G/SCM/Q2/CHN/106  
 
27 January 2022  
(22-0708) Page: 1/7 
Committee on Subsidies and Countervailing Measures  Original: English  
 
 
SUBSIDIES  
QUESTIONS POSED BY THE UNITED STATES REGARDING  
THE NEW AND FULL NOTIFICATION OF CHINA1 
The following communication, dated and received on 24 January 2022, is being circulated at the 
request of the delegation of the United States . 
 
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The United States appreciates China 's timely submission of its 2021 subsidy notification but r emains 
concerned that the notification, like many previous notifications, over -reports inconsequential 
subsidy programs that do not satisfy the criteria for notification under Article 25 of the Agreement 
on Subsidies and Countervailing Measures (Subsidies Agreement), while under -reporting significant 
programs in important economic sectors that do satisfy the criteria for notification.  
 
Question 1  
 
As noted above, China 's subsidy notification appears to over -report inconsequential subsidy 
programs that shoul d not be notified. These include programs for poverty alleviation, disabled 
people, HIV drugs, general employment promotion, and sewage treatment.  
 
The programs for benefitting enterprises that employ the handicapped or disabled include the 
following: central government Programs 19 Exemption of employment security fund for people with 
disabilities ; Program 21 Preferential vat policies for enterprises that employ people with disabilities; 
and Program 22 Preferential income tax policies for enterprises that employ people with disabilities.  
 
a. These programs appear to be available to all enterprises. On what basis, are the 
programs specific under Article 2 of the Subsidies Agreement?  
 
The programs that benefit handicapped or disabled people directly, include the following central 
government programs: Program 23 Preferential tax treatment for products used by people with 
disabilities and Program 24 Preferenti al tax treatment for products used by people with disabilities.  
 
b. How does an enterprise benefit from a VAT exemption granted to a consumer?  
 
Question  2 
 
We note that China has made extensive use of government guidance funds to make equity 
investments in va rious sectors. The majority owners of these funds normally consist of government 
ministries and state -owned enterprises which ultimately ensure that funds are spent consistent with 
government policy. At a press conference last year, the National Developmen t and Reform 
Commission expressed concern that investments in the semiconductor industry were being made 
"blindly " resulting in a "waste of resources ". Moreover, in a report on below -market financing by the 
Organization for Economic Cooperation and Develop ment (OECD), it was concluded that many of 
the government equity investments made by government guidance funds have not generated a 
return at a level consistent with the expectations of a private investor.  
 
 
1 G/SCM/N/372/ CHN G/SCM/Q2/CHN/106  
 
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 In light of these facts, why has China not notifi ed the following government guidance funds: (1) 
National IC Fund; (2) Shanghai IC Fund; (3) Hubei IC Fund; (4) National IC Fund, Phase 2; and (5) 
Beijing IC Industrial Development Fund?  
 
Question 3 
 
Based on public information, after several difficult year s and serious accounting irregularities, in 
2017 the China International Trust Investment Corporation (CITIC), a state -owned enterprise, 
stated that it would be buying 807 million new shares and USD 320 million of convertible bonds in 
Hongqiao Group, also a state -owned enterprise, and reported to be the largest aluminum  smelter.  
Why was this investment not included in China 's notification? As the owner of CITIC, did the 
Government of China make this i nvestment consistent with the usual investment practice of private 
investors, especially taking into account the existing overcapacity in the industry?  If so, is this 
analysis public?   
 
Question 4 
 
Based on public information, in 2016 provincial -level auth orities in the Xinjiang Uyghur Autonomous 
Region announced a set of preferential policies for aluminum  smelters in Jimsar County. These 
policies included the provision of land, tax breaks and grants to certain firms.  Why were these 
programs not notified?  
 
Question 5 
 
Based on public information, Lingyuan Iron & Steel Co. Ltd., a state -owned steel company, 
announced in 2015 that it had received 790 million RMB from the city government; similar reports 
indicate that the company has been receiving subsidies si nce 2012.  Why were these programs not 
notified?  
 
Question 6 
 
In March of 2020, the Chinese National Energy Administration (NEA) released Announcement 
2020/17 (Announcement), which stated the budget for supporting new projects in the domestic solar 
photovol taic (PV) industry for 2020 would be RMB 1.5 billion. The budget reportedly covers 
production of PV parts and equipment to distribution of energy and integration with the Chinese 
national grid.  Why was this program not notified?  Although the budget was low er than the previous 
year, why is China continuing to subsidize an industry in which there is already excess capacity?  
 
Question 7 
 
One of China 's policy banks is the China Development Bank (CDB).  As such, its lending policies have 
been consistent with gov ernment policy potentially providing preferential financing to favo ured 
enterprises and sectors.  
 
a. We understand that in November of 2016, the CDB and the Ministry of Industry and 
Information Technology signed a joint agreement, wherein the bank pledged to  provide 
USD 44 billion of investment to support the Made in China 2025 program, within the 
13th Five-Year Plan Period (2016 -2020).  Why was this program not notified?  
 
b. According to research in the Journal of Finance  in February 2018, 95 % of CBD 's industrial 
loans are to state -owned enterprises.  How does CDB price its loans to SOEs and what risk 
premium does it assign to SOEs?  According to this same research, 86 % of provincial level 
state-owned enterprises have loans outstanding with CDB.  This research concludes that 
"CDB industrial loans help SOEs grow larger and sell more but lead private firms to shrink 
in size and sell less. " How does China explain this disparate impact of CDB loan provision?  
To what extent are CDB  loans to SOEs non -performing?  
 
c. CDB's subsidiary, CDB Capital, deals in equity investments.  Please describe what factors 
CDB Capital considers when making equity investment decisions?  What is the target rate of 
return on equity sought by CDB Capital?  To wh at extent is this target met?  
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 Question 8 
 
An examination of the financial statements of various fossil fuel companies in China, such Sinopec, 
PetroChina and CNOOC, indicate the government provided financial appropriations totaling 
RMB 12.4 billion ( USD 1.8 billion) in 2020.  Why were these financial contributions not included in 
China 's notification?  
 
Question 9 
 
An examination of government budget documents indicate that RMB 128 billion( USD 18.3 billion) 
was spent in 2020 to lower fuel prices.  Why was this  expenditure not included in China 's notification?  
 
Question 10 
 
According to government budget documents, RMB 4.4 billion ( USD 628 million) was spent in 2020 
to support oil, gas, and coal exploration funding for various entities.  Why were these expenditures 
not included in China 's notification?  
 
Question 11 
 
How many of the normative legal measures referenced in the notification have been published in the 
MOFCOM Gazette as required by China 's Protocol of Accession?  If nay have been published, ple ase 
indicate which ones.  
 
Question 12 
 
For the following programs, please explain how national and subnational governments define 
overcapacity, and please explain how funds are distributed among the targeted sectors: Beijing 
Program 1.2  (Fund for Resolving  of Overcapacity in Coal Sector and Resettlement and Relocation of 
Employees ); Hebei Program 3.2  (Reward and Subsidy to Resolve Overcapacity in Coal Industry ); 
Inner Mongolia Program 5.4  (Reward and Subsidy Fund to Resolve Overcapacity in Steel and Coal 
Industries ); Anhui Program 12.3  (Reward and Subsidy Fund to Resolve Overcapacity in Steel and 
Coal Industries ); Guangxi Zhuang Program 20.2  (Special Reward and Subsidy for Restructuring of 
Industrial Enterprises ); Yunnan Program 25.1  (Fund to Resolve Overcapacity ); and Shaanxi Program 
27.3 (Fund to Resolve Overcapacity ).  
 
Question 13  
 
Please explain whether the following programs provide support to firms to relocate capacity to other 
regions of China or other countries: Beijing Program 1.2  (Fund for R esolving of Overcapacity in Coal 
Sector and Resettlement and Relocation of Employees ); Hebei Program 3.2  (Reward and Subsidy to 
Resolve Overcapacity in Coal Industry ); Inner Mongolia Program 5.4  (Reward and Subsidy Fund to 
Resolve Overcapacity in Steel and  Coal Industries ); Anhui Program 12.3 (Reward and Subsidy Fund 
to Resolve Overcapacity in Steel and Coal Industries ); Guangxi Zhuang Program 20.2  (Special 
Reward and Subsidy for Restructuring of Industrial Enterprises ); Yunnan Program 25.1  (Fund to 
Resolve  Overcapacity ); and Shaanxi Program 27.3  (Fund to Resolve Overcapacity ). 
 
Question 14 
 
Please explain whether any of the following programs provide support to firms to transition 
steelmaking production technologies from the blast furnace/basic oxygen furnace method to electric 
arc furnace method, or other modes of production:  Inner Mongolia Program 5.4  (Reward and Subsidy 
Fund to Resolve Overcapacity in Steel and Coal Industries ); Anhui Program 12.3  (Reward and 
Subsidy Fund to Resolve  Overcapacity in S teel and Coal Industries ); Yunnan Province Program 25.1  
(Fund to Resolve Overcapacity ); and Shaanxi Province Program 27.3 (Fund to Resolve 
Overcapacity ). 
 G/SCM/Q2/CHN/106  
 
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 Question 15 
 
Please explain whether any of the following programs also apply to the aluminum  industry for each 
respective Province/Autonomous Region:  Beijing Program 1.2  (Fund for Resolving of Overcapacity 
in Coal Sector and Resettlement and Relocation of Employees ); Hebei Program 3.2  (Reward and 
Subsidy to Resolve Overcapacity in Coal Industry ); Inner Mongolia Program 5.4  (Reward and Subsidy 
Fund to Resolve Overcapacity in Steel and Coal Industries ); Anhui Program 12.3  (Reward and 
Subsidy Fund to Resolve Overcapacity in Steel and Coal Industries ); Guangxi Zhuang Program 20.2  
(Special Reward and S ubsidy for Restructuring of Industrial Enterprises ); Yunnan Program 25.1  
(Fund to Resolve Overcapacity ); and Shaanxi Program 27.3  (Fund to Resolve Overcapacity ). 
 
Question 16 
 
Please explain how "high-tech" is defined for purposes of Program 4:  Preferential tax policies for 
high-tech enterprises.  
 
Question 17 
 
For Program 12: Preferential VAT treatment for integrated utilization of resources,  what are the 
numbers 1,2,3,4 referencing under the heading of How the subsidy is provided ? 
 
Question 18 
 
Are there any imported vehicles or vessels listed in the Catalogue of the Models of New Energy 
Vehicles Exempted from Vehicle Purchase Tax referenced in Program 15: Preferential tax treatment 
for energy -saving and new energy vehicles and vessels?  
 
Question 19 
 
Are the recipients of Program 16: Preferential tax treatment for the public buses and trolleybuses 
purchased by urban public transportation enter prises government agencies?  If so, why was this 
program notified?  
 
Question 20 
 
As noted in previously years, under Program 27: Preferential tax policies for farming, forest, animal 
husbandry and fishery product projects distant water fishing enterprises a re completely exempt from 
income tax.  Is that correct?  
 
Question 21 
 
What is the normal rate for the resource tax?  What other payments are made to the government for 
the right to mine  (Program  31: Preferential tax policies on backfilling mining and mining resources 
of depleted mines )? 
 
Question 22 
 
Please explain why China is notifying a program that provides subsidies to "registered poor people " 
(Program 38: Promoting entrepreneurship and employment of key groups )? 
 
Question 23 
 
Does imported machinery qualify for benefits under Program  42: Fund for the development of 
agricultural production?  
 
Question 24 
 
Are any of the subsidies in Program 49: Special fund for foreign economic and trade development, 
linked to exporting?  What is "The factor approach "? 
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 Question 25 
 
Why is natural gas considered renewable energy under Program 50: Special fund for the 
development of renewable energy ? 
 
Question 26 
 
To whom is the preferential tax treatment provided under Program 56: Preferential tax treatment 
for environmental protection in urban and rural centralized sewage treatment and domestic waste 
treatment plants given?  If given to a government entity, why is this program being notified?  
 
Question 27 
 
What is the legal basis for shutting down for capacity under Program 59: Preferential tax treatment 
on the house property tax and urban land use tax of enterprises engaged in capacity reduction and 
structural adju stment ? What measures are taken to ensure new capacity will not be subsequently 
created?  
 
Question 28 
 
What type of commercial enterprises are being subsidized under Program 62: Preferential tax 
treatment for relocation from inhospitable areas for poverty alleviation?  If no commercial enterprises 
receive subsidies under this program, why is it included in the notification?  
 
Question 29 
 
How is Program 66: Preferential tax policies for enterprises engaged in projects of agricultural, 
forestry, animal husband ry and fishery different than Program 27  Preferential tax policies for 
enterprises engaged in projects of agricultural, forestry, animal husbandry and fishery?  
 
Question 30 
 
Please describe the purpose of providing funds in the form of "whole funds + task list" ( Program 67: 
Fishery stocks enhancement and fish fries releasing).  What type of items might be included on a 
task list?   
 
Question 31 
 
China 's notification indicates that the "Subsidy fund for fishery development and the scrapping, 
dismantling a nd renovating of vessels " program expired December 31, 2019, but that "[s]ome of 
the funds were provided in 2020. " The notification goes on to state that the subsidy fund for 2020 
was nearly RMB 8 billion. Did the program remain in place in 2020, or did it  officially expire on 
31 December 2019? If it did not expire, was a new measure issued to continue the program into 
2020, and if so was that measure included in China 's notification?  
 
Question 32 
 
According to the Domestic Refined Fuel Price Reform Upward Adjustment According to the System  
notice issued on 31 December 2021 (and earlier iterations of this program), purchasers of diesel 
fuel in the fishery sector enjoy a preferential price compared to other retail purchasers, based on a 
state determined sales  price.  In its responses to U.S. questions on China 's 2019 Notification, China 
noted that the program on Domestic Refined Fuel Price Reform Upward Adjustment According to the 
System  had been repealed. However, the system appears to still be in place, having been updated 
multiple times in each of 2019, 2020, and 2021.  If the program has been repealed, why does it 
continue to be updated?  Please explain and provide the legal citation fo r the repealing legal measure. 
If the program is on -going, does China intend to notify it and publish it in the MOFCOM Gazette?  
 
Question 33 
 
Are government entities the sole recipients of the grants under Tianjin Programs 2.9 and 2.10 ? If 
so, why is this  program being notified?  
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 Question 34 
 
What types of industries receive benefits under Hebei Programs 3.5, 3.6, 3.8 and 3.9 ?  
 
Question 35 
  
What types of industries receive benefits under Shanxi Program 4.5 ? 
 
Question 36 
 
What is an "economic forest " (Inner Mongolia Autonomous Region Program 5.11 )?  
 
Question 37 
 
If Jilin Program 7.5  is for the construction of public charging infrastructure, why is it being notified?  
What commercial enterprise is benefitting?  
 
Question 38 
 
Under Heilongjiang Program 8.11 , what type of metal is being supported?  
 
Question 39 
 
Are any of the benefits provided under Shanghai Program 9.1  linked to exports?  
 
Question 40 
 
How does supporting the listing of an enterprise under Shanghai Program 9.16 promot e speeding 
up "industrial restructuring "? 
 
Question 41 
 
What is the legal authority for closing down capacity under Jiangsu Program 10.8 ? 
 
Question 42 
 
What specific activities are supported under Zhejiang Program 11.2?  Does it include the renovation 
or construction of fishing vessels?  
 
Question 43 
 
How does subsidizing the construction of fishing boats "control fishing intensity " or any of the other 
listed policy objectives under Zhejiang Program 11.7 ; subsidizing more fishing boats would s eem to 
increase fishing intensity?  
 
Question 44 
 
Does Fujian Program 13.1 include the construction or renovation of fishing vessels?  
 
Question 45 
 
How does Fujian Program 13.3 (titled Special Fund for Fishing Ports ) "promote fishery scientific 
innovation "? 
 
Question 46 
 
Under Shandong Program 15.2 , does any of the funding go towards building or renovating new 
fishing vessels?  
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 Question 47 
 
Does the need for a fishing moratorium indicate that the level of fishing effort needs to be controlled?  
If not, why not ( Guangdong Program 19.3, 19.13, 19.19 )? 
 
Question 48 
 
Under Guangdong Program 19.17 , what are considered the strategic emerging industries?  
 
Question 49 
 
Please describe in greater detail what can be considered "new material pro ducts " under Shannxi 
Program 27.1 ? 
 
Question 50 
 
Does Dalian City of Liaoning Province Program 32.2  support the purchase or renovation of fishing 
vessels for marine wild capture?  
 
Question 51 
 
Does Xiamen City of Fujian Province Program 35.2 finance the purchase or renovation of distant 
water fishing vessels?  
 
Question 52 
 
What is considered a strategic emerging industry under Shenzhen City of Guangdong Province 
Program 36.2 ? 
 
 
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