic areas enjoyed greater  flexibility in utilizing foreign 
capital, introducing foreign technology and conduc ting economic cooperation overseas.  At present, 
foreign investors were entitled to certain preferential treatment.  
139. The representative of China further stated that  FIEs located in SEZs or the Economic and 
Technical Development Zones of open coastal cities were entitled to a corporate income tax rate of 
15% (the normal income tax was 33%).  Profits re mitted abroad by foreign investors were exempted 
from income tax.  The preferential income tax rate of 15% was applicable to technology-intensive or 
knowledge-intensive items or projects with forei gn investment of over US$30 million, as well as 
enterprises that operated in the fields of energy, transport and port construction.   
140. The representative of China noted that throughout the customs territory of China, a socialist 
market economy system was applied.  In 1999, the foreign trade volume of SEZs accounted for nearly 
one fifth of the nation's total.  The national laws and regulations on taxation were applicable to SEZs 
in a uniform manner. 
141. In response to further requests fo r information, the representative of China indicated that there 
was no plan to establish any new SEZs. The special preferential tariff policies applied to SEZs had 
been eliminated. With the development of Chin a's economic reform and opening up, China would 
implement its tariff policy uniformly throughout its customs territory. Members of the Working Party 
expressed concern that imported products introduced  from these special economic areas into other 
parts of China's customs territory should be subject to the same treatment in the application of all 
taxes, import restrictions and customs duties and other charges as that normally applied to imports 
into the other parts of China's cu stoms territory. The representative of  China stated that China would 
undertake to ensure such non-discriminatory treat ment.  The Working Party took note of this 
commitment. 
142. Some members of the Working Party also ra ised concerns as to whether the assistance 
provided to minority autonomous regions and other areas of economic poverty was consistent with 
WTO requirements.  In response, the representa tive of China confirmed that China had a clear 
commitment to uniform administration of the trade regime within each such area and that, upon accession, China would ensure that such assistan ce would be implemented consistent with WTO 
obligations.  The Working Party t ook note of this commitment. WT/ACC/SPEC/CHN/1/Rev.4 
Page 34  
 
143. Some members of the Working Party requested that China take steps to ensure that all 
products imported into the other parts of the cust oms territory of China from special economic areas 
would be subject to the same normal customs du ties and charges as any other product imported into 
the customs territory of China.  In particular , those members requested that China undertake a 
commitment to apply all taxes, charges and measur es affecting imports, including import restrictions 
and customs and tariff charges, that were normally a pplied to imports into the other parts of China's 
customs territory to all imported products, including physically incorporated components, entering 
China's customs territory from the special economic areas. 
144. The representative of China confirmed that Ch ina would strengthen the uniform enforcement 
of taxes, tariffs and non-tariff measures on trade between its special economic areas and the other 
parts of China's customs territory.  China further confirmed that statistics on trade between China's 
special economic areas and the other parts of its cu stoms territory would be maintained and improved, 
and would be notified to the WTO on a regular b asis.  The Working Party took note of these 
commitments. 
145. Some members of the Working Party requested that China notify the WTO Secretariat of all 
the relevant laws, regula tions and other measures relating to its special economic areas.  They asked 
that the notification list and identify all those speci al economic areas.  Those members also requested 
that China notify the WTO Secretariat promptly, but in any case within 60 days, of any additions or 
modifications to its special economic areas, including  notification of the laws, regulations and other 
measures relating thereto.   
146. The representative of China confirmed that  China would provide information in its 
notifications describing how the special trade, tariff,  and tax regulations app lied were limited to the 
designated special economic areas, including info rmation concerning their enforcement.  The 
Working Party took note of this commitment. 
147. In response to concerns raised by some memb ers of the Working Party, the representative of 
China confirmed that any preferential arrangements provided to enterprises located within the special 
economic areas would be provided on a non-discrimin atory basis.  The Working Party took note of 
this commitment.  
8. Government Procurement 
148. The representative of China stated that in orde r to promote China's government procurement, 
the Ministry of Finance promulgated the Inte rim Regulations on Government Procurement in 
April 1998.  The Interim Regulations were stipulated  in line with the spirit of the WTO Agreement on  WT/ACC/SPEC/CHN/1/Rev.4  
 Page 35 
 
 
Government Procurement ("GPA") and on the basis of  the relevant provisions of the United Nations 
Model Law on Procurement of Goods , Construction and Services while making reference to the laws 
and regulations of some WTO Members on govern ment procurement. The policy and procedure 
regarding government procurement provided for therei n were consistent with international practice. 
China stuck to the fundamental principles of being open, fair, equitable, efficient and in the public 
interest when carrying out government procuremen t.  At present, China was formulating the 
Government Procurement Law. 
149. Some members of the Working Party stated that  China should become a Signatory to the GPA 
and that prior to its accession to the GPA, China sh ould conduct all government procurement, within 
the meaning of the Draft Protocol, in a transpar ent and non-discriminatory manner.  Those members 
noted that China's public entities engaged excl usively in commercial activities would not be 
conducting government procurement and thus laws, regulations and other measures regulating these 
entities' procurement practices would be fully subject to WTO requirements. 
150. The representative of China stat ed that China intended to beco me a Signatory to the GPA and 
that until such time, all government  entities at the central and sub- central level would conduct their 
procurement in a transparent manner and provide a ll foreign suppliers with equal opportunity to 
participate in that procurement pursuant to the prin ciple of MFN treatment.  Such procurements would 
be subject only to laws, regulations, judicial decisi ons, administrative rulings of general application, 
and procedures (including standard contract clauses)  which had been published and made available to 
the public.  The Working Party took note of these commitments. 
151. Noting China’s intention to become a Signatory  of the GPA, some members of the Working 
Party stated that China should, upon entry into for ce of the Draft Protocol, seek to become an observer 
to the GPA, and should initiate negotiations for membership in the Agreement by tabling an 
Appendix 1 offer within two years of accession.  The representative of China responded that China 
would give serious consideration to this request. 
9. Transit 
152. The representative of China stated that the cu rrent regulation of transit in China, the 
Regulations of the Customs of the People's Republic  of China on the Supervision and Administration 
of Transit Goods, was consistent with Article V of the GATT 1994. 
10. Agricultural Policies 
 [To be completed] 
 WT/ACC/SPEC/CHN/1/Rev.4 
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11. Trade in Civil Aircraft 
153. In response to questions from members of th e Working Party, the representative of China 
indicated that China was not in a position to co mmit to joining the Agreement on Trade in Civil 
Aircraft at the present stage. 
154. The representative of China confirmed that Chin a would not impose any provisions of offsets 
or other forms of industrial compensation when pur chasing civil aircraft, including specified types or 
volumes of business opportunities.  Members of the Working Party took note of this commitment. 
12. Textiles 
155. Some members of the Working Party proposed and the representative of  China accepted that 
the quantitative restrictions maintained by WTO Members on imports of tex tiles and apparel products 
originating in China that were in force on the date prior to the date of the accession of China to the 
WTO should be notified to the Textiles Monitoring Body ("TMB") as being the base levels for the 
purpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing ("ATC").  
For such WTO Members, the phrase "day prior to  the date of entry into force of the WTO 
Agreement", contained in Article 2.1 of the ATC, s hould be deemed to refer to the day prior to the 
date of accession of China to the WTO.  To th ese base levels, the increase in growth rates provided 
for in Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of accession 
of China to the WTO.  The Working Party took note of these commitments. 
156. The representative of China agr eed that the following provision s would apply to trade in 
textiles and clothing products until 31 December 20 08 and be part of the terms and conditions for 
China's accession to the WTO: 
 (a) In the event that a WTO Member believed that imports of Chinese origin of textiles 
and apparel products covered by the ATC were , due to market disruption, threatening 
to impede the orderly development of tr ade in these products, such Member could 
request consultations with China with a view to easing or avoiding such market disruption.  The Member requesting consultati ons would provide China, at the time of 
the request, with a detailed factual statement of reasons and justifications for its request for consultations with current data  which, in the view of the requesting 
Member, showed:  (1) the existence or threat of market disruption;  and (2) the role of 
products of Chinese origin in that disruption;  WT/ACC/SPEC/CHN/1/Rev.4  
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 (b) Consultations would be held within 30 da ys of receipt of the request.  Every effort 
would be made to reach agreement on a mutually satisfactory solution within 90 days 
of the receipt of such request, unless extended by mutual agreement; 
 (c) Upon receipt of the request for consultations, China agreed to hold its shipments to 
the requesting Member of textile or textile  products in the category or categories 
subject to these consultations to a level no greater than 7.5 per cent (6 per cent for 
wool product categories) above the amount entered during the first 12 months of the 
most recent 14 months preceding the month in which the request for consultations was made; 
 (d) If no mutually satisfactory solution we re reached during the 90-day consultation 
period, consultations would continue and the Member re questing consultations could 
continue the limits under subparagraph (c) for textiles or textile products in the 
category or categories subject to these consultations; 
 (e) The term of any restraint limit establis hed under subparagraph (d) would be effective 
for the period beginning on the date of th e request for consultations and ending on 
31 December of the year in which consultations were requested, or where three or 
fewer months remained in the year at the ti me of the request for consultations, for the 
period ending 12 months after the request for consultations; 
 (f) No action taken under this provision would re main in effect beyond one year, without 
reapplication, unless otherwise agreed between the Member concerned and China. 
The Working Party took no te of these commitments. 
13. Measures Maintained Against China 
157. The representative of China stated that WTO Members should eliminate all discriminatory 
non-tariff measures maintained against Chinese expor ts from the date of China's accession to the 
WTO.  In response, some members of the Working Pa rty stated that, in their view, such measures did 
not need to be phased out until such time as Chin a's foreign trade regime fully conformed to WTO 
obligations. 
158. In light of the above, it was agreed that any prohibitions, quantitative restrictions or other 
measures maintained against imports from China in  a manner inconsistent with the WTO Agreement 
would be listed in Annex 8 to the Draft Protocol.  It was further agreed that all such measures would WT/ACC/SPEC/CHN/1/Rev.4 
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be phased out or otherwise dealt with in accordan ce with mutually agreed terms and timetables as 
specified in said annex. 
14. Transitional Safeguards 
 [To be completed] 
 
15. Transitional Review Mechanism 
 [To be completed] 
 
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME 
 [To be completed] 
 
VI. POLICIES AFFECTING TRADE IN SERVICES 
 [To be completed] 
 VII. OTHER ISSUES 
1. Notifications 
159. Members of the Working Party requested that  China provide to the WTO Secretariat the 
notifications described in paragraphs … of this Draft Report.   
2. Special Trade Arrangements 
160. Some members of the Working Party raised speci fic concerns in relation to some of China's 
special trade arrangements, including barter trad e arrangements, with third countries and separate 
customs territories, which those members considered not  to be in conformity with WTO requirements.  
In response, the representative of China noted that  China would undertake a commitment in the Draft 
Protocol to eliminate or bring into conformity with WTO requirements, all such special trade 
arrangements that were not in conformity with tho se requirements, by no later than the date of entry 
into force of the Draft Protocol.  
3. Transparency 
 [To be completed] 
 VIII.  CONCLUSIONS 
161. The Working Party took note of the explanations and statements of China concerning its 
foreign trade regime, as reflected in this Draft Report.  The Working Party took note of the 
commitments given by China in relation to cer tain specific matters which are reproduced in 
paragraphs […] of this Draft Report and noted that these commitments are incorporated in paragraph 1.2 of the Draft Protocol.  WT/ACC/SPEC/CHN/1/Rev.4  
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162. Having carried out the examination of the foreign trade regime of China and in the light of the 
explanations, commitments and concessions made  by China, the Working Party reached the 
conclusion that China should be invited to accede to the Marrakesh Agreement Establishing the WTO 
under the provisions of Article XII.  For this pur pose, the Working Party prepared the Draft Decision 
and Draft Protocol reproduced in the Appendix to  this Draft Report, and took note of China's 
Schedule of Concessions and Commitments on Goods [(document WT/ACC/SPEC/CHN…)] and 
China's Schedule of Specific Commitments on Services [(document WT/ACC/SPEC/CHN…)] that 
were annexed to the Draft Protocol.  It was propo sed that these texts be adopted by the General 
Council when it adopted the Draft Report.  When the Draft Decision was adopted, the Draft Protocol would be open for acceptance by China which would become a WTO Member 30 days after it accepted the said Draft Protocol.  The Working Party ag reed, therefore, that it had completed its work 
concerning the negotiations for the accessi on of China to the WTO Agreement. 
 
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