WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/CHN/43 
23 July 2012 
 (12-4038) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
  
 
  
SUBSIDIES 
 
Questions Posed by the UNITED STATES Regarding the  
New and Full Subsidies Notification of CHINA1 
 
 
 The following communication, dated 20 July 2012, is being circulated at the request of the Delegation of the United States. 
 
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 Introduction 
 
The United States would like to thank China for its  most recent subsidies notification.  As 
China is aware, transparency is a core princi ple of the Agreement on Subsidies and Countervailing 
Measures (Subsidies Agreement).  We appreciate this la test effort of China's to move towards greater 
compliance with its transparency commitments.  However, the United States continues to be 
concerned about the incomplete nature of this noti fication.  As with China's first notification, the 
United States finds this most recent submission to be seriously deficient in a number of ways.   
 
As an initial matter, the United States would note that, even with this latest submission, China 
is still not up to date on its subs idy notification obligation as this submission only covers the period 
from 2005 to 2008.  As the United States has noted in the past, based on our experience, many of 
China's support programs are authorized for relativel y short periods of time (eg, two years) and are 
often subject to change.  Consequently, a subsid y notification covering a period several years ago, 
may present Members with an incomplete and inaccur ate picture of China's current support policies.  
Further, the notified central government subsidies a ppear to be largely the same partial listing of 
subsidies as those notified in China's last, and only ot her, subsidy notification, in 2006.  As with the 
last notification, many of the programs notified app ear to be social-welfare related programs that, for 
example, promote employment for the handicapped.  Wh ile interesting, when considered in light of 
the many other programs that the United States identif ied in its counter notification, it appears that 
these programs are not fully representative of China' s overall subsidy regime, which contains many 
sector-specific programs intended to benefit manufacture rs that potentially have a more direct impact 
on trade.  Moreover, the fact that few new program s have been notified is particularly concerning 
given that China took five years to submit this latest notification.   Further it is clear that this latest notifica tion is manifestly incomplete.  The notification 
includes only a few of the subsidies identified in Un ited States' recent counter notification, submitted 
pursuant to Article 25.10 of the Subsidies Agreement.
2  Of the 198 programs included in the 
                                                      
 1 G/SCM/N/155/CHN-G/SCM/N/186/CHN.  
2 G/SCM/Q2/CHN/42. G/SCM/Q2/CHN/43 
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  United States' submission, only seven are contained in  China's latest notification.  Moreover, China 
has again failed to notify a single subsidy administ ered by provincial or local governments.  As 
demonstrated by the information provided in the United States' counter notification, it is clear that China maintains a vast number of sub-central governme nt programs, none of whic h have been notified.  
As we have stated repeatedly, based on our experi ence and analysis, it appears clear that in many 
cases only broad support policies are issued at th e central government level, which are then 
implemented in a more particular  and concrete manner at the sub-central level.  Therefore, we 
continue to believe that a subsidy notificati on from China that does not include sub-central 
government programs is seriously incomplete.  
Also absent from China's notification are many  programs that the United States and other WTO 
Members have identified in various countervailing duty investigations, including, for example, certain programs involving grants, policy lending by state- owned banks and the provision of various goods at 
less than adequate remuneration. 
 
 The incomplete nature of China's notificati on is particularly concerning given that China 
appears to have made frequent use of subsidies that  are prohibited by the Subsidies Agreement.  In 
fact, the United States has been successful in br inging three WTO cases challenging scores of Chinese 
subsidies as prohibited by the Subsidies Agreement,  and only a small percentage of these subsidies 
have ever been notified by China.  Further, b ased on the information in the United States' counter 
notification, it appears that Chin a has maintained other prohibited subsidies programs that have yet to 
be notified.  It is now incumbent upon China to pr omptly notify and provide detailed information and 
data regarding the operation of the many s ubsidy programs from the United States' counter 
notification that China has yet to notify. 
 
Questions 
 
Having made the important observations above, th e United States has the follow questions 
regarding the programs that China did include in its latest notification. 
 Program 18 – Fiscal fund to alleviate poverty 
 
Why is this program being notified if it provi des "subsidies to individuals and organizations 
for individual subsidization, infrastructure constr uction and training programs in poverty stricken 
areas."? 
 Program 50 – Fund for optimizing the import and e xport structure of mechanical and electrical 
products as well as high-tech products 
 
1. Please provide all the eligibility criteria by which enterprises or industrial associations are 
selected to receive funds under the program.  2. If the legal authority under which this program  has been established is no longer in effect, 
please provide the name and cite of the successor legal measure.   
3. Are "financial appropriations" grants?  If not , please clearly describe the form of the subsidy 
(e.g., grant, loan, tax concession).  If the appropriations are in the form of a loan, are the terms better 
than market terms?  4. What is the difference between an "innova tion base" and "export base"?  What are the 
specific differences with respect  to eligibility criteria?   G/SCM/Q2/CHN/43 
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  5. What is a collective/common/public service plat form and what is its purpose?  What are the 
legal means by which such entities are organized and operated?  Is an "intermediary organization" the 
same as a collective/common/public service platform?   6. To the extent this program provides s upport contingent upon export performance, please 
explain how China plans to bring this program into compliance with its obligations under Article 3 of 
the Subsidies Agreement.  Program 51 – Fund for promoting the trade of agri cultural, light industry and textile products 
 
1. Please describe all the eligibility criteria by wh ich projects are selected to receive funding 
under the program.  2. Are "financial appropriations" grants?  If not, please clearly describe the form of the subsidy.  
If the appropriations are in the form of a lo an, are the terms better than market terms? 
 
3. Does funding of this program come from the foreign trade development fund?  Program 52 – Fund for promotion of coordinate d development of foreign trade and economic 
relations among regions 
 
Please describe the eligibility criteria by which projects are selected to receive funding under 
the program.  To the extent this program is c ontingent upon export performance, please explain how 
China plans to bring this program into compliance wi th its obligations under Article 3 of the Subsidies 
Agreement.  
Program 87 – Fund for development of electrical information industry 
 
1. Please explain what sectors or types of products the "electrical information industry" encompasses.  2. Please explain how the "interest discount" operates.  For example, does a company receive a 
loan from a bank and then receive a grant after maki ng an interest payment?  Or does the government 
provide a grant to the bank that provides the loan  to the company?  Does the "interest discount" 
mechanism operate in the same manner across all support programs?  3. Please explain how the "venture investment" operates.  Does a government entity purchase an 
equity share of the beneficiary company?  What government entity makes the investment and holds 
the equity share?  Generally, how do the terms of  the investment differ from commercial terms?  Is 
there another form of investment?  Please explain.  Program 88 – Fund for high technology R&D for packaging industry 
 
Please describe how the interest discounts are provided.  
 Program 22 – Preferential tax treatment for buildi ng material products produced with integrated 
utilization of resources 
Program 23 – Preferential tax treatment for buildi ng material products produced with integrated 
utilization of resources 
 
Why do these two programs have the sa me title?  How do the programs differ? 
 G/SCM/Q2/CHN/43 
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  Program 28 – Preferential tax policies for enterprises making little profits 
Program 29 – Preferential tax policies for enterprises making little profits 
 
Why do these programs have the same title?  How do the programs differ?   
 
Program 31 – Preferential tax policies for enterprises that employ disabled people 
Program 32 – Preferential tax policies for enterprises that employ disabled people 
Program 33 – Preferential tax policies for enterprises that employ disabled people 
Program 34 – Preferential tax policies for enterprises that employ disabled people 
 1. Why do these programs have the same title?  Please explain whether these programs are 
related in any way, either in terms of authorizi ng legal measures or in what the programs seek to 
achieve.  How do the programs differ?   2. Are these programs specific to certain enterprises in particular sectors or regions?  If not, why 
are they being notified?  
 Program 35 – Preferential tax treatment for imported products exclusively used by the disabled people 
Program 36 – Preferential tax treatment for products for the disabled people 
 
 These programs appear to provide tax benef its to disabled individuals.  Why are these 
programs being notified? 
 Program 40 – Preferential tax policies for the research and development of enterprises 
Program 41 – Preferential tax policies for the research and development of enterprises 
Program 42 –  Preferential tax policies for th e research and development of enterprises 
 
Why do these programs have the same title?  Please explain how these programs are related in 
any way, either in terms of authorizing legal meas ures or in what the programs seek to achieve.  How 
do the programs differ?  Did one or more of these programs replace others?  Program 45 – Research and development fund for industrial technologies 
  What is the form of the subsidy (i.e., grant, loan, tax concession, etc.)?  What is the meaning 
of "financial appropriations"?  Program 46 – Fund for supporting the technological  innovation of the technological small and 
medium sized enterprises 
 
1. Please explain how the "interest discount" operates.  For example, does a company receive a loan from a bank and then receive a grant after maki ng an interest payment?  Or does the government 
provide a grant to the bank that provides the loan to the beneficiary company?    
2. Please explain how "capital investment" ope rates.  Does a government entity purchase an 
equity share of the beneficiary company?  What government entity makes the investment and holds 
the equity share?  Generally, how do the terms of the investment differ from market terms?  Is there another form of investment?  Please explain.  
3. How is "capital investment" different from "venture investment" (see Program 87)?   
  G/SCM/Q2/CHN/43 
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  Program 48 – Special fund for establishment of service systems for SMEs 
  
Under "To whom and how the subsidy is  provided," the notification states: 
 
The fund is provided as grant to entities which provide services to SMEs.  For those 
who provide training services to the SMEs, re nt charges of training venue, payments 
to the lecturers and expenses on teaching ma terials may be fully subsidized by the 
fund, and accommodations incurred by the tr aining services may be subsidized at a 
maximum of RMB 150 person/day.  For those who provide credit services to SMEs, the actual expenses may be subsidized as appropriate.  For those who provide 
services for SMEs to start business, the actual expenses may be subsidized as 
appropriate.  For those who provide mana gement consulting services for SMEs, the 
actual expenses may be subsidized as appropriate.    
1. Please explain more fully how the subsidy is  provided under this program?  Does the service 
provider or the SME apply for the subsidy? 
 2. Is the subsidy always paid directly to the service supplier?  If so, how does the benefit accrue 
to the SME?  Does the government require th at a lower price be charged to the SME? 
 3. What does it mean that "the actual expenses ma y be subsidized"?  For example, is a lower 
price charged by the service supplier who then is reimbursed? 
 Program 75 – Interest Discount for poultry industry 
 
What is the precise mechanism by which "the inte rest rate . . . may be subsidized"?  Does the 
farmer receive a grant after making an interest paym ent, or does the bank receive a grant to charge a 
lower interest rate?   Program 86 – Fund for research and development of integrated circuit industry 
 
What is the form of the subsidy (i.e. grant, loan, tax concession, etc.)?  For each form, please 
describe fully the nature of the subs idy and exactly how it is provided. 
 Program 87 – Fund for development of electrical information industry  
  
1. Please explain what sectors or types of products the "electrical information industry" 
encompasses.  2. Please explain how the "interest discount" operates.  For example, does a company receive a loan from a bank and then receive a grant after maki ng an interest payment?  Or does the government 
provide a grant to the bank that provides the loan to the company? 
 
3. Please explain how the "venture investment" operates.  Does a government entity purchase an 
equity share of the beneficiary company?  What government entity does the investment and holds the 
equity share?  Generally, what are the terms of the investment and how do they differ from commercial terms?  Is there another form of investment?  Please explain. G/SCM/Q2/CHN/43 
Page 6  
 
  Program 90 – Preferential Tax Treatment  for Casting and Forging Products 
 
 We understand from China's response to our qu estions on China's first subsidy notification 
that a list of 284 casting and forging products manufact urers receive a refund of a certain percentage 
of their VAT paid on inputs. 
 
1. Do enterprises on this list receive a refund on all purchases they make, or only on inputs used 
in manufacturing casting and forging products?  2. How is the value-added portion of the criteria for this program fulfilled? For example, is it 
fulfilled through the purchase of a certain amount of inputs, e.g., domestically-produced inputs? 
 
Program 91 – Preferential Tax Treatment to Dies Products 
 
We understand from China's response to our ques tions on China's first subsidy notification 
that a list of 160 dies manufacturers receive a refund of a certain percentage of their VAT paid on 
inputs.  1. Do enterprises on this list receive a refund on all purchases they make, or only on inputs used 
in manufacturing dies products?  
2. How is the value-added portion of the criteria for this program fulfilled? For example, is it 
fulfilled through the purchase of a certain amount of inputs, e.g., domestically-produced inputs? 
  
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