RESTRICTED WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/ACC/SPEC/CHN/1/Rev.4
25 October 2000
(00-4438)
Working Party on the
Accession of ChinaOriginal:  English/
anglais/
inglés
DRAFT REPORT OF THE WORKING PARTY
ON THE ACCESSION OF CHINA TO THE WTO1
Revision
Following the Chairman's remarks at the conclusion of the Twelfth Meeting of the Working
Party on 28 September 2000, this further revision of the Draft Report of the Working Party on the
Accession of China to the WTO is being circulated on the Chairman's own responsibility.  This
revision attempts to take into account developments during the Twelfth Meeting and is submitted tothe 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'OMC1
Révision
Suite aux remarques formulées par le Président à l'issue de la douzième réunion du Groupe de
travail le 28 septembre 2000, cette nouvelle révision du projet de rapport du Groupe de travail del'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 cours de la douzième réunion du Groupe de travail et
est soumise au Groupe pour faciliter la suite des débats.
Grupo de Trabajo sobre laAdhesión de China
PROYECTO DE INFORME DEL GRUPO DE TRABAJO
SOBRE LA ADHESIÓN DE CHINA A LA OMC
1
Revisión
Como consecuencia de las observaciones formuladas por el Presidente al concluir la
duodécima reunión del Grupo de Trabajo del 28 de  septiembre de 2000, se distribuye esta nueva
revisión del proyecto de informe del Grupo de Trabajo sobre la Adhesión de China a la OMC bajo laresponsabilidad del Presidente.  La presente revisión tiene por objeto tener en cuenta los nuevos
acontecimientos que se han producido durante la du odécima reunión y se somete al Grupo de Trabajo
con el fin de facilitar la continuación de los debates.
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/ACC/SPEC/CHN/1/Rev.4
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TABLE OF CONTENTS
I. INTRO DUCTION ................................................................................................................. ...1
1. Documentation provided....................................................................................................... ...1
2. Introductory  statements ...................................................................................................... .....1
II. ECONOMIC POLICIES..........................................................................................................3
1. Non-discrimination (including 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.......................................................................127. Pricing Policie s ............................................................................................................. ...........13
8. Competitio n Policy........................................................................................................... .......15
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES....................................16
1. Power of Executive, Legislative and Judicial Branches of Government............................16
2. Authority of Sub-Central Governments ...............................................................................163. Uniform Administration of the Trade Regime.....................................................................16
4. Judicial Review .............................................................................................................. .........16
IV. POLICIES AFFECTING TRADE IN GOODS ...................................................................16
A. TRADING RIGHTS ............................................................................................................... ..16
B. IMPORT RE GULATIO N.........................................................................................................16
1. Ordinary Customs Duties...................................................................................................... .16
2. Other Duties and Charges..................................................................................................... .18
3. Rules of  Orig in .............................................................................................................. ..........18
4. Fees and Charges for Services Rendered..............................................................................19
5. Application of Internal Taxes to Imports .............................................................................196. Tariff Exemptions............................................................................................................ .......20
7. Tariff Rate  Quotas ........................................................................................................... .......21
8. Quantitative Import Restrictions, including Prohibitions and Quotas..............................21
9. Import Licensing............................................................................................................. ........21
10. Customs Valuation........................................................................................................... .......23
11. Other Customs Formalities................................................................................................... .24
12. Preshipment Inspec tion...................................................................................................... ....24
13. Anti-Dumping, Countervailing Duties..................................................................................25
14. Safeguards .................................................................................................................. .............25
C. EXPORT RE GULATI ONS ......................................................................................................25WT/ACC/SPEC/CHN/1/Rev.4
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1. Customs Tariffs, Fees and Charges for Services Rendered, Application of
Internal Taxes to Exports...................................................................................................... .25
2. Export Licensing and Export Restrictions ...........................................................................25
3. Export Subsidies ............................................................................................................. ........27
D. INTERNAL POLICIES AFFECTI NG FOREIGN TRADE  IN GOODS.................................28
1. Taxes and Charges Levied on Imports and Exports ...........................................................28
2. Industrial Policy, including Subsidies...................................................................................28
3. Technical Barriers to Trade.................................................................................................. .28
4. Sanitary and Phytosanitary Measures..................................................................................28
5. Trade-Related Investment Measures ....................................................................................29
6. State Trading Entities....................................................................................................... ......30
7. Special Economic Areas ....................................................................................................... ..32
8. Government Procurement......................................................................................................3 4
9. Transit...................................................................................................................... ................35
10. Agricultural  Poli cies ....................................................................................................... ........35
11. Trade in Ci vil Ai rcraft ..................................................................................................... ......36
12. Textiles .................................................................................................................... .................36
13. Measures Maintained  Against China....................................................................................37
14. Transitional Safeguards ..................................................................................................... ....38
15. Transitional Review Mechanism ...........................................................................................38
V. TRADE-RELATED INTELLECTUAL  PROPERTY REGIME.......................................38
VI. POLICIES AFFECTING TRADE IN SE RVICES..............................................................38
VII. OTHER ISSUES ............................................................................................................... ......38
1. Notifica tions................................................................................................................ .............38
2. Special Trade Arrangements .................................................................................................38
3. Transparency ................................................................................................................. .........38
VIII. CONCLUSIONS ............................................................................................................... ......38WT/ACC/SPEC/CHN/1/Rev.4
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I. INTRODUCTION
1. At its meeting on 4 March 1987, the Council established a Working Party to examine the
request of the Government of the People's Republic of China ("China") (L/6017, submitted on10 July 1986) for resumption of its status as a GATT contracting party, and to submit to the Councilrecommendations which may include a Draft Protocol on the Status of China.  In a communication
dated 7 December 1995, the Government of China applied for accession to the AgreementEstablishing the World Trade Organization ("WTO Agreement") pursuant to Article XII of the WTOAgreement.  Following China's application and pursuant to the decision of the General Council on31 January 1995, the existing Working Party on China's Status as a GATT 1947 Contracting Partywas transformed into a WTO Accession Working Party, 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 Contracting Party met on 20 occasions between
1987 and 1995 under the Chairmanship of H.E. Mr. Pierre-Louis Girard (Switzerland).  The WorkingParty 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 theforeign trade regime of China, together with replies of the Chinese authorities thereto.  In addition, theGovernment of China made available to the Working 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 China stated that China's consistent efforts toresume its status as a contracting party to GATT and accession to the WTO were in line with itsobjective of economic reform to establish a socialist market economy as well as its basic nationalpolicy of opening to the outside world.  China believed that its WTO accession would increase itseconomic growth and enhance its economic and trade relations with WTO Members.
5.  Members of the Working Party welcomed China's accession to the WTO and considered that
its accession would contribute to a strengthening of the multilateral trading system, enhancing theWT/ACC/SPEC/CHN/1/Rev.4
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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 population of 1.25 billion.  Since 1979, China had been progressively
reforming its economic system, with the objective of  establishing and improving the socialist market
economy.  The reform package introduced in 1994, covering the banking, finance, taxation,investment, foreign exchange ("forex") and foreign trade sectors, had brought about majorbreakthroughs in China's socialist market economy.  State-owned enterprises had been reformed by aclear definition of property rights and responsibilities, 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, responsiblefor its own profits and losses.  A nation-wide unified and open market system had been developed.An improved macroeconomic regulatory system used indirect means and market forces to play a
central role in economic management and the allocation 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 supervision.  The exchange rate of theChinese currency Renminbi (also "RMB") had been unified and remained stable.  The Renminbi hadbeen made convertible on current account.  Further liberalization of pricing policy had resulted in themajority of consumer and producer products being subject to market prices.  The market now played amuch 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 theper capita dispensable income for urban dwellers was RMB 5,425 yuan (approximately US$ 655).  Inrecent years, foreign trade had grown substantially.  In 1999, total imports and exports of goodsreached US$ 360.65 billion, of which exports stood at US$ 194.93 billion, and imports, US$ 165.72billion. 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 still a developing country and therefore should have the right toenjoy all the special and preferential treatment accorded to developing country Members pursuant to
the WTO Agreement.
9. Some members of the Working Party indicated that because of the significant size, rapid
growth and transitional nature of the Chinese economy, a pragmatic approach should be taken inWT/ACC/SPEC/CHN/1/Rev.4
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determining China's need for recourse to transitional periods and other special provisions in the WTO
agreements available to developing country WTO Members.  Each agreement and China's situationshould be carefully considered and specifically addressed.
10. At the request of interested members of the Working Party, the representative of China agreed
that China would undertake bilateral market access negotiations with respect to industrial and
agricultural products, and initial commitments in services.
11. Some members of the Working Party stated that in addition to undertaking market access
negotiations in goods and services, close attention should also be paid to China's multilateralcommitments, in particular China's future obligations under the Multilateral Agreements on Trade inGoods and the General Agreement on Trade in Services ("GATS").  This was of vital importance toensure that China would be able to take full benefit of WTO membership as quickly as possible, aswell as to ensure that the value of any market access conditions undertaken were not adverselyaffected by inconsistent measures such as some types of non-tariff measures.
12. The representative of China stated that the achievement of balance between rights and
obligations was the basic principle in its negotiation of WTO accession.
13. Some members of the Working Party expressed concern over discrepancies in statistical
information supplied by the Government of China on trade volume/value.  Members and Chinapursued this issue separately in an Informal Group of Experts on Export Statistics.
14. The Working Party reviewed the foreign trade regime of China.  The discussions and
commitments resulting therefrom are contained in paragraphs … below and in the Draft Protocol ofAccession ("Draft Protocol") and in China's Schedules annexed to the Draft Protocol.
II. ECONOMIC POLICIES
1. Non-discrimination (including national treatment)
15. Some members expressed concern regarding the application of the principle of non-
discrimination in relation to foreign individuals and enterprises (whether wholly or partly foreign
funded).  Those members stated that China should enter a commitment to accord non-discriminatory
treatment to all foreign individuals and enterprises and foreign-funded enterprises in respect of theprocurement of inputs and goods and services necessary for production of goods and the conditionsunder which their goods were produced, marketed or sold, in the domestic market and for export.  Inaddition, those members said that China should also enter a commitment to guarantee non-discriminatory treatment in respect of the prices and availability of goods and services supplied byWT/ACC/SPEC/CHN/1/Rev.4
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national and sub-national authorities and public or state enterprises, in areas including transportation,
energy, basic telecommunications, other utilities and factors of production.
16. Some members of the Working Party also raised concerns over China's practice of
conditioning or imposing restrictions 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 procurement of goods and services, and the distribution of import andexport licences.  Members of the Working Party requested that China enter into a commitment not tocondition such practices on the nationality of the entity concerned.
17. In response, the representative of China emphasized the importance of the commitments that
the government was undertaking on non-discrimination.  The representative of China noted, however,that any commitment to provide non-discriminatory treatment to Chinese enterprises, includingforeign-funded enterprises, and foreign enterprises a nd individuals in China, would be subject to other
provisions of the Draft Protocol and, in partic ular, would not prejudice China's rights under the
GATS, China's Schedule of Specific Commitments or commitments undertaken in relation to trade-
related investment measures.
18. The representative of China further confirmed that China would provide the same treatment to
Chinese enterprises, including foreign-funded enterprises, and foreign enterprises and individuals inChina.  China would eliminate dual pricing practi ces as well as differences in treatment accorded to
goods produced for sale in China in comparison to those produced for export.  The Working Partytook note of these commitments.
19. The representative of China confirmed that, consistent with China's rights and obligations
under the WTO Agreement and the Draft Protocol, China would provide non-discriminatory treatment
to all WTO Members, including Members of the WTO that were separate customs territories.  TheWorking Party took note of this commitment.
20. Members of the Working Party expressed concern about certain provisions of Chinese laws,
regulations, administrative notices and other requirements which could, directly or indirectly, result inless favourable treatment of imported products in contravention of Article III of the GeneralAgreement on Tariffs and Trade ("GATT 1994").  Such requirements included product registrationand certification, internal taxation, price and profit controls and all distinct forms of licensing forimports, and distribution or sale of imported goods.  Even where such requirements existed in relation
to domestically produced goods, Members re-iterated that any de facto  or de jure less favourable
treatment of imported goods had to be eliminated in order to ensure full conf ormity with the principle
of national treatment.WT/ACC/SPEC/CHN/1/Rev.4
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21. Some members of the Working Party drew China's attention to the variety of types of
requirements which could contravene GATT Article III. Specific reference was made to theprocedures, charges and conditions for granting of business licences, whether to import, distribute, re-sell or retail goods of non-Chinese origin.  Reference 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 attention of China to its obligation to ensure thatproduct testing and certification requirements, including procedures for in situ  inspections, posed no
greater burden – whether financial or practical - on goods of non-Chinese origin than on domestic
goods.  Those members underlined that conformity assessment procedures and standards, includingsafety and other compliance requirements, had to respect the terms of the WTO Agreement onTechnical Barriers to Trade ("TBT Agreement") as well as GATT Article III.
22. The representative of China confirmed that the full respect of all laws, regulations and
administrative requirements with the principle of non-discrimination between domestically produced
and imported products would be ensured and enforced by the date of China's accession to the WTO
unless otherwise provided in the Draft Protocol or Draft Report.  The representative of China declaredthat, by accession, China would repeal and cease to apply all such existing laws, regulations and othermeasures whose effect was inconsistent with WTO rules on national treatment.  This commitment wasmade in relation to final or interim laws, administrative measures, rules and notices, or any other formof stipulation or guideline. The Working Party took note of these commitments.
23. In particular, the representative of China confirmed that measures would be taken at national
and subnational level, including repeal or modification of legislation, to provide full GATT national
treatment in respect of laws, regulations and other 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, notices and measures which subjected
imported pharmaceuticals to distinct procedures and formulas for pricing and classification,
or which set limits on profit margins attainable and imports, or which created any otherconditions regarding price or local content which could result in less favourable treatment of
imported products;
- Cigarettes, including unification of the licensing requirements so that a single licence
authorized the sale of all cigarettes, irrespective of their country of origin, and elimination ofWT/ACC/SPEC/CHN/1/Rev.4
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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 thecase of cigarettes, China could avail itself of a transitional period of two years to fully unifythe 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 China'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 ofthe licensing requirements so that a single licence authorized the sale of all spirits irrespectiveof their country of origin;
- Chemicals, including registration procedures applicable to imported products, such as those
applied under China's "Environmental Control Regulations for Initial Imports of Chemical
Products and Imports and Export s 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, which had to be equitable in relation to thosechargeable 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 ofaccession in order to amend or repeal the relevant legislation.  The Working Party took note of these
commitments.
2. Monetary and Fiscal Policy
24. The representative of China stated that through the reform and opening up in the last two
decades, China had established a fiscal management system which was compatible with the principlesof a market economy.  With respect to fiscal revenue, a taxation system with a value-added tax as themain element had been established since the taxation reform in 1994. With respect to fiscalexpenditure, over recent years the government had, in line with the public fiscal requirement generally
exercised by market economies, strengthened its adjustment of the structure of expenditure and given
priority to public needs so as to ensure the normal operations of the government.
25. The representative of China further stated that in recent years, while pursuing proactive fiscal
policy, China had implemented proper monetary policy and had taken a series of adjusting and reformWT/ACC/SPEC/CHN/1/Rev.4
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measures which included lowering the interest rate for loans from financial institutions, improving the
system of required deposit reserves and lowering the ratio of required reserves, positively increasingthe input of base money and encouraging the commercial banks to expand their credit.
26. In respect of future fiscal policy, the Government of China would further improve its taxation
system and would continue to improve the efficiency of fiscal expenditure through implementing
reform measures such as sectoral budget, centralized payment by the national treasury and zero basebudget, as well as improving management of fiscal expenditure. With respect to future monetarypolicy, the central bank would continue to pursue a prudent policy, maintain the stability of RMB,promote interest rate liberalization and establish a modern commercial banking system.
3. Foreign Exchange and Payments
27. Some members of the Working Party raised concerns about China's use of forex controls to
regulate the level and composition of trade in goods and services.  In response, the representative ofChina stated that its system of forex had undergone rapid change and that China was now a memberof the International Monetary Fund ("IMF").  Significant moves had been taken to reform, rationalizeand liberalize the forex market.  The practice of multiple exchange rates in swap centres had beenabolished.  China had already unified its forex market and removed many of the restrictions on the useof forex.
28. Outlining the historical development of China' s forex reform, the representative of China
stated that the purpose of China's forex reform was to 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 developing.  In early 1994, official RMB exchange rates were unified with themarket rates. The banking exchange system was adopted and a nationwide unified inter-bank forex
market was established, with conditional convertibility of the Renminbi on current accounts.  Since1996, foreign investment enterprises ("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 formally accepted the obligations of Article VIII of the IMF's Articles of Agreement,removing exchange restrictions on current account transactions.  Accordingly, since then theRenminbi had been fully convertible on current accounts.  It was confirmed by the IMF in its Staff
Report on Article IV Consultations with China in 2000 that China had no existing forex restrictions
for current account transactions.
29. The representative of China stated that the State Administration of Foreign Exchange
("SAFE") was under the auspices of the People's Bank of China ("PBC"), and was the administrativeorgan empowered to regulate forex.  Its main functions were to monitor and advise on balance-of-WT/ACC/SPEC/CHN/1/Rev.4
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payments and forex matters.  SAFE was also requir ed to draft appropriate regulations and monitor
compliance.  He further noted that domestic and foreign banks, and financial institutions could engagein forex business, with the approval of the PBC.
30. In response to requests from members of the Working Party for further information, the
representative of China added that for forex payments under current accounts, domestic entities
(including FIEs) could purchase forex at market exchange rates from designated banks or debit theirforex accounts directly upon presentation of valid documents.  For payments such as pre-payment,commission, etc., exceeding the proportion or limit, the entities could also purchase forex from thebanks upon meeting the bona fide  test administered by SAFE.  Forex for personal use by individuals
could be purchased directly from the banks upon presentation of valid documents (within a specifiedlimit).  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 bydomestic entities had to be repatriated into China, some of which could be retained and some sold to
the designated banks at market rates.  A verification system for forex payment (imports) and forex
receipt (exports) had also been adopted.
31. Concerning the exchange rate regime in particular, the representative of China noted that
since the unification of exchange rates on 1 January 1994, China had adopted a single and managedfloating exchange rate regime based on supply and demand.  PBC published the reference rates ofRMB against the US dollar, the HK dollar and Japanese yen based on the weighted average prices offorex transactions at the interbank forex market during the previous day's trading. The buying andselling rates of RMB against the US dollar on the inter-bank forex market could fluctuate within 0.3%
of the reference rate. For the HK dollar and Japanese yen, the permitted range was 1%.   Designated
forex banks could deal with their clients at an agreed rate.  Under such contracts the exchange rate ofthe US dollar was required to be within 0.15% of the reference rate, whereas for the HK dollar andJapanese yen, the permitted range was 1%.  The exchange rates for other foreign currencies werebased on the rates of RMB against the US dollar and cross-exchange rates of other foreign currencyon the international market. The permitted margin  between the buying and selling rate could not
exceed 0.5%.
32. The representative of China further noted that since 1 January 1994, designated forex banks
had become major participants in forex transactions.  On 1 April 1994, the China Foreign Exchange
Trading System was set up in Shanghai and branches were opened in dozens of cities.  The Shanghai
Foreign Exchange Trading System had adopted a system of membership, respective quotation,concentrated trading and forex market settlement.  Designated forex banks dealt on the inter-bankmarket according to the turnover position limit on ba nking exchange stipulated by SAFE and coveredWT/ACC/SPEC/CHN/1/Rev.4
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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 supply and demand, and maintain the stability of theRMB exchange rate.
33. The representative of China noted that since 1 July 1996, forex dealing of the FIEs was
carried out through the banking exchange system.  He further noted that to encourage foreign direct
investment, China had granted national treatment to FIEs in exchange administration.  Accordingly,
FIEs were allowed to open and hold forex settlement accounts to retain receipts under currentaccounts, up to a maximum amount stipulated by SAFE.  Receipts in excess of the maximum amountwere required to be sold to designated forex bank s.  No restrictions were maintained on the payment
and transfer of current transactions by FIEs, a nd FIEs could purchase forex from designated forex
banks or debit their forex accounts for any payment under current transactions, upon the presentationof valid documents to the designated forex banks or SAFE for the bona fide test.  FIEs could alsoopen forex accounts to hold foreign-invested capital, and they could sell from these accounts upon the
approval of SAFE.  FIEs  could also borrow forex 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 forex accounts or in forex purchased from designatedforex banks after liquidation, upon approval by SAFE according to law.
34. The representative of China further noted that the laws and regulations mentioned above
were:  Law of the People's Republic of China on Chinese-Foreign Equity Joint Venture;  Law of thePeople's Republic of China on Chinese-Foreign Contractual Joint Venture;  Regulations on theExchange System of the People's Republic of China; and Regulations on the Sale and Purchase of and
Payment in Foreign Exchange.
35. Some members of the Working Party stated that China should undertake appropriate
commitments on its reform of forex.
36. In response, the representative of China stated that China would implement its obligations
with respect to forex matters in accordance with the provisions of the WTO Agreement and related
declarations and decisions that concerned the IMF.  The representative further confirmed China'sacceptance of the obligations of Article VIII of the IMF's Articles of Agreement, which provided that"no member shall, without the approval of the Fund, impose restrictions on the making of paymentsand transfers for current international transactions ".  He stated that, in accordance with these
obligations, and unless otherwise provided for in the IMF's Articles of Agreement, China would not
resort to any laws, regulations or other measures, including any requirements with respect tocontractual terms, that would restrict the availability to any individual or enterprise of forex forWT/ACC/SPEC/CHN/1/Rev.4
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current international transactions within its customs territory to an amount rela ted to the forex inflows
attributable to that individual or enterprise.  He stated, moreover, that China would not subjectindividual requests for forex for the making of payments and transfers  for current international
transactions, including the issuance of credit or cr edit guarantees for current international transactions
(e.g., letters of credit; direct loans; guarantees of loans by financial institutions or other entities; or
insurance of financing by financial institutions or other entities), to any form of approval or restriction(including a requirement for the presentation of an invoice), in a manner inconsistent with itsobligations under the IMF's Articles of Agreement.  The Working Party took note of thesecommitments.
37. In addition, the representative of China stated that China would provide information on
exchange measures as required under Article VIII, Section 5 of the IMF's Articles of Agreement, andsuch other information on its exchange measures as was deemed necessary in the context of thetransitional review mechanism.  The Working Party took note of this commitment.
4. Balance-of-Payments Measures
38. Some members of the Working Party stated that China should apply balance-of-payments
("BOPs") measures only under the circumstances provided for in the WTO Agreement and not as ajustification for imposition of restrictions on imports for other protectionist purposes.  Those membersstated that measures taken for BOPs reasons should have the least trade disruptive effect possible andshould be limited to temporary import surcharges, import deposit requirements or other equivalent
price-based trade measures, and those measures should not be used to provide import protection for
specific sectors, industries or products.
39. Those members further stated that any such measures should be notified pursuant to the
Understanding on the Balance-of-Payments Provis ions of the GATT 1994 ("BOPs Understanding")
and to the General Council not later than the imposition of the measures, together with a timeschedule for their elimination and a programme of external and domestic policy measures to be usedto restore BOPs equilibrium.  Those members also stated that following deposit of such a notification,the Committee on Balance-of-Payments Restrictions ("BOPs Committee") should meet to examinethe notification.  It was noted that paragraph 4 of the BOPs Understanding would be available to
China in the case of "essential products".  Some members stated that the BOPs Committee should
review the operation of any BOPs measures taken by China, if so requested by China or a WTOMember.WT/ACC/SPEC/CHN/1/Rev.4
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40. Some other members considered that, in respect of measures taken for BOP purposes, China
should enjoy the same rights as those accorded to other developing country WTO Members, asprovided in GATT Article XVIII:B and the BOPs Understanding.
41. In response, the representative of China stated that China considered that it should have the
right to make full use of WTO BOPs provisions to protect, if necessary, its BOPs situation.  He
confirmed that China would fully comply with the provisions of the GATT 1994 and the BOPsUnderstanding.  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 notprice-based, it would transform such measures into  price-based measures as soon as possible.  Any
measures taken would be maintained strictly in accordance with the GATT 1994 and the BOPsUnderstanding, and would not exceed what was necessary to address the particular BOPs situation.The representative of China also confirmed that measures taken for BOPs reasons would only beapplied to control the general level of imports and not to protect specific sectors or industries.  The
Working Party took note of these commitments.
5. Investment Regime
42. The representative of China stated 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. Thehighly centralized investment administration under the planned economy had been progressivelytransformed into a new pattern of diversification of investors, multi-channelling of capital sources and
diversification of investment modalities. The gove rnment encouraged foreign investment into the
Chinese market and had uninterruptedly opened and expanded the scope for investment. At the sametime, the Government of China also encouraged the development of the non-state-operated economyand was speeding up the opening of areas for non-st ate investment. With China's programme in the
establishment of its market economy, the construction projects of various enterprises utilizing freecapital and financed by the credit of the enterprise would be fully subject to the decision-making ofthe enterprise concerned and at their own risk. The commercial banks' credit activities to all kinds ofinvestors would be based on their own evaluation and decision-making, and would be at their own
risk.  The business activities of intermediate invest ment 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 agencies and the service activities financed by thegovernment would also be subject to the terms a nd conditions agreed in the contracts concerned.
43. The representative of China further stated that China had promulgated investment guidelines
and that the Government of China was in the process of revising and completing these guidelines.Responding to concerns raised by certain members of the Working Party, he confirmed that theseWT/ACC/SPEC/CHN/1/Rev.4
Page 12
investment guidelines and their implementation would be in full conformity with the WTO
Agreement.
6. State-Owned and State-Invested Enterprises
44. The representative of China stated that the state-owned enterprises of China basically
operated in accordance with rules of market economy.  The government would no longer directlyadminister the human, finance and material resources, and operational activities such as production,supply and marketing.  The prices of commodities produced by state-owned enterprises were decidedby the market and resources in operational areas were fundamentally allocated by the market.  Thestate-owned banks had been commercialized and lending to state-owned enterprises took place
exclusively under market conditions.  China was furthering its reform of state-owned enterprises and
establishing a modern enterprise system.
45. In light of the role that state-owned and state-invested enterprises played in China's economy,
some members of the Working Party expressed concer ns about the continuing governmental influence
and guidance of the decisions and activities of such enterprises relating to the purchase and sale ofgoods 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 China to clarify its understanding of the types of activities that wouldnot come within the scope of Article III:8(a) of GATT 1994.  For example, any measure relating tostate-owned and state-invested enterprises importing materials and machinery used in the assembly of
goods, which were then exported or otherwise made available for commercial sale or use or for non-
governmental purposes, would not be considered to be a measure relating to government procurement.
46. The representative of China emphasized the evolving nature of China's economy and the
significant role of FIEs and the private sector in the economy.  Given the increasing need anddesirability 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 WTOAgreement.
47. The representative of China further confirmed that China would ensure that all state-owned
and state-invested enterprises would make purchases and sales based solely on commercial
considerations, e.g. price, quality, marketability and availability, and that the enterprises of other
WTO Members would have an adequate opportunity to compete for sales to and purchases from theseenterprises on non-discriminatory terms and conditions.  In addition, the Government of China wouldnot influence, directly or indirectly, commercial decisions on the part of state-owned or state-investedenterprises, including the quantity, value or country of origin of any goods purchased or sold, exceptWT/ACC/SPEC/CHN/1/Rev.4
Page 13
in a manner consistent with the WTO Agreement.  The Working Party took note of these
commitments.
48. The representative of China confirmed that, without prejudice to China's rights in future
negotiations in the Government Procurement 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 togovernment procurement. Thus, such purchases or sales would be subject to the provisions ofArticles II, XVI and XVII of the GATS and Arti cle III of the GATT 1994.  The Working Party took
note of this commitment.
49. Certain members of the Working Party expressed concern about laws, regulations and
measures in China affecting the transfer of technol ogy, in particular in the context of investment
decisions.  Moreover, these members expressed concern about measures conditioning the receipt of
benefits, including investment approvals, upon t echnology transfer.  In their view, the terms and
conditions of technology transfer, particularly in the context of an investment, should be agreedbetween the parties to the investment without gove rnment interference.  The government should not,
for example, condition investment approval upon technology transfer.
50. The representative of China confirmed that China would only impose, apply or enforce laws,
regulations or measures relating to the transfer of technology, production processes, or otherproprietary knowledge to an individual or enterprise in its territory that were not inconsistent with theWTO Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") and
the Agreement on Trade-Related Investment Measures ("TRIMs Agreement").  China confirmed that
the terms and conditions of technology transfer, production processes or other proprietary knowledge,particularly in the context of an investment, woul d only require agreement between the parties to the
investment.  The Working Party took note of these commitments.
7. Pricing Policies
51. Some members of the Working Party noted that China had made extensive use of price
controls, for example in the agricultural sector.  Those members requested that China undertake
specific commitments concerning its system of state pricing.  In particular, those members stated that
China should allow prices for traded goods and services in every sector to be determined by marketforces, and multi-tier pricing practices for such goods and services should be eliminated.  Thosemembers noted, however, that China expected to ma intain price controls on the goods and services
listed in Annex 4 to the Draft Protocol, and stated th at any such controls should be maintained in aWT/ACC/SPEC/CHN/1/Rev.4
Page 14
manner consistent with the WTO Agreement, in particular Article III of the GATT 1994 and Annex 2,
paragraphs 3 and 4, of the Agreement on Agriculture.  Those members noted that except inexceptional circumstances, and subject to notification to the WTO Secretariat, price controls shouldnot be extended 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.
52. Members expressed the view that price controls and state pricing in China also encompassed
"guidance pricing" and  regulation of the range of profits that enterprises could enjoy.  Such policiesand practices would also be subject to China's commitments.  In their view, price controls should beadopted only in extraordinary circumstances and should be removed as soon as the circumstancesjustifying their adoption were addressed.
53. The representative of China said that China currently applied a mechanism of market-based
pricing under macro-economic adjustment.  He noted that national treatment was 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 theseauthorities. Products and services subject to government pricing were those having a direct bearing onthe national economy and the basic needs of the people's livelihood, including those products thatwere scarce in China.
54. He added that the government guidance price mechanism 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 situation, make their own decisions on prices.  Withmarket-regulated prices, enterprises were free to set prices in accordance with supply and demand tothe extent permitted by generally applicable laws, regulations and policies concerning prices.
55. The representative of China stated that in formulating government prices and government
guidance prices, the following criteria were taken into account:  normal production costs, supply anddemand situation, relevant government policies and prices of related products. When fixing prices ofconsumer goods, consideration was given to the limits of consumers' purchasing power.  He notedthat 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 govern ment guidance prices 1.2%, and that of market-
regulated prices 94.7%.  For agricultural products, the share of government prices was 9.1%,WT/ACC/SPEC/CHN/1/Rev.4
Page 15
government guidance prices 7.1%, and market-regulated 83.3%.  For production inputs, the share of
government prices was 9.6%, that of government guidance prices 4.4%, and market-regulated prices86%.  The share of directly government-controlled prices had been much reduced.  The Governmentof China considered that China's price system was becoming increasingly rationalized, creating a
relatively fair marketplace for all enterprises to compete on an equal footing.
56. The representative of China recalled that Annex 4 of the Draft Protocol contained a
comprehensive listing of all products and services presently subject to government guidance pricingand government pricing.
57. The representative of China confirmed that it would publish in the official journal the list of
goods and services subject to state pricing and changes thereto, together with price-settingmechanisms and policies.  The Working Party took note of these commitments.
58. The representative of China confirmed that the official journal providing price information
was the Pricing Monthly of the People's Republic of China, published in Beijing.  It was a monthly
magazine listing all products and services priced by the State.  He further stated that China would
continue to further its price reform, adjusting the catalogue subject to state pricing and furtherliberalize its pricing policies.
59. The representative of China further confirmed that price controls would not be used for
purposes of affording protection to domestic industries  or services providers.  The Working Party took
note of this commitment.
60. In addition, the representative of China confirmed that China would apply its current price
controls and any other price controls from the entry into force of the Draft Protocol in a WTO-
consistent fashion, and would take account of the interests of exporting WTO Members as provided
for in Article III:9 of the GATT 1994.  The Working Party took note of these commitments.
8. Competition Policy
61. The representative of China noted that the Government of China encouraged fair competition
and was against acts of unfair competition of all kinds. The Law of the People's Republic of China onCombating Unfair Competition, promulgated on 2 September 1992 and implemented on1 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, the Criminal Law and other relevant laws also
contained provisions on anti-monopoly and unfair co mpetition. China was now formulating the Law
on Anti-Monopoly.WT/ACC/SPEC/CHN/1/Rev.4
Page 16
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
1. Power of Executive, Legislative and Judicial Branches of Government
[To be completed]
2. Authority of Sub-Central Governments
[To be completed]
3. Uniform Administration of the Trade Regime
[To be completed]
4. Judicial Review
[To be completed]
IV. POLICIES AFFECTING TRADE IN GOODS
A. TRADING RIGHTS
[To be completed]
B. IMPORT REGULATION
1. Ordinary Customs Duties
62. Members of the Working Party welcomed China's decision to bind tariffs for all products in
its schedule on market access for goods.  This action would increase the certainty and predictability ofthis aspect of China's trade regime.  Members also noted the substantial unilateral tariff reductionsmade in many sectors by China in recent years.
63. The representative of China provided members of the Working Party with a copy of the
Customs Import and Export Tariff of the People's Republic of China ("Customs Tariff") and related
laws and regulations.  He noted that the 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 andsupport domestic production;  and (b) to serve as an important source of revenue for the treasury ofthe central government.  China's tariff policy was to promote economic reform and opening of theeconomy.  The basic principles for establishing dut y rates were as follows.  Duty-free or low duty
rates were applied to imported goods which were needed for the national economy and the people'slivelihood but which were not produced sufficiently domestically.  Import duty rates on raw materialswere generally lower than those on semi-manufactured or manufactured products.  For parts orcomponents of machinery, equipment and instrument s which were not produced domestically, or at a
sufficiently high standard, the import duty was lower than the duty on finished products.  Higher duty
rates were applied to products which were produced domestically or which were considered non-WT/ACC/SPEC/CHN/1/Rev.4
Page 17
essential for the national economy and the people's livelihood.   A higher duty was applied to
imported products, the equivalent of which were produced domestically and the local manufacturer ofwhich needed protection.
64. The representative of China said that China had adopted the Harmonized Commodity
Description and Coding System (HS) as from 1 January 1992 and joined the International Convention
on the Harmonized Commodity Description and Coding System in the same year.  There were21 sections, 97 chapters and 7062 eight-digit tariff headings based on the six-digit HS'96 version inthe Customs Tariff for the year 2000.  Tariff rates were fixed by the State Council. Partial adjustmentto the duty rates was subject to deliberation and final decision by the State Council TariffCommission.  The simple average of China's import duties in 2000 was 16.4%.  Among the 7062tariff headings, tariff rates for 525 headings were below 5%, 1488 were between 5% (inclusive) and10% (exclusive), 2022 between 10% (inclusive) and 15% (inclusive) and 3027 were above 15%.Information on tariff rates for specific products and import statistical data for recent years had been
provided to the Working Party.
65. He also noted that currently there were two columns of import duty rates: general rates and
preferential rates.  The preferential rates applied to imports originating in countries and regions withwhich China had concluded reciprocal tariff agreements, whereas the general rates applied to importsfrom other sources.
66. The representative of China confirmed that upon accession China would participate in the
Information Technology Agreement ("ITA") and would eliminate tariffs on all informationtechnology products as set out in China's schedule.  Furthermore, upon accession, China would
eliminate all other duties and charges for ITA products.  The Working Party took note of these
commitments.
67. Certain members of the Working Party expressed particular concerns about tariff treatment in
the auto sector.  In response to questions about the tariff treatment for kits for motor vehicles, Chinaconfirmed that it had no tariff lines for completely knocked-down kits for motor vehicles or semi-knocked down kits for motor vehicles.  If China cr eated such tariff lines, the tariff rates would be no
more than 10%.  The Working Party took note of this commitment.
68. China undertook bilateral market access negotiations on goods with members of the Working
Party.  The results of those negotiations were contained in the Schedule of Concessions and
Commitments on Goods and formed Annex 10 to the Draft Protocol.WT/ACC/SPEC/CHN/1/Rev.4
Page 18
2. Other Duties and Charges
69. The representative of China confirmed that China 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 GATT1994.  The Working Party took note of that commitment.
3. Rules of Origin
70. Some members of the Working Party requested information about the adoption and
application of rules of origin in China, whether in the context of free trade agreements or otherwise,
and also requested China to confirm that its rules of origin for both preferential and non-preferential
trade complied fully with the WTO Agreement on Rules of Origin.
71. The representative of China noted that the criteria for making the determination of substantial
transformation was:  (a) change in tariff classification of a four-digit tariff line in the Customs Tariff;or (b) the value-added component was 30% or more in the total value of a new product.
72. He further noted that under current arrangements, and in accordance with the criteria outlined
above, when an imported product was processed and manufactured in several countries, the country oforigin of the product was determined to be the last country in which the product underwent substantialtransformation.  The rules of origin applied for statistical purposes were the same.  However, for
statistical purposes, the General Customs Admini stration ("Customs") also recorded countries of
consumption and trading countries.
73. The representative of China stated that China's rules of origin for import and export were non-
preferential rules of origin.  Once the international harmonization of non-preferential rules of originwas concluded, China would fully adopt and apply the internationally harmonized non-preferentialrules of origin.  A mechanism that met the requirements of Articles 2(h) and 3(f), and Annex II,paragraph 3(d) of the Agreement, which required provision upon request of an assessment of theorigin of an import or an export and outlined the terms under which it would be provided, would beestablished in China's legal framework by the date of accession.  The Working Party took note of
these commitments.
74. The representative of China further stated that China would not use the rules of origin as an
instrument to pursue trade objectives directly or indirectly.  He also confirmed that China would applyrules of origin equally for all purposes.  The Working Party took note of these commitments.
75. The representative of China confirmed that from the date of accession, China would ensure
that its laws, regulations and other measures relatin g to rules of origin would be in full conformityWT/ACC/SPEC/CHN/1/Rev.4
Page 19
with the WTO Agreement on the Rules of Origin a nd that it would implement such laws, regulations
and other measures in full conformity with that Agreement.  The Working Party took note of thiscommitment.
4. Fees and Charges for Services Rendered
76. Members of the Working Party noted that as a condition of accession, China should undertake
a commitment to ensure conformity of Customs fees and charges with Article VIII of the GATT 1994.The representative of China confirmed that China would comply with Article VIII of GATT 1994 inthis regard.  The Working Party took note of this commitment.
5. Application of Internal Taxes to Imports
77. Some members of the Working Party expressed concern that some internal taxes applied to
imports, including a value-added tax ("VAT") were not administered in conformity with therequirements of the GATT 1994, particularly Article III.  Those members of the Working Party notedthat China appeared to permit the application of discriminatory internal taxes and charges to importedgoods and services, including taxes and charges applied by sub-national authorities.  Those membersrequested that China reaffirm that all such internal  taxes and charges would be in conformity with the
requirements of the GATT 1994.
78. In response, the representative of China noted that there were three major types of taxes
levied on products and services:  (a) VAT levied on goods and services for processing, maintenanceand assembling;  (b) the Consumption Tax on some se lected consumer products;  and (c) the Business
Tax on providing services, transferring intangible assets and selling real estate.   Both the VAT andthe Consumption Tax were applicable to entities importing goods.  VAT and the Consumption Tax onimported goods were collected by Customs at the poin t of entry.  He noted that VAT was  reimbursed
once goods were exported.  Exported goods were exempted from the Consumption Tax.
79. He further noted that the State Council determined all policies concerning the levying of VAT
and the Consumption Tax, adjustment of tax types and tax rates (tax value), as well as the tax
exemption of VAT, the Consumption Tax and the Business 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 administered by the State competent departments oftaxation, while the Business Tax was collected and administered by the local competent departmentsof taxation.
80. The representative of China confirmed that from the date of accession, China would ensure
that its laws, regulations and other measures relating to internal taxes and charges levied on importsWT/ACC/SPEC/CHN/1/Rev.4
Page 20
would be in full conformity with its WTO oblig ations and that it would implement such laws,
regulations and other measures in full conformity with those obligations.  The Working Party tooknote of this commitment.
6. Tariff Exemptions
81. The representative of China stated that the tariff exemption policy of China was developed
and implemented in accordance with the Customs Law of the People's Republic of China and theRegulations of the People's Republic of China on Import and Export Duties. The coverage of specifictariff reduction or exemption was provided for by the State Council. All the tariff reductions andexemptions were applied on an MFN basis.
82. The representative of China noted that in accordance with international practices and
provisions of China's Customs Law, import duty reductions or exemptions were available for the
following goods:
(a) A consignment of goods, on which customs duties were estimated below
RMB 10 yuan;
(b) advertising articles and samples, which were of no commercial value;(c) goods and materials, which were rendered gratis by international organizations or
foreign governments;
(d) fuels, stores, beverages and provisions for use en route loaded by any means of
transport, which were in transit across the border;
(e) exported goods being replaced;
(f) goods damaged prior to Customs release;(g) goods covered by international treaties providing for tariff reductions and exemptions
which China had entered into or acceded to;
(h) goods temporarily imported;(i) goods imported under inward processing programmes;(j) goods imported at zero cost for replacement purposes;(k) domestic- or foreign-funded projects encouraged by China;WT/ACC/SPEC/CHN/1/Rev.4
Page 21
(l) articles for scientific research, education and the disabled.
He noted that goods so imported were required to be put under Customs supervision and control. The
Customs duty was required to be recovered if such goods were sold, transferred or used for otherpurposes during the time period of supervision and control.
83. Some members of the Working Party expressed concerns over the availability and application
of tariff reductions and exemptions for a variety of enterprises and other entities, including statetrading enterprises, state-owned enterprises, fore ign-invested enterprises and not-for-profit entities.
Similar concerns also existed for exemptions from application of other duties, taxes and charges.These members noted the negative effect such reductions or exemptions could have on revenues andpredictability and certainty in application of tariff and other trade measures.
84. The representative of China confirmed that upon entry into force of the Draft Protocol, China
would adopt and apply tariff reductions and exemp tions so as to ensure MFN treatment for imported
goods.  The Working Party took note of this commitment.
7. Tariff Rate Quotas
[To be completed]
8. Quantitative Import Restrictions, including Prohibitions and Quotas
[To be completed]
9. Import Licensing
85. The representative of China confirmed that the list of all entities responsible for the
authorization or approval of imports would be upda ted and republished in the official journal, the
MOFTEC Gazette, within one month of any change thereto.  The Working Party took note of thiscommitment.
86. In response to requests for additional information about its system of import licensing, the
representative of China said that the import licensing system was administered without discriminationamong countries or regions.  In 1984, the State Coun cil had promulgated the "Interim Regulations on
Licensing System for Import Commodities", and MOFTEC and Customs had issued "Detailed Rulesfor the Implementation of the Interim Regulations on Licensing System for Import Commodities".The Interim Regulations were uniformly implemented throughout China.  In 1999, of 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 relevantprovisions of the "Foreign Trade Law".WT/ACC/SPEC/CHN/1/Rev.4
Page 22
87. The representative of China further stated that in 1993, China had applied import restrictions
to 53 product categories.  By 1999, the number had been reduced to 35.  Products covered were (1)Processed oil; (2) Wool;  (3) Polyester fibre;  (4) Acrylic fibres;  (5) Polyester fillet;  (6) Natural
rubber;  (7) Vehicles tyres;  (8) Sodium cyanide;  (9) Sugar;  (10) Fertilizer;  (11) Tobacco and its
products;  (12) Acetate tow;  (13) Cotton;  (14) Motor vehicles and their key parts;  (15) Motorcycles
and their engines and chassises; (16) Colour television sets and TV kinescope;  (17) Radios, taperecorders 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 compressor;  (24) Audio and video tape duplicationequipment;  (25) Crane lorries and their chassises;  (26) Electronic microscopes;  (27) Open-endspinning 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 forchemical 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 MOFTEC. These categories were as follows:  (1)Processed oil;  (2) Fertilizer; (3) Tobacco; (4) Vegetable oil; (5) Grain; (6) Natural rubber; (7) Wool;(8) Acrylic fibers; (9) Sugar; (10) Cotton; (11) Crude oil; (12) Steel; and (13) Plywood.
88. Concerning the granting and administration of import licences, the representative of China
said that the examination and approval of the lice nce took two to three working days.  Applications
for import licences could be submitted to the Qu ota and Licence Administrative Bureau of MOFTEC,
or Special Commissioner Offices in 16 provin ces, or Commissions of Foreign Economic Relations
and Trade of various provinces, autonomous regions, and municipalities directly under the central
government and those with independent budgetary st atus. Licensing agencies authorized by MOFTEC
could issue import licences on the basis of import documents submitted by the applicants,  approvedby the competent departments. A licence could not be bought, sold or transferred, and was valid forone calendar year.  Import licences could be extended once for up to three months.
89. Some members 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 approval of registration, would act as a restraint onimports.  The representative of China emphasized that the purpose of the registration system was only
to gather statistical information.  He confirmed that China would bring its automatic licensing system
into conformity with Article 2 of the Agreement on Import Licensing Procedures upon entry intoforce of the Draft Protocol.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.4
Page 23
90. Some members of the Working Party noted that enterprises and individuals seeking to import
products subject to tariff quota administration requirements had to go through extensive procedures toreceive a quota allocation and that the quota certificate would indicate whether the subject good wasto 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 importlicensing requirement that might apply.
91. The representative of China confirmed that China would not require a separate import licence
approval for goods subject to a TRQ allocation re quirement but would provide any necessary import
licence in the procedure that granted a quota allocation.  If quota were reallocated pursuant to China'sTRQ administration commitments, the provisions rela ting to licensing of such reallocated quantities
would apply.  The Working Party took note of this commitment.
10. Customs Valuation
92. Some members expressed concern regarding the methods used by China to determine duty-
paying value of goods, in particular regarding the practice of using minimum or reference prices forcertain goods, which would be inconsistent with the Agreement on Implementation of Article VII ofthe GATT 1994 ("Customs Valuation Agreement").  Other WTO-consistent means were available toMembers doubting the veracity of declared transaction values.
93. In response, the representative of China stated that China had ceased to use and would not
reintroduce minimum or reference prices as a means to determine customs value.  The Working Party
took note of this commitment.
94. The representative of China considered that there would not be situations where the "normal
transaction value" could not be "ascertained" since the Customs Valuation Agreement providedseveral methods for valuation.
95. The representative of China recalled that the overwhelming majority of China's customs
duties were ad valorem  duties.  The customs or duty-paying value of imported goods was assessed
according to the c.i.f. price based on the transaction value, as defined in the Customs ValuationAgreement.  If the transaction value of imported goods could not be determined, the duty-paying
value was determined based on other means provid ed for in the Customs Valuation Agreement.  He
also noted that the Customs Law provided for appeal procedures. In the event of a dispute overcalculation of duty paid or payable with the Customs, the dissatisfied importer could apply toWT/ACC/SPEC/CHN/1/Rev.4
Page 24
Customs for a reconsideration of the case. If the appeal was rejected the importer could sue at the
People's Court.
96. The representative of China confirmed that, from the entry into force of the Draft Protocol,
China would apply fully the Customs Valuation Agreement, including the customs valuation
methodologies set forth in Articles 1 through 8 of the Agreement.  In addition, China would apply the
provisions of the Decision on the Treatment of Interest Charges in Customs Value of Imported Goods,and the Decision on the Valuation of Carrier Media Bearing Software for Data Processing Equipment,adopted by the WTO Committee on Customs Valuation (G/VAL/5).  In accordance with these latterprovisions, only the cost of the carrier medium itself would be accounted for in determining thecustoms value of carrier media bearing software.  The Working Party took note of thesecommitments.
11. Other Customs Formalities
97. The representative of China said that Chin a joined the International Convention on the
Simplification and Harmonisation of Customs Syst em in 1988 and on 15 June 2000 signed the
Protocol on the Amendment of the International Convention on the Simplification and Harmonisationof Customs System.  The Customs authorities of China had only adopted such customs formalities asdeclaration, examination, levying of duties and release which were consistent with internationalpractices.
12. Preshipment Inspection
98. The representative of China stated that, currently, there were trade and commerce inspection
agencies (including joint-venture agencies) engaged in preshipment inspection.  China committeditself to comply with the Agreement on Preshipmen t Inspection, and would regulate the existing trade
and commerce inspection agencies and permit the qualified agencies to be engaged in preshipmentinspection in line with the government mandate or the terms and conditions of commercial contracts.
99. Some members of the Working Party requested information on whether China used the
services of a private preshipment inspection entity.  The representative of China confirmed that China
would ensure that, upon accession, any laws and regulations relating to preshipment inspection by anyinspection agency, including private entities, would be consistent with relevant WTO agreements, in
particular, the Agreement on Preshipment Inspection and the Customs Valuation Agreement.Moreover, any fees charged in connection with such preshipment inspection would be commensuratewith 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.4
Page 25
13. Anti-Dumping, Countervailing Duties
[To be completed]
14. Safeguards
100. The representative of China stated that upon accession, China would implement its
Regulation on Safeguard by which the future safeguard measures would be regulated.  The draftingwork of this regulation was still under way.  The contents of this new regulation would be fullyconsistent with the Agreement on Safeguards.  He noted that, at present, China was in the process ofdrafting safeguard legislation in accordance with Article 29 of the Foreign Trade Law and theAgreement on Safeguards.  The Working Party took note of this commitment.
C. EXPORT REGULATIONS
1. Customs Tariffs, Fees and Charges for Services Rendered, Application of Internal Taxes
to Exports
101. Some members of the Working Party raised concerns over taxes and charges applied
exclusively to exports.  In their view, such taxes and charges should be eliminated unless applied inconformity with GATT Article VIII or listed in Annex 6 to the Draft Protocol.
102. The representative of China noted that the majority of products were free of export duty,
although 36 items, including tungsten ore, Ferrosil icon and some aluminum products, were subject to
export duties.  He noted that the duty-paying value of exported goods was the F.O.B. price of thegoods.
2. Export Licensing and Export Restrictions
103. The representative of China confirmed that the list of all entities responsible for the
authorization or approval of expor ts would be updated and republished in the official journal, the
MOFTEC Gazette, within one month of any change thereto.  The Working Party took note of thiscommitment.
104. The representative of China said that China applied its export licence system to certain
agricultural products, resource products and ch emicals. China's export licencing system was
administered in accordance with the "Interim Procedures for the Export Licencing System". In 1992,
there were 143 categories of products subject to export licencing which accounted for 48.3% of thetotal value of the China's exports, but by 1999, the total number of products subject to exportlicensing had been reduced to 58 categories and 73 items with an export value of US$ 18.5 billion,taking up only 9.5% of total exports. Export licence s for these products were issued according to the
stipulated commodity scope respectively by the Administrative Bureau of Quota and LicenceWT/ACC/SPEC/CHN/1/Rev.4
Page 26
(ABQL), the Special Commissioner Offices (SCO) located in 16 provinces and the Commissions of
Foreign Economic Relations and 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) maintenance of national security or public interests;
(2) protection against shortage of supply in the domestic market or exhaustion of natural resources;(3) limited market capacity of importing countries or regions;  or (4) obligations stipulated ininternational treaties.  Export licensing was also used for statistical purposes.
105. He further noted that an application for an export licence had to be submitted to the licence
issuing institutions authorized by MOFTEC, together with documents approving the export by thecompetent departments, and other relevant materials (such as the Export Qualification Certificate forthe enterprises, export contract and so on). The procedures 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 thelicensing requirement.  If the products were not subject to licensing, customs clearance would begiven after examination by Customs on the basis of export contracts and other relevant documents.
106. Certain members of the Working Party noted the conditions in the GATT 1994 in regard to
non-automatic licensing and export restrictions.  They  pointed out that export prohibitions, restrictions
and non-automatic licensing could only temporarily be applied under Article XI of the GATT 1994 toprevent or relieve critical shortages of foodstuffs or other products essential to an exporting WTO
Member.  Article XX of the GATT 1994 also allowed for restrictive export measures, but only if such
measures were made effective in conjunction with restrictions on domestic production orconsumption.
107. Members of the Working Party welcomed the steady reduction in the number products subject
to export licensing in China.  Certain members reiterated their request for the submission of acomplete list of restrictions presently applied.  These members expressed concern that the remainingnumber was still high, covering about 10 per cent of export trade, and requested that they be eitherreduced further or eliminated by the date of accession in order to achieve full compatibility withGATT requirements.  Some members expressed particular concern about export restrictions on raw
materials or intermediate products that could be subject to further processing, such as tungsten ore
concentrates, rare earths and other metals.WT/ACC/SPEC/CHN/1/Rev.4
Page 27
108. The representative of China confirmed that China would abide by WTO rules in respect of
non-automatic export licensing and export restrictions.  The Foreign Trade Law would also bebrought into conformity with GATT requirements.  Moreover, export restrictions and licensing would
only be applied, after the date of accession, in those cases where this was justified by GATT
provisions.  The representative of China further confirmed that export restrictions on tungsten ore
concentrates would be eliminated upon entry into force of the Draft Protocol.  The Working Partytook note of these commitments.
109. The representative of China stated that China prohibited export of narcotic drugs, poisons,
materials containing State secrets, precious and rare animals and plants.
110. Some members of the Working Party expressed concern about China's restrictions on exports
of silk.  Certain other members expressed concern about export restrictions on other goods, inparticular raw materials or intermediate products that could be subject to further processing, such astungsten ore concentrates, rare earths and other metals.  Members of the Working Party urged China
to ensure that any such restrictions that were im posed or maintained complied with the terms of the
WTO Agreement and the Draft Protocol.
111. The representative of China confirmed that upon entry into force of the Draft Protocol,
restrictions on exports would be eliminated unless they could be justified under the WTO Agreementor the Draft Protocol.  The Working Party took note of this commitment.
3. Export Subsidies
112. Some members of the Working Party noted that China had provided a list of prohibited
subsidies falling within the scope of Article 3 of the SCM Agreement and a timetable for theirelimination, in Annex 5b of the Draft Protocol.  Thos e members considered this list to be incomplete.
113. The representative of China confirmed that it wo uld eliminate all export subsidies, within the
meaning of Article 3.1(a) of the SCM Agreement, by  the time of accession, including fiscal or other
financial measures referred to in Article 1 of the SCM Agreement which were contingent upon exportperformance.  To this end, China would, by accession, cease to maintain all pre-existing exportsubsidy programmes and, upon accession, make no further payments or disbursements, nor foregorevenue or confer any other benefit, under such programmes.  This commitment covered subsidies
granted at all levels of government, including tax exemptions, reductions, deferrals or forgiveness to
enterprises, which were contingent, in law or in fact, upon an obligation to export.  The WorkingParty took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.4
Page 28
114. On the same basis, the representative of China confirmed that China would eliminate, upon
accession, all subsidies contingent upon the use of domestic over imported goods, within the meaningof Article 3.1(b) of the SCM Agreement.  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
115. Some members of the Working Party expressed concern about the application of the VAT and
additional charges levied by sub-central governments on imports.  Non-discriminatory application of
the VAT and other internal taxes was deemed essential.
116. The representative of China confirmed that from the entry into force of the Draft Protocol,
China would ensure that its laws and regulations relating to all fees, charges or taxes levied onimports and exports would be in full conformity with its WTO obligations, including Articles I, III:2and 4, and XI:1 of the GATT 1994, and that it would also implement such laws and regulations in full
conformity with these obligations.  The Working Party took note of this commitment.
2. Industrial Policy, including Subsidies
[To be completed]
3. Technical Barriers to Trade
[To be completed]
4. Sanitary and Phytosanitary Measures
117. Sanitary and Phytosanitary Measures Some members of the Working Party expressed
concerns in relation to the use by China of sanitary and phytosanitary ("SPS") procedures as non-tariffbarriers and raised specific instances where they considered that China's measures were not consistentwith the WTO Agreement on the Application of Sanitary and Phytosanitary Measures ("SPS
Agreement").  These members sought assurances that China would not use SPS measures to restrict
trade, that SPS measures would only be imposed to the extent necessary to protect human, animal orplant life or health, and that such measures would be based fully on scientific principles.
118. The representative of China stated that pursuant to the provisions of the SPS Agreement,
China applied SPS measures only to the extent nece ssary to protect the life and health of human
beings, animals and plants.  He also noted that most of China's SPS measures were equivalent tointernational standards, guidelines and recommendations.  China would not apply SPS measures in amanner which would act as a disguised restriction on trade.  In accordance with the SPS Agreement,WT/ACC/SPEC/CHN/1/Rev.4
Page 29
China would ensure that SPS measures would not be maintained without sufficient scientific
evidence.  The Working Party took note of these commitments.
119. Members expressed the view that China should apply the SPS Agreement from the date of
China's accession and should ensure conformity with the SPS Agreement of all its laws, regulations
and practices relating to SPS measures.  In response, the representative of China confirmed that China
would fully apply the SPS Agreement from the date of accession and would ensure the conformitywith the SPS Agreement of all of its laws, regulations and practices relating to SPS measures.  TheWorking Party took note of these commitments.
120. Members of the Working Party noted that China's notification of laws, regulations and other
SPS measures, referred to in the Draft Protocol, was provided in document WT/ACC/CHN/33.Members of the Working Party agreed that this notification did not prejudge the legal status under theWTO Agreement of the nature or effects of the notified laws, regulations and other measures.  Therepresentative of China also submitted an action plan for implementation of China's SPS
commitments, circulated to the Working Party in WT/ACC/CHN/XX.  The action plan outlined the
steps that China was taking to ensure full implementation of the SPS Agreement, including revision ofits laws, regulations and other measures.
121. The representative of China said that China had set up an SPS notification authority and an
SPS enquiry point which would be notified to the SPS Committee.  Laws, regulations, rules, standardsand procedures relating to SPS measures, including inspection, had been published in publicationssuch as the MOFTEC Gazette.  Information could also be gathered from the SPS notificationauthority or from China's SPS enquiry point.
5. Trade-Related Investment Measures
122. The representative of China confirmed that upon accession, as set forth in the Draft Protocol,
China would comply fully with the TRIMs Agreemen t, without recourse to Article 5 thereof, and
would eliminate foreign-exchange balancing a nd trade balancing requirements, local content
requirements and export performance requirements. Chinese authorities would not enforce the termsof contracts containing such requirements.  The allocation, permission or rights for importation andinvestment would not be conditional upon performance requirements set by national or sub-national
authorities, or subject to secondary conditions covering, for example, the conduct of research, the
provision of offsets or other forms of industrial compensation including specified types or volumes ofbusiness 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 ofcompeting Chinese domestic suppliers.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.4
Page 30
123. In the context of discussions on the government's Industrial Policy for the Automotive Sector,
the representative of China confirmed that this pol icy would be amended to ensure compatibility with
WTO rules and principles.  The Working Party took note of this commitment.
124. The representative of China added that amendments would be made to ensure that all
measures applicable to motor vehicle producers restricting the categories, types or models of vehicle
permitted for production, would gradually be lifted.  Such measures would be completely removedtwo years after accession, thus ensuring that moto r vehicle producers would be free to choose the
categories, types and models they produced.  However, it was understood that category authorizationsby the government could continue to distinguish between trucks and buses, light commercial vehicles,and passenger cars (including multi-purpose vehicles and sport utility vehicles).  The Working Partytook note of this commitment.
125. The representative of China confirmed that Chin a also agreed to raise the limit within which
investments in motor vehicle manufacturing could be  approved at provincial government level only,
from the current level of US$ 30 million, to US$ 60 million one year after accession, US$ 90 million
two years after accession, and US$ 150 million four years after accession.  The Working Party tooknote of this commitment.
126. With respect to the manufacture of motor vehi cle engines, the representative of China also
confirmed that China agreed to remove the 50% foreign equity limit for joint-ventures uponaccession.  The Working Party took note of this commitment.
6. State Trading Entities
127. Some members of the Working Party expressed concern that the activities of China's state
trading enterprises were not sufficiently transparent and were not in accordance with WTOobligations.  The representative of China indicated, however, that China's state trading enterprises hadfull management autonomy and responsibility for their own profits and losses and that China hadundertaken broad and significant commitments to improve the transparency of state tradingenterprises' operation and the measures relating to such operation.
128. The same members of the Working Party also stated that China should ensure that the import
purchasing practices and procedures of state trading enterprises were fully transparent, and in
compliance with the requirements of the WTO Agreement.  They considered that China should also
refrain from taking any measure to influence or direct state trading enterprises as to the quantity,value, or country of origin of goods purchased or sold, except in accordance with the requirements ofthe WTO Agreement.  Those members also stated that as part of China's notification under theWT/ACC/SPEC/CHN/1/Rev.4
Page 31
GATT 1994 and the Understanding on the Interpretation of Article XVII of the GATT 1994, China
should notify information on state trading, including, in the case of state trading of exported goods,domestic procurement prices, contract terms for delivery and financing terms and conditions.
129. In response, the representative of China stated that its state trading enterprises had full
management autonomy and responsibility for their own profits and losses.  However, some members
of the Working Party again stated that China should undertake a commitment to ensure that all statetrading enterprises complied with the requirements  of the WTO Agreement.  The representative of
China noted that a list of products subject to state trading had been provided in Annex 2a of the DraftProtocol.  He also confirmed that information on state trading enterprises, as required by the DraftProtocol, would be supplied, but st ated that such notification should be without prejudice to the
commercial interests of the state trading enterprises.
130. Members of the Working Party took note of the specific arrangements that would apply for
fertilizers and crude and processed oil.  A key feature 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 obligation on state enterprises trading in fertilizers to carryover to the next year any unused import quantities.
131. Some members of the Working Party requested assurances that, for oil products, quantities
reserved for non-state traders would be allocated in such a manner that they would be fully utilized.
In this respect, the representative of China confirmed that imports allocated to non-state traders ofcrude and processed oil, as specified in Annex 2a of the Draft Protocol, would be carried over to thenext year if they were not fully utilized.  In addition, 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 information relevant to such traders upon request.The Working Party took note of these commitments.
132. Some members of the Working Party noted that prior to accession, some enterprises in China
were permitted to import goods for their production purposes, including those goods included inAnnex 2a.  The representative of China confirmed that, notwithstanding section 5, paragraph 1, of theDraft Protocol, non-state trading enterprises, including private enterprises, would still be permitted toimport such goods for production purposes and that national treatment would be provided to suchimports.  The Working Party took note of these commitments.
133. Some members of the Working Party expressed concerns about supplies of raw materials in
the textiles sector, and particularly in regard to supplies of silk, in the light of China's position as themajor world supplier of silk, currently subject to state trading rights concerning exports.WT/ACC/SPEC/CHN/1/Rev.4
Page 32
134. In this regard, the representative of China confirmed that China would progressively abolish
the system of state trading in respect of silk by measures increasing and extending trading rights, withthe result that China would remove completely the silk products set out in numbers 10 and 11 ofAnnex 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 not  to introduce any changes of a more restrictive
nature to the existing structures in place for the supply of silk.  The representative of China furtherconfirmed that access to supplies of raw materials in the textiles sector would remain at conditions noless favorable than for domestic users, and gave his assurance that access to supplies of raw materialsas enjoyed under existing arrangements would not be adversely affected following China's accessionto the WTO.  The Working Party took note of these commitments.
135. Members of the Working Party noted that domestic prices for most agricultural commodities
in China were higher than world prices, and this differential allowed China's state trading enterprises
to import at low prices and then mark up the price 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 thatmark-ups could be used to reduce the competitiveness of imported products and limit the range ofqualities and grades available to end-users in China.  The representative of China stated that currentlystate trading enterprises did not mark up imported products; instead, they only charged a nominaltransaction fee.  Consequently, China claimed that its practice was consistent with WTO obligations,did not result in any trade-distorting effect, and that under China's law limits existed on the fees that
could be charged by state trading enterprises.
136. The representative of China stated that China would ensure that no price increase in respect to
imports, in particular by state trading enterprises, would result in protection beyond that allowed in itsSchedule of Concessions and Commitments on Goods or that was not otherwise justified under WTOrules.  The Working Party took note of this commitment.
7. Special Economic Areas
137. Members of the Working Party noted that there was insufficient information available
concerning special economic areas within China’s customs territory, including border trade regions
and minority autonomous areas, Special Economic Zones (“SEZs”), open coastal cities, economic andtechnical development zones and other areas where special regimes for tariffs, taxes and regulationshad been established (collectively referred to as “special economic areas”), in particular their names,geographic boundaries, and relevant laws, regulations and other measures relating thereto.WT/ACC/SPEC/CHN/1/Rev.4
Page 33
138. In response, the representative of China stated that since 1979 China had established a
number of special economic areas where more open policies were applied.  They included five SEZs,14 open coastal cities, six open cities along the Yangtze River, 21 provincial capital cities and 13inland boundary cities.  Those special economic areas enjoyed greater flexibility in utilizing foreign
capital, introducing foreign technology and conducting economic cooperation overseas.  At present,
foreign investors were entitled to certain preferential treatment.
139. The representative of China further stated that FIEs located in SEZs or the Economic and
Technical Development Zones of open coastal cities were entitled to a corporate income tax rate of15% (the normal income tax was 33%).  Profits remitted abroad by foreign investors were exemptedfrom income tax.  The preferential income tax rate of 15% was applicable to technology-intensive orknowledge-intensive items or projects with foreign investment of over US$30 million, as well asenterprises that operated in the fields of energy, transport and port construction.
140. The representative of China noted that throughout  the customs territory of China, a socialist
market economy system was applied.  In 1999, the foreign trade volume of SEZs accounted for nearly
one fifth of the nation's total.  The national laws and regulations on taxation were applicable to SEZsin a uniform manner.
141. In response to further requests for information, the representative of China indicated that there
was no plan to establish any new SEZs. The special preferential tariff policies applied to SEZs hadbeen eliminated. With the development of China's economic reform and opening up, China wouldimplement its tariff policy uniformly throughout its customs territory. Members of the Working Partyexpressed 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 importsinto the other parts of China's customs territory. The representative of China stated that China wouldundertake to ensure such non-discriminatory treatment.  The Working Party took note of thiscommitment.
142. Some members of the Working Party also raised concerns as to whether the assistance
provided to minority autonomous regions and other areas of economic poverty was consistent withWTO requirements.  In response, the representative of China confirmed that China had a clearcommitment to uniform administration of the trad e regime within each such area and that, upon
accession, China would ensure that such assistance would be implemented consistent with WTO
obligations.  The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.4
Page 34
143. Some members of the Working Party requested that China take steps to ensure that all
products imported into the other parts of the customs territory of China from special economic areaswould be subject to the same normal customs duties and charges as any other product imported intothe customs territory of China.  In particular, those members requested that China undertake a
commitment to apply all taxes, charges and measures affecting imports, including import restrictions
and customs and tariff charges, that were normally applied to imports into the other parts of China'scustoms territory to all imported products, including physically incorporated components, enteringChina's customs territory from the special economic areas.
144. The representative of China confirmed that China would strengthen the uniform enforcement
of taxes, tariffs and non-tariff measures on trade between its special economic areas and the otherparts of China's customs territory.  China further confirmed that statistics on trade between China'sspecial economic areas and the other parts of its customs territory would be maintained and improved,and would be notified to the WTO on a regular basis.  The Working Party took note of these
commitments.
145. Some members of the Working Party requested that China notify the WTO Secretariat of all
the relevant laws, regulations and other measures relating to its special economic areas.  They askedthat the notification list and identify all those special economic areas.  Those members also requestedthat China notify the WTO Secretariat promptly, but in any case within 60 days, of any additions ormodifications to its special economic areas, including notification of the laws, regulations and othermeasures relating thereto.
146. The representative of China confirmed that China would provide information in its
notifications describing how the special trade, tariff, and tax regulations applied were limited to the
designated special economic areas, including in formation concerning their enforcement.  The
Working Party took note of this commitment.
147. In response to concerns raised by some members of the Working Party, the representative of
China confirmed that any preferential arrangements provided to enterprises located within the specialeconomic areas would be provided on a non-discriminatory basis.  The Working Party took note ofthis commitment.
8. Government Procurement
148. The representative of China stated that in order to promote China's government procurement,
the Ministry of Finance promulgated the Interim Regulations on Government Procurement inApril 1998.  The Interim Regulations were stipulated in line with the spirit of the WTO Agreement onWT/ACC/SPEC/CHN/1/Rev.4
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Government Procurement ("GPA") and on the basis of the relevant provisions of the United Nations
Model Law on Procurement of Goods, Construction and Services while making reference to the lawsand regulations of some WTO Members on government procurement. The policy and procedureregarding government procurement provided for ther ein 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 procurem ent.  At present, China was formulating the
Government Procurement Law.
149. Some members of the Working Party stated that China should become a Signatory to the GPA
and that prior to its accession to the GPA, China should conduct all government procurement, withinthe meaning of the Draft Protocol, in a transparent and non-discriminatory manner.  Those membersnoted that China's public entities engaged exclusively in commercial activities would not beconducting government procurement and thus laws, regulations and other measures regulating theseentities' procurement practices would be fully subject to WTO requirements.
150. The representative of China stated that China intended to become a Signatory to the GPA and
that until such time, all government entities at the central and sub-central level would conduct theirprocurement in a transparent manner and provide all foreign suppliers with equal opportunity toparticipate in that procurement pursuant to the principle of MFN treatment.  Such procurements wouldbe subject only to laws, regulations, judicial decisions, administrative rulings of general application,and procedures (including standard contract clauses) which had been published and made available tothe public.  The Working Party took note of these commitments.
151. Noting China’s intention to become a Signatory of the GPA, some members of the Working
Party stated that China should, upon entry into force of the Draft Protocol, seek to become an observer
to the GPA, and should initiate negotiations for membership in the Agreement by tabling anAppendix 1 offer within two years of accession.  The representative of China responded that Chinawould give serious consideration to this request.
9. Transit
152. The representative of China stated that the current regulation of transit in China, the
Regulations of the Customs of the People's Republic of China on the Supervision and Administration
of Transit Goods, was consistent with Article V of the GATT 1994.
10. Agricultural Policies
[To be completed]WT/ACC/SPEC/CHN/1/Rev.4
Page 36
11. Trade in Civil Aircraft
153. In response to questions from members of the Working Party, the representative of China
indicated that China was not in a position to co mmit to joining the Agreement on Trade in Civil
Aircraft at the present stage.
154. The representative of China confirmed that China would not impose any provisions of offsets
or other forms of industrial compensation when purchasing civil aircraft, including specified types orvolumes of business opportunities.  Members of the Working Party took note of this commitment.
12. Textiles
155. Some members of the Working Party proposed and the representative of China accepted that
the quantitative restrictions maintained by WTO Members on imports of textiles and apparel productsoriginating 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 thepurpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing ("ATC").
For such WTO Members, the phrase "day prior to the date of entry into force of the WTOAgreement", contained in Article 2.1 of the ATC, should be deemed to refer to the day prior to thedate of accession of China to the WTO.  To these base levels, the increase in growth rates provided
for in Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of accession
of China to the WTO.  The Working Party took note of these commitments.
156. The representative of China agreed that the following provisions would apply to trade in
textiles and clothing products until 31 December 2008 and be part of the terms and conditions forChina's accession to the WTO:
(a) In the event that a WTO Member believed that imports of Chinese origin of textiles
and apparel products covered by the ATC were, due to market disruption, threateningto impede the orderly development of trade in these products, such Member couldrequest consultations with China with a view to easing or avoiding such market
disruption.  The Member requesting consultations would provide China, at the time of
the request, with a detailed factual statement of reasons and justifications for itsrequest for consultations with current data which, in the view of the requestingMember, showed:  (1) the existence or threat of market disruption;  and (2) the role of
products of Chinese origin in that disruption;WT/ACC/SPEC/CHN/1/Rev.4
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(b) Consultations would be held within 30 days of receipt of the request.  Every effort
would be made to reach agreement on a mutually satisfactory solution within 90 daysof 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 forwool product categories) above the amount entered during the first 12 months of themost recent 14 months preceding the month in which the request for consultationswas made;
(d) If no mutually satisfactory solution were reached during the 90-day consultation
period, consultations would continue and the Member requesting consultations couldcontinue the limits under subparagraph (c) for textiles or textile products in thecategory or categories subject to these consultations;
(e) The term of any restraint limit established under subparagraph (d) would be effective
for the period beginning on the date of the request for consultations and ending on31 December of the year in which consultations were requested, or where three orfewer months remained in the year at the time of the request for consultations, for theperiod ending 12 months after the request for consultations;
(f) No action taken under this provision would remain in effect beyond one year, without
reapplication, unless otherwise agreed between the Member concerned and China.
The Working Party took note of these commitments.
13. Measures Maintained Against China
157. The representative of China stated that WTO Members should eliminate all discriminatory
non-tariff measures maintained against Chinese exports from the date of China's accession to theWTO.  In response, some members of the Working Party stated that, in their view, such measures didnot need to be phased out until such time as China's foreign trade regime fully conformed to WTOobligations.
158. In light of the above, it was agreed that any prohibitions, quantitative restrictions or other
measures maintained against imports from China in a manner inconsistent with the WTO Agreement
would be listed in Annex 8 to the Draft Protocol.  It was further agreed that all such measures wouldWT/ACC/SPEC/CHN/1/Rev.4
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be phased out or otherwise dealt with in accordance with mutually agreed terms and timetables as
specified in said annex.
14. Transitional Safeguards
[To be completed]
15. Transitional Review Mechanism
[To be completed]
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME
[To be completed]
VI. POLICIES AFFECTING TRADE IN SERVICES
[To be completed]
VII. OTHER ISSUES
1. Notifications
159. Members of the Working Party requested that China provide to the WTO Secretariat the
notifications described in paragraphs … of this Draft Report.
2. Special Trade Arrangements
160. Some members of the Working Party raised specific concerns in relation to some of China's
special trade arrangements, including barter trade arrangements, with third countries and separatecustoms territories, which those members considered not to be in conformity with WTO requirements.
In response, the representative of China noted that China would undertake a commitment in the DraftProtocol to eliminate or bring into conformity  with WTO requirements, all such special trade
arrangements that were not in conformity with those requirements, by no later than the date of entryinto force of the Draft Protocol.
3. Transparency
[To be completed]
VIII.  CONCLUSIONS
161. The Working Party took note of the explanations and statements of China concerning its
foreign trade regime, as reflected in this Draft Report.  The Working Party took note of thecommitments given by China in relation to certain specific matters which are reproduced inparagraphs […] of this Draft Report and noted that these commitments are incorporated in
paragraph 1.2 of the Draft Protocol.WT/ACC/SPEC/CHN/1/Rev.4
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162. Having carried out the examination of the foreign trade regime of China and in the light of the
explanations, commitments and concessions made by China, the Working Party reached theconclusion that China should be invited to accede to the Marrakesh Agreement Establishing the WTOunder the provisions of Article XII.  For this purpose, 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…)] thatwere annexed to the Draft Protocol.  It was proposed that these texts be adopted by the GeneralCouncil when it adopted the Draft Report.  When the Draft Decision was adopted, the Draft Protocolwould be open for acceptance by China which would become a WTO Member 30 days after itaccepted the said Draft Protocol.  The Working Party agreed, therefore, that it had completed its workconcerning the negotiations for the accession of China to the WTO Agreement.
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