WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/CHN/46 
29 October 2012 
 (12-5904) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
  
 
  
SUBSIDIES 
 
Request from the UNITED STATES to CHINA 
Pursuant to Article 25.8 of the Agreement 
  
 The following communication, dated 24 October 2012, is being circulated at the request of 
the Delegation of the United States.  
_______________ 
 
  Information available to the United States i ndicates that China administers the programmes 
described below, which appear to provide subsidies as defined in paragraph 1 of Article 1 of the WTO 
Agreement on Subsidies and Countervailing Measures (SCM Agreement) and which appear to be 
specific within the meaning of Article 2.  Please provide the following information for each of the 
programmes, policies, or implementing measures discussed below:  
(a) Current status of the programme, policy or implementing measure;  
(b) The name of the programme, policy or implementing measure under which the 
subsidies are provided, the administering authority, and the policy objective and/or 
purpose of the subsidy;  
(c) A description of the subsidy provided under the programme, policy or implementing 
measure including the form of the subsidy, e.g., grants, loans, tax concessions, etc; 
(d) Duration of the subsidy and/or any ot her time-limits attached to it;   
(e) Eligibility criteria for the subsidy; and, 
(f) Please explain whether China made available to WTO Members translations into one 
or more of the official languages of the WTO each of the laws, regulations and other 
measures relating to the policies discu ssed, as it is obligated to do under 
paragraph 330 of the Worki ng Party Report accompanying its Protocol of Accession.  
If so, please identify  where these translations can be found.  If not, pursuant to Part I, 
Paragraphs 2(C)(1) and 2(C)(3), of the Protocol on the Accession of the People's 
Republic of China  (WT/L/432), please provide legal citations for and identify where  
all of the laws, regulations and other measu res of the policies discussed can be found. G/SCM/Q2/CHN/46 
Page 2  
 
  G
OVERNMENT ASSISTANCE PROVIDED THROUGH ECONOMIC PLANNING MEASURES  
1. Subsidies for key, pillar and encour aged industries in industrial plans 
 It is the understanding of the United States that China has national-level industrial plans that 
provide targets and goals for key, pillar and other priority or encouraged industries or projects.  In 
general, FYPs are prepared by the National De velopment and Reform Commission (NDRC) with 
input from other government ministries as well as pr ovincial and local level governments, academics 
and industry.  These national plans are subject to guidance from the Chinese Communist Party's 
Central Committee and are ratified by the Nationa l People's Congress (NPC).  These national plans 
are usually further elaborated upon and implemented at provincial and local levels through related 
local subsidiary plans and measures.  In order to facilitate achieving the particular industry targets and 
goals set out, many of these central and sub-central  plans, along with related implementing measures, 
contain provisions that provide the policy and legal basis for, or otherwise give rise to, the provision 
of various subsidies to those targeted industries.  It is the United States' understanding that most, if not 
all, enterprises in China, including state-owne d and controlled enterprises, generally must conduct 
their operations consistent with such plans and th at these plans form a key basis to decision making 
across a wide swath of sectors and activities with th e economy. To the extent that China's industrial 
plans contain grants, tax incentives and preferential lo ans to producers in key, pillar and other priority 
or encouraged industries, it would appear th at these subsidies should be notified.   
 
 The United States requests that China provide responses to the general questions above with 
respect to every central or sub-central industrial plan for key, pillar and other priority or encouraged industries that include such provisions for subsid ies.  In addition, for each of these plans, please 
provide the following information:  Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Please explain how central plans are developed and implemented, and how they relate 
to sub-central levels.  Please describe the relationship between the central 
government's industrial policies and subsidy pr ograms, such as those contained in or 
called for by China's five-year plans, and the implementation of industrial policies 
and subsidy programs by the sub-central governments.   
(c) How are subsidy programs at the sub-centra l government level financed?  Are there 
cost-sharing arrangements betw een or among different leve ls of government?  If so, 
please explain. 
2. Iron and steel policy 
 The China Iron and Steel Industry Development Policy Order of the NDRC (No. 35) (2005), 
Development Policies for the Iron and Steel Industry  ("Iron and Steel Policy") drafted by the National 
Development and Reform Commission and released at the 20 July 2005 executive meeting of the State Council, outlines China's comprehensive policy for rationalization of its steel industry.   
Specifically, Article 16 states that "{f}or a major iron and steel project that is based on home-made equipment as newly developed, the state shall grant policy supports in such aspects as taxation, grant 
for interest payment and scientific research funds."  China's Steel Policy specifically provides for state 
support in the form of "tax refunds, discounted inte rest rates, funds for research and other policy  G/SCM/Q2/CHN/46 
 Page 3 
 
 
  support for major iron and steel projects utilizi ng newly developed domestic equipment."   
Meanwhile, Article 18 of the Steel Policy states in part: "Policy on Import of Technology and 
Equipment:  Encourage industry to use domestic equipment and technology; reduce imports.  For 
equipment and technology that must  be imported due to the lack of domestic ability to produce such 
or due to insufficient domestic supply, such equipm ent and technology must be modern and practical.  
For current and future large scale equipment, loca lization of production must be organized."   
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) To the extent that incentives under the Iron and Steel Policy are contingent upon the 
purchase of domestic machinery, please explain how those subsidies comply with China's obligations under Article 3 of the SCM Agreement. 
3. Decision of the State Council on promulgating the interim provisions on promoting 
industrial structure adjustment for implementation 
 One incentive commonly found in various industrial policies and plans is the provision of 
credit.  Article 17 of the Decision of the State Council on Prom ulgating the Interim Provisions on 
Promoting Industrial Structure Adjustme nt for Implementation (2 December 2005) ("Decision 40") 
directs financial institutions to provide credit supports  to projects in certain industries.  Article 12 of 
Decision 40 specifically references the NDRC's Directory Catalogue on Readjustment of Industrial 
Structure (2 December 2005)  ("the Catalogue"), which provides a list of projects considered to be 
"encouraged".   Such projects include wind energy power projects as well as the production of steel 
tube for oil well pipes, cold rolled silicon sheet, al cohol ether fuel, energy saving sheet glass, auto 
parts, high-tech pulp and paper as well as top gr ade textile products.  A revised version of the 
Catalogue was released by the Govern ment of China in March 2011.   
 
 One clear example of the implementation of Decision 40 is the lending provided to a leading 
paper producer in China, Shandong Chenming.  Pu blically available information suggests that a s one 
of the leading paper making companies in China, Shandong Chenming has enjoyed the support of the 
government at various levels.  In fact, Shando ng Chenming itself has said that the Chinese 
government implements a policy to encourage the grow th of larger enterprises by providing support to 
major paper making companies in terms of materi al supplies and new product development, while 
restricting smaller enterprises which include minor paper companies. I nformation also suggests that 
China's Paper Making Development Policy,  which was promulgated a nd implemented by the NDRC 
on 15 October 2007, directs domestic financial in stitutions, especially policy banks, to provide 
prioritized financing supports to construction projects of ma jor domestic pulp and paper making 
enterprises.  It would appear that Shandong Chen ming received such policy lending for its projects 
that were considered "encouraged".  
 To the extent that encouraged projects in th e Catalogue receive priority access to credit, it 
would appear that Decision 40 also meets th e definition of a notifiable subsidy.   
 
Questions  
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. G/SCM/Q2/CHN/46 
Page 4  
 
  (b) Please also discuss the interaction of the Ca talogue (both the 20 05 and 2011 versions) 
with other industrial policy legisla tion (e.g. the Renewable Energy Law). 
4. Guideline for High Technology Commercialization 
 
 On 26 December 2007, the NDRC issued the Guideline for High-Technology 
Commercialization for the 11
th Five-Year Period  ("the Guideline"). The Guideline listed ten 
prioritized areas for technology and innovation cap acity development and identified 16 advanced 
technologies to be promoted by the government during the 11th five-year period (2006-2010). The 
16 technologies include: software and integrated ci rcuits; new generation internet technologies; new 
generation mobile communication technologies; digi tal audio and video technologies; new electronic 
devices; information security technologies; me dical biotechnologies; traditional medicine 
technologies; biomedical engineering; biotechnol ogy; modern agricultural technology; commercial 
airliner development; satellite technologies; new ma terial technologies; new energy technologies; and 
energy conservation and emission reduction technologies.   
 The Guideline  calls on the government to take measur es to facilitate the development and 
commercialization of the identified key technologies. It  envisages several roles to be played by the 
government. For example, it states that the govern ment should encourage and help steer private 
investment by promptly publishing high-tech de velopment guidelines for various industries and 
notifying the public of high-tech commercialization projects that will receive public funds.  Further, 
local governments should guide and encourage financia l institutions and intermediaries to participate 
in the commercialization of high-tech innovation ach ievements.  In addition, the government should 
promote innovation efforts by providing financial s upport, such as loan interest subsidies and the 
injection of public funds, focusing on technologies th at will have strong spillover effects and a broad 
strategic impact on the public welfare.  To the ex tent that the Guideline calls for loan interest 
subsidies and other grants to producers in the ab ove-mentioned technologies, it would appear that the 
Guideline meets the definition of a notifiable subsidy.   
 
Questions  
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
(b) Explain how the Guideline is to be impl emented at both central and sub-central 
government levels. 
(c) Please also discuss how the Guideline is u sed when implementing other industrial 
policy legislation (e.g., the Renewable Energy Law). 
G
OVERNMENT ASSISTANCE PROVIDED THROUGH STIMULUS PLAN MEASURES  
 
5. Stimulus Plans Subsidies 
 
 In the context of the financial crisis that began in 2008, China, like many other countries, 
including the United States, implemented various stimulus plans in key sectors. 
 
 The  Plan for Adjustment and Revival of Textile Industry  (24 April 2009), inter alia , states the 
following:    
Investment on technological progress and technical reconstruction shall be 
strengthened. The technological progress and technical reconstruction of the  G/SCM/Q2/CHN/46 
 Page 5 
 
 
  enterprise shall be supported, particularly the industrialization and application of 
high-tech fiber; development & applica tion of industrial textile; independent 
development of new type of spinning and weaving. Also, the technical reconstruction of spinning & weaving, textile printing a nd chemical fiber as well as the construction 
of independent brand shall be supported. . . . 
The enterprises shall be encouraged to carry  out the merger and reorganization. The 
backbone enterprises in the textile & clothing  industry shall be encouraged to merge 
and reorganize the difficult enterprises; in the course of merger and reorganization, the support shall be given in such aspects as circulating fund, debt examining and 
personnel emplacement. . . . 
Financial support shall be further given to the textile enterprise. . . . The eligible 
enterprises shall be supported to issue cor porate bonds and small and medium-sized 
enterprise's collective bond and short term financing bonds. . . . 
The textile enterprise's burden shall be relie ved. According to relevant regulations, 
the payment of social insurance fees could be suspended or the rate thereof could be 
lowered for the enterprises which seriously  suffer from the operating difficulties. The 
unemployment insurance funds could be used  to pay the social insurance subsidies 
and post allowance if the enterprise with  operating difficulties adopts such measures 
as on the job training, work in shifts and negotiable wage payment to stabilize the employees and guarantee that the job displacement is avoided or reduced. The industrial support policy made by the local government shall appropriately incline to 
the textile enterprises. Also, the liquidati on of various unreasonable charges shall be 
accelerated. . .  
 The  Plan for Adjustment and Revival of Non-Ferrous Metal  (12 May 2009), inter alia , states 
the following:  
Stabilize the domestic market and improve the export environment.  The state 
measures to enlarge domestic demands sh all be positively carried out, so as to 
improve product structure, add effectiv e supply and satisfy the demand for non-
ferrous metal products in the downstrea m industries, such as electric power, 
transportation, architecture, machinery and light industry, etc. Also, new products and 
materials shall be vigorously developed to m eet the needs in the fields of aerospace, 
national defense, war industry and high & ne w technology, etc, so as to cultivate new 
consumption points of growth, stabilize and enlarge home markets. 
We shall continue exercising strict cont rol over the outlet of "higher consumption 
products, higher pollution products and r esource products"; meanwhile, appropriate 
flexible policies on export duties shall be im plemented, so as to support the export of 
products via deep processing, which are feat ured with higher technological contents 
and added value. In addition, the trial pr ocessing trade in large-scale copper smelting 
enterprises that meet access conditions of copper smelting shall be carried forward. 
The transformation of export mode shall be accelerated. Specifically, we should encourage the export of terminal products, such as mechanical e quipment, means of 
transport, electrical equipment and instrume nts and meters, etc, so as to drive the 
indirect export of non-ferrous metal. At  the same time, overseas antidumping, for 
example, trade friction, shall be positively answered. . . . 
We shall increase the investment on technological progress and technical 
reconstruction. The special fund shall be taken from the newly added central G/SCM/Q2/CHN/46 
Page 6  
 
  investment to support the technical R&D and technical reconstruction of the non-
ferrous metal industry by means of loan discount. The financial incentive shall be 
increased for renovation of energy-saving technology to encourage and guide the enterprises to positively carry forward the re novation of energy-saving technology. . .  
The financing policy with both encouragement and restriction shall be continuously. The financing 
support shall be enhanced for the backbone enterp rises in the non-ferrous metal industry. For the 
enterprises which are subject to the industrial polic y, environmental protection, agrarian law and 
portfolio management as specified as well as implem ent the merge & reorganization, "going to the 
outside world" and technical reconstruction, the s upport shall be given in terms of issuing stock, 
corporate bond, corporate bonds as well as the bank loan. . . .  
 
 The  Plan for Adjustment and Revival of Light Industry , inter alia , states the following: 
 
The overall technical level of industry sha ll be improved. The papermaking industry 
shall be supported to conduct the technical  renovation by means of such technologies 
as deep delignify, element-free chlorine bleach, high & medium condensing and fully 
automatic control system; the home applian ces industry shall be supported to upgrade 
and renovate the production lines for the critical components of refrigerator, air-conditioner and washing machine, so as to  realize the industrialization of high 
efficiency & energy-saving refrigerator,  air-conditioner and washing machine; the 
plastics industry shall be supported to upgrad e the green plastic construction materials 
and multifunctional agricultural film with large width; the surface active agent 
industry shall be supported to popularize th e use of environmentally friendly surface 
active agent, so as to realize the indus trialization of environmentally friendly 
functional products; the hardware indus try shall be supported to upgrade the 
traditional processing technology  and equi pment, so as to improve the production 
level. . . .  
The product structure shall be adjusted. We  shall support the development of market 
shortage products, optimize the product stru cture and increase domestic content ratio. 
The deep processing of agricultural by-produ cts shall be supported to particularly 
carry forward the diversification of oil verities. Also, the production with high efficiency, low consumption and ecology shall be implemented to advance the 
appreciation and deep development of oil bearing crop, so as to add the productive 
capacity of 1-million-ton peanut oil, 1-m illion-ton colza oil, 500,000-ton cottonseed 
oil and 1-million-ton special non-fluid oil.  Meanwhile, the safety supply of edible 
vegetable oil shall be guaranteed. The "10th Five-Year Plan" for Engineering Construction for Integration of Wood s& Paper-making Nationwide and 2010's 
Special Planning shall be continuously im plemented to accelerate the construction of 
main projects and add the productive capac ity of 2.2-million-ton wood pulp, 300,000-
ton bamboo pulp, so as to increase the proportion of home-made wood pulp and boost the integrative growth of woods & paper-making. . . .  
Financial support shall be furthe r provided. We shall fulfill the Several Opinions 
Issued by the General Office of the St ate Council on Stimulating Current Economic 
Development through Finance  (GBF (2008) No.126), so as to encourage financial 
institutions to increase credit support for the light industry enterprises that are provided with good operating conditions in ge neral, good credit records and play vital 
roles in stimulating employment, but temporarily suffer from difficulties in operation. Also, the mature loan of above enterprises could be properly extended. In addition, 
tax bureau's formalities and procedures on ex amining financial institutions' bad debt 
cancellation shall be simplified. . . .   G/SCM/Q2/CHN/46 
 Page 7 
 
 
  Merger & reorganization and elimination of backward productive capacity shall be 
encouraged. The policies concerning merger & reorganization shall be conscientiously carried out and support in terms of circulating funds, liability 
assessment and personnel placement, etc. shall be granted; priority shall be given to 
the technology innovation & renovation launched by the merged or reorganized 
enterprises. . . . 
The Steel Adjustment and Revitalization Plan (23 March 2009), inter alia , states the following: 
 
Technological progress and technical reconstruction for the steel industry shall be carried out (details as per attached list 1) . The major supports shall be given to the 
large-sized backbone enterprises following the state's industrial policies; the leading 
enterprises which implement the reorganiza tion of trans-regions, ownerships and 
industries as well as the producers for critical materials used in national defense and 
outer-space flight & aviation. The use of high-tensile steel bars and materials-saving techniques shall be promoted for the key rolling shapes used in the development of 
high speed railway, high magnetic induction grain-oriented silicon steel and high 
intensity machine straightening. The circulated economy and energy-saving technology such as HTHP dry cooling, wast e heat utilization of agglomeration and 
stack gas desulphurization shall be devel oped. Meanwhile, major supports shall be 
available for the techniques used in developing the poor iron mines. . . .  
Input in the technological progress and techni cal reconstruction shall be strengthened.  
Special funds shall be available for the i nvestment in capital construction within the 
central budget. The loan could be adopted for supporting the technical reconstruction 
of steel enterprises (excluding the renovation of power-saving technology), technological R&D and technology introduction, so as to push forward the technological progress of steel industry. The Steel structure shall be adjusted to 
improve the quality of steel products. Th e financial incentive for power-saving 
technology shall be further increased to en courage and support the steel enterprises to 
positively carry forward the renovation of pow er-saving technology. . . .       
The financing policy with both encouragi ng and restriction shall be continuously 
implemented.  The financial support for backbone steel enterprises shall be 
strengthened. We shall give supports to the projects which are subject to the 
environmental protection, agrarian law and portfolio management requirements as 
well as the enterprises which implement the merger, reorganization; go to the outside world and make technological progress in terms of issuing stock, corporate bond, middle-term bill, short term financing and bank loan as well as absorbing the 
privately collected equities. In addition, we  shall avoid the capital chain rupture of the 
large-sized backbone enterprises. If necess ary, the loan and discount shall be 
available. Meanwhile, the financing restric tion shall be continuously implemented for 
the projects without the approval and th e enterprises with backward productive 
capacity. . . .  
We shall support R&D and fruitful results conversion of such key technologies as 
non- blast furnace iron smelting, continuous cas ting of ligature, high efficiency and 
low cost clean steel production, continuous  casting of large slab and integrated 
utilization of slag. Also, major supports sha ll be given to the production technology 
concerning the special heavy plate used  for 1000 MW thermal power and nuclear 
power as well as the high magnetic induction a nd low core loss silicon steel used for 
high-pressure boiler tube and transforme r above 250,000 KVA. . . .      G/SCM/Q2/CHN/46 
Page 8  
 
  We shall support the development of smelting technology and deep mining 
technology for the low-grade mineral resources such as brown iron ore, high phosphorus iron ore and siderite. Also, inte grated utilization of resources such as 
vanadium, titanium and iron boron shall be encouraged. . . .  
We shall support the recycling of coking products as well as the development and 
application of energy-saving & pollution reduction technology used for production of 
ferroalloy, carbon and refractory materials. . . .  
We shall support the independently developm ent of automatic control technology and 
Informatization management technol ogy for steel production. . . .  
The Restructuring and Revitalization Plan of Shipbuilding Industry , inter alia , states the following: 
 III.   Main Tasks of Industrial Restructuring and Revitalization   
 
(I)  Stabilize output of shipbuilding ente rprises: take effective measures to 
support large-size shipbuilding enterp rises and shipping companies.... Guide 
shipbuilding enterprises to strengthen their production management, reasonably 
schedule their production plan, ensure the quality and progress of shipbuilding and 
maintain the continuity of production.  
(II)  Increase demands in the shipbuildi ng market: accelerate the scraping and 
renewal of old and dilapidated vessels, el iminate single-hull oil tankers and actively 
develop oceangoing fishing vessels, special -purpose vessels, engineering vessels, 
workboats, etc.  
(III)  Develop marine engineering equipment: support shipbuilding enterprises to 
research and develop new-type self-lift drilling platforms, deep-water semi-submerged drilling platform, production platfo rm, float-type production and storage 
devices, marine engineering vessels, large-size modules, comprehensive integrated modules and various other types of marine engineering equipment.  
(IV)  Support the mergers and restructuring of enterprises: support large-size 
shipbuilding enterprises and other pillar shi pbuilding enterprises to carry out mergers 
and restructuring. Promote large-size sh ipbuilding enterprises to form strategic 
alliances with upstream and downstrea m enterprises for mutual supports and 
development. Guide small and medium-siz e shipbuilding enterprises to restructure 
their businesses, develop such businesses as intermediate product manufacturing, ship 
repair and special-purpose vessel production and explore markets other than the 
vessel market. Support qualified enterprises to  purchase famous ove rseas enterprises, 
R&D organs and marketing networks of accessory marine equipment.  
(V)  Improve independent i nnovating capacity: compile a " Catalog of Key R&D 
Projects of Shipbuilding Industry "; support the optimization and upgrading of the 
three mainstream vessels; develop vessels that satisfy new codes, standards and 
environment protection and energy-saving requirements; improve the R&D capability 
of large-size LNG vessels, LPG vessels, au tomobile carriers, scientific survey vessels 
and other hi-tech high-added-value vessels;  accelerate the independent R&D work of 
new-type marine diesel engines and their key components, on-deck machineries, cabin equipment as well as communication and navigational automation equipment; 
promote the researches of fundamental and common technologies of modern 
shipbuilding and vessel and marine engineering equipment.   G/SCM/Q2/CHN/46 
 Page 9 
 
 
  (VI)  Strengthen corporate technological renovations: compile a " Catalog of 
Technological Renovation Projects and Products of Shipbuilding Industry "; support 
the projects of production facilities of hi-tech high-added-value vessels and marine engineering equipment; support the technolog ical renovations of vessel and marine 
engineering equipment and accessory products that can't be domestically produced or 
have distinctive energy-saving and e nvironment protection effects or whose 
production capacity can't satisfy market demands.  
(VIII)  Actively explore international market s: make and improve relevant measures, 
consolidate China's competitive edges in the international market of the three 
mainstream vessels and improve our share in the international market of hi-tech high-
added-value vessels and marine engineeri ng equipment; encourage enterprises of 
accessory marine equipment to establish overseas marketing networks and after-sales service systems in order to boost exports.  
 IV.  Policies and Measures  
 
(I)  Increase credit financing for producti ons and operations: various relevant 
banks shall ensure timely awarding of credit loans to shipbuilding enterprises as their 
working capitals in the process of shipbu ilding and contract performance. The period 
of such credit loans shall be extended a ppropriately in case of delayed acceptance by 
ship owners. Bonds of payments and repaym ents shall be issued to creditable and 
reputable ship owners and shipbuilding enterprises. Strengthen cooperation between 
banks and shipbuilding enterprises and offe r mortgage loans for ships being built. 
Support qualified shipbuilding enterprises to go public and issue debentures. Accelerate the establishment of a shipbuilding industry investment fund.  
(II)  Increase credit loans to overseas bu yers of Chinese vessels: encourage 
financial institutions to increase credit loans to overseas buyers of Chinese vessels 
and help large-size shipbuilding enterpri ses and other pillar shipbuilding enterprises 
to stabilize their overseas ship orders.  
(III)  Encourage the purchase of rejected vessels: research and make relevant 
policies and measures to encourage pillar shipping companies to purchase rejected oceangoing vessels and encourage financia l leasing companies to purchase vessels 
that are rejected by overseas importers.  
(IV)  Increase domestic demands for vessels: continue to implement the VAT 
refund policy for domestic enterprises that sell marine engineering structures to domestic marine petroleum and natural gas mining enterprises. Increase investments within budget limits and start, ahead of schedule, the construction of governmental 
and public vessels that have been in corporated into national plans.  
(V)  Accelerate the elimination of old and dilapidated vessels and single-hull oil 
tankers: research the policies that encourage the scraping and renewal of old and dilapidated vessels. Accelerate the intr oduction of policies that compulsorily 
eliminate single-hull (including single-hull double-bottom and single-hull single-bottom) oil tankers and forbid the renova tion and operation of overage vessels.  
(VI)  Strictly control addition of new production capacities: land, ocean, 
environment protection, financial and other governmental organs at various levels 
shall not accept the applications for new construction projects of shipyards and slipways other than those shipbuilding projects already included in the "Middle and G/SCM/Q2/CHN/46 
Page 10  
 
  Long-term Development Plan for Shipbuild ing Industry (2006 – 2015)". New basic 
infrastructure projects for large-size marine engineering equipment shall be reported to the government for approval. Approval of  expansion projects of existing shipyards 
and slipways shouldn't be given in the next three years.  
(VII)  Perfect corporate merger and restructuring policies: make and introduce 
policies and measures to encourage corporate mergers and restructuring; properly 
deploy redundant personnel, transfer corporate assets, merge and dispose of corporate liabilities and distribute properties, taxes and other interests. Support large-size shipbuilding enterprises to carry out anne xations and restructuring through capital 
stock injections, financing, credit loans, etc. Support pillar shipbuilding enterprises to 
annex and restructure other shipbuilding enterprises. Preferentially approve the 
technical renovation projects of pillar shi pbuilding enterprises and encourage them to 
implement product restructuring.  
(VIII)  Increase investments in scientific  researches and technical renovations: 
increase investments in the researches of  hi-tech vessels; support the R&D of new-
type hi-tech vessels, marine engineering equipment and other key accessory 
equipment; support the researches of key common technologies and advanced manufacturing technologies; accelerate the establishment of shipbuilding industrial 
standard systems. Support technical renovations in the professional manufacturing facilities and equipment of accessory ma rine equipment, marine engineering 
equipment and special-purpose vessels; suppor t large-size shipbuilding enterprises to 
carry out informatization and process fl ow renovations after annexations and 
restructuring; support medium and small-size shipbuilding enterprises to carry out restructuring according to relevant indus trial policies and requirements. Support 
shipbuilding enterprises and scientific resear ch organs to improve their scientific 
research conditions.  
Question 
 
(a) For each of the above stimulus plans, pl ease answer the general questions (a-f) listed 
above on page 1 for each of the programmes, policies or implementing measures developed at the central or sub-central levels of government.  
I
NVESTMENT AND INTEREST SUBSIDIES  
 6. Interim Management Measures on Investment Subsidy and Interest Deduction Project 
of Central Budget -- Order of the Nati onal Development and Reform Commission 
(No. 31), 8 June 2005 
 
 China's Interim Management Measures on Inves tment Subsidy and Interest Deduction  
("Management Measures") were released by Order No. 31 of the NDRC on 8 June 2005, and 
implemented on 1 August 2005.  Article 1 of the Management Measures states that it is for the "purpose of regulating the management of investment  subsidy and interest deduction projects within 
central budget and enhancing the bene fits from using the central budgetary  subsidies and interest 
discount funds."  Article 3 of the Management Measu res further states that the "investment subsidies" 
are those given by the NDRC "to the qualified proj ects invested by enterprises and those invested by 
local governments", and that the "interest deduction" re fers to "the loan inte rest subsidies given by 
NDRC to the qualified investment projects that use mi d and long term bank loans."  Further, it states 
that, "{t}he provision of investment subsidies and interest deduction funds shall be gratuitous."  
Article 4 stipulates that these investment subsidies and interest deductions are to be allocated to 
"investment projects for protecting and improving the ecological environment"; "investment projects  G/SCM/Q2/CHN/46 
 Page 11 
 
 
  for promoting economic and social development of  the under-developed regions", investment projects 
for pushing forward the scientific progress and indus trialization of high and new technologies", and 
"projects that conform to the relevant provisions of the state".  In addition, Article 7 of the 
Management Measures provides that up to 200 million yuan in may be given to any single investment 
project under this program.  If the "central budgetary  investment fund arranged for a single investment 
project exceeds 30 million yuan, it will be managed as a "direct investment or capital injection" and is 
subject to NDRC examination and approval.  Invest ment projects that receive 30 million yuan or less 
are managed as investment subsidies or inter est deductions and application is necessary for 
application and approval.  With respect to th e application for funding under the Management 
Measures, Article 11 states that an application shall include, inter alia, "the policy basis for the 
application for investment subsidy or interest discount". 
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
(b) Are "investment subsidies" in the form of  cash provided to eligible recipients under 
this program?   
(c) Where the central budgetary investment fund arranged for a single investment project 
exceeds 30 million yuan, please explain how funding to eligible recipients is provided 
by "direct investment or capital injection".  In other words, what type of funding do 
the eligible recipients receive in this circumstance ( e.g., equity infusion, grant, loan, 
etc.)? 
(d) Please discuss the types of investment projects that are eligible for funding under this 
program.  
TECHNOLOGY PROGRAMMES  
 
7. The Law on Science and Technology Development 
 
 In December 2007, the National People's Congress passed the revised Law on Science and 
Technology Development .  The purpose of the law is to promote "the progress of science and 
technology, bringing into play the role of scien ce and technology as the primary productive forces, 
and promoting the transformation of scientific and technologic advances into practical productive 
forces, in order that science and technology shall re nder service to economic and social development."  
This law provides that the government should cr eate monetary incentives that are conducive to 
"independent innovation" as well as "increase its i nput of government funds, and formulate, among 
other policies, industrial, taxation, financial and governmental procurement policies to encourage and 
give guidance to the input of social funds, and pu sh forward sustained and stable increase of funds for 
scientific research and technological development by all sectors of society."   In providing specific guidance regarding tec hnology and scientific research, the law instructs 
the government to establish funds to "finance ac tivities for scientific and technological progress," 
provide preferential tax policies for certain indus tries that engage in scientific research and 
technological development, and to "give priority to the application of scientific and technological 
advances and the development of high and new tec hnology industries in offering financial services."  
Additionally, State Council is given the right to establish "national high and new technology industrial 
development zones, and give guidance and assistance  to construction and deve lopment of such zones G/SCM/Q2/CHN/46 
Page 12  
 
  so as to endow them with their sp ecial characteristics and advantages and give play to the effect of 
concentrated efforts."   The government is also instructed to "encour age enterprises to increase their input in research 
and development and in technological  innovation," and use state funds to "provide discounted interest 
rates and guarantees to the loan s received by enterprises for independent innovation."  Finally, it 
requires the government to increase funding for scientif ic and technological endeavors, and that these 
funds "shall constitute an appropriate  percentage of the gross domes tic product and shall gradually be 
increased."  To the extent that this law calls fo r loans and other incentives to producers in high and 
new technology industries, it would appear that this law meets the definition of a notifiable subsidy.   
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
8. Interim rule on tax deduction for research and development expenses 
 
 Under Article 30 of the Enterprise Income Tax Law of th e People's Republic of China , 
companies can "super" deduct "research and develo pment expenses incurred for the development of 
new technology, new products, and new techni ques." Under Article 95 of the implementing 
regulations, companies may deduct an additiona l 50 per cent of R&D expenses incurred for new 
developments or, alternatively, if the R&D expens es resulted in an intangible asset, the company may 
amortize the capitalized intangible asset based on 15 0 per cent of its costs.  Only R&D activities 
carried out for projects listed in the Catalogue of Key High- Technology Territories Supported by the 
States and Guidelines for the Latest Key Priority  Developmental Areas in High-Technology Industry 
(2007)  may benefit from the "super" deduction. 
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
9. Tax deduction for tec hnology development 
 
 Pursuant to the 2003 Circular of the Ministry of Finance (MOF) and the State Administration 
of Taxation (SAT) on Expanding the Application of Tax Deduction for Technology Development 
Expenditure by Enterprises , industrial enterprises, including textile and apparel manufacturing 
enterprises, regardless of ownership, are not only  able to fully deduct the expenses incurred for 
research and development of new products, new tec hnologies and new crafts from their income taxes, 
but are also allowed an additional 50 per cent deduc tion of R&D expenses, if such expenses increase 
10 per cent or more from the previous year. 
 
Question  
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
  G/SCM/Q2/CHN/46 
 Page 13 
 
 
  INTEGRATED CIRCUITS AND SOFTWARE PROGRAMMES  
 
10. Circular on Certain Policies for Further En couragement to Development of Software 
Industry and Integrated Circuits Industry  
 On 28 January 2011, the State Council published a circular titled Certain Policies for Further 
Encouraging the Development of the Software I ndustry and Integrated Circuit Industry (GuoFa 
[2011] No. 4) ("Circular 4").  According to public info rmation, Circular 4 provides various incentives 
for the software and integrated circuit industries,  including tax, investment and financing, and R&D 
incentives.  In addition to existing incentives, Circul ar 4 confirms that certain new tax incentives will 
be introduced.  In addition, publically available information indicates that, in order to implement 
Circular 4, the General Administration of Cu stoms (GAC) has promulgated an announcement and 
released policies and measures to support the devel opment of the software and integrated circuit 
industries.  According to GAC's announcemen t, policies and measures of GAC, the imported 
materials and parts of certified integrated circu it design enterprises may also enjoy exemption of 
import duties.    
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
(b) Explain whether Circular 4  replaces the Preferential Tax Policies for Integrated 
Circuit Industry (State Council Circular G uo Fa No. 18 of 2000) referenced in China's 
21 October 2011 Notification (G/SCM/N/155/CHN; G/SCM/N/186/CHN) and explain any differences in the incentives provided under these two State Council 
Circulars.  
(c) Under Circular 4, policy financial institu tions are to provide major support to 
integrated circuit projects.  Please expl ain how policy financial institutions are 
defined under Circular 4 and whether these policy financial institutions include the 
China Development Bank and the Export-Import Bank of China. 
11. Integrated circuit policies detailing preferential  policies to integrated circuit production 
companies 
 
 Publically available information suggests that , in addition to Circular 4, noted above, the 
Government of China administers several other pr eferential policies for integrated circuit production 
companies.  These include: 
 
- the Notice of the Ministry of Finance, the Stat e Administration of Taxation and the General  
Administration of Customs on Relevant Taxation Policy Encouraging the Further 
Development of  the Software Industry and the Integrated Circuit Industry ("Integrated Circuit 
Notice"), jointly issued by the Ministry of Fi nance, the State Administration of Taxation and 
the General Administration of Customs on 22 September 2000, as amended by the Notice of 
the Ministry of  Finance and the State Administration of Taxation on Approval Procedure 
Concerning Foreign  Invested Enterprises' Implementing En terprise Income Tax Policies of 
the Software and Integrated  Circuit Industry  ("Approval Notice"), jointly issued by the 
Ministry of Finance and the State Administration of Taxation on 1 July 2005;  
 
- 
the Notice of the Ministry of Finance, the St ate Administration of Taxation on Taxation 
Policies  Concerning the Tax Policies for Furth er Encouraging the Development of the G/SCM/Q2/CHN/46 
Page 14  
 
  Software and the  Integrated Circuit Industry , or the Further Development Taxation Notice, 
jointly issued by the Ministry of Finance and the State Administration of Taxation on 10 October 2002, as amended by Notice of the Ministry of Finance, the State Administration 
of Taxation on Termination of Value-added Tax Refund Policies for Integrated Circuits , or 
the Termination Notice, jointly issued by  the Ministry of Finance and the State 
Administration of Taxation on 25 October 2004;  
 - the Notice of the Ministry of Finance on Taxation Policies Concerning the Import of Self-used 
Raw Materials and Consumables by Part of Integrated Circuit Production Enterprises , or the 
Raw Materials Taxation Notice, issued by the Ministry of Finance on 24 August 2002;  
 
- the Notice on Taxation Policies Concerning the Im port of Construction Materials Specially 
used for Clean Rooms by Part of the Integrated Circuit Production Enterprises , or the 
Construction Materials Taxation Notice, issued by the Ministry of Finance on 26 September 2002;  
 
- the Notice by the Ministry of Finance and the St ate Administration of Taxation on Increasing 
Tax Refund Rate for Export of Certain Information Technology(IT) Products , or the Export 
Notice, issued by the Ministry of Finance and the State Administration of Taxation on 
10 December 2004;  
 
- the Measures for the Accreditation of the Inte grated Circuit Enterprise Encouraged by the 
State  (For Trial Implementation) , or the Accreditation Measures, jointly issued by the 
National Development and Reform Commission, the Ministry of Information Industry, the 
State Administration of Taxation and the General Administration of Customs on 21 October 2005; and  
 
- the Interim Measures for the Management of the Special Fund for the Research and 
Development  of the Integrated Circuit Industry, or the Fund Measures, jointly issued by the 
Ministry of Finance, the Ministry of Inform ation Industry and the National Development and 
Reform Commission on 23 March 2005.  
 
Question 
 
(a) Due to the different titles used to report the two notified programs relevant to the 
integrated circuit industry (program numb er 85 and 85) in China's 21 October 2011 
Notification (G/SCM/N/155/CHN; G/SCM/N/186/CHN), the United States is unable 
to determine whether there is any overlap between the integrated circuit polices listed 
above and the two programs in the notification.   To the extent there is a difference, 
please answer the general questions (a-f) listed above on page 1 for each of the programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
12. China Assistance To Semiconductor Manufactu ring International Corporation (SMIC) 
 
 In January 2008, SMIC announced its plan to start a new integrated circuit production project 
in Shenzhen with the support of the Shenzhen  municipal government.  Publically available 
information shows (1) that the company received US$306.1 million in government awards for several 
specific R&D projects between 2009-2011; (2) received government cash subsidies of  
US$16.6 million between 2000-2011 based on its estimated interest expense on the company's 
outstanding borrowings; and (3) that certain local governments provided subsidies equal to 
US$83 million between 2009-2011 to encourage the comp any to participate and manage new plants  G/SCM/Q2/CHN/46 
 Page 15 
 
 
  related to the integrated circuit industry.  In  addition, SMIC received US$82.9 million between 2009-
2011 in proceeds from government subsidies to purchase plant and equipment.    
Question 
 (a) Please describe the programs under which this assistance was provided.  If different 
than the general semiconductor programs descr ibed earlier, please answer the general 
questions (a-f) listed above on page 1 fo r each of the programmes, policies or 
implementing measures developed at the central  or sub-central levels of government.  
A
EROSPACE AND CIVIL AIRCRAFT PROGRAMMES  
 13. Subsidies Provided To Civil Aircraft 
 
 Publicly available information indicat es that the Chinese government has dedicated 
significant resources to the development of domesti cally designed and produced civil aircraft.  The 
11
th Five-Year Plan (2006-2010) listed the project as a priority.  The large aircraft project remains 
listed as a key science and technology special project.  Other programmes also support this development.  It is unclear whether the support that  these varied programmes provide for the project is 
being provided on commercial terms.  
Questions 
 
(a) In addition to the below questions, please answer the general questions (a-f) listed 
above on page 1 for each of the programmes, policies or implementing measures developed at the central or sub-central levels of government.  
(b) Please provide information on the terms a nd conditions under which the Government 
of China, including China's EX-IM Bank and state-owned commercial banks such as 
ICBC, provide investment subsidies, loan in terest rate subsidies and loan financing 
for commercial aircraft projects. 
T
EXTILE PROGRAMMES  
 
14. Special fund to support the restructuring of the textiles industry and the efforts of 
Chinese textile companies to "Go Global" 
 
 The 2006 Circular on Relevant Policies to Promote Chinese Textile Industry to Shift to New 
Ways of Growth in Foreign Trade and Suppor t Chinese Textile Enterprises to Go Global  issued by 
the Ministry of Finance, the NDRC, and the Minist ry of Commerce, authorized the allocation of a 
special government fund to support technology innov ation and restructuring in the textiles industry 
and overseas investment by textile companies. Lu mp sum direct grants are provided to projects 
involving technology innovation, development a nd industrialization of core technologies and 
equipment, establishment of innovation services pl atforms, and brand deve lopment and promotion. 
Loan interest subsidies are provided for the constr uction of overseas textile industrial parks, as well as 
the provision of land, manufacturing facilities, infrastructure and services in overseas textile industrial 
parks. 
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  G/SCM/Q2/CHN/46 
Page 16  
 
  15. Customs duties and VAT refund for advanced textile manufacturing 
 
 Pursuant to the 2007 Notice of the Ministry of Finance, the State Development and Reform Commission, the General Customs Administration,  and the State Administration of Taxation on  
Relevant Import Tax Policies to Implement the Opini ons of the State Council on Revitalization of the 
Industrial Machinery Manufacturing Industries , companies engaged in the manufacturing of 
advanced textile machinery are eligible to recei ve refund of customs duties and import VAT for the 
imports of key spare parts and raw materials that cannot be produced domestically.  
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
16. Priority support rendered by the central gov ernment to selected local textile industries 
 
 According to publicly available informati on, the Chinese National Textile and Apparel 
Industry Council (CNTAC) and the Hangzhou M unicipal Government signed a cooperation 
agreement under which CNTAC will give priority s upport to the upgrading of the textile industry in 
Hangzhou, a textile centre in China. As part of the cooperation, the two sides will collaborate in 
establishing a textile circulation and innovation ser vice platform with a total investment of 
RMB 320 million in the Xiaoshan district of Hangz hou City, the largest polyester manufacturing base 
in the world.  
 
Question  
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
17. Trade Promotion Fund for Agriculture, Light Industry and Textile Products 
 
 The Provisional Measures on the Administra tion of the Trade Promotion Fund for 
Agriculture, Light Industry and Textile Products (Shang Gui Fa [2005] No. 507) appear to provide 
funds to enhance the quality and safety level of agricultural, light industry and textile products 
exported by China.  Based upon the language in th is measure, "export industrial organizations" are 
specifically targeted for funding.  Among other goals , funds under this program are used to formulate 
medium and long-term export industrial developm ent plans as well as for national trade promotion 
activities in these sectors.  It appears that these provisions were reiterated in Notices Concerning 
Application of the Fund for Promoting the Trade of Agriculture, Light Industry and Textile Products 
in 2006 (SMH [2006] No.78) and Notice Issued by General Of fice of Ministry of Commerce for 
Examining Trade Promotion Fund Used in Agricu ltural, Light Industry and Textile Products (SBMH 
[2006] No. 152).  Further, it appears that several provin ces in China have released notices that 
implement these central government measures: 
 
 Fujian Province:   Supplementary Notice Issued by Department of Foreign Trade & Economic 
Cooperation of Fuijian Province for Applying Trade Promotion Funds Project of 
Agricultural, Light Industry and Textile Products in 2006   
 
 Shandong Province:
  Notice of Making Efforts to Accomplish the Work of Applying the Trade 
Promotion Capital for Agricultural, Light Industry and Textile Products in 2006 (LWJMFZ  G/SCM/Q2/CHN/46 
 Page 17 
 
 
  [2006] No. 747) and Notice of Suggestions on Stepping up the Structure Adjustment in Textile 
Industry to Boost the Industry's Upgrading I ssued by Ten Ministries and Commissions, such 
as Development and Reform Commission of PRC (LJMYZ [2006] No. 281)  
 
 Jiangsu Province:   Notice of Making Efforts to Accomplish the Work of Applying 2006's the 
Trade Promotion Funds  for Agricultural, Li ght Industry and Textile Products in Jiangsu, 
Notice Concerning Examining and Acceptance of  Jiangsu's Trade Promotion Funds Project 
for Agricultural, Light Industry and Textile  Products in 2006 (SWJM [2006] No. 715), and 
Notice of Applying for the Special Fund used in  the Structure Adjustment of Jiangsu's Textile 
Industry in 2008  
 
 Zhejiang Province:   Notice of Making Efforts to Accomp lish the Work of Applying the Special 
Fund Used in Stepping up Structural Adjustme nt And Change of Growth Mode in Textile 
Industry, Issued by the Economic and Tr ade Commission of Zhejiang Province.  
 Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) An explanation of the types of "trade promotion activities" that are funded under 
these programs. 
(c) An explanation of how such incentives are compliant with China's obligations under 
Article 3 of the SCM Agreement. 
18. Special Fund for Brand Development 
 
 Pursuant to the Circular on the Administration of the Special Fund for Brand Development , 
issued by the Ministry of Commerce and the Ministry of Finance in 2006, the government of China 
created a fund to serve the following purposes: to  support companies in implementation of brand 
development  programs, companies in participati on of national and interna tional exhibitions, brand 
promotion activities, international exchanges, trai nings and seminars related to brand building, and 
other public services that facilitate brand building.  
 The United States understands that the Ministry of Commerce and the Ministry of Finance 
appropriate the fund to provincial governments who are required to formulate their own measures on 
the administration of the fund. 
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
F
ISHERY PROGRAMMES  
 
19. Ministry of Agriculture 11th Five-Year Plan for Nationwide Fishery Development 
 
 On page 14 of the 11th Five-Year Plan for Nationwide Fishery Development it is stated: 
 G/SCM/Q2/CHN/46 
Page 18  
 
  Regional emphasis:  The coastal areas in Southeast China should further strengthen 
the export-oriented aquaculture of eel, praw n, tilapia, large yellow croaker and other 
advantaged varieties, encourage the deve lopment of the aquaculture with wave-
resistant deep-sea cages and expand the deve lopment space of seawater aquaculture; 
the Yellow Sea and Bohai Sea regions should further consolidate the aquaculture of 
prawn, seashell, fish and other advantaged export-oriented varieties . . .  
 On page 27 of the 11
th Five-Year Plan for Nationwide Fishery Development it is stated: 
 
Implement fishery support and subsidy policy.  We should continue the policy of 
subsidizing marine fishermen who change  their production line; support resource 
expedition, renovation of fishing vessels, a nd adjustment of operating modes; adopt 
duty-free policy for the import of aquatic fingerlings and fries, actively strive for subsidies on fine aquatic va rieties and special support policy for oceanic fishery and 
enhance industrial competitiveness. 
 On page 29 of the 11
th Five-Year Plan for Nationwide Fishery Development, it is stated: 
  
Encourage multi-channel financing. We shoul d give full scope to the demonstrative, 
guiding and regulating role of government investment, give equal stress on government investment and guidance, and market promotion, make full use of the economic means of market, guide bank lo ans, corporate funds, personal donations, 
foreign investments, international aids and other social funds to take part in the 
development of fishery and the conservati on of resources and environment, form a 
new investment mechanism for diversified investment and interest sharing, and 
enlarge the fund aggregate for fishery development.  
Question 
 
(a) In addition to the below questions, please answer the general questions (a-f) listed 
above on page 1 for each of the programmes, policies or implementing measures developed at the central or sub-central levels of government.  
20. Fuel subsidies for fisheries 
 
 According to publicly available information, China's Ministry of Agriculture launched a program in 2006 that subsidizes diesel oil used in  fisheries and has benefited more than 20 million 
fishermen over the past five years. The program covers fishermen and fishery enterprises that use 
motorized fishing vessels for near-shore and inland fishing and aquatic production.  In 2006 alone, 
China's central budget allocated subsidies of 3.18 billion yuan. 
 
 According to the Notice of the State Council on Implementing the Price and Tax Reform of 
Refined Oil ("State Council Notice"), revenue from the gasoline and diesel tax increases are to be 
distributed for increasing subsidies to grain farm ers, fishermen and other groups "with financial 
difficult and public welfare sectors."  Specifically, the central government will subsidize, through 
special transfer payments, the cost increases sustained by these industries as a result of price 
adjustments for refined oil.  The State Council No tice mandated that the Ministry of Finance, in 
consultation with relevant depa rtments, publish standards and di stribution mechanisms for such 
subsidies in 2009.   According to the Notice on Improving the Subsidy Mec hanism for Farmers, Impoverished 
People and the Public-Welfare Sectors for Refined Oil Products Price and Tax Reform , subsidies for 
the cost of refined oil purchases by qualified appl icants (e.g. grain farmers, fishermen, urban cab  G/SCM/Q2/CHN/46 
 Page 19 
 
 
  drivers) are appropriated by the Ministry of Finance every April in the form of  a transfer payment to 
the provincial government.  The provincial governme nt is then responsible for transferring the 
payment to the individual applicant.  If the subs idy beneficiary is a central-level state-owned 
enterprise, the subsidy amount is directly paid to the state-owned enterprise by the Ministry of Finance.  The standard for determining the subsid y amount is an annual weighted-average calculation 
of the difference between the actual cost of diesel fuel and a base amount of 3870 RMB/MT (pre-tax). 
  It appears that while this program is administer ed at the central level, the funds are transferred 
from the Ministry of Finance to local governments at  the provincial level, and then distributed to 
recipients.  In Zhejiang province, the uniform s ubsidy rate for all fishery motorboats is 241 
RMB/KW, although the calculation methodology for the consumption amount differs between ocean 
and inland fishery motorboats.     In Shandong province, the diesel fuel subsidy am ount is differentiated by the time of the year, 
the type of fishery operation and the horsepow er.   For example, from 1 January 2009 to 
14 January 2009 (a 14-day period), the "subsidy sta ndard" was 1000 RMB/MT.  In other words, the 
weighted-average difference between the actual co st of diesel fuel and the base amount of 3870 
RMB/MT (set by the central government) was 1000 RMB/MT for this 14-day period.  
Questions 
  
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Does each province have its own provincial implementation plan?  If so, please 
explain how the benefits under this progr am are implemented in each province. 
S
UBSIDIES PROVIDED FOR COMPANIES LOCATING IN PROVINCIAL LEVEL ZONES , BASES AND 
CLUSTERS  
 
 As noted above, China's five-year plans outline policies and tools to be used in the 
development of certain industries.  One tool used by China to support the innovation process is 
through the development of science parks, technology  zones, bases, clusters and innovation parks. 
China's nationally designated parks ( i.e. science parks, research parks a nd technology parks) focus on 
science related and high-technology related industries. It is our understanding that some parks serve as 
nationally- designated regional hubs, some parks are designated to carry out national science and 
technology programmes and others are used to combine the above two policies. According to 
publically-available information, China uses various  incentives aimed at attracting foreign direct 
investment to promote the development of these parks .  These incentives are put into place in order to 
"accelerate the establishment of a technological i nnovation system" by usi ng "national innovative 
cities, indigenous innovation demonstr ation areas, and high-tech zones,  etc." Such incentives include:  
 
 Taxation and financial policies that support R&D; 
 Implementation of taxation policies th at promote technology progress; and 
 Implementation of financial polic ies that encourage innovation.  
 
 The programs listed below are just are examples of China's efforts to use designated areas for 
the development of certain key sectors.   G/SCM/Q2/CHN/46 
Page 20  
 
  21. Subsidies to Enterprises Located in Intensiv e Industrial Zones in the Shunde District 
 According to Circular on Printing and Distributing the Implementation Rules for the 
Construction of Intensive Industrial Zones (SHUNFUBANFA{2002}No.33), in order to promote 
certain industries, the Shunde District government provides certain incentives to companies located in 
Intensive Industrial Zones within the Shunde District .  For example, companies located in these zones 
receive an exemption from land de velopment fees.  In addition, the Shunde District government 
provides electricity at preferential rates to enterp rises located in industrial  zones.  Specifically, 
enterprises located in these zones are charged for electricity at the preferential rate reserved for large-
scale, industrial enterprises, regardless of the en terprise size.  Further, companies in the Shunde 
Intensive Industrial Zone receive exemptions from the city tax for the first two years of an enterprise's 
operation and a 50 per cent reduction in city taxes for th e next three years.  To qualify, the enterprise 
must invest more than 20 million RMB in fixed asset s or operate within an  "encouraged" industry. 
 Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
(b) Please also provide information regardi ng the list of "encouraged" industries under 
this program. 
22. Subsidies to Enterprises Located in Indus trial Cluster Zones in Foshan City 
  According to public sources, the City of Foshan provides a one-time grant of RMB 15 per 
square meter for each square meter of land used by  certain enterprises.  The following enterprises are 
eligible for these grants: 1) enterprises located in industrial cluster zones with fixed asset investments 
greater than RMB 20 million; or 2) newly-established industrial enterprises that produce "encouraged" products identified in the "Catalogue  of Products Under Structural Adjustment 
Program."   Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
(b) Please also provide information regarding th e list of "encouraged" products under this 
program. 
23. Subsidies to Newly-Established Industrial Pr ojects in Zhongshan's Industrial Zones  
 
 According to public sources, companies in Zhongshan whose projects qualify as newly-
established projects in industrial zones receive a RMB 2,000 per square mete r reduction in land-use 
charges. In 2000, the amount of these land-use charge deductions for certain companies was 
increased.  Specifically, companies are now eligible for a RMB 4,000 per mu reduction if they meet one of the following two criteria:  (1) domestic-f unded industrial projects listed as encouraged in 
Zhongshan's "Development-Oriented Industry Dir ectory in Zhongshan;" or (2) foreign-funded 
industrial projects that were identified in the centr al government's "Catalogue for Guidance of Foreign 
Investment Industries."     G/SCM/Q2/CHN/46 
 Page 21 
 
 
   Furthermore, in 2004 the program was furt her modified to offer a RMB 3,000 per mu 
reduction to companies that meet one of the following three criteria:  (1) domestically-invested industrial projects, industrial projects, products, a nd technology identified as a top priority in the 
development policies of the central government a nd the province; (2) foreign-invested industrial 
projects listed as encouraged in the "Catalogue for Gu idance of Foreign Investment Industries;" or (3) 
industrial projects invested in specialized industr ial towns for "lighting, hardware, electrical home 
appliances, air conditioners, garment, furniture and food, and in compliance with relevant industrial 
policies."  
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Please provide the list of industries that are considered "development-oriented" 
according to the directory noted above. 
(c) Please provide a list of ‘top priority' technol ogies identified in the relevant policies.  
24. Subsidies to Enterprises Located in Certain Industrial Clusters 
 
 According to  Ningbo City Iron and Steel Industry Ad justment and Revitalization Action Plan 
(12 October 2009), Pearl River Delta Industrial Layout Integration Plan ,  and the Jiangmen City 
Economic and Social Developm ent 12th Five-Year Plan , enterprises located in in dustrial clusters in 
Ningbo City, the Pearl Delta region, including Jia ngmen city receive the following incentives:  
 
 Exemptions from Land Development Fees; 
 Land Purchase Grants; 
 Grants to Hire Post-Doctoral Workers; 
 Interest Subsidies; 
 Preferential Loans;  
 Lowering Interest Rates; and 
 Tax Reductions or Exemptions. 
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing measu res developed at the central or sub-
central levels of government.  
25. Subsidies to Enterprises Located in the Li anyungang Economic and Technological 
Development Zone (LETDZ)  
 
 Publically available information indicates that the Lianyungang Economic and Technological 
Development Zone is a state-leve l approved development zone and is  divided into four sub zones: 
Processing for Export, Industrial Base for New Pharmaceuticals, Eastern Industrial Park and High-tech and Private Business. The main areas in which investment is encouraged include: the chemical 
industry, new pharmaceutical industry, machinery industry, electronic industry, light industry, 
building materials and the textile industry. Publica lly available information indicates that companies 
located in the LETDZ are eligible to  receive the following incentives:  
 G/SCM/Q2/CHN/46 
Page 22  
 
   Land development grants; 
 Grants for paying taxes; and 
 Tax rebates on electric power, gas consumed by the companies for production. 
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Given that one of the sub-zones is dedicated to projects related to "processing for 
export", please explain how this program is compliant with China's obligations under 
Article 3 of the SCM Agreement. 
26. Subsidies to Enterprises Located in the Ti anjin Economic-Technological Development 
Area (TEDA) 
 
 According to publically available informa tion, TEDA provides support to certain "focus 
sectors" that include telecommunication, automotiv e, bio-pharmaceutical, food and beverage, new 
energy and new materials, equipment manufacturing, petro-chemicals, aviation and modern services. 
Within these sectors, TEDA provides various typ es of incentives to qualifying companies.  The 
Provision of Tianjin Economic -Technological Development Area on Promoting the Development of 
the High and New Technology Sectors  ("TEDA's General Provisions") states that such companies are 
eligible to receive the following benefits:  
 Support for construction; 
 Taxation incentives; 
 High technology companies receive 100 % of fina ncial support for the first two years and 50% 
for the following three years; 
 High technology start-ups receive rent subsidy for up to three years; and 
 Support fund of RMB 100 million for independent R&D efforts. 
 
Chapter IV (entitled "Support for Key Sect ors and Areas") of TEDA's General Provisions 
provides further tools to be used to promote cer tain sectors within the TE DA. These incentives include 
the following: 
 
Article 15 (Special Fund for the Software and IC Design Sectors): This article 
provides for a  special fund of RMB 3 million, which is provided each year for the 
software sector to support the construction of a public service platform of software 
technology and the growth of software companies.  
Article 16 (Financial Support for the Software Companies to Obtain 
Certification): This article provides for financial support of RMB 150,000 to 
RMB 350,000 for software companies obtaini ng a Capability Maturity Model (CM) 
or  Capability Maturity Model Integration (CMMI) certificate. 
Article 17 (Operational Support for Software Companies): This article provides 
for certain financial support for the indepe ndent R&D and technological innovation 
of software or IC design companies. 
Article 18 (Special Fund for Leading Talents of Start-up Companies in the 
Biotech & Pharmaceutical  Sector): This article provides for RMB 3 million in  G/SCM/Q2/CHN/46 
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  support for an "overseas-returned leading tale nt of a start-up company" in the biotech 
& pharmaceutical sector with a project possessing independent IPR and potential for commercialization. 
Article 20 (Special Planning for Biot ech & Pharmaceutical R&D Application): 
This article provides that qualified compani es shall be entitled to financial support for 
the R&D in the biotech and pharmaceutical s ectors. Specifically, every year a special 
fund of RMB 100 million shall be provided to support the R&D of new drugs and 
their commercialization.  
Article 21 (Support for Developing the International Market):  This article 
provides  financial support as high as RMB 500,000 to high-tech companies involved 
in  the biotech pharmaceutical sectors that  have access to international markets.  
Article 22 (Operational Support for Incubators):  This article provides  financial 
support to high-tech incubators for a period of five years, in accordance with their 
actual contribution, for the purpose of setting up public laboratory platform and the incubation fund.  
Chapter V (entitled "Support for Financing") of the TEDA General Provisions provides 
further tools to be used to promote certain sectors within the TEDA.  
Article 23 (Incubation Fund):  This article provides  that TEDA shall set up an 
incubation fund of RMB 10 million to support start-up high-tech companies.   
Article 24 (Venture Investment Development Fund): This article provides that 
TEDA shall set up a venture investment development fund of RMB 50 million to 
support venture investment in TEDA.  
Article 25 (Financial Support for Going Public through Share Reform): This 
article provides that  TEDA shall set up a special fund to provide financial support to 
high-tech businesses seeking going public through share reform. 
Article 26 (Credit Guaranty): This article provides that   TEDA shall set up a 
special risk fund of RMB 20 million for loan guarantees to high-tech SMEs through 
TEDA Credit Guaranty Center for SMEs. 
Article 27 (Soft Loans): this article provides that  TEDA shall support the high-tech 
start-ups' R&D commercialization projects by providing soft loans to expand production.  
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
27. Subsidies to enterprises located in the Su Qian Economic Development Zone  
 
 Pursuant to the Preferential Policies for Chemical Pr ojects in Su Yu North District, Jiangsu 
Province, 2005 , chemical enterprises in the Su Yu Nort h District/Su Qian Economic Development 
Zone receive the following local tax benefits:   G/SCM/Q2/CHN/46 
Page 24  
 
   Income tax rebates; 
 Exemption from fees levied by the municipal government; 
 Tax benefits from local income tax if the value of exports counts for more than 50 per cent of 
the value of the production year; and  
 Preferential tax rates over a period of ten years.   
 
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
28. Subsidies to Enterprises located in the Zhongguancun Science Park 
  Zhongguancun Science Park was established as a state-level industrial pa rk which consists of 
ten parks located in different districts within Beijing: Haidian Park, Fengt ai Park, Changping Park, 
Yizhuang Park, Desheng Park, Shijingshan Park, Y onghe Park, Tongzhou Park, Electronic Town and 
Daxing Biopharmaceutical Industrial Park . As part of the developmen t of Zhongguancun Park, various 
preferential policies are provided to companies locati ng within its boundaries, including the following:  
 
 Guaranteeing high-risks loans for SMEs of up to 5 million yuan a year at a single bank; 
 Loan interest payment subsidies for SMEs; 
 Establishment of a national S&T financial i nnovation centre that involves government and 
social funds, industrial and financial capita l, and direct and indirect finances; 
 Tax incentives;  
 Subsides for R&D; 
 Municipal fees levied by half; and 
 Land use right transfer payments levied by 75%. 
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Please provide information regarding the different industries that have located in this 
industrial park. 
29. Chongqing Chemical Industrial Park Preferential Policies 
  Based upon publicly available information, it appears that companies located in the 
Chongqing Chemical Industrial Park are eligible for sev eral incentives, including some that appear to 
be contingent upon exportation.  For example, in a ddition to income tax exemptions provided in the 
first 5 years a company is located in the industrial park, it appears that for the sixth through the tenth 
years of operation, if a company's export income  exceeds 60% of the company's total sales income, 
"50% of the income tax revenue retained to the distri ct office shall be returned  to the enterprise."    
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.   G/SCM/Q2/CHN/46 
 Page 25 
 
 
  (b) With regard to incentives provided conti ngent on a company's export income, please 
explain how such incentives are compliant w ith China's obligations under Article 3 of 
the SCM Agreement. 
30. Northeast Footwear Industrial Park loca ted in Liaoyuan City of Jilin Province 
  According to publicly available information, th e Northeast Footwear Industrial Park located in 
Liaoyuan City of Jilin Province provides incentives to investors including:   
 Tax benefits : local income taxes can be refunded to the enterprises in fu ll within 5 years; 
enterprises with annual VAT payments a bove RMB 1 million and sales taxes of RMB 
500,000 may receive a 20 per cent refund of the portion of the tax allocated to the 
industrial park. 
 Preferential treatment in land use : enterprises with a fixed asset investment of above 
RMB 10 million and annual tax payments of RMB 1 million can receive a waiver of the land leasing fee for 20 years. 
 Preferential treatment in administrative fees : enterprises with a fixed asset investment of 
above RMB 5 million can receive a waiver of administrative fees during the construction period and within 5 years of operation. 
 Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
O
THER LOCAL PROGRAMS  
 
31. Promoting the Development of Non-State-Owned Economy in Liaoning Province 
 
 Article 9 of the Suggestions of the People's Government of Liaoning Province on Promoting 
the Development of Non-State-Owned Economy (22 December 2006) , issued by the Liaoning 
Provincial Government, states that subsidies and de velopment funds such as treasury bonds for key 
projects and reduced interest rates loans should be provided for "technological innovations relating to products for export."  Further, this measure provi des for "subsidies for research development of 
products for exports..."  
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government. 
(b) How are the terms of the reduced interest  rate loans determined for qualifying 
companies under this program?  
(c) Please also explain how such incentives are compliant with China's obligations under 
Article 3 of the SCM Agreement. 
32. Shandong Province Policies on Encouragi ng Trade and Exportation Expansion 
 
 2006 Shandong Province Policies on Encouragi ng Trade and Exportation Expansion  (Lu Cai 
Qi [2006] No. 5) appears to provide incentives to companies in Shandong Province contingent upon G/SCM/Q2/CHN/46 
Page 26  
 
  export performance.  For example, this program pr ovides for interest discounts on loans to "productive 
exportation enterprises" that are used for research a nd development of export products.  This program 
also appears to provide subsidies for export cred it insurance as well as grants to entities that have 
made "remarkable contributions to the forei gn economic cooperation and international trade 
development of the province."  It appears that the Shandong Province maintained similar programs in 
2003, 2004 and 2005.   
  Further, it appears, based on publicly availa ble information from a government website, that 
this provincial policy is being im plemented further at the local le vel.  Specifically, the city of 
Shouguang within the Shandong Province provides sim ilar export contingent incentives to companies.  
The goal of this city program is to "increase trade and exportation enterprises" and "develop key 
exportation enterprises."  Under this program, the ci ty will provide a subsidy to exporting enterprises 
of RMB 0.04 per USD 1.00 in exports. In addition, Shouguang will provide a 25%  interest discount to 
enterprises on export rebate loans.    Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Please explain how such incentives are comp liant with China's obligations under 
Article 3 of the SCM Agreement. 
33. Subsidies to "Contract-Honoring and Promise-Keeping" Enterprises in Certain 
Provinces 
 
 Pursuant to  Notice on Public Announcement of  2009 ‘Contract-Honoring and Promise-
Keeping Enterprises',  Administration for Market Safety Supervision of Shunde District (8 June 2010)  
and Preferential Support Measures of Relevant Govern ment Agencies of Foshan City for Publically-
Announced ‘Contract-Honoring and Promise-Keeping' Enterprises, selected companies designated as 
"Contract-Honoring and Promise-Keeping" are eligible for the following incentives:  
 
 Grants to train workers, attend overseas  exhibitions, and re novate and innovative 
technology; 
 Preferential interest rates for loans;  
 Preferential foreign exchange rates; and  
 Preferential interest rates for large foreign currency deposits. 
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) Please explain what type of qualifications a company needs to have in order to be 
designated as a "Contract-Honoring and Promise-Keeping" enterprise.  
34. Hangzhou City of Zhejiang Province Textile Exports 
  According to the Notice on Applying for the Awards for Brand Name Textile and Apparel 
Exports  published in 2004, benefits are extended to exporters on the basis of the total amount of  G/SCM/Q2/CHN/46 
 Page 27 
 
 
  exports.  In 2004, firms that exported a total that  valued between 1-5 million USD received an award 
of 10,000 RMB, for exports valued between 5-10 million the reward was 30,000 RMB, for 10-50 
million the reward was 60,000 RMB, and for over 50 million the reward was 100,000 RMB. 
 
Questions 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
(b) To the extent that incentives under the Awa rds for Brand Name Textile and Apparel 
Exports are contingent upon export perfo rmance, please explain how this program 
complies with China's obligations under Article 3 of the Subsidies Agreement. 
35. Liaoning Province Loan Interest Subsidies for Technology Renovation 
 
 According to the Measures of Liaoning Province on the Administration of the Fund for Loan 
Interest Subsidies for Technology Upgrading , provincial and municipal governments administer a fund 
used to subsidize loan interest for upgrading technologies and equipment across a range of key industries.  The fund serves to encourage banks and other financial institutions to increase the 
magnitude of support to enterprises in technology upgrading.  
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
36. Zhongshan City Loan Interest Subsidies for Technology Renovation 
 
 According to the Provisional Measures of Zhongshan City on the Administration of the Fund 
for Loan Interest Subsidies for Technology Upgrading of Industrial Enterprises , projects can receive 
subsidies up to RMB 3 million or 30-40 per cent of the total amount of interest in a year.  
Question 
 
(a) Please answer the general questions (a-f) listed above on page 1 for each of the 
programmes, policies or implementing meas ures developed at the central or sub-
central levels of government.  
 
 
__________