RESTRICTED  WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  WT/ACC/SPEC/CHN/1/Rev.3 
11 September 2000 
 (00-3500) 
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 Eleventh Meeting of the Working 
Party on 27 July 2000, this further revision of th e Draft Report of the Working Party on the Accession 
of China to the WTO is being circulated on the Chai rman's own responsibility.  This revision attempts 
to take into account developments during the Eleven th 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 onzième réunion du Groupe de 
travail le 27 juillet 2000, cette nouvelle révision du projet de ra pport 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 onzième 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 
undécima reunión del Grupo de Trabajo del 27 de ju lio de 2000, se distribuye esta nueva revisión del 
proyecto de informe del Grupo de Trabajo 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 und écima 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.3 
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.......................................................................11 
7. Pricing Policies ............................................................................................................ ............13 
8. Competition Policy.......................................................................................................... ........15 
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES ....................................15 
1. Power of Executive, Legislative and Judicial Branches of Government............................15 
2. Authority of Sub-Central Governments ...............................................................................16 
3. Uniform Administration  of the Trade Regime.....................................................................17 
4. Judicial Review ............................................................................................................. ..........18 
IV. POLICIES AFFECTIN G TRADE IN GOODS ...................................................................19 
A. T
RADING RIGHTS .....................................................................................................................19 
1. Designated Trading.......................................................................................................... .......20 
B. IMPORT  REGULATION ......................................................................................................22 
1. Ordinary Customs Duties..................................................................................................... ..22 
2. Other Duties and Charges.................................................................................................... ..23 
3. Rules of Origin ............................................................................................................. ...........23 
4. Fees and Charges fo r Services Rendered..............................................................................24 
5. Application of Internal Taxes to Imports .............................................................................25 
6. Tariff Exemptions ........................................................................................................... ........25 
7. Tariff Rate Quotas .......................................................................................................... ........27 
8. Quantitative Import Restrictions, including Prohibitions and Quotas..............................29 9. Import Licensing............................................................................................................ .........32 
10. Customs Valuation.......................................................................................................... ........34 
11. Other Customs Formalities.................................................................................................. ..35 
12. Preshipment  Inspection..................................................................................................... .....35 
13. Anti-Dumping, Countervailing Duties ..................................................................................36 14. Safeguards ................................................................................................................. ..............40 
C. EXPORT
 REGULATIONS ....................................................................................................40 WT/ACC/SPEC/CHN/1/Rev.3 
Page ii  
 
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of 
Internal Taxes to Exports...................................................................................................... .40 
2. Export Licensing ............................................................................................................ .........40 
3. Export Restrictions ......................................................................................................... ........41 
4. Export Subsidies ............................................................................................................ .........42 
D. INTERNAL
 POLICIES  AFFECTING  FOREIGN  TRADE  IN GOODS ...........................42 
1. Taxes and Charges Levied on Imports and Exports ...........................................................42 
2. Industrial Policy, including Subsidies ...................................................................................43 3. Technical Barriers to Trade................................................................................................. ..46 
4. Sanitary and Phytosanitary Measures ..................................................................................51 
5. Trade-Related Investment Measures ....................................................................................51 
6. State Trading Entities...................................................................................................... .......52 
7. Special Economic Areas ...................................................................................................... ...55 
8. Government Procurement...................................................................................................... 56 
9. Transit..................................................................................................................... .................57 
10. Agricultural Policies ...................................................................................................... .........57 
11. Trade in Civil Aircraft.................................................................................................... ........58 
12. Textiles ................................................................................................................... ..................59 
13. Measures Maintained  Against China....................................................................................60 
14. Transitional Safeguards .................................................................................................... .....60 
15. Transitional Review Mechanism ...........................................................................................61 
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME.......................................62 
VI. POLICIES AFFECTING TRADE IN SERVICES..............................................................63 
1. Licensing ................................................................................................................... ...............63 
2. Choice of Partner ........................................................................................................... .........68 
3. Modification of the Equity Interest .......................................................................................68  
4. Prior Experience Requirement for Es tablishment in Insurance Sector ............................68 
5. Inspectio n Services......................................................................................................... .........68 
6. Market Research............................................................................................................. ........69 
7. Legal Services.............................................................................................................. ............69 
8. Schedule of Specific Commitments .......................................................................................69 VII. OTHE R ISSUES .............................................................................................................. .......69 
1. Notifications............................................................................................................... ..............69 
2. Trade Agreements............................................................................................................ .......69 
3. Transparency ................................................................................................................ ..........70 
VIII. CONC LUSIONS .............................................................................................................. .......73 
  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 1 
 
 
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.3 
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. In response, some members of the Working Pa rty indicated that because of the significant 
size, rapid growth and transitional nature of th e Chinese economy, a pragmatic approach should be  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 3 
 
 
taken in determining China's need for recourse to transitional periods and other special provisions in 
the WTO agreements available to developing coun try WTO Members.  Each agreement and China's 
situation should be carefully c onsidered and specifically addressed. 
10. Many members of the Working Party expressed thei r interest in carrying out bilateral market 
access negotiations with China with respect to industrial and agricultu ral products, and initial 
commitments in services.  The representative of China stated that China was ke en to undertake such 
negotiations with interested Working Party members.   
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.  The representative of 
China stated that the achievement of balance betwee n rights and obligations was the basic principle in 
its negotiation of WTO accession. 
12. 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 separat ely in an Informal Group of Experts on Export Statistics.  The Group of 
Experts submitted its report to the Chairman  of the Working Party on 30 June 1994. 
13. 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 Protocol.   
II. ECONOMIC POLICIES 
1. Non-discrimination (including national treatment) 
14. 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-WT/ACC/SPEC/CHN/1/Rev.3 
Page 4  
 
discriminatory treatment in respect of the prices  and availability of goods and services supplied by 
national and sub-national authorities and public or state enterprises, in areas including transportation, 
energy, basic telecommunications, other utilities and factors of production. 
15. 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.   
16. 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. 
17. 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.   
18. 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 other WTO Members, in particular with respect  to any benefit accorded to Members of the WTO 
that were separate customs territories.  The Working Party took note of this commitment. 
19. 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  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 5 
 
 
treatment of imported goods had to be eliminated in order to ensure full conformity with the principle 
of national treatment. 
20. 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 technical 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. 
21. 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 ensu red and enforced by the date of  China's accession to the WTO. 
The representative of China declared that, by acces sion, China would repeal and cease to apply all 
such existing laws, regulations and other measures w hose 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.  
22. 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; WT/ACC/SPEC/CHN/1/Rev.3 
Page 6  
 
- 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 
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 transitional period of one year from the date of accession in order to amend or repeal the relevant legi slation.  The Working Party took note of these 
commitments.  
2. Monetary and Fiscal Policy 
23. 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.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 7 
 
 
24. 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 
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. 
25. 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 
26. 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 was undergoi ng rapid change.  Significant moves had been taken 
to reform, rationalize and liberalize the forex market.  The practice of multiple exchange rates in swap 
centres had been abolished.  China had already uni fied its forex market and removed many of the 
restrictions on the use of forex.  Some members of the Working Party stated that China should 
undertake appropriate commitments  on its reform of forex.  
27. In response, the representative of China stated that China was a member of the International 
Monetary Fund ("IMF").  The purpose of China's fo rex reform was to gradually reduce administrative 
intervention and increase the role of market forces.  From 1979, a forex retention system was applied 
in China, although forex swap was gradually develo ping.  In early 1994, official RMB exchange rates 
were unified with the market rates. The banki ng exchange system was adopted and a nationwide 
unified inter-bank forex market was established, w ith conditional convertibility of the Renminbi on 
current accounts.  Since 1996, foreign investment en terprises ("FIEs") were also permitted into the 
banking exchange system, and the remaining exchange restrictions on current accounts were 
eliminated. On 1 December 1996, China had form ally accepted the obligations of Article VIII, 
Sections 2, 3, and 4 of the IMF's Articles of Ag reement, removing exchange restrictions on current 
account transactions.  Accordingly, since then the Renminbi had been fully convertible on current 
accounts. 
28. 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 WT/ACC/SPEC/CHN/1/Rev.3 
Page 8  
 
organ empowered to regulate forex.  Its main f unctions were to monitor and advise on balance-of-
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.  
29. 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.  
30. 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%. 
31. The representative of China further noted that since 1 January 1994, designated forex banks 
had become major participants in forex transacti ons.  On 1 April 1994, a Chinese 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  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 9 
 
 
market according to the turnover position limit on ba nking exchange stipulated by SAFE and covered 
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.  
32. 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.   
33. 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.  
34. The representative of China stated that signifi cant steps had been taken to reform, rationalize 
and liberalize its forex market.  In particular, Chin a had unified its forex market and achieved current 
account convertibility.  In the light of these advanc es, China would provide complete information on 
its exchange controls in the context of the trans itional review mechanism and such other information 
as was deemed necessary in the cont ext of the transitional review mechanism.  The Working Party 
took note of this commitment. 
35. 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 IMF.  In particular, China confirmed that it would not subject individual 
requests for forex for the making of payments and transfers  for current international transactions, WT/ACC/SPEC/CHN/1/Rev.3 
Page 10  
 
including the issuance of credit or credit guarantees for current international transactions (e.g., letters 
of credit; direct loans; guarantees of loans by fina ncial institutions or other entities; or insurance of 
financing by financial institutions or other 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 
Articles of Agreement of the IMF.  The Wo rking Party took note of this commitment. 
4. Balance-of-Payments Measures 
36. 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. 
37. 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 on an annual basis, if so requested by 
China or a WTO Member. 
38. 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.   
39. 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.  The representative of China confirmed that China woul d 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 tran sform such measures into price-based measures as 
soon as possible.  Any measures taken would not exceed what was necessar y to address the BOPs  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 11 
 
 
situation and would be maintain ed only so long as considered n ecessary by the BOPs Committee.  
China confirmed that measures taken for BOPs reas ons would only be applied to control the general 
level of imports and not to protect specific sectors,  industries, or products.  The Working Party took 
note of these commitments. 
5. Investment Regime 
40. 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. 
6. State-Owned and State-Invested Enterprises 
41. 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 and th e central revenue would no longer be used to 
invest in these enterprises.  China was furthering its reform of state-owned enterprises and 
establishing a modern enterprise system. 
42. 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 WT/ACC/SPEC/CHN/1/Rev.3 
Page 12  
 
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. 
43. 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.    
44. 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 
in a manner consistent with the WTO Agreemen t.  The Working Party took note of these 
commitments.   
45. 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.  
46. 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  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 13 
 
 
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.  
47. 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, would be agreed between the parties to the investment.  
The Working Party took no te of these commitments. 
7. Pricing Policies  
48. 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 the goods and services listed in Annex 4 to the Draft Protocol were 
expected to remain subject to price controls, c onsistent with the WTO Agreement, in particular 
Article III of the GATT 1994 and Annex 2, paragra phs 3 and 4, of the Agreement on Agriculture.  
Those members noted that except in exceptional circ umstances, and subject to notification to the 
WTO Secretariat, price controls should not be ex tended to goods or services beyond those listed 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.  
49. China confirmed that it would publish in the official journal the list of goods and services 
subject to state pricing and changes thereto, togeth er with price-setting mechanisms and policies.  The 
Working Party took note of these commitments. 
50. 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. WT/ACC/SPEC/CHN/1/Rev.3 
Page 14  
 
51. 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.   
52. 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.   
53. 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%, 
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. 
54. 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. 
55. 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  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 15 
 
 
continue to further its price reform, adjusting the catalogue subject to state pricing and further 
liberalize its pricing policies. 
56. 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. 
57. 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 
58. 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. 
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES 
1. Power of Executive, Legislative and Judicial Branches of Government 
59. The representative of China informed members of  the Working Party that in accordance with 
the Constitution and the Law on Legislation of the People's Republic of China, the National People's 
Congress was the highest organ of state power.  Its permanent body was its Standing Committee.  The National People's Congress and its Standing Committ ee exercised the legislative power of the State. 
They had the power to formulate the C onstitution and laws.  The State Council, i.e., the Central 
People's Government of China, was the executive bod y of the highest organ of state power. The State 
Council, in accordance with the Constitution and relevant laws, was entrusted with the power to 
formulate administrative regulations.  The minist ries and commissions of the State Council could 
issue departmental rules within the jurisdiction of  their respective departments and in accordance with 
the laws and administrative regulations.  The provincial people's congresses and their standing 
committees could adopt local regulations.  The provi ncial governments had the power to make local 
government rules.  The National People's Congress and its Standing Committee had the power to annul the administrative regulations that contradict ed the Constitution and laws as well as the local WT/ACC/SPEC/CHN/1/Rev.3 
Page 16  
 
regulations that contradicted the Constitution, laws  and administrative regulations.  The State Council 
had the power to annul departmental rules and local government rules that were inconsistent with the 
Constitution, laws or administrative regulations.  The Government of China believed that these 
features of the Chinese legal system would ensure an effective and uniform implementation of the 
obligations after China's accession. 
60. The representative of China stated that Ch ina had been consistently performing its 
international treaty obligations in good faith.  According to the Constitution and the Law on the 
Procedures of Conclusion of Treaties, the WTO Ag reement fell within the category of "important 
international agreements" subject to the ratifi cation by the Standing Committee of the National 
People's Congress. China would ensure that its laws and regulations pertaining to or affecting trade 
were in conformity with the WTO Agreement and with its commitments so as to fully perform its 
international obligations. For this purpose, China had commenced a pl an to systematically revise its 
relevant domestic laws. Therefore, the WTO Agreem ent would be implemented in an effective and 
uniform way after China's accession. 
61. In response to questions from some Members, the representative of China stated that pursuant 
to Article 142 of the General Principles of Civil La w, if any international treaty concluded or acceded 
to by China contained provisions differing from t hose in China's civil laws, the provisions of the 
international treaty would apply, unless the pr ovisions were ones on which China had announced 
reservations. for ratification.  Upon ratifi cation by the National People's Congress, the WTO 
Agreement would have the status of domestic law. 
2. Authority of Sub-Central Governments 
62. Several members of the Working Party raised  concerns about the continued presence of 
multiple and overlapping trade instruments used by different levels of government within China.  
Those members considered that this situation resu lted in a lessening of the security and predictability 
of access to the Chinese market.  In addition, some members expressed concerns about the limited 
control exercised by the central government over trad e measures introduced at the sub-national level. 
63. Some members of the Working Party raised concerns in relation to the uniformity of 
administration of the foreign trade and economic regi me within China.  In particular, those members 
raised concerns about measures ta ken by sub-national authorities.  In response, the representative of 
China emphasized that the central government had full constitutional authority to ensure compliance 
with WTO obligations by both national and sub-nati onal governmental authorities in China.  Some 
members requested that an appropriate commitmen t be undertaken in this regard by China.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 17 
 
 
64. In response to questions from members of th e Working Party, the representative of China 
confirmed that all fiscal, fina ncial and budgetary activities perfor med by sub-central governments 
would be in compliance with Article III of the GATT 1994.  The Working Party took note of this 
commitment. 
65. Some members of the Working Party raised c oncerns about the limited ability of China's 
central government to be sufficiently informed about non-uniform practices and to take necessary 
enforcement actions.  Those memb ers stated that China should establish a mechanism by which any 
concerned person could bring to the attention of the central government cases of non-uniform 
application of the trade regime. 
3. Uniform Administration of the Trade Regime 
66. Members of the Working Party stated that it shou ld be made clear that China would apply the 
requirements of the WTO Agreement and its other accession commitments throughout China's entire 
customs territory, including border trade regions, minority autonomous areas, Special Economic 
Zones ("SEZs"), open coastal cities, economic and technical development zones and other special 
economic areas. 
67. Members of the Working Party also stated that China should ensure that the provisions of the 
WTO Agreement and any additional ob ligations created by the Draft Protocol were applied uniformly 
throughout its entire customs territory, including at the sub-national level.  Members of the Working 
Party also noted that China should administer in a uniform, impartial and reasonable manner all its 
laws, regulations and other measur es pertaining to or affecting trade in goods, services, TRIPS or the 
control of forex. In this connection, members of  the Working Party request ed that China establish a 
mechanism under which individuals and enterprises could bring to the attention of the national 
authorities cases of non-uniform application of the tr ade regime.  Members of the Working Party also 
noted that China's laws, regulations and other m easures of government entities at the sub-national 
level would be required to conform to the obligat ions undertaken in the Draft Protocol and the 
WTO Agreement. 
68. The representative of China confirmed that s ub-central entities had no autonomous authority 
over issues of subsidies, taxation, trade policy or any other measures covered by WTO provisions.  He 
also confirmed that the provisions of the WTO Ag reement, including the Draft Protocol, would be 
applied uniformly throughout its customs territory , including in SEZs and other areas where special 
regimes for tariffs, taxes and regulations were esta blished.  The Working Party took note of these 
commitments. WT/ACC/SPEC/CHN/1/Rev.3 
Page 18  
 
69. The representative of China further confirmed that the mechanism established pursuant to 
Section 2(A) of the Draft Protocol would be operativ e upon entry into force of the Draft Protocol.  All 
individuals and entities could bring to the attention of central government authorities cases of 
non-uniform application of China's trade regi me, including its commitments under the WTO 
Agreement and the Draft Protocol. When China's au thorities were informed of such cases, relevant 
government authorities would act promptly to remedy the situation without requiring affected parties 
to petition through the courts, taking  into consideration the need to  provide a meaningful remedy.  
The individual or entity making the notification would be informed promptly in writing of any 
decision and action taken.  The Working Party took note of these commitments. 
4. Judicial Review 
70. Some members of the Working Party stated that China should designate independent 
tribunals, contact points, and procedures for the prom pt review of all administrative actions relating to 
the implementation of laws, regula tions, judicial decisions and administrative rulings of general 
application referred to in Article X:1 of the GA TT 1994, including administrative actions relating to 
import or export licences, non-tariff measures and an y other measures within the scope of the WTO 
Agreement.  Those members stated that notwithstanding Article X:3(c) of the GATT 1994, the tribunals should be independent of the agenci es entrusted with administrative enforcement of 
provisions contained in the WTO Agreement. 
71. Those members also stated that the administra tive actions subject to review should include 
measures relating to the availability and distribution of import and export licences, permits or quotas;  
application of measures for safeguard or BOPs purpo ses or to protect against unfair trade;  and any 
other measures within the scope of the WTO Agreem ent, in particular any actions required to be 
reviewed under the relevant provisions of the TRIPS Agreement and the GATS.  Such review 
procedures should include the opportunity for appeal, without penalty, by individuals or enterprises 
affected by any administrative action subject to re view.  If an initial right of appeal were to an 
administrative body, there should be an opportunity for a further appeal to a judicial body.  Any 
decision by any appellate body and the reasons th erefore would be communicated in writing to the 
appellant, together with notificati on of any right to further appeal. 
72. Some members of the Working Party expressed concern that China needed to improve its 
institutions and procedures for the prompt review of  disputes over trade-related matters in China, in 
particular with respect to the independence of th e administrative and judicial authorities responsible 
for reviewing measures.  These members also sought to  ensure that all measures related to the WTO, 
including forex measures, would be subject to  review under Chinese domestic procedures;  in 
particular they sought a commitment to cover measures related to services trade and intellectual  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 19 
 
 
property. These members sought e xplicit confirmation that certain types of measures, such as 
decisions relating to statutory inspection and chemi cal registration, would be subject to judicial 
review. 
73. The representative of China expressed concern over the expectation of a few members for 
China to assume higher obligations than those requi red by the WTO covered agreements with regard 
to judicial review, obligations which no Member in  the WTO had ever been required to undertake.  
The representative of China took the position that  such requirements for China would surely 
undermine the fundamental principle of non-discrimination of the organization. 
74.  The representative of China confirmed that it w ould revise its relevant laws and regulations 
so that its relevant domestic laws  and regulations would be consiste nt with the requirements of all 
WTO covered agreements on procedures for judicial re view of specific administrative actions.  In this 
respect, China would assume its obligations relating to judicial review only to the extent required by 
the relevant WTO agreements.  The Workin g Party took note of this commitment.  
75. In response to questions from members, th e representative of China confirmed that 
administrative actions relating to any measure with in the scope of the WTO, including decisions 
relating to national treatment, conformity assessments, grant or denial of a licence to provide a service 
and other matters, would be subject to the procedures established for prompt review under 
Section 2(D) of the Draft Protocol, and informa tion on such procedures would be available through 
the enquiry point that China would establish upon a ccession.  The Working Party took note of these 
commitments. 
76. The representative of China confirmed that measures subject to review would include 
measures affecting in any way the regulation, cont rol, supply or promotion of transportation and 
transportation-related services, insurance and insu rance-related services, banking and other financial 
services, telecommunications services, distributio n services, entertainment services, information 
processing services, construction and maintenance services, professional services, and retail sales 
services.  China undertook to ensure that all such measures would be subject to review.  The Working 
Party took note of this commitment.   
IV. POLICIES AFFECTING TRADE IN GOODS 
A. TRADING RIGHTS  
77. Members of the Working Party noted that Ch ina was in the process of liberalizing the 
availability of the right to import and export good s from China, but that such rights were now 
restricted to enterprises in China.  Objective criteria for the grant of trading rights needed to be agreed WT/ACC/SPEC/CHN/1/Rev.3 
Page 20  
 
and applied to facilitate implementa tion of the national treatment provisions in Section 5 of the Draft 
Protocol.  Certain members emphasized that upon accession China would need to apply the same 
criteria to foreign enterprises and individuals that  it applied to Chinese enterprises in authorizing 
foreign enterprises and individuals to import and export goods, rather than approving the grant of such 
rights on a case-by-case basis.  This would ensure that the process of progressive liberalization would proceed more rapidly and uniformly. 
78. Those members noted China's commitment to accord foreign enterpri ses and individuals, 
including those not invested or registered in Chin a, national treatment with respect to obtaining the 
right to trade.  Moreover, goods imported or exporte d by foreign enterprises and individuals should be 
accorded national treatment under Article III of GA TT 1994, especially paragraph 4 thereof, in 
respect of internal sale, offering for sale, purchase, transportation, distribution or use, including their 
direct access to end-users. In respect of goods that would remain subject to designated trading listed in 
Annex 2b of the Draft Protocol, China should ph ase out limitations on the grant of trading rights 
pursuant to the schedule in that Annex.  They al so stated that China should complete all necessary 
legislative procedures to implement these co mmitments during this transition period. 
79. The representative of China stat ed that the end-users mentioned above referred to the Chinese 
enterprises without right to import and/or export. At present, these enterprises imported products for 
their own use through enterprises with the right to import and export.  Three years after China's accession to the WTO, the right to trade would be liberalized, as a result of which all enterprises in 
China would have the right to trade.  Therefore, th e end-users at that time would be legal persons of 
enterprises which used imported products.  The Working Party took note of these commitments. 
1. Designated Trading 
80. The representative of China stated  that China would adjust and expand its list of enterprises 
under its designated trading regime annually duri ng the transition period, leading up to full 
implementation of the commitment contained in  Annex 2b. The criteria for enterprise under 
designated trading regime included registered capital, import and export volume and the import 
volume of products subject to designated trading in  the previous year, bank credit rating and profits 
and losses. 
81. Members of the Working Party requested that China provide detailed information regarding 
the process for enterprises and indi viduals to qualify to import and export goods.  The need for 
specific, objective and automatic criteria for the prompt grant of rights was emphasized.  Existing 
enterprises should be able to engage in importation and exportation without need to amend their scope 
of business or obtain a new business licence, since the approval process could itself delay and form a  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 21 
 
 
barrier to obtaining these important rights.  Members of the Working Party sought assurances that 
China's requirements for various licences, such as import business licences, would not adversely 
affect the realization of the right to trade.  Nor should enterprises be required to establish in a 
particular form or create separate entitie s to engage in importing or exporting.  
82. The representative of China confirmed that duri ng the three years of transition, China would 
progressively liberalize the scope and availability of trading rights in China.  Upon accession, China 
would eliminate export performance and trade a nd foreign exchange bala ncing requirements as 
criteria for obtaining or maintaining the right to im port and export.  The representative of China also 
confirmed that any enterprise in China was free to apply for the trading rights and would be granted 
such rights in accordance with criteria set out in th e Foreign Trade Law. The enterprises with trading 
rights in China would be permitted to import and e xport all goods, except for those goods listed in 
Annex 2a and Annex 2b of the Draft Protocol.  The Working Party took note of these commitments.  
83. The representative of China further confirmed that China would grant to any enterprise 
possessing the right to trade any product pursuant to Section 5 of the Draft Protocol, the right to 
import goods in Annex 2a that were subject to a tari ff rate quota ("TRQ") or to an agreed volume of  
imports by non-state trading enterprises, except fo r the quantity of such goods specifically reserved 
for importation by state trading enterprises.  Any fi rm possessing the right to trade pursuant to Section 
5 of the Draft Protocol would also have the right to import that portion of a TRQ reallocated to non-
state trading enterprises pursuant to the agreed ru les on TRQ administration.  The representative of 
China also confirmed that for goods in Annex 2a subj ect to a TRQ, any enterprise granted the right to 
trade, pursuant to Section 5 of the Draft Protocol, would be permitted to import such goods at the out-of-quota tariff rate.  The Working Party took note of these commitments.  
84. Members of the Working Party noted China's commitment that it would phase out the 
limitation on the grant of trading rights for goods sp ecified in Annex 2b within three years of entry 
into force of its Draft Protocol.  In respondi ng to questions raised by WTO members, the 
representative of China said that China would progre ssively liberalize the right to trade in such goods 
by increasing the number of designated entities permitted to import goods in each of the three years of 
the transition period specified in Annex 2b.  Th e representative of China added that China would 
extend the right to register as designated importi ng and exporting enterprises for the goods in Annex 
2b in each of the first, second and third years after entr y into force of its Draft Protocol, to enterprises 
that used such goods in the production of finished goods and enterprises that distributed such goods in 
China.  At the end of three years, all enterprises in China and all foreign enterprises and individuals 
would be permitted to import and export such goods  throughout the customs territory of China. The 
Working Party took note of this commitment. WT/ACC/SPEC/CHN/1/Rev.3 
Page 22  
 
B. IMPORT
 REGULATION 
1. Ordinary Customs Duties 
85. 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. 
86. The representative of China provided members of the Working Party with a copy of the 
Customs Import Tariff of the People's Republic of Ch ina and related laws and regulations.  He noted 
that the Customs 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 fo r the treasury of the central government.  China's 
tariff policy was 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 th e people's livelihood but which were not produced 
sufficiently domestically.  Import duty rates on raw materials were generally lower than those on 
semi-manufactured or manufactured products.  For parts or components of machinery, equipment and 
instruments 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 
produced domestically or which were consider ed non-essential for the national economy and the 
people's livelihood.   A higher duty was applied to imported products, the equi valent of which were 
produced domestically and the local manufacturer of which needed protection. 
87. 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 tariff headings in  the Customs Import and Export Tariff of the 
People's Republic of China.  Tariff rates were fixe d 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 be tween 5% (inclusive) and 10% (exclusive), 2022 
between 10% (inclusive) and 15% (inclusive) and 3027 were above 15%.  In formation on tariff rates 
for specific products and import statistical data fo r recent years had been provided to the Working 
Party.    WT/ACC/SPEC/CHN/1/Rev.3 
 Page 23 
 
 
88. 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.  The representative of China clar ified that the term "HS 2000" was China's own 
nomenclature for applied rates, referring to China' s specific 8-digit classification in 2000 but based on 
the 4-digit HS'96 classification. 
89. 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. 
90. 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. 
91. 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.  
2. Other Duties and Charges 
92. 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 
93. 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. 
94. The representative of China noted that the criteri a for making the determination of substantial 
transformation was:  (a) change in tariff classification of a four-digit tariff line in the Customs Import WT/ACC/SPEC/CHN/1/Rev.3 
Page 24  
 
and Export Tariff of the People's Republic of Chin a ("Customs Tariff");  or (b) the value-added 
component was 30% or more in the total value of a new product. 
95. He further noted that under current arrangeme nts, 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 product underwent substan tial transformation.  Substantial transformation 
was understood to mean processing which resulted in  a change of the four-digit level tariff 
classification or an added value (including all cost-r elated expenditures) exceeding 30% of the total 
value.  These rules of origin were applicable to a ll imported products.  The rules of origin applied for 
statistical purposes were the same.  However, for statistical purposes, the General Customs Administration ("Customs") also recorded countries of consumption and trading countries. 
96. The representative of China stated  that China's rules of origin for import and export were non-
preferential rules of origin.  Upon its accession to the WTO, China would implement the Agreement 
on Rules of Origin.  Once the international harm onization of non-preferential rules of origin was 
concluded, China would fully adopt the internati onally harmonized non-preferential rules of origin.  
The Working Party took no te of these commitments. 
97. The representative of China further stated that China would not use the rules of origin as an 
instrument to pursue trade objectives directly or in directly.  The Working Party took note of this 
commitment. 
98. The representative of China confirmed that from the date of accession, China's preferential 
and non-preferential rules of origin would comply fully with the Agreement on Rules of Origin, and 
that a mechanism that met the requirements of Ar ticle 2(h) and Annex II, paragraph 3(d) of the 
Agreement, which required provision upon request of an assessment of the origin of the import and 
outlined the terms under which it would be provided, would be established in China's legal framework 
prior to accession.  The Working Party took note of these commitments. 
4. Fees and Charges for Services Rendered 
99. Some members of the Working Party expressed c oncern over an apparent lack of uniformity 
of customs fees and charges administered by national and sub-national authorities.  These members 
noted that as a condition of accession China should u ndertake a commitment to ensure conformity of 
such fees and charges with Article VIII of th e 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.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 25 
 
 
5. Application of Internal Taxes to Imports 
100. 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 undertake a commitment to ensure  that all such internal taxes and charges would 
be in conformity with the requirements of the GATT 1994.   
101. 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 entiti es importing goods. VAT and 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. 
102. 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.  
6. Tariff Exemptions 
103. 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 th e State Council. All the statutory tariff reductions 
and exemptions were applied on an MFN basis. 
104. 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: WT/ACC/SPEC/CHN/1/Rev.3 
Page 26  
 
 (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 the processing programme;  (j) goods imported at zero cost for offset purpose;  (k) domestic- or foreign-funded projects encouraged by China; 
 (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. 
105. Some members of the Working Party expressed  concerns over the broad availability and 
application of tariff reductions and exemptions fo r a wide variety of enterprises and other entities, 
including state trading enterprises, state-owned en terprises, foreign-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 detrimental e ffect such reductions or exemptions could have 
on revenues and predictability and certainty in application of tariff and other trade measures.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 27 
 
 
106. The representative of China confirmed that upon en try into force of the Draft Protocol, China 
would adopt and apply reductions and exemptions so as to ensure MFN and national treatment for 
imported goods.  The Working Party took note of this commitment. 
7. Tariff Rate Quotas 
107. Some members of the Working Party expressed concern over the lack of transparency, 
uniformity and security of China's administration of its TRQ regime.  Those members suggested that China enter a commitment in relation to those ma tters.  The representative of China confirmed that 
administration of TRQs would be consistent w ith the Agreement on Import Licensing Procedures.  
The Working Party took note of this commitment. 
108. Some members of the Working Party raised concerns regarding the current operation of 
China's TRQ system for bulk agricultural commoditie s and the practices of state trading enterprises in 
relation to importing such products.  These concer ns included the current lack of transparent 
regulations for administering TRQs; failure to  establish and publish annual TRQ quantities; trade-
restrictive and non-competitive practices of stat e trading enterprises; and general uncertainty, 
inconsistency and discrimination in  trade of bulk commodities.  Tho se members requested that China 
reduce tariffs and regulate access for bulk commodities by using TRQs with low in-quota duties.   
109. The representative of China confirmed that China would adopt TRQs for certain goods and 
would ensure that these TRQs were administ ered on a transparent, predictable, and non-
discriminatory basis using clearly specified time frames, administrative procedures and requirements 
that would provide effective import opportunities and promote filling each TRQ, including the grant 
of trading rights and import licences to non-state trading entities to import quota allocations permitted 
to be imported by such entities. China confirmed th at for the goods listed in Annex 2 of the Draft 
Protocol that were subject to a TRQ, China woul d apply the provisions of its market access schedule 
relating to TRQ administration and related comm itments in the Draft Protocol, including those 
relating to the right to trade.  The Working Party took note of these commitments. 
110. Members of the Working Party expressed c oncern that scheduled TRQs should be 
administered simply, effectively, transparently  and in a non-trade restrictive manner.  The 
representative of China agreed that China would ad minister the TRQs fully  in accordance with WTO 
rules and principles and that the administration would be in accord with the provisions set out in the Schedule of Concessions and Commitments on G oods.  The Working Party took note of this 
commitment. WT/ACC/SPEC/CHN/1/Rev.3 
Page 28  
 
111. The representative of China noted that in 1996,  for the first time, China published a list of 
import products subject to tariff quota administration, t ogether with their eligible tariff rates in and out 
quota.  The allocation was based on historical pe rformance and state trading administration.  
However, the administration on imports within th e tariff quota was identical to that for pure quota 
products.  In addition, China had also tried several ways of administration, including import at applied 
tariff rates, first come first served, and first come first served at the point of entry, on certain products 
and bonded import which was strictly monitored by Customs.  In comparison with WTO rules and 
regulations, current administrative measures lacked transparency and the time-frame and quantity of 
allocation varied from year to year.  Besides, the information was released only in internal documents, 
with no prior notice. 
112. The representative of China further noted th at market-oriented reform to agricultural 
production and trade conformed to Ch ina's construction of a socialist market economy.  In the past 
several years, China had made great progress in freeing agricultural products from state pricing and trading, in guiding farmers to adjust the struct ure of agricultural production based on the demand of 
the market.  In connection with that reform proces s, in the bilateral negotiations with agricultural 
exporting countries, China committed that as soon as it became a Member of the WTO, it would 
eliminate TRQ administration of a certain numbe r of TRQ products and implement single tariff 
administration on those products, including barley, so ybean, rape-seed, peanut oil, sunflower seed oil, 
corn oil, etc.  In addition to that effort, China would apply tariffication on products including sugar, 
cotton and three types of fertilizers, which were cu rrently subject to import quantitative restrictions, 
and list them under products subject to TRQ admini stration.  When China acceded to the WTO, China 
would further shorten the list to 13 categories and 42 tariff lines.  Ten categories were agricultural 
products including 39 tariff lines, namely wheat, corn, ri ce, soybean oil, rape-seed oil, palm oil, sugar, 
wool, wool tops and cotton.  In addition, three categories (three tariff lines), namely urea, DAP and 
NPK fertilizer, would be put under TRQ administrati on.  The Working Party took note of this 
commitment. 
113. The representative of China stated that as a Me mber of the WTO China would strictly comply 
with relevant rules and regulations of the WTO.  In line with that commitm ent, China was preparing 
for significant reform to the current TRQ administrati on, in a bid to have it conform to the relevant 
requirements of the WTO: 
 (a) implement in-quota and out-quota rates to TRQ products, as specified in the 
Schedule; 
  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 29 
 
 
 (b) identify and publish in advance the ini tial tariff quota quantity and annual increase 
within the implementation period, namely the minimum market access opportunity of 
the TRQ products in every year within the implementation period; 
  (c) stipulate and publish TRQ administration and establish a TRQ administration system 
which was open, fair, transparent and non-discriminative; 
 
 (d) publish in advance specific qualifications  for applicants and specific administration 
for every TRQ product, and designate a fixe d "enquiry point" to provide consultation 
and increase transparency; 
 
 (e) set a fixed time-frame for TRQ app lication, allocation and reallocation; 
  (f) limit imports share of the state trading enterprises and provide a gradually increasing 
opportunity to participate in trading the TRQ products for non-state trading 
enterprises including private enterprises, sh areholding enterprises and foreign-funded 
enterprises, national treatment would be endowed to every non-state trading enterprise with trading rights; 
 
 (g) establish and optimize feedback and su pervision mechanism toward quota holders, 
and promote rational and full utilization of TRQ;  and 
  (h) set up a fixed "enquiry point", as an obl igation by Article 13.3 of the GATT 1994 and 
other relevant provisions, for exporting count ries and suppliers of TRQ products, so 
as to provide consultation and informati on on TRQ administration, allocation and 
implementation. 
 Moreover, the Government of China was trying to  further simplify the administrative regime and 
procedures of TRQ administration, in a bid to fac ilitate users, enhance effi ciency and adapt to the 
above-mentioned reform.  8. Quantitative Import Restrictions, including Prohibitions and Quotas 
114. In response to requests for information from members of the Working Party, the 
representative of China noted that China prohib ited or restricted the importation of certain 
commodities, including various types of weapons , ammunition and explos ives, narcotic drugs, 
poisons, obscene materials, and foodstuffs, medicines, animals and plants.  WT/ACC/SPEC/CHN/1/Rev.3 
Page 30  
 
115. Some members of the Working Party noted that  there were a large number of overlapping 
non-tariff measures in existence in China, both at th e national and sub-national levels, which appeared 
to have a trade restrictive or trade distorting eff ect.  Those members requested that China undertake a 
commitment to eliminate and not to introduce, re -introduce or apply non-tariff measures other than 
those specifically identified and subject to phased elimination in Annex 3 to  the Draft Protocol.  
116. Some members of the Working Party also rai sed concerns that many non-tariff measures were 
imposed by sub-national authorities in China on a non-transparent, discretionary and discriminatory 
basis.  Those members of the Working Party asked that China undertake a co mmitment to ensure that 
non-tariff measures would only be imposed by the ce ntral government or by sub-national authorities 
with clear authorization from the central government .  Actions lacking authorization from the national 
authorities should not be implemented or enforced. 
117. Some members of the Working Party noted th at China had provided a list of non-tariff 
measures in respect of which China was prepared  to commence phased elimination, contained in 
Annex 3 of the Draft Protocol.  Those members stat ed that China should eliminate the measures listed 
in accordance with the schedule prov ided in Annex 3, during the periods  specified in Annex 3.  Those 
members also noted that the protection afforded by the measures listed in Annex 3 should not be 
increased or expanded in size, scope, or duratio n, nor any new measures be applied, unless in 
conformity with the provisions of the WTO Agreement. 
118. Those members of the Working Party also stat ed that in implementing the provisions of 
Articles III and XI of the GATT 1994 and the Agre ement on Agriculture, China should eliminate and 
not introduce any new nor re-introduce any old non- tariff measures that coul d not be justified under 
the provisions of the WTO Agreement.  Those me mbers also stated that all non-tariff measures 
administered by China, whether or not referred to  in Annex 3 of the Draft Protocol, which were 
applied after China's accession to the WTO, should be  allocated and otherwise administered in strict 
conformity with the provisions of the WTO Agre ement, including Article XIII of the GATT 1994 and 
the Agreement on Import Licensing Procedures, including notification requirements. 
119. The representative of China stated that during the phasing-out period, China would administer 
relevant quotas, licences and tendering requirement s in accordance with the current administrative 
regulations which had been notified to the Secretaria t.  China had also modified Annex 3 on the basis 
of the comments raised by certain members of the Working Party.  Annex 3 contained all the products 
subject to quotas, licences and tendering requirements in China. 
120. Some members of the Working Party requested information on how China would implement 
the quota and licensing requirements for products listed in Annex 3, in particular the procedures and  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 31 
 
 
criteria for grant of quota allocations and licensing during the phase-out period for these restrictions.  
Members expressed concern about complex and burde nsome requirements for obtaining a licence or 
quota allocation which often require d approvals from various authorities within an organization as 
well as approval from both the sub-central and central  level.  Those members sought a transparent, 
streamlined system that would issue quota allo cations and licences through a simple, consolidated 
approval process that would ensure full use of the quota and its equitable distribution among 
importers.  Those members also requested inform ation on how China would establish the value of 
imports for those products whose quota was estab lished in terms of value of imports.     
121. The representative of China confirmed that th e products currently covered under the HS 
categories listed in Annex 3 were the only products that would continue to be subject to quotas during 
the agreed phase-out periods and that additional pro ducts would not be added to these HS categories. 
Further, the representative of China stated that for products listed in Annex 3 as being subject to quota 
and licensing requirements, any entity possessing the ri ght to trade, including enterprises in the sector 
importing the products or importing inputs for prod uction purposes, would be eligible for a quota 
allocation and licence to import  products listed in A nnex 3.  China's system for quota allocation and 
licensing would ensure that those entities with quota allocations would also receive any necessary 
import licence.  This system would conform to WTO rules, including the WTO Agreement on Import Licensing Procedures, and would be transparent, tim ely, responsive to market conditions and would 
minimize the burden on trade.  All applications fo r an import licence and allocation of quota were to 
be submitted to the organization au thorized to grant such allocati ons and licences. Applicants would 
be required to approach only one organization at one level (central or sub-central) to obtain both an 
allocation and licence.  In exceptional cases, an app licant might be required to approach up to three 
organizations for approval of an allocation and licen ce.  The relevant organization, amount of quota, 
including the growth in quota provided for in A nnex 3, and procedures for application for a quota 
allocation and licence, including the beginning and e nd date of the application period and any other 
relevant procedures or criteria, w ould be published in the official journal referred to in paragraph 
2(C)(2) of the Draft Protocol no later than 30 days  prior to the beginning of the application period. 
Such application period would be from 1-30 June .  Quotas and licences would be allocated to 
applicants no later than 30 days after closure of the application period.  Members of the Working 
Party took note of these commitments. 
122. The representative of China stated  that China would grant quota allocations on a first-come-
first served basis, valid for importations on a calendar year basis.   If after the specified application 
period additional quota remained,  the relevant organization would receive and process requests for 
quota allocations and licences until the full amount of th e quota had been allocated.  Such allocations 
would be made within 10 days after receipt of a re quest.  If requests for a quota allocation received at WT/ACC/SPEC/CHN/1/Rev.3 
Page 32  
 
the same time exce eded the quota level, the relevant organization would ensure that quota was 
allocated in an equitable manner that promoted ut ilization of the allocation, including granting a 
proportionate share of individual requests and giving priority consideration to unfilled requests in the 
context of reallocated quota.  In all cases, alloca tions would be established for commercially viable 
quantities and provision would be ma de for partial shipments against a single allocation. Inquiries 
regarding quota allocation and grant of a licence coul d be made to the relevant organization, with 
written responses provided within 10 working da ys.  The Working Party took note of these 
commitments. 
123. The representative of China confirmed that all co mmercial terms of trade, including product 
specifications, product mix, pricing, and packagi ng, would be at the sole discretion of the quota 
holder.  Allocations would be valid for any article  or mixture of articles subject to the same quota as 
specified in Annex 3 of the Draft Protocol.  Allo cations would be valid for a period of 12 months 
from the opening of the quota import period.  However, if the holder of a quota allocation had not contracted for import of the total quantity allocated  to it within 6 months after the opening of the 
import period, the holder was to immediately retu rn the unused portion of the allocation to the 
relevant authority which would reallocate the quota immediately, if unfilled requests were pending, or 
otherwise within 10 days after receipt of a request for an allocation.  The relevant organization would 
publish notice of the availability of additional alloca tions on a monthly basis. This reallocation would 
be valid for the duration of the original term.  Fo r quota quantities specified in terms of value, China 
would determine the value of any shipment based on the FAS ship value listed on the bill of lading.   
The Working Party took no te of these commitments. 
9. Import Licensing 
124. 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. 
125. 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 uniformly implemen ted throughout China. The import licensing system 
ensured that limited forex resources were used for imports most needed by national economic development and that necessary assistance could be pr ovided to the domestic industries.  In 1999, of  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 33 
 
 
the total import value of US$ 165.7 billion, imports  subject to licensing 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".   
126. 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. 
127. 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 year.  Import licences could be extended once for up to three months.    
128. Some member of the Working Party expressed concern 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 WT/ACC/SPEC/CHN/1/Rev.3 
Page 34  
 
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.   
129. 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. 
130. 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 
131. 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. 
132. In response, the representative of China stated that from the date of accession, China would 
cease to use minimum or reference prices as a means to determine customs value.  The Working Party 
took note of this commitment. 
133. 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. 
134. 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 normal tran saction value.  If the transaction value of imported 
goods could not be determined, th e duty-paying value was determined based on the transaction value 
or the computed value of identical or similar goods.  He also noted that the Customs Law provided for 
appeal procedures. In the event of a dispute over calculation of duty paid or payable with the  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 35 
 
 
Customs, the dissatisfied importer could apply to Customs for a reconsideration of the case. If the 
appeal was rejected the importer could sue at the People's Court.   
135.  The representative of China confirmed that, from the entry into force of the Draft Protocol, 
China would apply fully the WTO provisions concerni ng customs valuation.  In this context, the 
representative of China stated that China had no inte ntion to resort to Article 20.3 of the Customs 
Valuation Agreement.  In addition, China would apply the provisions on the Treatment of Interest 
Charges in Customs Value of Imported Goods a nd for the Valuation of Carrier Media Bearing 
Software for Data Processing Equipment. In accord ance with these latter provisions, only the cost of 
the carrier medium itself would be accounted for in the customs value.   The Working Party took note 
of these commitments. 
11. Other Customs Formalities 
136. 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 
137. 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. 
138. 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 any laws and regulations rela ting to preshipment inspection by private entities 
currently or in the future would be consistent with relevant WTO agreements, in particular, the 
Agreements on Preshipment Inspection and Custom s Valuation.  Moreover, any fees charged in 
connection with such preshipment inspection woul d be commensurate with the service provided, in 
conformity with Article VIII:1 of the GATT 1994.  The Working Party took note of these 
commitments. WT/ACC/SPEC/CHN/1/Rev.3 
Page 36  
 
13. Anti-Dumping, Countervailing Duties 
139. The representative of China said that China had promulgated regula tions on anti-dumping and 
countervailing duties in 1997.  He further noted th at China had submitted an Action Plan setting out 
how it intended to revise its laws and regulations to bring them into  conformity with the Agreement 
on Implementation of Article VI of GAT T 1994 ("Anti-Dumping Agreement").  
140. Some Members of the Working Party raised con cerns that the current investigations by the 
Chinese authority would be judged to be inconsis tent with the Anti-Dumping Agreement if China 
were a Member of the WTO today. In certain c ases, the basis for calculating dumping margins for a 
preliminary affirmative determination was not discl osed to interested parties. Furthermore, the 
determination of injury and causation did not appear  to have been made on an objective examination 
of sufficient evidence. In the views of these Me mbers, bringing the Chinese anti-dumping rules into 
compliance with the WTO Agreement on its face w as not sufficient. WTO-consistency had to be 
secured substantively as well. The representative of Ch ina stated that China in tended to comply fully 
with the letter and spirit of the Anti-Dumping Agreement.   
141. The representative of China confirmed that, notwithstanding Article 18.3 of the 
Anti-Dumping Agreement, 
 (a) China would apply the provisions of the Anti-Dumping Agreement to: 
 (1) proceedings under Article 9.3, including the calculation of margins of 
dumping, in connection with anti-dumping me asures adopted before the entry into 
force of the Draft Protocol ("existing measures") pursuant to requests made on or after the entry into force of the Draft Protocol; 
 (2) reviews of existing measures initiated under Articles 9.5, 11.2, and 11.3 
pursuant to requests made on or after the entr y into force of the Draft Protocol.  Any 
review of an existing measure under Article 11.3 would be initiated no later than five 
years from the date of its imposition. 
 (b) China would also provide the type of j udicial review described in Article 13 of the 
Anti-Dumping Agreement with regard to proceedings under Article 9.3 and reviews 
under Articles 9.5, 11.2, and 11.3. 
The Working Party took no te of these commitments.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 37 
 
 
142. Several members of the Working Party noted  that China was continuing the process of 
transition towards a full market economy.  Those members noted that under those circumstances, in 
the case of imports of Chinese origin into a WT O Member, special difficulties could exist in 
determining cost and price comparability in th e context of anti-dumping investigations and 
countervailing duty investigations. Those members stated that in such cases, the importing WTO 
Member might find it necessary to take into account  the possibility that a strict comparison with 
domestic costs and prices in China might not always be appropriate.  
143. The representative of China expressed concern with  regard to past measures taken by certain 
WTO Members who had treated China as a non-market economy and imposed anti-dumping duties on Chinese companies without identifying or publis hing the criteria used, without giving Chinese 
companies sufficient opportunity to present evidence a nd defend their interests in a fair manner, and 
without explaining the rationale underlying their dete rminations, including with respect to the method 
of price comparison in the determinations.  The repr esentative of China thereupon stated the following 
positions with regard to the implementation of para graph (1)(b) of Article 20 of the Draft Protocol 
("Price Comparability in determining Dumping and Subsidization"):  
 (a) When determining price comparability in  a particular case in a manner not based on a 
strict comparison with domestic prices or costs in China, the importing WTO Member should ensure that it has establis hed and published rules in advance on (1) 
the criteria that it used for determining wh ether market economy conditions prevail in 
the industry producing the like product and (2) the methodology that it used in 
determining the price comparability.  The importing WTO Member should select the prices or costs of the like product produced in an economy comparable to that of China.  The process of investigation should be transparent and sufficient opportunities should be given to all interested parties, including Chinese producers or 
exporters, to make comments or counter-proposals; 
  (b) The importing WTO Member should give notice of the information which it required 
and provide Chinese producers and exporters ample opportunity to present evidence 
in writing in a particular case; 
  (c) The importing WTO Member should provide Chinese producers and exporters a full 
opportunity for the defence of their interests in a particular case;  
 
 (d) The importing WTO Member should provide a sufficiently detailed reasoning of its 
determinations in a particular case;  and WT/ACC/SPEC/CHN/1/Rev.3 
Page 38  
 
 
 (e)  The Anti-Dumping and SCM Agreements should fully apply in proceedings 
involving imports of Chinese origin except as otherwise provided in the Draft 
Protocol.  The provisions of the Disput e Settlement Understanding should apply to 
consultations and the settlement of disput es arising under Article 20 of the Draft 
Protocol. 
 
144. The representative of China noted that pursu ant to the provisions of "Regulation on 
Anti-dumping and Anti-subsidy of the People's Re public of China", there were four Chinese 
government bodies responsible for anti-dumping a nd countervailing duty investigations. Their 
identities and responsibilities were as follows: 
 A. Ministry of Foreign Trade and Economic Coop eration (MOFTEC) 
 
Receiving anti-dumping and countervaili ng petitions; Conducting investigation on 
dumping and dumping margin and issuing relevant prelimin ary determination 
decisions and notices;  Negotiating with foreign interested parties on "Price 
Undertaking" if necessary;  Providing proposal on imposition of definitive anti-
dumping or countervailing duties or proposals on duty refund, etc.  There was an Anti-dumping Division established under the Department of Treaties and Law of 
MOFTEC, with responsibility to ha ndle anti-dumping and countervailing 
investigations on alleged imports. 
 B. State Economics and Trade Commission (SETC) 
 
Responsible for the investigation of injury caused to the domestic industry by the 
dumped or subsidized imports, the extent of such injury and making injury findings. 
There was a non-permanent decision and policy-making body in SETC, named the 
Injury Investigation and Determination Co mmittee ("IIDC"), which was composed of 
six commissioners from the relevant departments of SETC. There was a permanent executive office in charge of the investigation of injury to the industry and submitting 
its findings to the IIDC for approval. 
 C. General Customs Administration (Customs) 
  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 39 
 
 
Coordinating anti-dumping investigations  with MOFTEC;  Enforcing anti-dumping 
measures such as collecting cash deposits , dumping or countervailing duties and 
monitoring its implementation. WT/ACC/SPEC/CHN/1/Rev.3 
Page 40  
 
 D. Tariff Commission of State Council(TCSC) 
 
Making final decisions on whether or not to levy the anti-dumping or countervailing 
duties and refund duties based on the sugg estions by MOFTEC with regard to 
imposing anti-dumping or countervailing duties and reimbursing excess amount of 
duties, respectively. 
14. Safeguards  
145. 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.  
C. EXPORT
 REGULATIONS 
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of Internal Taxes 
to Exports 
146. 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. 
147. 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 
148. 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. 
149. 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  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 41 
 
 
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 
(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. 
150. 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. 
151. Some members of the Working Party expressed concern that China's export licensing rules 
had been used to restrict exports in a manner inc onsistent with WTO requirements.  They noted that 
Article XI of the GATT 1994 applied to both import and export restrictions and the same need for 
certainty, predictability, transparency and minimizi ng the burden on trade applied with respect to the 
granting of export licences as pertained to import licences.   
152. The representative of China stated that  upon accession, China would apply the same 
procedures to the granting of export licences as it applied to automatic and non-automatic import 
licences, depending on the WTO justification for such export licence.  The Working Party took note 
of this commitment. 
3. Export Restrictions 
153. The representative of China said that China pr ohibited export of narc otic drugs, poisons, 
materials containing State secrets, precious and rare animals and plants. WT/ACC/SPEC/CHN/1/Rev.3 
Page 42  
 
154. 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 meta ls.  Members urged China to ensure that any such 
restrictions that were imposed or maintained co mplied with the terms of the WTO Agreement and the 
Draft Protocol.  Some members also noted that the requirements and procedures for obtaining import 
licences and export licences often were not transparent,  and, when known, proved overly burdensome.  
Often, it took a long time to obtain all of the re quired approvals.  The representative of China 
confirmed that upon entry into force of the Draft Prot ocol, restrictions on exports would be eliminated 
unless they could be justified under the WTO Agreem ent or the Draft Protocol.  The Working Party 
took note of this commitment. 
4. Export Subsidies 
155. 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. 
156. The representative of China confirmed that it w ould eliminate all export subsidies by the time 
of accession, and not re-introduce any export subsidi es, including fiscal or other financial measures 
referred to in Article 1 of the SCM Agreement whic h were contingent upon export performance.  To 
this end, China would, by acces sion, cease to maintain all pre-ex isting export subs idy programmes 
and, upon accession, make no further payments or di sbursements, nor forego revenue or confer any 
other benefit, under such programmes.  This commitm ent covered subsidies gran ted 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. 
157. 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.  The Working Party 
took note of this commitment. 
D. INTERNAL
 POLICIES  AFFECTING  FOREIGN  TRADE  IN GOODS 
1. Taxes and Charges Levied on Imports and Exports 
158. Some members of the Working Party expressed pa rticular concern about the application of 
the VAT and additional charges levied by sub-cen tral governments on imports.  In some cases,  
producers of domestic goods either did not pay th e VAT or failed to pass the charge along to  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 43 
 
 
customers.  The loss of revenue from this failure to pass along the VAT often put such firms into an 
unprofitable position and loans or other measures woul d then be provided to address the situation. 
Non-discriminatory application of the VAT and other internal taxes was deemed essential.  Moreover, 
central-government discipline over the practices of s ub-central authorities to ensure their conformity 
with the provisions of the Draft Protoc ol and the WTO Agreement was essential. 
159. 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 
160. Some members of the Working Party noted that  the situation of differential treatment of 
minority autonomous regions and other areas of economic poverty within China was uncertain and 
could raise problems in relation to the requireme nts of the SCM Agreement.  In response, the 
representative of China stated that, under the Cons titution, the central government provided assistance 
to those disadvantaged areas.  
161. Some members of the Working Party expressed concern about certain of the provisions of 
Article 27 of the SCM Agreement which could be in terpreted as making special or differential rules 
available to China.  In particular, these members stated that it would be inappropriate for China to 
benefit from treatment such as modified injury stan dards in dispute settlement  proceedings involving 
subsidies pursuant to paragraphs  8 and 9 of Article 27, higher de minimis  and negligibility thresholds 
in countervailing duty investigations pursuant to  paragraphs 10, 11 and 12 of Article 27, or the 
inactionability of certain types of pre-privatization subsidies pursuant to paragraph 13 of Article 27.  
The representative of China stated that the inju ry standards applicable in dispute settlement 
proceedings involving actionable Chinese subsidies were set forth in Articles 5 and 6 and therefore 
Articles 27.8 and 27.9 had no releva nce and would not be invoked by China.  The representative of 
China also stated that the de minimis  and negligibility standards applicable to China were set forth in 
Articles 11.9 and 15.3 and therefore China would have no reason to invoke Article 27.10, 27.11 or 
27.12.  The representative of China further stated that Article 27.13 had no applicability in China's 
case because China did not undertake privatization as contemplated under Ar ticle 27.13 and therefore 
China would not make use of this provision.  The Working Part took note of these commitments. 
162. Some members of the Working Party raised concer ns about the provisions  of Article 29 of the 
SCM Agreement, which created sp ecial rules for certain economies undergoing transformation.  The WT/ACC/SPEC/CHN/1/Rev.3 
Page 44  
 
representative of China stated that these provisions did not apply to China's economy.  He confirmed 
that China therefore would not make use of these provisions.  The Working Party took note of this 
commitment. 
163. Some members of the Working Party were concer ned that the scope of subsidization in China 
should be adequately defined.  In this regard, it was concluded that all activities of state-owned 
enterprises (including banks) which involved a fina ncial contribution (e.g. provision of goods and 
services, purchases of goods, forgiveness of debt, provi sion of loans and/or guarantees) would fall 
within the scope of Article 1.1(a) of the SCM Ag reement, since such enterprises were part of or 
controlled by the government.  The representative of China confirmed this conclusion.  The Working 
Party took note of this commitment. 
164. Some members of the Working Party raised c oncerns over the notification which China had 
provided in Annex 5 to the Draft Protocol. regarding its subsidy re gime, which was last modified on 
[31 May 2000].  Those members in particular rai sed concerns over China's failure to provide a 
comprehensive list of the subsidies that it grante d or maintained, as sought in paragraph 1 of 
Article 11 of the Draft Protocol.  Those members also  considered that Annex 5 in some places did not 
contain the information required by Article 25 of  the SCM Agreement and Document G/SCM/6.  
While those members understood many of the difficulti es that China had encountered in attempting to 
provide the Working Party with a full notification,  they noted the importance of China's notification 
of subsidies.  
165. Some members of the Working Party explained that it was difficult to identify all of the 
subsidies that China had not notified in Annex 5, particularly because of transparency problems.  
Nevertheless, those members highlighted certain especi ally significant types of subsidies that had not 
been reported in Annex 5.  Those members of the Working Party first identified state support through 
the banking system, which took the form of policy loans, the automatic roll-over of state-owned 
enterprises' unpaid principal and interest, forgiven  or non-performing loans, and the selective use of 
below-market interest rates.  They indicated th at these subsides were provided by government-owned 
banks, such as the Peoples Bank of China, and th ey distinguished these subsidies from the ones 
notified in Annex 5 as being provided by recently creat ed policy banks.  They also noted that some of 
these subsidies were only available to exporting fi rms.  The representative of China acknowledged the 
existence of these types of measures, but indicated  that China was attempting to reduce state-owned 
enterprises' reliance on these types of measures and, further, to confine them to the policy banks 
identified in Annex 5.    WT/ACC/SPEC/CHN/1/Rev.3 
 Page 45 
 
 
166. Some members of the Working Party also st ated that, in their view, China provided 
significant subsidies in the form of tax deferrals a nd tax forgiveness, tax exemptions, tax credits and 
preferential tax rates, with state-owned enterprises again being the predominant recipient of this type 
of support.  They noted that most of these subs idies had not been included in Annex 5.  The 
representative of China acknowledged the existence of th ese types of  measures.  He explained that, as 
part of its effort to reform state-owned enterpri ses and make them more market-oriented, China was 
attempting to reduce substantially the av ailability of these types of measures.  
167. Some members of the Working Party emphasized  that Annex 5 contained only one subsidy 
programme provided by sub-central governments in China.  They also noted that this subsidy 
programme was several times the magnitude of a similar subsidy programme maintained by the 
central government.  While recognizing the special di fficulties that China, like many members of the 
Working Party themselves, had encountered in a ttempting to notify sub-central subsidies, those 
members nevertheless expressed concern that subsidi zation by provincial and municipal governments 
in China was quite significant and could result in  adverse effects on WTO Members.  They also 
expressed concern that these sub-central governments continued to provide subs idies contingent upon 
export performance and subsidies contingent upo n the use of domestic goods over imported goods; 
these practices were recognized as especially distortive  of trade and were prohibited in Article 3 of the 
SCM Agreement.  The representative of China acknow ledged that China had not been able to report 
all sub-central subsidies but indicated that China would comply with its obligations under the Draft 
Protocol and the SCM Agreement. 
168. Some members of the Working Party also raised  concern regarding the subsidies that China 
provided in connection with SEZs and other special economic areas.  Many of these subsidies were 
reported in Annex 5, but not as prohibited export su bsidies.  Those members considered many of the 
subsidies provided in connection with SEZs and ot her special economic areas to be prohibited export 
subsidies because they were contingent, at least  in part, upon export performance.  Those members 
also stated that the existing practice of granting preferential treatment to imported products and to 
joint-venture production enterprises in China's sp ecial economic areas conditional upon export or re-
export of products manufactu red or subject to additional processing in such areas met the definition of 
prohibited subsidies pursuant to Article 3 of the SCM Agreement.  Those members requested that 
China eliminate all of these subsidies upon accession.  In  response, the represent ative of China stated 
that China would review the operation of the programmes providing subsidies in SEZs and other 
special economic areas.  He stated that China, upon accession, would either eliminate any subsidies 
that it found to be contingent upon export performance or amend them to be c onsistent with the SCM 
Agreement.  The Working Party t ook note of this commitment. WT/ACC/SPEC/CHN/1/Rev.3 
Page 46  
 
169. Some members of the Working Party stated their belief that China had granted, on a 
discretionary basis, ad hoc  investment subsidies, which include d free or preferential provision of 
goods and services.  Those members stated that such  subsidies, whether granted at national or sub-
national level, should have been notified. The re presentative of China acknowledged the existence of 
these types of measures.  He explained that Ch ina was attempting to reduce substantially the 
availability of these types of subsidi es as part of its reform effort. 
170. Some members of the Working Pa rty stated that there was also no mention of subsidies to 
compensate for currency changes.  The representativ e of China acknowledged the existence of this 
type of measure.  
171. Some members of the Working Party request ed information from China regarding an 
unreported subsidy programme known as the Steel Import Substitution Programme, which appeared 
to provide export subsidies.  These members stated th at they had been inform ed that this programme 
was begun in 1997 and provided large tax rebates to the big four steel groups in China in connection 
with sales of domestic inputs to producers of fini shed products for use in their exported products.   
These members requested an explanation with regard  to the general operation of this programme, the 
specific products covered by it, and the amount of the rebates granted in relation to the amount of the 
value added tax, both under the terms of the rele vant law and in practice.  In response, the 
representative of China explained [...]. 
172. Some members of the Working Party also re quested information from China regarding the 
"China High-Tech Product Export Catalogue", which w as jointly published by the Ministry of Science 
and Technology, MOFTEC, the Ministry of Finance and Customs.  These members understood that this Catalogue addressed preferential central gove rnment export policies for the telecommunications, 
computer software, aviation and aerospace, lase rs, pharmaceuticals, medical equipment, new 
materials and energy industries.  These members requ ested an explanation regarding the nature of the 
export policies addressed by this Catalogue.  In res ponse, the representative of China explained [...]. 
3. Technical Barriers to Trade 
173. In response to requests for information from members of the Working Party, the 
representative of China confirmed that, further to Ch ina's application of the provisions of the GATT 
1994 and the TBT Agreement, internal mechanisms  existed in China (e.g. policy guidelines, 
inter-agency committees) to inform and consult w ith, on an ongoing basis, government agencies and 
ministries (at national and sub-national levels), and private sector interests, on the rights and 
obligations under the GATT 1994 and the TBT Agreem ent.  The Working Party took note of this 
commitment.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 47 
 
 
174. Concerning questions from members of the Working Party on the opportunity for public 
consultation and comment on proposed standards a nd technical regulations, the representative of 
China noted that China had already established such a mechanism.  Currently, China provided a 
45-day period to allow for comments on proposed st andards, technical regul ations, and conformity 
assessment procedures.  If within that 45-day peri od a request for extension of the time-limit was 
received from a WTO Member, the period was extended to 60 days.  In addition, provision was also 
made for a further extension of the time-limit be yond 60 days if requested by another Party to the 
TBT Agreement.  The Working Party took note of these commitments. 
175. Members of the Working Party noted that a comp ilation of technical regulations and relevant 
standards in force in China, was provided in Anne x 7 to the Draft Protocol.  Members agreed that 
Annex 7 did not prejudge the legal status, nature  or effects of notified standards and technical 
regulations under the WTO Agreement. 
176. Some members of the Working Party stated th at pursuant to the requirements of the TBT 
Agreement, China's standards, technical regulati ons and conformity assessment procedures should be 
based, to the maximum extent possible, on relevant in ternational standards, where they existed, except 
where use of different standards, technical regula tions and conformity assessment procedures could be 
justified to the TBT Committee, pursuant to Article 2.4 of the TBT Agreement, as necessary to fulfil 
legitimate objectives as defined in Article 2.2 of the TBT Agreement.  Those members also stated that 
any such standards, technical regulations a nd conformity assessment procedures should be 
administered so as not to create unnecessary barriers to trade.   
177. Those members of the Working Party also stat ed that government inspection agencies should 
not apply compulsory standards to imported produc ts which related solely to fulfilling unspecified 
criteria of quality, quantity or weight, nor require st atutory inspection of products solely because of 
the volume of such imports.  Those members stated  that China should publish complete commodity 
inspection criteria, whether formal or informal, in its official journal.  In this connection, those 
members noted that pursuant to Article 15.2 of the TBT Agreement, China should provide a notification Statement on Implementation and Admini stration of the Agreement consistent with the 
relevant Decisions adopted by the Committee on Technical Barriers to Trade of the Tokyo Round 
Agreement on Technical Barriers to Trade (TBT/16/Rev.7).   
178. Some members of the Working Party stated that government-mandated inspection agencies 
should not inspect imported products to assess complia nce with the terms of commercial contracts.  
Those members noted that China could inspect impo rted products or require conformity assessment 
when third-party testing or certification was not ab le to fulfil the legitimate objectives listed in the WT/ACC/SPEC/CHN/1/Rev.3 
Page 48  
 
TBT Agreement.  They noted that once Mutual Recognition Agreements we re concluded between 
China and a particular  WTO Member, China should not require inspection nor retesting in respect of 
any product exported from that Member which ha d been tested or certified to meet relevant 
international standards by a widely recognized c onformity assessment body.  Concerning foreign and 
joint-venture commodity inspection agencies, member s of the Working Party noted that China should 
not maintain requirements which had the effect of acting as barriers to their operation, unless 
otherwise specified in China's Schedule of Specific Commitments. 
179. Some members of the Working Party expressed their concern about China's practice of 
applying conformity assessment procedures to im ported products and not accepting the results of 
conformity assessment by bodies in other WTO Members.  The representative of China responded that products certified by bodies recognized by China would require no additional conformity 
assessment procedures in China, except for random sampling of said products.  The Working Party 
took note of this commitment. 
180. The representative of China stated that except t hose statutory inspections listed in Annexes 7a 
and 7b of the Draft Protocol, the Government of China, in accordance wi th legitimate objectives 
stipulated in the TBT Agreement for the protecti on of human, animal and plant health, national 
security, environmental protection, prevention of deceptive practices and guaranteeing quality of 
exported goods, carried out administration in terms of technical regulations, standards and conformity 
assessment, to a series of subjects such as medicine (including pesticides, veterinary medicine and 
organic medicine), airplanes, vessels and seaworth y installations, nuclear safety facilities, measuring 
instruments, pressuring vessels, pressuring tunnel s and special equipment, fire extinguishing 
equipment, safety of telecoms, wireless equi pment and networks, mining safety facilities and 
dangerous chemicals. 
181. The representative of China stated that pursuan t to the provisions of the TBT Agreement, 
China applied compulsory inspection and quarantine to  commodities as well as to animals, plants and 
their processed products as required in the interest s of national security, life and health of human 
beings, animals and plants, envir onmental protection, as well as prevention of deceptive activities.  He 
also noted that most of China's standards were equa l or equivalent to the international standards, and 
that China implemented the same standards, t echnical regulations and accreditation procedures of 
inspection and quarantine to both imported and dom estic goods. There was no discrimination against 
the imported goods, animals and plants and their processed products.  
182. The representative of China said that China ha d set up a TBT notifica tion authority and two 
enquiry points which had been notified to the TBT Committee.  Laws, regulations, rules, standards  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 49 
 
 
and procedures on entry-exit inspection and quarantine had been published in publications such as the 
MOFTEC Gazette.  Information could also be ga thered from the TBT notification authority, 
MOFTEC or China's TBT enquiry points.  
183. Some members of the Working Party expressed concerns about the complexity and lack of 
consistency of China's standards and inspection regi me.  In addition, members of the Working Party 
noted that imported and domestic products were not  inspected by the same governmental entities and 
that this situation could result in less favourable tr eatment for imports.  Some members also criticized 
mandatory government inspection requirements for co mpliance with terms of commercial contracts.  
In response to those concerns, the representative of China stated that China intended to comply fully 
with its WTO obligations concerning its standard s, technical regulations and inspection regime. 
184.  The representative of China also indicated that  China would ensure the transparency of its 
standard and certification systems by publishing a ll relevant laws and regulations, including the 
regulations concerning domestic products, which were not currently published.  Members of the 
Working Party took note of this commitment. 
185. Some members of the Working Party raised sp ecific concerns regarding the standards and 
certification systems in China, including such matters  as (a) registration of initial imports of chemical 
products, (b) procedures for the Chinese Commodity Inspection Bureau ("CCIB") safety mark and the 
"Great Wall" mark, (c) standards and certificati on for automobiles, and (d) the safety and quality 
licence system for boilers and pressu re vessels. In response to those concerns, the representative of 
China stated that China intended to implement the following measures. These measures would be 
implemented prior to China's accession to the WTO, unless otherwise indicated. 
 (a) Registration of Initial Imports of Chemical Products 
- Enact and implement, within one year after its accession to the WTO, a new 
law and relevant regulations regardin g assessment and control of chemicals 
for the protection of the environment, in which complete national treatment 
and full consistency with internati onal practices would be ensured. 
- Ensure that chemicals listed in the "inventory chemicals" annexed to the 
above new law and its regulations w ould be exempted from a registration 
obligation and that a unified assessment procedure would be established for 
domestic and imported pr oducts under the new law and its regulations. WT/ACC/SPEC/CHN/1/Rev.3 
Page 50  
 
 (b) CCIB Safety Mark and the "Great Wall" Mark 
- Promulgate implementation regulati ons on the harmonization of the CCIB 
safety mark and the "Great Wall" mark, by introducing into these regulations 
the principle of "a single application, a single inspection and a single fee payment" for obtaining both marks at th e same time. This principle would be 
applied before the promulgation of the regulations. 
- Accept testing reports for products subject to the CB Scheme to which China 
was a party, and simplify the procedures for obtaining the CCIB safety mark and/or the "Great Wall" mark. 
- Shorten the time period needed for importers to obtain both marks regarding 
the same products, to around three months in principle. 
 (c) Standards and Certification for Automobiles 
- Unify its laws, regulations and sta ndards applied to domestic and imported 
automobiles. 
- Formulate, publish and implement la ws and regulations, standards and 
implementation regulations to establish a transparent system under which all 
the laws and regulations would be appl ied so as to accord imported products 
treatment no less favourable than that a ccorded to like products of national 
origin. 
 (d) Safety and Quality Licence System for Boilers and Pressure Vessels 
- Accord imported products treatment no less favourable than that accorded to 
products of national origin, includ ing fees imposed for conformity 
assessment and the effective period of factory certification. 
- Adopt international standards to the greatest extent possible, and exempt 
imported products from inspection wh ere like domestic products are not 
subject to such inspection. 
- Simplify the inspection methods and procedures for factories and products 
certified by inspection agencies having bilateral mutual recognition 
arrangements.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 51 
 
 
4. Sanitary and Phytosanitary Measures 
186. Members of the Working Party noted that China' s notification of laws, regulations and other 
measures relating to sanitary and phytosanitary ("SP S") measures, referred to in the Draft Protocol, 
was provided in document WT/ACC/CHN/33.  Member s of the Working Part y agreed that this 
notification did not prejudge the legal status, nature  or effects of the notified laws, regulations and 
other measures under the WTO Agreement. 
187. Members expressed the view that China s hould apply the Agreement on Sanitary and 
Phytosanitary Measures ("SPS Agreement") from the da te of China's accession and should ensure the 
conformity with the SPS Agreement of all of it s laws, regulations and practices relating to SPS 
measures.  In response, the representative of Ch ina confirmed that China would fully apply the SPS 
Agreement from the date of accession and would en sure the conformity with the SPS Agreement of 
all of its laws, regulations and pr actices relating to SPS measures.  The Working Party took note of 
these commitments. 
188. The representative of China stated that pursuan t to the provisions of the SPS Agreement, 
China applied compulsory inspection and quarantine as required in the interests of national security, 
life and health of human beings, animals and plants, environmental protection, as well as the 
prevention of deceptive practices.  He also noted that most of China's standards were equivalent to the 
international standards, and that China implemen ted the same standards, technical regulations and 
accreditation procedures for inspection and quaran tine to both imported and domestic goods. There 
was no discrimination against imported goods, animal s and plants or their processed products.  
189. The representative of China said that China ha d set up an SPS notification authority and an 
SPS enquiry point of inspection and quarantin e which had been notified to the WTO's 
SPS Committee.  Laws, regulations, rules, standa rds and procedures on entry-exit inspection and 
quarantine had been published in publications such as the MOFTEC Gazette.  Information could also 
be gathered from the SPS notification authority or from China's SPS enquiry point.  
5. Trade-Related Investment Measures 
190. 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 WT/ACC/SPEC/CHN/1/Rev.3 
Page 52  
 
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. 
191. 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.  
192. 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 and sport utility vehicles). 
193. 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. 
194. 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. 
6. State Trading Entities 
195. 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.  
196. 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,  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 53 
 
 
value, or country of origin of goods purchased or  sold, except in accordance with the requirements of 
the WTO Agreement.  Those members also st ated that in light of the GATT 1994 and the 
Understanding on the Interpretation of Article  XVII of the GATT 1994, China should notify 
information on state trading, including, in th e case of state trading of exported goods, domestic 
procurement prices, contract terms for de livery and financing terms and conditions. 
197. 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 stated that the notification of information on state trading enterprises would be 
provided in conformity with the relevant WTO agreement and interpretations. Meanwhile, such 
notification should be without prejudice to the comme rcial interests of the state trading enterprises. 
198. 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.  
199. 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. 
200. Some members of the Working Party noted that  prior to accession, enterprises in China were 
permitted to import goods for production purposes, incl uding those goods included in Annex 2a.  The 
representative of China confirmed that, notwithstandi ng section 5, paragraph 1, of the Draft Protocol, 
non-state trading enterprises, including private traders, would still be permitted to import for 
production purposes goods which continue d to be subject to state trading under the Draft Protocol and 
the WTO Agreement, and that such enterprises woul d have direct access to end-users of these goods, 
including processors.  The Working Pa rty took note of these commitments. WT/ACC/SPEC/CHN/1/Rev.3 
Page 54  
 
201. 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. 
202. 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. 
203. The representative of China also confirmed that China would eliminate state trading of 
cottonseed oil, sunflower seed oil, and corn oil by  1 January 2006.  The Working Party took note of 
these commitments. 
204. 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. 
205. 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 that was not justified 
under WTO rules.  The Working Party took note of this commitment.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 55 
 
 
7. Special Economic Areas 
206. Members of the Working Party noted that th ere was insufficient information available 
concerning special economic areas, in particular their names, geographic boundaries, and relevant 
laws, regulations and other measures relating thereto.   In response, the representative of China stated 
that since 1979 China had established a number of zones and areas where more open policies were applied.  They included five SEZs, 14 coastal open cities, six open cities along the Yangtze River, 
21 provincial capital cities and 13 inland boundary cities.  Those areas enjoyed greater flexibility in 
utilizing foreign capital, introducing foreign technology and conductin g economic cooperation 
overseas.  At present, foreign investors were entitled to certain preferential treatment.  
207. 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.   
208. 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. 
209. 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. 
210. Some members of the Working Party also rai sed concerns about the differential treatment 
within areas of minority autonomous regions and ot her areas of economic poverty.  In response, the 
representative of China stated that China had a cl ear commitment to uniform administration of the 
trade regime within each such area and w as also determined to prevent smuggling. WT/ACC/SPEC/CHN/1/Rev.3 
Page 56  
 
211. 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, includi ng physically incorporated components, imported 
into China's customs territory from the special economic areas. 
212. 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. 
213. 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.   
214. 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. 
215. Some members of the Working Party also re quested that any preferential arrangements 
provided for enterprises located within the special economic areas should be applied on the basis of 
non-discrimination.  
8. Government Procurement 
216. 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 
Government Procurement ("GPA") and on the basis of  the relevant provisions of the United Nations  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 57 
 
 
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. 
217. 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. 
218. The representative of China said that until such time as China be came a signatory to the GPA, 
all government entities at the central and sub-centr al level would conduct their procurement in a 
transparent manner and provide all foreign suppliers with equal opportunity to participate in that 
procurement pursuant to the principle of MFN treatm ent.  Such procurements would be subject only 
to laws, regulations, judicial decisions, administrativ e rulings of general app lication, and procedures 
(including standard contract clauses) which had b een published and made av ailable to the public. 
9. Transit 
219. 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 
220. Members of the Working Party noted that Chin a's commitments on agricultural tariffs, on 
domestic support and on export subsidies for agricult ural products were contained in the Schedule of 
Concessions and Commitments on Goods annexed to th e Draft Protocol.  They further noted that 
China had bound its agricultural export subsidies at zero. 
221. In response to requests for information, the representative of China stated that since  China 
was a country with a vast agricu ltural base, as well as a vast popul ation, agricultural security, and 
food security in particular, was an issue of supreme importance. China would base its policies on domestic agricultural supply, especially on balanced  supply and demand of grains.  Meanwhile, China 
would actively seek international resources as a necessary supplement.  WT/ACC/SPEC/CHN/1/Rev.3 
Page 58  
 
222. Some members of the Working Party requested further information concerning administrative 
guidance provided at the national and sub-national le vel which could have the effect of influencing 
the quantity and composition of agricultural imports .  Those members requested that China undertake 
an appropriate commitment to eliminate these practices.  
223. China confirmed that, in the agricultural sector, it would not maintain, resort or revert to 
guidance plans or administrative guidance at the na tional or sub-national level that regulated the 
quantity of imports, import controls, import substitu tion practices, or other non-tariff trade measures 
maintained through state trading enterprises at the na tional or sub-national level.  The Working Party 
took note of this commitment. 
224. Some members of the Working Party requested a dditional information about the use of fiscal 
transfers and other forms of domestic subsidi es to government-owned and government-controlled 
entities in the agricultural sector.  Those members stated that China's notifications under the 
Agreement on Agriculture and other WTO Agreements  and related commitments for subsidies should 
include reference to such measures.  Those member s also stated that the information notified should 
also detail export subsidies within the meaning of  Article 9 of the Agreement on Agriculture.  In 
response, the representative of China confirmed that  China did not intend to resort to agricultural 
export subsidies in the future and that this fact was set out clearly in China's Schedule of Concessions 
and Commitments on Goods wherein China had bound its  agricultural export subsidies at zero.  The 
Working Party took note of this commitment. 
225. Some members of the Working Party stated that China should undertake a commitment not to 
invoke the provisions in Articles 6:2, 6:4(b), 6:5, 9: 4, 12:2, 15 or 16, or Annex 5, Section B of the 
Agreement on Agriculture. 
226. The representative of China confirmed that Ch ina would fully implement the Agreement on 
Agriculture from the date of entry into force of the Draft Protocol.  The Working Party took note of 
this commitment. 
11. Trade in Civil Aircraft 
227. 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. 
228. 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.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 59 
 
 
12. Textiles 
229. 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 Members, the phrase "day prior to the da te of entry into force of the WTO Agreement," 
contained in Article 2.1 of the ATC should be deemed  to refer to the day prior to the date of accession 
of China to the WTO.  To these base levels, the in crease in growth rates provided for in Articles 2.13 
and 2.14 of the ATC should be applied, as appropr iate,  from the date of accession of China to the 
WTO.  The Working Party took note of these commitments. 
[It is proposed to move the following paragraph to the Draft Protocol.] 
230. China agreed that the following provisions woul d apply to trade in textiles and clothing 
products until 31 December 2008 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 as of the date the WTO Agreement entered 
into force, were, due to market disruption, threatening to impede the orderly 
development of trade in these products, su ch Member could request consultations 
with China with a view to easing or avoiding such market disruption.  The Member requesting consultations woul d provide China, at the time of the request, with a 
detailed factual statement of reasons and jus tifications 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; 
 (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 WT/ACC/SPEC/CHN/1/Rev.3 
Page 60  
 
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 
231. 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. 
232. 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 
be phased out or otherwise dealt with in accordan ce with mutually agreed terms and timetables as 
specified in said annex. 
14. Transitional Safeguards 
233. Some members of the Working Party stated that  there was a need, during a transitional period, 
for a special safeguard mechanism to guard agains t imports from China in such increased quantities or 
under such conditions as to cause or threaten inju ry to domestic producers of like or directly 
competitive products.  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 61 
 
 
234. The representative of China stated  that China opposed the crea tion of such a discriminatory 
safeguards provision and considered that the safe guards provisions of the GATT provided sufficient 
protection to the domestic industries of WTO Me mbers.  Some members of the Working Party 
considered that the provision of a transitional safegua rd would have to be carefully circumscribed to 
prevent abuse in its invocation. 
235. The representative of China expressed the following position concerning the implementation 
of the Product-Specific Safeguard provide d in Section 19 of the Draft Protocol: 
 (a) The Safeguard Agreement should apply in  proceedings involving imports of Chinese 
origin except as otherwise provided in the Draft Protocol. 
  (b) The Dispute Settlement Understanding should apply to consultations and the 
settlement of disputes arising under Section 19 of the Draft Protocol. 
  (c) "Diversions of trade" mentioned in pa ragraph 8 of the Product-Specific Safeguard 
Section of the Draft Protocol, existed onl y when there was clea r evidence to show: 
(a) that imports of a product, like or directly competitive with a product produced by 
the domestic industry, were increasing significantly and absolutely as a result of the imposition of the Product-Specific Safeguard measure by other WTO Members against imports from China;  and (b) such  increased imports were a significant cause 
of material injury to the domestic industry.  The affected WTO Member should 
consider objective factors including the volum e of imports, the effect of imports on 
prices for the like or directly competitive products and the effect of such imports on the domestic industry producing like or dir ectly competitive products and any such 
other factors. 
 
 (d) If a measure taken as a result of diversions of trade remains in effect more than 
90 days, China would have the right to su spend the application of substantially 
equivalent concessions or obligations u nder the GATT 1994 to the Member applying 
the measure. 
 15. Transitional Review Mechanism 
236. Members of the Working Party stated that fo llowing China's accession to the WTO it would 
be necessary to establish a transitional review mech anism constituted by a working party to monitor 
China's compliance with its Draft Protocol and th e WTO Agreement within the overall framework of WT/ACC/SPEC/CHN/1/Rev.3 
Page 62  
 
China's progress in the reform of its economic and fo reign trade regimes.  Some members considered 
that the review should be held every two years (o r more frequently upon request of China or another 
WTO Member), and that a major review should be held, e.g., every six years.  That working party 
would have regard to the outline contained in Annex 9 to the Draft Protocol and could make 
recommendations, as appropriate, to China or to  the other WTO Members concerned.  Those 
members stated that that working party should also decide whether and to what  extent the transitional 
provisions provided in paragraphs … of this Dr aft Report should no longer apply.  Those members 
noted that once the transitional provisions ceased to  apply, the Transitional Review Mechanism would 
be extinguished.   
237. The representative of China st ated that his government did not in principle oppose such a 
review mechanism but considered that the review could be carried out as part of the regular Trade 
Policy Review to which China would be subject.   In response, some members of the Working Party 
stated that they considered th at the WTO Agreement's Trade Polic y Review Mechanism was not well 
adapted to the type of specific review of complian ce with conditions of accession that they considered 
to be necessary.  Some members stated that the Trade Policy Revi ew of China in the WTO should 
occur as regularly scheduled, notwithstanding the po ssible creation of a special transitional review 
mechanism for China. 
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME 
238. Members of the Working Party expressed concern that certain elements of China's laws were 
not yet fully compatible with the provisions of the TR IPS Agreement.  This related, in particular, to 
provisions in the fields of copyright and neighb ouring rights, trademarks, patents, geographical 
indications and layout-designs of integrated circu its, and to the enforcement of intellectual property 
rights.  Members also expressed c oncern that there was a continued need for additional enforcement 
efforts by the Government of China. 
239. Some members of the Working Party stated that China should amend the following laws: the 
Copyright Law to provide for a rental right  for computer programmes and phonograms; the 
Trademark Law to provide for protection of trad e-names, famous marks and marks consisting of 
colours, letters or numerals; the Patent Law to a llow compulsory licensing only within the limits 
prescribed in the TRIPS Agreement, and the Crimin al Code to provide remedies which constitute a 
deterrent to further infringements.  In additi on, China should provide for the protection of 
geographical indications and layout-designs of in tegrated circuits to implement the respective 
provisions of the TRIPS Agreement.  China should also strengthen the legislative framework for the 
enforcement of intellectual property rights for all right-holders. In partic ular, national treatment 
should be fully applied, so that copyright en forcement action by local copyright bureaux involving  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 63 
 
 
foreign right-holders, would no longer require clearance by the National Copyright Administration in 
Beijing. Other procedural rights should be strengthe ned as well, so that right-holders could obtain 
information on government enforcement activities and that investigations could be conducted within 
reasonable time-limits supported, where necessary, by  significant fines that constitute an effective 
deterrent to further infringements.  In addition,  China should ensure the vigorous application by 
Chinese authorities of the enforcement legislation in  order to considerably reduce the existing high 
levels of piracy and counterfeiti ng.  Action should include the closure of manufacturing facilities as 
well as markets and retail shops that had been the ob ject of administrative convictions for infringing 
activities. 
240. The representative of China confirmed th at upon accession China would fully apply the 
provisions of the TRIPS Agreement and did not intend to have recourse to the provisions of Article 65 
of that Agreement.  The Working Party took note of this commitment. 
VI. POLICIES AFFECTING TRADE IN SERVICES 
241. Some members of the Working Party expressed c oncerns regarding the issue of transparency 
in China's services regime, in particular in r espect of obtaining, extending and renewing licences and 
other approvals required to provide services in China's market.  These members welcomed the broad ranging and comprehensive commitments that China wa s undertaking  to increase transparency and to 
provide information to governments and service providers on any matter relating to the GATS 
including China's Schedule of Specific Commitments.    Those members also expressed the view that 
upon its accession, China should publish a list of author ities responsible for authorizing, approving or 
regulating those service sectors in which China made specific commitments as well as the specific 
procedures and conditions for obtaining, extending,  renewing, denying or terminating licences or 
approvals.  These members also stated the need to ensure the independe nce and impartiality of 
regulatory authorities from the enterprises and individuals that they regulated. 
242. The representative of China stated that Ch ina would publish promptly and, except in 
emergency situations, at the latest by their entr y into force, all releva nt measures of general 
application which pertained to or affected the supply of services and make  relevant information 
publicly available.  The Working Party took note of this commitment. 
1. Licensing 
243. Some members of the Working Party noted that the procedures and conditions for obtaining, 
extending or renewing licences or a pprovals for providing services had to be consistent with the 
provisions of the WTO Agreement, including the Dr aft Protocol and China's Schedule of Specific 
Commitments.  Any licensing or approval process should not itself act as a barrier to market access WT/ACC/SPEC/CHN/1/Rev.3 
Page 64  
 
and should not be more trade restrictive than n ecessary.  Specific time frames for decision, the 
opportunity to cure deficiencies in an applicati on and to submit additiona l information, and the 
prompt provision in writing of reasons for denial of  an application, should be provided for in the 
procedures. Fees charged for processing of app lications should be commensurate with the 
administrative cost of processing the application.   Conditions for filing an application and the time 
taken to approve applications we re not to have the effect of quantitative limitations on service 
suppliers or denial of national treatment.  Those members expressed particular concern regarding the 
practice of inviting only certain service providers to  apply for licences or approvals and the practice of 
automatically terminating the effectiveness of an a pplication if the approving authority did not act 
within a set period of time.  Moreover, automa tically terminating the effectiveness of pending 
applications after a certain period of time wit hout providing reasons had the effect of denying a 
licence with no effective right of appeal as required unde r the Draft Protocol.  Applicants needed to be 
informed of the reasons for denial of a licence and su ch reasons needed to be consistent with China's 
WTO commitments.   
244. The representative of China confirmed that, in  the application of its commitments under the 
WTO Agreement, the Draft Protocol and its Sche dule of Specific Commitments, China would, upon 
accession, ensure that its licensing and approval pr ocedures for foreign service suppliers to provide 
services in China would be consistent with Article  VI of GATS.  For authorization required for the 
supply of a service on which a specific commitment had been made in China's Schedule of Specific 
Commitments, the competent authorities of China would, within a reasonable period of time after the 
submission of an application considered complete  under domestic laws and regulations, inform the 
applicant of the decision concerning the application.   For the services included in China's Schedule of 
Specific Commitments, the decisions and procedures used by regulators would be impartial with 
respect to all market participants unless otherwis e specified in the Schedule.  Where China required 
an examination to licence professionals, such ex aminations would be scheduled at reasonable 
intervals.  The Working Party took note of these commitments. 
245. The representative of China also confirmed th at established foreign service suppliers would 
be able to agree with their joint-venture partners  on the modification of their equity interest and 
implement this.  He further confirmed that such an  agreement would be approved if consistent with 
the relevant equity commitments in China's GATS Schedule.  The Working Party took note of these 
commitments. 
246. The representative of China submitted an acti on plan for implementing China's services and 
related commitments, circulated to the Workin g Party in [WT/ACC/CHN/X].  The action plan 
outlined the steps that Ch ina was taking to ensure full implem entation of its services commitments, in  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 65 
 
 
particular, focusing on revisions in  its laws, regulations and other measures relating to licensing of 
enterprises to provide services to comply with its obligations.  The representative of China confirmed 
that China would inform WTO Members regarding its revision of relevant laws , regulations and other 
measures to comply with China's obligations.   The Working Party took note of this commitment. 
247. Members of the Working Party welcomed China' s commitments in the area of distribution, 
noting that implementation of its commitments in th is area would modernize China's infrastructure for 
supplying this essential service.  Moreover, China' s commitments were subject to a progressive phase-
in of rights which would require changes in Chin a's laws and regulations concerning distribution 
activities generally.  New regulations on sales away  from a fixed location, for example, were 
specifically referenced in China's Schedule of Speci fic Commitments.  Some members noted that the 
World Code of Conduct provided a strong ethical basis for regulating sales away from a fixed 
location.  Members also sought confirmation that  the supply of franchising services was different 
from the establishment of a "chain store" since franchises with numerous establishments could be envisioned in a country of the size and population of China.  
248. The representative of China confirmed that China would consult with WTO Members and 
develop regulations, cons istent with the commitments in its services schedule, on direct sales 
activities.  The Working Party took note of this commitment. 
249. The representative of China clarified that franchising services could be supplied in the form 
of chain stores and that therefore the limitations on certain chain stores would apply to enterprises 
established and operating unde r franchising agreements. 
250. In response to questions from members of th e Working Party regarding certain terms in 
China's Schedule of Specific Commitments, the re presentative of China confirmed the following:   
(a) A "master policy" was a policy that pr ovided blanket coverage for the same legal 
person's property and liabilities located in diffe rent places.  A master policy could only be 
issued by the business department of an insure r's head office or that of its authorized 
province-level branch offices.  Other branches were not allowed to issue master policies. 
I. Master policy business with the state key construction projects as its subject-
matter insured.  
 If investors on the state key construction projects (i.e., projects that were so 
listed and annually announced by th e State Development and Planning 
Commission) met either of the following requirements, they could purchase a WT/ACC/SPEC/CHN/1/Rev.3 
Page 66  
 
master policy from insurers that we re located in the same place as the 
investors' legal persons were located. 
 (1) The investment on the subject-matter insured were all from China 
(including the reinvestment from the fo reign-invested enterprises in China) 
and the sum of investment of the inv estor accounted for over 15% of the total 
investment. 
 (2) The investment was partially from abroad, and partially from China 
(including the reinvestment from the fo reign-invested enterprises in China) 
and the sum of investment of the Chin ese investor accounted for over 15% of 
the total domestic investment. 
 For those projects that drew all investment from abroad, every insurer could provide 
coverage in the form of a master policy. 
II. A Master policy covering different s ubject-matters insured of the same legal 
person. 
 For those subject-matters insured located in different places and owned by 
the same legal person (excluding financial, railway, and post and 
telecommunications industries and enterprises), a master policy could be issued on the basis of either of the following conditions. 
 (1) For the sake of payment of th e premium tax, insurance companies 
incorporated where the legal person or accounting unit of the insurance 
applicant was located, were allowed to issue a master policy. 
 (2) If over 50% of the insurance am ount of the subject-matter insured 
was from a larger or medium sized city, then insurers in that city were allowed to issue a master policy, no matter whether the insurance applicant's 
legal person or accounting unit was located in the city. 
(b) The subject-matter insured of Large Commercial Risk was limited to large-scale 
commercial enterprise or large-scale construction project. 
I. For an insurance risk written on an y large-scale commercial enterprise, the 
following conditions had to be met: 
  (i) the fixed asset of the enterprise exceeded 200 million RMB;  and  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 67 
 
 
 (ii) in one single insurance contr act, either the sum-insured exceeded 500 
million RMB or the total annual premium income exceeded one million 
RMB. 
II. For an insurance risk written on an y large-scale construction project, the 
following conditions had to be met: 
  (i) the project had to be approved by relevant state departments; 
  (ii) the total amount of investment exceeded 200 million RMB;  and 
 (iii) in one single insurance contract, the sum insured exceeded 
500 million RMB and the total annual premium income exceeded one million RMB. 
III. The calculation basis for the above-mentioned sum insured and premium 
income did not include motor insurance,  credit insurance, employer liability 
insurance, statutory insurance, policy insurance and other insurance business 
stipulated by CIRC. 
 (c) Motor insurance, credit insurance, empl oyer liability insurance, statutory insurance 
and other insurance business excluded by the CI RC could not be underwritten or co-insured 
by insurers located other than where the s ubject-insured was located, or covered under a 
master policy. 
 (d) Statutory insurance products in Chin a's Schedule of Specific Commitments were 
limited to the following specific categories, and no additional products or categories would be 
added: Mandatory third-party liability of auto insurance, driver and operator liability for buses 
and other commercial vehicles (by railway, road and ships); and the 20% compulsory reinsurance of all lines of the primary risk s for non-life, personal accident and health 
insurance business with an appoint ed Chinese reinsurance company. 
 (e) The term "foreign insurers" included services providers that provided reinsurance 
services or services auxiliary to insurance only. 
 (f) China could make changes to the defin itions of the above-defined "Master Policy" 
and "Large Commercial Risk", and the new de finitions would be im plemented on a national 
treatment basis.  WT/ACC/SPEC/CHN/1/Rev.3 
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251. Members of the Working Party welcomed China' s commitment to permit internal branching 
for all insurance firms consistent with the phase-out  of geographic restrictions.  Some members noted 
that China had certain qualifications in addition to  prudential measures that foreign insurers had to 
meet to apply for a licence to provide services in Ch ina.  Those qualifications related to a minimum 
period of establishment in a WTO Member, total asse ts and maintenance of a representative office in 
China.  These qualifications did not apply to those established foreign insurance companies in China 
seeking to practice internal branching.   
2. Choice of Partner 
252. Some members expressed concern regarding th e existing practice of imposing conditions on 
the Chinese companies that were allowed to part ner with foreign service suppliers. These members 
indicated that this could amount to de facto  quotas, as the number of potential partners meeting those 
conditions might be limited. The representative of China confirmed that a foreign service supplier 
would be able to partner with a Chinese entity of  its choice as long as the Chinese partner was legally 
established in China and met the criteria set out in relevant Chinese laws and regulations.  The 
Working Party took note of this commitment. 
3. Modification of the Equity Interest 
253. With respect to its Schedule of Specific Commit ments, the representative of China confirmed 
that established foreign service suppliers would be ab le to agree with their joint-venture partners on 
the modification of their equity interest and impl ement such modification. The representative of China 
confirmed that such an agreement would be appr oved if consistent with the relevant equity 
commitments in China's Schedule of Specific Commitments. The Working Party took note of this commitment. 
4. Prior Experience Requirement for Es tablishment in Insurance Sector 
254. In response to questions from members, the representative of China confirmed that, the 
merging, division, restructuring or other change of legal form of an insurance company would not 
impact the prior experience requirements included in China's Schedule of Specific Commitments, as 
long as the insurance activities were maintained in the new entity.  The Working Party took note of 
this commitment. 
5. Inspection Services 
255. In response to questions from members of th e Working Party, the representative of China 
confirmed that China would not maintain requirements which had the effect of acting as barriers to  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 69 
 
 
the operation of foreign and joint-venture commodi ty inspection agencies. The Working Party took 
note of this commitment. 
6. Market Research 
256. Some members of the Working Party expressed c oncern regarding market research activities. 
In response to questions from members in this respect, the representative of China confirmed that, 
upon accession to the WTO, China would remove the prior approval requirement for market research 
services, defined as investigation services designed to secure information on the prospects and performance of an organization's products in the ma rket, including market analysis (of the size and 
other characteristics of a market) and analysis of consumer attitudes and preferences. Market research 
firms registered in China, which were engaged in such services, would only be required to file the 
survey plan and the questionnaire form on record in the statistical agencies of government at or above 
the provincial level.  The Working Party took note of these commitments. 
7. Legal Services 
257. In response to questions from members of th e Working Party, the representative of China 
clarified that "Chinese national registered lawyer s", as indicated in China's Schedule of Specific 
Commitments, were those Chinese nationals who ha d obtained a lawyer's certificate and a practising 
permit and had registered in a Chinese law firm for practising. 
8. Schedule of Specific Commitments 
258. China's Schedule of Specific Commitments was a nnexed to the Draft Protocol reproduced in 
the Appendix to this Draft Report.   This Schedule of Specific Commitments contained the market 
access commitments of China in respect of services. 
VII. OTHER ISSUES 
1. Notifications 
259. Members of the Working Party requested that  China provide to the WTO Secretariat the 
notifications described in paragraphs … of this Draft Report.   
2. Trade Agreements 
260. 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.  Those members requested th at China enter a commitment to eliminate such 
arrangements or bring them into conformity with WTO obligations by no later than the date of its 
accession to the WTO Agreement. WT/ACC/SPEC/CHN/1/Rev.3 
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3. Transparency 
261. Some members of the Working Party requested  that China undertake to ensure that upon 
request, and prior to implementation or enforcem ent, all laws, regulations and other measures 
pertaining to or affecting trade in goods, services, TRIPS or the control of forex would be published 
and made available to WTO Members.   
262. Those members of the Working Pa rty also requested that China designate an official journal 
in which all laws, regulations and other measures pe rtaining to or affecting matters covered by the 
WTO Agreement would be published and that those laws regulations and other measures should only 
become effective following a peri od within which interested par ties could submit comments to the 
designated authorities.  They asked that China publis h that journal on a regular basis and make copies 
of all issues of this journal readily available to individuals and enterprises. 
263. Members of the Working Party also requested  that China set up an enquiry point where 
information relating to all laws, regulations and other measures pertaining to or affecting trade in 
goods, services, TRIPS or the control of forex could be  obtained.  Those members stated that replies 
to such enquiries should generally be provided within  30 days of a request, and should in no case take 
longer than 45 days, and if so delayed a statemen t indicating the reasons therefore should be provided 
in writing to the interested party.  Members noted th at replies to enquiries would need to be complete 
and represent the authoritative view of the Government of China. 
264. The representative of China stated that Chin a would, according to the requirements of all 
WTO covered agreements, make ava ilable to WTO Members, upon requ est, relevant laws, regulations 
and other measures when such measures were implemen ted or enforced.  He further stated that China 
would establish or designate an enquiry point wh ere, upon request of other WTO Members, laws, 
regulations and other measures pertaining to or a ffecting the subject-matters of the WTO Agreement 
could be obtained and replies to relevant inqui ries from other WTO Members be provided within a 
reasonable period of time.  The Working Party took note of these commitments. 
265. Members of the Working Party further request ed that China provide the WTO Secretariat 
with statistical data and information describing Ch ina's economy and trading system, as specified in 
Annex 1 of the Draft Protocol, every two years, and 30 calendar days prior to a meeting of the 
Working Party on Trade with China that would be established by the Draft Protocol.  
266. Some members of the Working Party expressed concern about the lack of transparency 
regarding the laws, regulations a nd other measures that applied to matters covered in the WTO 
Agreement and the Draft Protocol.  In particular, some members noted the difficulty in finding and  WT/ACC/SPEC/CHN/1/Rev.3 
 Page 71 
 
 
obtaining copies of regulations and other measures undertaken by various ministries as well as those 
taken by provincial and local authorities.  Tran sparency of regulations and other measures, 
particularly of sub-central authorities, was essentia l since these authorities often provided the details 
on how the more general laws, re gulations and other measures of the central government would be 
implemented and often differed among various juri sdictions. Those members emphasized the need to 
receive such information in a timely fashion so that governments and traders could be prepared to 
comply with such provisions and could exercise their rights in respect of implementation and 
enforcement of such measures.  Those members not ed the development of the Internet and other 
means to ensure that information from all government  bodies at all levels could be assembled in one 
place and made readily available.  The creation and maintenance of a single, authoritative journal and 
enquiry point would greatly facilitate disseminati on of information and help promote compliance. 
267. Members of the Working Party also emphasized the importance of a meaningful opportunity 
to provide comments prior to final implementation of  laws, regulations and other measures.  Such an 
opportunity could enhance understandi ng of the provision and permit China to take such comments 
into account before implementing a measure. 
268. In response, the representative of China noted th at the Government of China regularly issued 
publications providing information on China's foreign trade system, such as the: "Almanac of Foreign 
Economic Relations and Trade" and "The Bulle tin of MOFTEC" published by MOFTEC; "Statistical 
Yearbook of China", published by the State Sta tistical Bureau; "China's Customs Statistics 
(Quarterly)", edited and published by the Customs.   China's laws and administrative rules and 
regulations of the State Council relating to foreign tr ade were all published, as were regulations issued 
by Ministries and Commissions.  Such laws and regul ations were available in the "Bulletin of the 
State Council", the "Collection of the Laws and Re gulations of the People's Republic of China" and 
the "MOFTEC Gazette".  The administrative regulati ons and directives relating to foreign trade were 
also published on MOFTEC's official website (http://www.moftec.gov.cn) and periodicals.  
269. He further noted that there were no forex restri ctions affecting import or export. Information 
on forex measures was published by the SA FE and was available on SAFE's website 
(http://www.safe.gov.cn) and via the news media. 
270. Concerning administration of imports and exports, the representative of China noted that 
MOFTEC, together with the releva nt departments, decided the items and specific quantities of 
products subject to import and expor t licensing and made timely adjustments according to the need of 
the current situation.  Such information would be published in the "International Business" newspaper 
and the "MOFTEC Gazette".  WT/ACC/SPEC/CHN/1/Rev.3 
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271. He also noted that information on China's customs laws and regulations, import and export 
duty rates, and customs procedures were published in  the "State Council Bulletin" and in the press 
media, and were available upon request. The procedur es concerning application of duty rates, customs 
value and duty determination, drawback and duty recovery, as well as the procedures concerning duty 
exemptions and reduction, were al so published.  Customs also publis hed monthly customs statistics, 
calculated according to country of origin and final destin ation, on the basis of eight-digit HS levels.    
272. The representative of China noted that any b ilateral trade agreemen ts concluded between 
China and its trading partners, and protocols on the exchange of goods negotiated under them were 
published in "The Treaty Series of the PRC".  He al so noted that the "Directory of China's Foreign 
Economic Relations and Trade Enterprises" and "China's Foreign Trade Corporations and 
Organizations" were two publications which id entified foreign trade corporations and other 
enterprises in China engaged in foreign trade.  
273. The representative of China confirmed that China would make available to WTO Members 
translations into one or more of the official languages of the WTO all la ws, regulations and other 
measures pertaining to or affecting trade in goods, ser vices, TRIPS or the control of forex, and to the 
maximum extent possible would make these laws, regulations and other measures available [__] 
calendar days before they were implemented or enforced.  The Working Party took note of these 
commitments.  
274. The representative of China confirmed that pub lication of all laws, regulations and other 
measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex would 
include the effective date of these measures.  Wh ere appropriate, it would also include the products 
and services affected by a particular measure,  identified by appropriate tariff line and CPC 
classification.  The Working Party took note of these commitments. 
275. The representative of China confirmed that China would publish in the official journal, by 
appropriate classification and by service where rele vant, a list of all organizations, including those 
organizations delegated such authority from the national authorities, that were responsible for 
authorizing, approving or regulating services activi ties whether through grant of licence or other 
approval.  Procedures and the c onditions for obtaining such licen ces or approval would also be 
published.  The Working Party took note of these commitments. 
276. The representative of China confirmed that  none of the information required by the 
WTO Agreement or the Draft Protocol to be disclosed  would be withheld as confidential information.  
The Working Party took note of this commitment.  WT/ACC/SPEC/CHN/1/Rev.3 
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277. The representative of China confirmed that Ch ina would establish or designate an enquiry 
point where all information relating to the laws, regulations and other measures pertaining to or 
affecting trade in goods, services, TRIPS or the cont rol of forex, as well as the published texts, could 
be obtained.  This informati on would include the names of na tional or sub-national authorities 
(including contact points) responsible for implem enting a particular measure.  The Working Party 
took note of these commitments. 
278. The representative of China stated that the full listing of official journals was as follows:  
Gazette of the Standing Committee of the National People's Congress of the People's Republic of China;  Gazette of the State Council of the People's Republic of China;  Collection of the Laws of the 
People's Republic of China;  Collection of the Laws and Regulations of the People's Republic of 
China;  Gazette of MOFTEC of the People's Republic  of China;  Proclamation of the People's Bank of 
the People's Republic of China;  Proclamation of the Ministry of Finance of the People's Republic of 
China. 
VIII.  CONCLUSIONS 
279. 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. 
280. 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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