RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/W/245 
15 November 2004 
 
 (04-4838) 
Council for Trade in Services Original:   English 
  
 
COMMUNICATION FROM THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, 
PENGHU, KINMEN AND MATSU  
 
Transitional Review Mechanism in connection with Paragraph 18 of 
 
the Protocol on the Accession of the People’s Republic of China  
 
  The following communication, dated 11 Novemb er 2004, from the delegation of the Separate 
Customs Territory of Taiwan, Penghu, Kinmen and Mats u, is being circulated to the Members of the 
Council for Trade in Services 
 
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Written Questions to China from the Separate Customs Territory of Taiwan,  
Penghu, Kinmen and Matsu concerning Trade in Services 
 
 
I. ADVERTISING SERVICES 
1. We welcome China’s Measures Governing Foreign In vested Advertisement Enterprises , 
published on 3 March 2004, and we have  noted that foreign service suppliers are permitted to engage 
in the advertising business in China in the fo rm of joint ventures and wholly-foreign-owned 
enterprises.  It would be appreciated, however, if China could please provide some further 
clarification and information, as follows:  
(a) China requires joint ventures and wholly foreign-owned enterprises to have been 
established and running for 2 years and 3 years respectively, prior to the application being made (Articles 9 and 10). We wonder whether this might be seen as a 
hindrance to new foreign service suppliers attempting to gain early access to the 
market.  
(b) Foreign-invested advertising enterprises that  intend to set up subsidiaries are required 
to have an annual turnover of no less than  RMB 20 million (Article 11).  It would be 
appreciated if China could clarify the rati onale for this additional requirement, which 
was not listed in its schedule of GATS commitments. 
II. COMMUNICATION SERVICES 
2. While it is evident that China has made pr ogress on the implementation of measures to open 
up its communications market, and certain regulations  have already been issued, we would appreciate 
further clarification of the following: 
(a) According to Articles 9 and 14 of the Regulations of the People’s Republic of China 
on Telecommunications (PRCTEL)  and Article 9 of the Administrative Measures on S/C/W/245 
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 Telecommunications Business Operation Licenses (AMTBOL) , the value-added 
telecom services operating in provinces, municipal areas and municipalities (PMMs) should be approved by the telecom author ities of the respective PMMs.  However, 
according to the last part of Article 9 of AMTBOL, foreign-invested telecom 
businesses must comply with the Provisions on the Administration of Foreign-
invested Telecommunication Enterprises (PAFTE)  and need to be approved by the 
MII.  Articles 13, 15, 16 and 17 of the PAFTE place additional limitations on foreign-
invested value-added telecom services.  No t only must they first be ratified by the 
telecom authorities of the PMM, but they must also be approved by the MII and other 
offices. It would appear, therefore, that foreign-invested value-added telecom 
businesses have more provisions to deal with than domestic businesses.  Could China please confirm whether its ratification system in the PAFTE , especially as it applies 
to foreign-invested value-added teleco m services operating in the PMMs, is 
consistent with GATS Article 17 on nati onal treatment and GATS Article 6 on 
domestic regulation for reasonable,  objective and impartial methods? 
(b) Article 4 of the PAFTE  provides that the geographical scope within which foreign-
invested telecom companies are allowed to  operate is identified by the MII in 
accordance with the relevant regulations.  Apart from those contained in China’s 
Schedule of Specific Commitments, we w ould appreciate knowing whether any other 
stipulations or “relevant regulations” exist at the present time. 
(c) According to Article 15 of  PAFTE , some items of foreign-invested telecom services 
must be approved by the Planning Department or the Economic General 
Administrative Department of the State Council.  Could China please advise us as to what these investment items are, and provi de details of the relevant regulation? 
3. According to China’s Guidance Catalogue on Foreign-invested Enterprises , an exclusively 
foreign-invested venture will be  permitted to operate mobile voi ce and data services in basic 
telecommunications with no geographic restriction for a period of five years following China’s 
accession, i.e. until 11 December 2006 at the latest .  These statements imply that China will abolish 
the the upper bound limit on stocks invested by foreig ners as well as the restriction on the geographic 
scope of the above telecom services on 11 December 2006, at the latest.  We are very interested in 
learning more about China’s schedule for implemen ting these plans and would appreciate any further 
information on this subject that China can provide. 
4. Article 9 of PRCTEL stipulates that telecom businesses using new technology that is not 
listed in the “Telecommunication Services Classificati on Catalogue” (TSCC) should report this to the 
telecom authorities of PMM.  Could China please describe in detail the procedures and regulations that should be followed once such bus inesses obtain their operating permits? 
5. On 21 February 2003, China promulgated a new,  modified TSCC, in which the final notation 
to basic telecommunication services indicates that some basic telecom services, such as paging 
services, are administrated in light of the value- added telecom services.  Could China please identify 
for us the actual measures used to regulate such services and provide a description of the relevant 
provisions? 
III. DISTRIBUTION SERVICES 
6. According to China’s phase-in commitments,  within 3 years of accession foreign service 
suppliers may engage in the Commission Agent Services and Wholesale Trade Services of all imported and domestically produced pr oducts except chemical fertilizers, processed oil and crude oil, 
and no ownership, geographic and quantitative restric tions will apply.  In addition, no ownership,  S/C/W/245 
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 geographic and quantitative restrictions will apply to  all services supplied by retailing services, with 
the exception of chemical fertilizers and chain stores with more than 30 outlets engaged in distributing 
specified products.  No restrictions, either, will be imposed on franchise businesses. 
7. In the process of implementing those commitm ents, China issued three important pieces of 
legislation, in April and June 2004.  These include: the Foreign Trade Law (approved by the National 
People’s Congress on 4 April and entered into force on 1 July 2004); the Measures Governing 
Foreign Investment in Commercial Fields  (issued by the Ministry of Commerce on 16 April and 
which came into effect on 1 June, 2004); and the Measures of Record-Filing Registering for Foreign 
Trade Dealers  (issued by the Ministry of Commerce on 25 June and effective from 1 July 2004).  The 
issuing of these laws and measures implies a signi ficant step forward in the opening-up of China’s 
distribution services market.  
8. In this connection, we would appreciate r eceiving further information and clarification 
concerning the following points: 
(a) Under Article 9 of the Foreign Trade Law , a foreign trade dealer that intends to 
engage in the import and export of goods a nd technology shall pr oceed with record-
filing registration with the authority res ponsible for foreign trade under the State 
Council or agencies authorized by the au thority.  However, in the case where a 
foreign-invested enterprise already has the right to import materials for its own 
production and then exports pr oducts manufactured in China, is it still necessary for 
that enterprise to proceed with  a record-filing registration? 
(b) If a foreign-invested enterprise intends to expand its business scope from the field of 
production into the field of commerce (such as retailing and wholesaling trade 
services), would it be sufficient for that en terprise to apply for an amendment to its 
original business registration or would it need to establish a new foreign-invested 
commercial enterprise as outlined in the Measures Governing Foreign Investment in 
Commercial Fields ? 
(c) Article 7 of the Measures Governing Foreign Invest ment in Commercial Fields  
stipulates that under normal circumstances the operating period of a foreign-invested 
commercial enterprise shall be no more than  30 years. Would China please provide us 
with the rationale for this regulation and cl arify whether an ente rprise must apply for 
a new licence when the 30 years has expired? 
(d) Article 9 of the Measures Governing Foreign Invest ment in Commercial Fields 
stipulates that once approved, a foreign-i nvested commercial enterprise is permitted 
to engage in retailing services and wholesale trade services, and obtains the right to 
import and export products.  Does such an en terprise then still need to make a record-
filing registration in line with Article 2 of the  Regulations of Record-Filing 
Registering for Foreign Trade Dealers ? 
(e) Could China please provide information on the number of applications for Record-
Filing Registration that have been approved since the Measures of Record-Filing 
Registering for Foreign Trade Dealers came into force.  We are also interested in 
knowing whether there is a minimum cap ital requirement for individuals.  
IV. EDUCATION SERVICES 
9. China issued its Regulations of the People’s Republic of China on Chinese-Foreign 
Cooperation in Running Schools  on 1 March 2003.  Article 25 of the Regulations  states that the S/C/W/245 
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 president or the principal administrator of a Chinese-foreign cooperatively-run school shall be a 
person with People’s Republic of China nationa lity and domiciled in the territory of China. 
(a) Would China please help us to understand  the reasons for these requirements? 
(b) According to China’s WTO commitments, “j oint schools will be established, with 
foreign majority ownership permitted.”  It would be appreciated if China could please 
explain how the above-menti oned requirements under Article  25 are consistent with 
its “foreign majority ownership permitted” commitment. 
10. China brought its Implementing Rules of the People’s Republic of China on Chinese-Foreign 
Cooperation in Running Schools  into effect from 1 July 2004. Article 7 of these Implementing Rules 
stipulates that a Chinese-foreign cooperatively-run school is neither allowed to set up internal 
subsidiaries, nor to set up anothe r cooperatively-run institution.  Gi ven that no such limitation exists 
in China’s WTO commitments, what is the jus tification for these above-mentioned requirements? 
V. TRANSPORT SERVICES 
11. In its accession commitments, China set the mi nimum registered capital requirement for a 
joint-venture freight forwarding agency at no less than US$ 1 million.  However, its Notification on 
Issues Relating to the Experimental Establis hment of Foreign-Invested Logistic Enterprises , effective 
from 20 July 2002, stipulates that only foreign enterprises having more than US$ 5 million registered 
capital will be permitted.  We could not find an y explanation for this requirement in China’s 
responses to questions in 2003 (S/C/M/69), nor an explanation of how it is  consistent with its 
commitments. It would be appreciated if China could provide further clarification. 
12. We welcome China’s Administrative Regulations of Foreign-invested International transport 
Business  that came into effect on 1 June 2004.  These Administrative Regulations  state that foreign 
service suppliers are permitted to establish joint vent ures to provide maritime cargo-handling services, 
container stations and depot services.  Article 5, however, states that the foreign equity share in such a 
joint venture shall be no more than 49%.  We woul d therefore be grateful for an explanation from 
China as to how this is consistent with the stat ement in its commitments “with foreign majority 
ownership permitted”.  
 
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