G/SCM/Q2/CHN/92  
28 October  2020 
(20-7572) Page: 1/5 
Committee on Subsidies and Countervailing Measures  Original:  English  
 
  
SUBSIDIES  
REPLIES TO QUESTIONS1 POSED BY CANADA REGARDING  
THE NEW AND FULL NOTIFICATION OF CHINA2 
The following communication, dated 27 October  2020, is being circulated at the request of the 
delegation of C hina. 
 
_______________  
 
 
Question 1  
For Federal  Program 8 : Preferential Tax Policies for the Incubators of Science and 
Technology Enterprises, could China explain what are the eligible incubators ? Are all 
science and technology incubators eligible?  
Reply : 
Notice of the Ministry of Finance and the State Taxation Administration on Tax Policy for Science and 
Technolog y Enterprise Incubators (Cai Shui [2016]  No.89) explicitly provides requirements  that an 
incubator shall meet to be eligible for the preferential  tax policy stated in the Notice . It has not put 
restrictions  on the types of incubators, and eligible ones can all enjoy the preferential policy.  
Question 2  
For Federal Program 11 : Preferential Tax Treatment for Public Infrastructure Projects that 
are Par ticularly Supported by the State, could China specify whether this program is only 
provided for Chinese enterprises or if foreign enterprises could also access this program?  
Reply : 
According to the Corporate Income Tax Law of the People's Republic of China , enterprises  enjoy tax 
exempt ion or deduction in accordance with laws  for the income gained in the investment and 
operation of public infrastructure projects particularly supported by the state. The tax preference for 
investment and operation of key natio nal public infrastructure is a statutory project income 
preferential treatment. An enterprise  enjoy s the preferential policy according to relevant provisions 
for the income gained in the investment and operation of public infrastructure projects  particularly  
supported by the state. The current tax law and its supporting policies do not restrict or prohibit 
foreign enterprises (non-resident companies) from enjoying this preferential policy. If a non -resident 
enterprise obtains the qualifications t o construct and invest in eligible public infrastructure projects 
in accordance with the provisions and procedures  stipulated by Chinese laws  and regulations, its 
investment and operation income also enjoy preferential treatment in accordance with the tax law. 
 
1 G/SCM/Q2/CHN/85.  
2 G/SCM/N/343/CHN.  G/SCM/Q2/CHN/92  
- 2 - 
  Question 3  
For Federal Program 17 : Preferential VAT on Photovoltaic -Generated Electricity, could 
China specify whether this preferential VAT treatment is available only to domestic 
industries?  
Reply : 
The above preferential tax polic y has  not set condi tions on the nature of products whether being 
dome stic, and eligible taxpayers can enjoy the preferential treatment in accordance with relevant 
provisions . The preferential VAT treatment on photovoltaic power generation has  expired on 
December  31, 2018.  
Question 4  
For Federal Program 18 : Preferential VAT on Hydropower Electricity, could China specify 
whether this preferential VAT treatment is available only to domestic industries?  
Reply : 
The above preferential tax polic y has  not set conditions on the nature of products whether being 
dome stic, and eligible taxpayers can enjoy the preferential treatment in accordance with relevant 
provisions . The preferential VAT treatment on hydro power generation has expired on 
December  31, 2017. 
Question 5  
For Federal Program 56 : Fund for Development of Strategic Emerging Industries, could 
China please explain what industries are considered strategic emerging industries?  
Reply : 
Strategic emerging industries consist of nine fields, i.e.  new-generation information technology, 
high-end equipment manufacturing, new materials, bio -industry, new energy automobile s, new 
energy, energy conservation and environmental protection, digital entrepreneurship, and relevant  
service industries.  
Question 6  
For F ederal Program 58 : Reward for Public -Private Partnership Projects, could China 
expand upon the eligibility requirements for this program, including which types of 
enterprises are eligible ? China also refers to this program as a reward, grant, and fiscal 
appropriation, could China please clarify if there is a difference between these three 
characterizations, and what that difference may be ? This question also applies to Shanxi 
Province Program 2 : Reward for PPP projects.  
Reply : 
First, as for  project eligibility requirements and business types, r eward policy  for PPP projects is 
designed for PPP demonstration projects supported by the  central government and PPP projects  
transformed from in -stock projects of local financing platforms. This policy provide s equal  treatment 
to all enterprises with different types of ownership. Second , as for  means of support, t he rewarding 
funds for PPP projects are comprehensive financial subsidies, which are coordinated by the financial 
department for subsid y in a  project 's early stage and other related financial expenditures . It is 
different from grants and financial appropriations.  G/SCM/Q2/CHN/92  
- 3 - 
  Question 7  
For Federal Program 60 : Reward and Support Fund for Restructuring of Industrial 
Enterprises, could China explain how these funds he lp reduce excess capacity ? In 
addition, to whom are funds disbursed, and what activities are covered ? This question is 
also applicable to several sub -central programs, including the following:  
• Hebei Province 2 : Reward for efforts to remove excessive coal capacity . 
• Hebei Province 17 : Reward for efforts to remove steel overcapacity . 
• Shaanxi Province 6 : Fund for overcapacity reduction . 
• Inner Mongolia Autonomous Region 4 : Reward for removing overcapacity in 
the steel and coal sectors . 
• Jilin Province 10 : Grant for reduce overcapacity in the coal mines sector . 
• Anhui Province 6 : Fund for removing overcapacity in the iron and steel and 
coal industries . 
• Shandong Province 3 : Reward for overcapacity reduction in steel industry . 
• Shandong Province 6 : Reward for the structural adjustment of industrial 
enterprises . 
• Henan Province 13 : Fund to resolve the overcapacity . 
• Guangxi Zhuang Autonomous Region 3 : Reward for the restructuring of 
industrial enterprises . 
• Sichuan Province 24 : Reward for eliminating out dated capacity . 
Reply : 
A post-reward  approach is adopted to allocate the fund. The reduction -before -allocation approach 
ensures the actual  use of funds by capacity -reduction enterprises to support the ir laid-off employees. 
Capacity -reduction enterprises apply for reward and support  funds on a voluntary basis, and strictly 
abide by relevant provisions on fund  utilization . The reward and support funds are mainly used to 
support the employees involved in excess capacity  reduction , inclu ding the settlement of the 
enterprise 's arrears in employee wages, social insurance premiums, internal retirement expenses, 
economic compensation, etc.  
Question 8  
For Federal Program 70 : House Property Tax and Urban Land Use Tax Concession for 
Enterprises Involving the Reduction of Excessive Capacities and Structural Adjustment, 
could China please explain if this program is only open to certain industries, and if so, 
which industries ? Also, which industries have made use of the program?  
Reply : 
In order to p romote capacity reduction, structural adjustment , as well as industrial transformation 
and upgrading, the Ministry of Finance, jointly with the State Taxation Administration, issued the 
Notice on Policies of House Property Tax and Urban Land Use Tax Conces sion for Enterprises 
Involving the Reduction of Excessive Capacities and Structural Adjustment  (Cai Shui [2018] 
No. 107). For enterprises that have suspended production and business or closed in line with the 
policies on capacity reduction and structural a djustment , house property tax and urban land use tax 
will be exempted from the month following the production and business  suspension. Eligible 
enterprises (industry) can apply to enjoy this policy in accordance with relevant provisions., not only 
for spec ific industries . 
Question 9  
For Federal Programs 76 : Public Subsidy for the Prevention of Aquatic Animal Diseases, 
77: Subsidy for Scrapping and Dismantling Vessels and for Ship Type Standardization 
(2017) ; Subsidy Fund for Fishery Development and the Scra pping, Dismantling and 
Renovating of Vessels (2018), and 78 : Subsidy for Improved Aquatic Breed, China 
provided an amount disbursed for each year . Is this a per unit amount ? If so, what is the 
unit China used (per project, per company, etc.)?  G/SCM/Q2/CHN/92  
- 4 - 
  Reply : 
Reply : The subsidies provided under the above three programs are all total amount for fishery. For 
Central Government Program 77: Subsidy for Scrapping and Dismantling Vessels and for Ship Type 
Standardization (2017), and Subsidy Fund for Fishery Developme nt and the Scrapping, Dismantling 
and Renovating of Vessels (2018) , the fishery -related subsidy  is RMB 7,997.74 million per year.  
Question 10  
Canada is aware of subsidy programs that were not included in China 's notification . Can 
China please comment on wh y these programs were not notified or provide further 
information?  
• Special Fund for Patent Invention – It is our understanding that this program 
was established in the Interim Measures for the Administration of Intellectual 
Property (Patent) Special Funds in Shandong Province, which was issued by 
the Department of Finance of Shandong Province.  
• Export Performance Grants – It is our understanding that this program was 
established in the Administration of International Market Development Funds 
for Small and Medium -Sized Enterprises Cai Qi No. 467, 2000, which came into 
force on October  24, 2000 . It appears to have been established by the Ministry 
of Foreign Trade and Economic Cooperation and the program is administered 
at the local levels to support the d evelopment of small and medium -sized 
enterprises.  
Reply : 
China makes the notification based on its own understanding of the subsidy agreement.  
Question 11  
Hebei Province 15 : Fund for Development of Emerging Industries, could China specify 
which emerging industries are eligible for this program ? Are there any further eligibility 
criteria?  
Reply : 
The Fund for Development of Emerging Industries , a program of Tangshan City, Hebei Province , is 
mainly used to support the industrialization projects in such fields  as advanced environmental 
protection.  
Question 12  
Hebei Province 19 : Reward for Companies Listed on the Stock Market, could China clarify 
the industries in which the companies eligible for this reward operate?  
Reply : 
This program provides a one -off subsidy to companies  of the city successful ly listed on various capital 
markets . It is not designed for specific industries.  
Question 13  
Heilongjiang Province 12 : Fund for the New Metal Material Industry, could China explain 
what is considered the new metal material industry and what enterprises may be eligible?  
Reply : 
Please refer to the notification submitted  by China.  G/SCM/Q2/CHN/92  
- 5 - 
  Question 14  
Jiangsu Province 8 : Fund for Eliminating Backward Production Capacity, could China 
explain how this grant will help reduce high pollution capacity . Who are the eligible 
enterprises and what are the selection criteria?  
Reply : 
The Fund for Eliminating Backward Production Capacity  urges and encourage s enterprises with 
outdated equipment and technolog ies to make  improvement . In line with relevant laws and 
regulations, competent departments will shut down enterprises with serious pollution and safety 
issues , or repeated ly complained by the public and unable or unwilling to make the improvement. 
Under such a condition, the fun d is mainly used for dismantling equipment and support ing proper 
arrangement and diversion of  the employees  involved . 
It is mainly designed for enterprises with outdated production capacity , high resource consumption, 
high pollution emissions, high risk fa ctor, low industrial level, poor economic benefits, and repeated 
public complaints . 
Criteria: Companies that use equipment and techniques explicitly excluded by the national industrial 
policy; companies that produce outdated products explicitly phased out by the country; companies 
that have not met the national access conditions (standards)  of an industry ; companies with energy 
consumption per  RMB 10,000 of output (equivalent method) exceeding 1 ton of coal  equivalent ; 
companies that do not meet the requirements of environmental protection, safety, quality, and 
health protection, especially those with serious pollution and a high risk of dust explosion; and 
companies with repeated compl aints from the  public.  
Question 15  
Jiangsu Pr ovince 17 : Grant for Compensating the Elimination of Backward Chemical 
Capacity, could China explain what are the eligible enterprises and the selection criteria.  
Reply : 
According to the Special Action Plan of Jiangsu Provincial People's Government on Two Reductions, 
Six Rectifications and Three Improvements , actions are taken to regulate chemical enterprises in 
four steps. It aims at phasing out c hemical  enterprises with outdated production capacity, low 
resource reuse  rate, poor comprehe nsive benefits, high environmental risks , and inadequate safety 
measures. Such efforts are beneficial to expedite the improvement of overall  competitiveness and 
maintain social harmony and stability.  
In accordance with the requirements of  "production suspe nsion , equipment dismantling , business 
license cancellation or change, toxic and hazardous waste disposal, and support  laid-off emloyees ", 
after shut ting down and passing the acceptance check, the enterprise will gain the compensat ion 
according to related standards.  
__________