China WT/TPR/S/264/Rev.1 
 Page 11 
 
 
  II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) INSTITUTIONAL AND LEGAL FRAMEWORK  
1. There have been no major changes to China's institutional and legal framework regarding 
trade since 2010.1 
2. Under the 12th Five-Year Plan, issued on 16 Marc h 2011, China aims to enhance its 
administrative efficiency by optimizing its st ructure, administration layers, and functional 
responsibilities, and promote the reform of big mini stries/departments, with an emphasis on solving 
the problem of redundant agencies, overlapping competence, and conflicting policies.2 
3. The WTO Agreements and China's Protocol of Accession are implemented domestically 
through enabling legislation.  Both the Civil Proce dure Law and the relevant judicial interpretations 
accept the principle that, when an international tr eaty concluded or acceded to by China contains 
provisions that differ from the provisions of the Civil Procedure Law, the provisions of the international treaty will apply, except for cases in which China has made reservations. 
(i) Transparency 
4. Since its previous Review, China has taken some  small steps to improve transparency.  The 
State Council issued a few circulars to direct gove rnment agencies at all levels to enhance, inter alia , 
government information disclosures;  public consul tations for drafting regulations and rules; and 
administrative reconsideration (appeal).
3 
5. Nonetheless, many aspects of China's trade a nd investment policy regime remain complex 
and opaque, leaving scope for administrative di scretion and corruption.  According to a 2011 
Corruption Perception Index, which measures percep tions of corruption among public officials and 
politicians in 183 countries, China ranked 75th, with a score 3.6 out of 10, almost identical to its 
ranking in 2009.4   
(a) Information dissemination 
6. Under the Provisions on the Disclosure of Govern ment Information, which entered into force 
on 1 May 2008, governments at the central and lo cal levels must:  establish the processes for 
information disclosure;  formulate guides and cat alogues on the information to be disclosed;  and 
improve the publication of information and systems concerning performance review, public 
comments, annual reporting, and accountability.  Government agencies must disclose, on their own 
                                                      
1 The National People's Congress and its Standing Committee exercise legislative power;  the State 
Council, i.e. the Central People's Government, is the executive body of the highest organ of state power and the 
highest organ of state administration;  China's judicial sy stem consists of the Supreme People's Court, the local 
people's courts at different levels, and special cour ts such as military, railway, and maritime courts. 
2 The 12th Five-Year Plan, Section 1, Chapter 46. 
3 The General Office of the State Council is in charge of guiding and supervising the disclosure of 
government information.  The National Corruption Prevention Bureau, which reports directly to the State council, is responsible for assuring the transparency of government information at various levels;  with a view to 
preventing corruption, it monitors the flow of suspicio us assets and corruption activities.  The Legislative 
Affairs Office of the State Council is responsible for checking coherence of regulations, and carrying out public consultations for draft regulations. 
4 Transparency International online information.   Viewed at:  http://cpi.transparency.org/ 
cpi2011/results. WT/TPR/S/264/Rev.1 Trade Policy Review 
Page 12 
  
  initiative, information that, inter alia :  involves the vital interests of  citizen, legal persons or other 
organizations;  need to be broadly known to the pu blic;  reflects the structure, functions, procedure, 
and condition related to the administrative agencies;  and is required to be disclosed in accordance 
with other laws and regulations.  Such "voluntary"  disclosure of information to the public must be 
conducted within 20 working days from the day the information is formed or revised.  Government 
agencies must respond to disclosure requests from the public within 15-30 working days.5 
7. The Provisions on the Disclosure of Government  Information define government information 
and a mechanism of related administrative remedi es.  The Government has identified problems of 
administrative disclosure including implementation,  comprehensiveness of disclosure, procedural 
problems, and the balance between informa tion disclosure and confidential information.6  On judicial 
procedures regarding information disclosure, the Re gulations on Trials over Administrative Litigation 
Cases of Government Information Disclosure, a judi cial interpretation of th e Supreme People's Court 
(entered into force on 13 August 2011), stated th at the People's Courts must register litigation 
claiming that the Government did not provide appr opriate information in time, in response to the 
applicant's request.   
8. The website of the China Legislative Informa tion Network System, which is maintained by 
the Legislative Affairs Office of the State Council,  publishes mainly the central government's trade-
related laws and regulations as well as some tr ade-related departmental rules by the central 
governmental agencies, in Chinese.  In addition, it provides on-line or off-line links to other agencies 
and ministries that are responsible for drafts of  administrative regulations  and departmental rules 
proposed for public comments;  it also has links to  local government legislative affairs offices.  
According to the authorities, all draft administra tive regulations have been  published on the website 
for public comments since 2008.7  In addition, MOFCOM's China Foreign Trade and Economic 
Gazette publishes China's trade-related laws, regulation, and rules.  
9. Neither ex ante nor ex post  economic evaluations of policies and measures (including tax and 
non-tax incentives) are published, indicating that this form of transparency is not a major feature of 
China's institutional framework, to the detrim ent of public accountability and thus governance. 
10. Upon accession to the WTO, China established enquiry points and enquiry websites under the 
Ministry of Commerce (MOFCOM), and the Gene ral Administration of Quality Supervision, 
Inspection and Quarantine (AQSIQ).8 
(b) Consultations with the private sector, including notice and comment procedures 
11. In accordance with the Legislation Law and its relevant regulations9, when administrative 
regulations, rules of the State Council ministries and local governments are drafted10, the opinions of 
                                                      
5 Article 14 of the Provisions excludes informati on regarding national security, commercial secrets, and 
personal privacy. 
6 See the Circular of Opinions on Deepenin g Administrative Disclosure and Strengthening 
Administrative Service, issued by the General Office of the State Council on 2 August 2011.  Viewed at:  
http://www.gov.cn/jrzg/2011-08/02/content_1918496.htm. 
7 WTO document S/C/M/92, 12 December 2008, paragraph 24. 
8 The enquiry points are:  http://sms.mofcom.gov.cn/ (MOFCOM), and http://www.tbt-sps.gov.cn/ 
sites/english/Contact/Pages/default.aspx (AQSIQ). 
9 Relevant regulations include the Regulations on Procedures for Formulation of Administrative 
Regulations (State Council Decree 321), and the Regulation on Procedures for Formulation of Departmental 
Rules (State Council Decree 322), effective 1 January 2002. China WT/TPR/S/264/Rev.1 
 Page 13 
 
 
  relevant authorities, other organizations, and citiz ens must be solicited extensively, particularly 
regarding major issues in the regulations.  Consu ltations may be carried out through symposiums, 
workshops, "expert" discussion meetings, seminars, a nd public hearings.  If the regulations or rules 
are "directly involved with immediate interests of citi zens, legal persons or othe r organizations", or if 
relevant authorities, organizations or citizens have major differing opinions on them, the drafting 
authority must publish such regulations/rules for pub lic comments;  it may also hold public hearings.11  
It would appear that regulatory agencies have discret ion to decide whether a hearing is held, whom to 
invite (e.g. affected foreign parties), and how the hearing is organized.12 
12. On 10 October 2010, the State Council issued Certain Opinions on Strengthening the 
Building of a Government Ruling by Law with a view to clarifying obligations of ministries and 
agencies to solicit public comments on draft administra tive regulations and depart mental rules.  Under 
the Opinions, administrative agencies at the ce ntral and provincial leve ls must solicit public 
comments when developing administrative regulations a nd departmental rules;  they are also required 
to broaden the scope of information disclosure a nd to enhance administrative reconsideration and 
litigations.  Although, according to the authorities, all draft administrative regulations have been 
published on the China Legislative Information Ne twork for public comments since 2008, it would 
appear that not all departmental rules have been  published (e.g. on the China Legislative Information 
Network or on ministry/agency websites) for public  comment.  The authorities state that "expert 
hearings" have been conducted for all trade-related laws and regulati ons in the drafting process.  It 
was not clear to the Secretariat to what extent affected foreign investors were involved in the 
consultations, or whether proceedings or minutes of the hearings were available to the public.   
13. All drafts of trade-related administrative regula tions and departmental rules that are published 
for public comment must provide a comment period of not less than 30 days, subject to exceptions.13  
With some exceptions, regulations and rules enter into force 30 days after promulgation.14   
14. The authorities maintain that suggestions from the public on legislation are usually 
sufficiently reflected in drafts of laws and admini strative rules.  However, according to the OECD, 
public participation in policy formulation in China is  still at a relatively early stage, characterized by 
informing the public rather than collecting opinions for improving policy making.15   
                                                                                                                                                                     
10 For a more detailed explanation of China's legal structure and legislative process, see WTO (2006), 
p. 36.  
11 The drafting agencies must give the public a 30-day notice about the date, time, venue, and topics of 
public hearings.  If regulatory agencies, in the process of drafting, do not publish the draft to the public, and do 
not conduct any public hearing, the legislative organiza tion may seek approval from the corresponding ministry 
or the government at its corresponding level to publish the drafts, and conduct public hearings.  Minutes of the public hearings must be made;  and responses to and treatment of comments from public hearing must be 
explained and justified when the draft rules are sent for verification. 
12 OECD (2009b), p. 103. 
13 Agreement on the 4th Sino-US Strategic Economic Dialogue, June 2008.  Viewed 
at:  http://www.america.gov/st/tex ttrans-english/2008/June/20080619 150342xjsnommis0 .7032129.html 
[3 August 2011]. 
14 Regulations and rules that are related to national security, foreign exchange, monetary policies, or 
whose implementation will be hindered by non-immedi ate effect, will enter into effect on the day of 
promulgation.  The Legislative Affairs Office of the State Council issued a circular (Guo Fa Han 2002/134) to the legislative affairs agencies of ministries (at the cent ral level) and local governments (at the provincial level) 
to urge strict adherence to the 30-day notice fo r all departmental rules/provincial regulations. 
15 OECD (2010b), p. 220. WT/TPR/S/264/Rev.1 Trade Policy Review 
Page 14 
  
  (c) Appeal procedures 
15. In accordance with the Interim Measures Con cerning Complaints from Foreign-invested 
Enterprises16, the Complaint Coordination Office for Foreign-invested Enterprises and the National 
Complaint Centre for Foreign-invested Enterpri ses under MOFCOM supervise and handle complaints 
from foreign-invested enterprises that  consider their rights have been impaired by the authorities.  
Data on actual complaints were not made available to the Secretariat.   
16. In accordance with the Law on Ad ministrative Reconsideration17, any citizens, organs, or 
other organizations may file appeals with a view to preventing and correcting specific administrative 
acts that are deemed illegal or improper, within 60 days of the occurrence of the administration action 
that they believe has damaged their legitimate right s.  A pilot programme to establish "administrative 
reconsideration commissions", which are independe nt from other government agencies, was launched 
in 2008 in Beijing, Heilongjiang, Jiangsu, Sha ndong, Henan, Guangdong, Hainan, and Guizhou.18  
(ii) Central-provincial relationships  
17. The Constitution of China provides that all leve ls of administration are subordinated to the 
State Council.  It would appear that responsibiliti es at the sub-national government level are not 
precisely defined and may differ among provinces.19  Where the division of responsibilities between 
the central and local governments is not clear, delegation from the central executive is the most 
common manner of policy implementation.  In eff ect, China has a shared gov ernance structure that 
requires continuous negotiations among different levels of government.20 
18. Laws are passed and enacted by the National People's Congress and its Standing Committee. 
The State Council promulgates national regulations and policies.  For the implementation of laws, 
regulations, and "national policies", the authorities at the provincial level may enact implementation 
measures with effect within the local administra tive territories.  These implementation measures may 
vary across regions, reflecting the different local interests.  The Constitution and other relevant 
statutes clarify that local regulations must yield before regulations of higher status.21  The Legal 
Affairs Office of the State Council reviews lo cal regulations to assure policy coherence. 
19. Ministerial-level administrative agencies promul gate administrative rules, which are expected 
to be applied uniformly nationwide.  Implemen tation and enforcement of national policies and 
measures are carried out mostly by counterpart agencies of local governments, except for those 
ministerial agencies that have local branches.  N onetheless, coordination between the agency at the 
central level and its counterparts at  the local level remains weak, rais ing issues of policy coherence.  
According to the authorities, higher level agencies tend  to use the argument "local yields to central" to 
solve conflicts.  
                                                      
16 MOFCOM Decree 2006/2, effective 1 October 2006 (in Chinese).  Viewed at:  http://www.gov.cn/ 
gongbao/content/2007/content_494436.htm.   
17 National People's Congress online information.  Viewed at:  http://www .npc.gov.cn/englishnpc/ 
Law/2007-12/11/content_1383562.htm.  
18 Online information viewed at:  http://news.xinhuanet.com/legal/2008-12/12/content_10494653.htm. 
19 Yang (2002),  p. 333;  and OECD (2010c), p. 220. 
20 OECD (2010c), p. 222. 
21 WTO (2006), pp. 34-37. China WT/TPR/S/264/Rev.1 
 Page 15 
 
 
  20. Provincial protectionism may result in barri ers to internal trade and investment.22  Local 
governments are dependent on revenues produced by th eir local SOEs and on income generated from 
economic activities in their local area.  On 28 Au gust 2010, the State Council issued a Circular of 
Opinions on Promotion of Enterprises Restructuri ng through Mergers and Acqui sitions (State Council 
Circular 2010/27), requiring local authorities to ab olish local regulations that hinder cross-province 
investment activities, in particular cross-provincia l mergers and acquisitions.  The authorities also 
state that various programmes, such as reform of  the system of transfer payments, have been 
introduced to reduce inter-provincial trade and investment barriers. 
(2) DEVELOPMENT AND ADMINISTRATION OF TRADE POLICIES  
(i) Main trade laws   
21. China's main laws covering international trad e include the Foreign Trade Law, the Customs 
Law, and the Regulations on Import and Export Tariffs, which contain the tariff schedules, as well as 
laws and regulations relating to  standards, SPS, anti-dumping meas ures, countervailing and safeguard 
measures, and intellectual property rights.  During th e period under review, vari ous trade-related laws, 
regulations and departmental rules have  been adopted or amended covering, inter alia,  border 
measures, taxation, competition, and intellectual property protection (Table AII.1);  China also 
abolished a number of trade-related administrative regulations and rules.23 
(ii) Trade policy objectives  
22. China's overall trade policy objective has remained largely unchanged since 2010:  to 
accelerate its opening to the outside world (with a view to introducing foreign technology and 
know-how);  develop foreign trade;  and promote sound economic development.   Within this overall 
trade policy objective, the 12th Five-Year Plan (covering 2011-15) places emphasis on exports and 
inward foreign investment but also on imports and outward foreign investment.24  In this context, 
China aims to stabilize exports, expand imports, and thus reduce the trade surplus.25  The authorities 
intend to achieve this objective through import fac ilitation measures, as well as further preferential 
trading agreements.  
(iii) Agencies involved in trade policy formulation and implementation  
23. Agencies involved in China's trade policy formulation remained unchanged during the review 
period.26  The Ministry of Commerce (MOFCOM) has main responsibility for policy coordination and 
                                                      
22 For a more detailed explanation, see WTO (2006), Box II.2, p. 41. 
23 These include:  the Regulation on Administration of Financial Institutions' Trading Spot and Forward 
Foreign Exchange on Behalf of Clients (promulgated by SAFE on 5 March 1988);  the Administration Measures on Foreign Exchanges for Overseas Investments (promulgated by SAFE on 6 March 1989);  the Administration 
Measures on Overseas Financial Institutions (PBC Decree 1990/1);  the Interim Measures for the Quota 
Administration of Import Tariff on Agricultural Products;  the Rules on Collection of Fees for International Vehicle Transport of Containers;  the Interim Measures for Administration of Highway and Waterway 
Infrastructure Projects with Foreign Lo ans;  the Interim Measures for Su pervision of Exchange Payment and 
Writing-off for Import Trade;  and the Measures for Administration of Agencies for Application of Safety and Quality Licenses for Imported Commodities. 
24 The 12th Five-Year Plan, Part XII. 
25 Minister Chen Deming answered journalists' questions at a press conference during the 11th National 
Congress, 7 March 2011.  Transcripts viewed at:  http://www.gov.cn/2011lh/zhibo/20110307a.htm 
[25 May 2011]. 
26 WTO (2010), p. 14. WT/TPR/S/264/Rev.1 Trade Policy Review 
Page 16 
  
  implementation of all trade-related issues.  Also involved in trade policy formulation and 
implementation are, inter alia,  the ministries of Agriculture;  Environmental Protection;  Finance;  
Industry and Information Technology;  Land and Resources;  and Transportation, as well as the 
National Development and Reform Commission (ND RC), which is in charge of overall national 
economic and social development policy.   
24. Several industry associations also collect a nd share information, identify and deal with 
problems related to industries, discuss trade policy issu es that affect their industries, and represent the 
interest of their sectors in relation to the Government.27   
(3) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Participation in the World Trade Organization 
25. China became a WTO Member on 11 December 2001.  It is not a signatory to the plurilateral 
Agreement on Government Procurement (GPA);  it  submitted a revised offer to join the GPA in 
December 2011.  It is an observer to the Agreement on Trade in Civil Aircraft.  China is a participant 
in the Agreement on Information Technology (ITA) ;  it is not a party to the Pharmaceutical 
Agreement. 
26. The authorities consider that the completion of Doha Round negotiati ons is important to 
support the multilateral trading system, and that "only after the Doha Round is completed will 
Members be confident to engage in in-d epth discussions on new issues of the 21st century".28  China 
emphasizes the importance of respecting the development mandate and the progress made so far. 
27. China has submitted a number of notifications during the period under review, including 
notifications on agriculture, services, technical regula tions, regional trade agreements, and intellectual 
property legislation (Table AII.2).  A total of 482 notifications were regist ered during January 2010 to 
February 2012, including a new notification on su bsidies adopted for 2005-2008.  Nonetheless, in 
some areas (e.g. state trading), notifications are considerably outdated or overdue.   
28. In the WTO Dispute Settlement Mechanis m, China was involved in 6 cases as a 
complainant29, and 12 as a respondent between 2010 and 2011.30  In addition, China participated as a 
third party in 24 disputes during the period under review.31  
(ii) Regional arrangements 
29. China was a latecomer to regional trade agreements  but has become an active participant.  It 
has also enlarged the geographic scope of its agreem ents.  Its earliest agreemen ts were signed with its 
                                                      
27 For a list of China's industries associations and chambers of commerce, see MOFCOM online 
information.  Viewed at:  http://english.mofcom.gov.cn/chamberofcomm.shtml. 
28 WTO document WT/MIN(11)/ST/106:  Statement by  China's Minister of  Commerce at the WTO 
Ministerial Conference, Eighth Session, Geneva, 15-17 December 2011. 
29 WT/DS379, WT/DS392, WT/DS397, WT/DS399, WT'/DS405 and WT/DS422. 
30 WT/DS387, WT/DS388, WT/DS390, WT/DS394, WT/DS395, WT/DS398, WT/DS407, 
WT/DS413, WT/DS414, WT/DS419, WT/D S425, and WT/DS427.  The authorities note that disputes regarding 
WT/DS387, WT/DS388, and WT/DS390 were settled bilaterally. 
31 WT/DS353, WT/DS369, WT/DS371, WT/DS375, WT/DS376, WT/DS377, WT/DS381, 
WT/DS384, WT/DS386, WT/DS389, WT/DS391, WT/DS396, WT/DS400, WT/DS401, WT/DS402, 
WT/DS403, WT/DS404, WT/DS412, WT/DS415, WT/DS416, WT/DS417, WT/DS418, WT/DS421, and 
WT/DS423. China WT/TPR/S/264/Rev.1 
 Page 17 
 
 
  neighbours (Hong Kong, China;  Macao, China;  ASE AN;  and the Asia Pacific Trade Agreement).  It 
has since moved further afield, negotiating agreem ents with New Zealand, Chile, Peru, and most 
recently Costa Rica.  Its current negotiations also confirm this broader search for RTA partners (including with the EFTA states, the GCC, India, th e Republic of Korea, and SACU).  The structure 
of its agreements has changed, an d become deeper over time, as the more recent agreements include 
commitments in services.  As stated in its 12
th Five-Year Plan, China intends to accelerate the 
implementation of the Free Trade Area Strategy, strengthen economic linkages with major trading 
partners, and deepen cooperation with em erging markets and developing countries. 
30. The authorities consider that regional trade agreements serve as a complement to the 
multilateral trading system while China pursues its opening-up policy;  in regard to free-trade 
agreements (FTAs)/regional trade agreements (RTAs) , China maintains that it follows the principle of 
inclusiveness and openness.  While in general,  the agreements notifie d by China to the WTO 
especially under Article XXIV of the GATT 1994 have  relatively high tariff line and bilateral import 
coverage, this is not the case for all its agreemen ts.  In its agreements with Chile, Peru, and 
New Zealand, China commits to eliminate duties on  94.6% to 97.2% of its tariffs, corresponding to 
88% to 99.1% of its bilateral imports from these trading partners;  however, duties on only 35.4% of 
its tariffs will be eliminated in the agreemen t with Pakistan, corresponding to 44.4% of China’s 
imports from Pakistan.  That Pakistan has also comm itted to relatively low levels of tariff elimination 
in the agreement suggests that Ch ina's commitments to eliminate ta riffs in its RTAs are based on 
reciprocity rather than a general policy of openness in its RTAs.   
31. China has notified to the WTO its involvement in 11 FTAs/RTAs (Table AII.3). 
32. China has concluded two new FTAs since 2009, i. e. the free-trade agreement with Costa Rica 
(signed April 2010, entered into force August 2011 ), and the Cross-Straits Economic Cooperation 
Framework Agreement (ECFA) with Chinese Taip ei (signed June 2010, entered into force 
September 2010).  The two agreements were the object of early announcements to the WTO. 
33. In addition, China has signed China-ASE AN FTA complementary agreements:  the 
memorandum on strengthening coopera tion in standards, technical regulations, and conformity 
assessment (25 October 2009);  the memorandum of unde rstanding on the cooperation in the field of 
intellectual property (21 December 2009);  the agre ement on investment (15 August 2009);  and the 
second protocol to amend the agreement on trade in goods (29 October 2010). 
34. China has signed supplementary agreements to the Closer Economic Partnership 
Arrangement between Hong Kong and the Mainla nd (Hong Kong CEPA) and between Macao and the 
Mainland (Macao CEPA).  Supplementary Agreemen t VI to Hong Kong CEPA  (signed 9 May 2009, 
effective 1 January 2010);  Supplementary  Agreement VII to H ong Kong CEPA (signed 
27 May 2010, effective 1 January 2011);  and Su pplementary Agreement VIII to Hong Kong CEPA 
(signed 13 December 2011, effective 1 April 2012) ;  Supplementary Agreement VI to Macao CEPA 
(signed 11 May 2009, effective 1 January 2010);  Supplementary Agreement VII to Macao CEPA 
(signed 28 May 2010, effective 1 January 2011);  and Supplemen tary Agreement VIII to Macao 
CEPA (signed 17 December 2011, effective 1 April 2012). 
35. China is pursuing negotiations or undertaking joint-studies on possible RTAs/FTAs with:  
Australia;  Norway;  Switzerland;  Iceland;  th e Gulf Co-operation Council (GCC);  India;  the 
Republic of Korea;  SACU (individually);  and the Republic of Korea and Japan (for a future tripartite 
agreement).   WT/TPR/S/264/Rev.1 Trade Policy Review 
Page 18 
  
  36. China has been a member of APEC since 1991.  In 2011, 64.3% of China's merchandise 
imports were from APEC members, and 61.3% of it s merchandise exports went to them.  China has 
been a member of ASEM since 1996.   
(iii) Unilateral preferences 
37. As of 1 January 2011, unilateral preferential tariffs on 60% of products  (in terms of national 
tariff lines) were offered to 36 least developed countries (LDCs).32  On 1 January 2012, Niger and 
Somalia were offered similar treatment.33  According to the authorities, about 90% of tariffs (in terms 
of national tariff lines) on imports from Lao PDR,  Cambodia, and Myanmar have been eliminated 
unilaterally since 1 January 2010 un der the China-ASEAN FTA framework.34  During the Eighth 
WTO Ministerial Conference, China indicated that it  would reduce tariffs to zero on 97% of imports 
(in terms of national tariff lines) from LDCs  that have diplomatic ties with China.35 
(4) FOREIGN INVESTMENT REGIME  
(i) Recent developments in FDI policy 
38. In 2010 (the latest year for which data are av ailable), China was the world's third largest 
recipient of FDI after the EU and the United States.36  China has been "enc ouraging" inward FDI, 
mainly in manufacturing, with particular emphasis on high-value-added production and new 
technology, and in certain services such as tel ecommunications, tourism, "modern" logistics, and 
service outsourcing.  On 1 January 2008, China elim inated preferential treatment to FDI projects in 
regard to the enterprise income tax, except for so me "grandfathering" of incentives during a five-year 
transition period.  Since 1 December 2010, fo reign enterprises pay urban maintenance and 
construction tax and education levies at  the same rates as domestic enterprises.37   
39. Since 1 January 2011, foreign investors have been "permitted" to invest in health care 
services in China on a pilot-project basis;  previous ly, they were listed in the "restricted" category.38   
                                                      
32 Online information.  Viewed at:   http://www.gov.cn/zwgk/2010-06/24/content_1635985.htm. 
33 Tariffs on some imports from Niger and Somalia were already zero-rated.   
34 An FTA between China and "old members" of  ASEAN, i.e. Brunei, Indonesia, Malaysia, 
Philippines, Singapore, and Thailand was fully implemented on 1 January 2010, whereas the FTA between 
China and "newer members", i.e. Cambodia, Lao PDR, My anmar, and Viet Nam is to be fully implemented on 
1 January 2015 (WTO document WT/COMTD/51, 21 December 2004). 
35 WTO document WT/MIN(11)/ST/106: Statement by  China's Minister of Commerce at the WTO 
Ministerial Conference, Eighth Session, Geneva, 15-17 December 2011. 
36 UNCTAD (2011). 
37 State Council Circular on Unifying the Urban Maintenance & Construction Tax, and Education 
Levies between Domestic and Foreign Enterprises (S tate Council Circular 2010/35, 18 October 2010). 
38 The General Office of the State Council Circular on Several Opinions on Further Encouraging and 
Guiding Social Capital to Invest in Healthcare Sector, 26 November 2010, "encourages" foreign investment to 
establish joint-venture healthcare institu tions (either equity or contractual), and the equity share ceiling is to be 
removed gradually.  A pilot programme of wholly foreign- owned healthcare institutions is being carried out.  As 
of 1 January 2011, healthcare serv ice providers from the Hong Kong SAR and the Macao SAR have been 
allowed to set up wholly owned hospitals in Shanghai, Chongqing, Guangdong, Fujian, and Hainan, and wholly owned care homes in Guangdong.  Service providers from Chinese Taipei have been allowed to set up wholly 
owned hospitals in Shanghai, Jiangsu, Guangdong, Fujian , and Hainan.  Foreign-invested healthcare institutions 
may set up as profitable or non-profit organizations. China WT/TPR/S/264/Rev.1 
 Page 19 
 
 
  40. A revised Catalogue for the Guidance of Foreign Investment Industries (2011 version), which 
entered into force on 30 January 2012, added 44 subs ectors and projects (e.g. services for intellectual 
property right protection, services of marine o il pollution clean-up technology, and new-energy 
automobiles) to the "encouraged" category, wher eas 41 subsectors and projects (e.g. manufacturing of 
complete automobiles, and of polysilicon) were  removed from the "encouraged" category.  The 
authorities noted that the foreign equity share ceiling for 11 subsectors in the "encouraged" and 
"restricted" categories were also removed on 30 January 2012.   
41. Since 6 April 2010, the Government has encour aged foreign-invested enterprises (FIEs) in 
joint ventures with Chinese enterp rises or research institutes to participate in government-funded 
projects under the "national technology devel opment programme" and the "innovation capacity-
building programme.39  The national technology developm ent programme and the innovation 
capacity-building programme are subsidy programme s managed by NDRC with the aim of promoting 
innovation.  The programmes are open to enterpri ses and research institutes.  Upon approval of 
projects put forward by enterprises, NDRC grants subs idies that partially cover the cost of innovation 
activities.  Since 31 August 2010, some manufacturing subsectors (e.g. textiles and apparel, toys, and 
domestic appliances) and banking services in the centra l and western regions have been classified as 
"encouraged", in accordance with the State Counc il's Guiding Opinions on Central and Western 
Regions' Receipt of Industrial Transfers.40  This reclassification will be reflected in the next revision 
of the Catalogue of Advantaged Industries for Fo reign Investment in Central-Western China.   
42. The Government intends to increase decentraliz ation and simplify verification procedures for 
foreign investment.  Since 4 May 2010, provincial au thorities have been delega ted to approve certain 
FDI projects below US$300 million (previously US$100 million).41  Since 14 February 2011, outward 
FDI below US$300 million in natural resources, a nd below US$100 million in non-natural resources 
may be approved by the authorities at the provincial level, except, inter alia , for projects on basic 
telecom network operation, cross-border hydro power development, large-scale agricultural development, major power grid, and news media.  Previously, all outward FDI projects had to be 
verified and approved by the NDRC, in accordance with the Interim Measures for Administration on 
Examination and Approval of Overseas Investment Projects. 
43. With a view to clarifying the procedures and scope of anti-trust reviews and national security 
reviews on M&A activities involving FDI, detaile d measures for national security reviews over 
foreign mergers and acquisitions
42, and a guideline for impact assessment of anti-trust reviews43, 
entered into force in September 2011. 
(ii) Regulatory framework 
44. Main laws and regulations specifically relate d to FDI in China remained unchanged during 
the period under review.  They include:  the Law on Chinese-Foreign Equity Joint Ventures, the Law 
on Chinese-Foreign Contractual Joint Ventures, the Law on Foreign-Capital Enterprises, and the Law 
on Partnership Enterprises,  and their implementing regulations.  Under these laws, FIEs include 
                                                      
39 Certain Opinions on Further Improving the Use of Foreign Capital (State Council's Circular 2010/9).   
40 State Council Circular 2010/28, 31 August 2010. 
41 See Certain Opinions on Further Improving the Use of Foreign Capital (State Council Circular 
2010/9). 
42 MOFCOM Provisions on National Security Review over Acquisitions of Domestic Enterprises by 
Foreign Investors, 1 September 2011. 
43 The Interim Provisions on the Assessment of the Impact of Concentration of Undertakings on 
Competition, 5 September 2011. WT/TPR/S/264/Rev.1 Trade Policy Review 
Page 20 
  
  equity joint ventures (with foreign investment no less than 25% of registered capital), contractual joint 
ventures and wholly foreign-owned enterprises,  participation in partnership enterprises44, and mergers 
and acquisitions of Chinese domestic enterprises.  The authorities noted that foreign investors may 
also be allowed to own some shares in stat e-controlled enterprises in certain sectors.45 
45. The Provisions on Guiding Foreign Investment Di rection classify foreign investment projects 
into four categories:  encouraged, permitted, restricted, and prohibited.46  The current Catalogue for 
the Guidance of Foreign Investment Industries , which entered into force on 30 January 2012, lists 
industries that are encouraged, restricted, and prohibited47;  projects that do not fall into these 
three groups are "permitted".   
46. The authorities intend to promote FDI in the central-western region of China.  To this 
purpose, all sectors listed in the Catalogue of Ad vantaged Industries for Foreign Investment in 
Central-Western China are "encouraged";  thus, pr eferential policies towards "encouraged" sectors are 
applied to all sectors, notably labour-intensive sect ors, in this catalogue.  Tax incentives are in place 
for FDIs investing in the central-western region.48  The current Catalogue entered into force on 
1 January 2009.  Processing trade in central-western region is also encouraged by special customs 
supervision zones or bonded warehousing. 49   
47. In general, projects in the encouraged cate gory are those that use improved technology and 
are less polluting50, while "restricted", and "prohibited" projects employ outdated technologies, 
over-exploit scarce natural resources, and tend to harm  the environment.  Foreign equity limits tend to 
be intricate and vary by industry, and are not necessarily related to the category.   
                                                      
44 Detailed regulations are contained in Measures of Management of Partnership Enterprises 
Established by Foreign Investors within the Territory  of China, State Counc il Decree 567, effective 
1 March 2010. 
45 State-controlled enterprises are enterprises in wh ich the State, or anothe r state-owned enterprise 
(SOE), holds more than 50% of equity; or, if the equity  share is less than 50%, the State or another SOE has 
controlling influence on its management and operation. 
46 Provisions on Guiding Foreign Investment Direction.  Viewed at:  http://english.gov.cn/laws/2005-
07/25/content_16873.htm [11 February 2008].   
47 The Catalogue for the Guidance of Foreign Investment Industries  is formulated based on the 
Catalogue of Guiding Industry Structure Adjustment .  The latest version of the latter entered into force on 
1 June 2011. 
48 Certain Opinions on Further Improving the Use of Foreign Capital (State Council Circular 2010/9), 
Section 2, Point 8 and Point 9.   
49 See the State Council's Guiding Opinions on Central and Western Regions' Receipt of Industrial 
Transfers (State Council Circular 2010/28, 31 August 2010).   
50 Encouraged industries include:  projects to deve lop new agriculture technologies and agriculture, or 
to develop energy, transportation or important raw material industries;  those for high and new technologies, or 
advanced application of technologies to improve produ ct quality, increase technology efficiency, or produce 
new equipment or new materials that cannot be produced domestically;  those helping to meet domestic and export market demand;  those adopting new technology or equipment for saving energy and raw materials;  and 
those making full use of human and natural resources in central and western parts of China.  Restricted 
industries include:  those that use outdated technology, or do not favour resource-conservation and the environment;  those using resources protected by law or regulations;  and "industries that shall be opened 
gradually".  Prohibited industries include:  those that endanger the safety of the State or damage social and 
public interests;  those that pollute the environment, destroy natural resources or impair human health;  those 
that occupy large amounts of arable land, or are unfavourable to protection and development of land resources;  
those that endanger the safety of military facilities a nd their performance;  and those that use Chinese 
craftsmanship or technology to make products. China WT/TPR/S/264/Rev.1 
 Page 21 
 
 
  48. FIEs in the encouraged category may import capital equipment duty free.  All 
foreign-invested enterprises may enlarge their sco pe of business, subject to approval.  Foreign 
investment in the restricted category may be perm itted, subject to approval, if export sales are over 
70% of total sales of the product.51   
(iii) Examination and approval procedure 
49. FDI in "important or restricted" projects52 requires verification by the authorities, as stipulated 
in the Decision on Reforming the Investment Syst em and the Catalogue of Investment Projects 
Requiring Government Verification (issued by th e State Council), which includes non-government-
funded, important or restricted fixed-asset investment projects, in several industries or sectors.53  All 
other investment projects, irrespective of the amount of investment, need to be registered only with 
the relevant authorities, such as the local development and reform commissions (DRCs). 
50. The main regulations for FDI in "important or  restricted" projects, the Interim Measures for 
the Administration of Examining and Verifying Foreign Investment Projects, based on the Decision and on the Administrative Permission Law, stipulat e examination and approval procedures for FDI in 
China.
54  To establish an FIE in such projects, app lications must be submitted for examination and 
verification to the NDRC, or to other govern ment agencies, such as the local DRCs.   
51. Projects valued at US$300 million or more (fo r FDI projects approved as of 4 May 2010 and 
after, compared with US$100 million previously) for encouraged and permitted sectors (US$50 million for restricted industries) must be ve rified by the NDRC or other relevant agencies 
(e.g. industry regulators) at the national level;  proj ects below these threshol ds may be verified and 
approved by local DRCs.
55  Applications for permitted and en couraged industries valued at over 
US$500 million (US$100 million for restricted industries), after examination by the NDRC, are submitted for verification to the State Council.  The NDRC must complete its examination and 
verification within 20 working days after accepti ng the application;  this may be extended by 
10 working days if it is difficult to reach a decision (t he project applicant is informed of the delay).  
The NDRC examines and verifies FDI applications against, inter alia,  the following provisions:  
relevant laws and regulations;  the Catalogue for the Guidance of Foreign Investment Industries ;  the 
Catalogue of Advantaged Industries for Fo reign Investment in Central-Western China ;  the 
medium-and long-term development plan for nationa l economy and society (the five-year plans);  
policies related to industry planning and restructur ing;  public interests and competition provisions;  
land-use planning, city planning, and environment pr otection policies;  national standards;  and rules 
on capital account management a nd foreign debt management.
56  
                                                      
51 The authorities note that this is not common. 
52 The authorities note that these restricted sectors are listed in the restricted category in the Catalogue 
of Guiding Industry Structure Adjustment  and the Catalogue for the Guidance of Foreign Investment Industries . 
53 These include:  agriculture and forestry;  energy;  transportation;  information technology;  raw 
materials;  manufacturing;  light industry and tobacco;  high and new technology;  urban infrastructure;  social projects (including tourism), and financial services. 
54 These measures apply to Chinese-foreign contract ual joint ventures, Chinese-foreign equity joint 
ventures, wholly foreign-owned enterprises, mergers betw een enterprises, acquisitions of domestic enterprises 
by foreign investors, and increases in capital of foreign-owned enterprises. 
55 The power to verify restricted industries may not be delegated to a department below provincial DRC 
level.  For projects of more than US$30 million involving FDI, local governments must submit a copy of the examination and verification document to the NDRC within 20 working days. 
56 Provisions in the Interim Measures for the Ad ministration of Verification and Authorization of 
Foreign Investment Project (NDRC Decree No. 2004/22), entered into force on 9 October 2004. WT/TPR/S/264/Rev.1 Trade Policy Review 
Page 22 
  
  52. In addition, FIEs (excluding in the financial s ector) seeking to establish in China must submit 
an application simultaneously to MOFC OM or local commercial departments57, for an FIE Approval 
Certificate.  This allows the FIE to complete all the other procedures necessary to commence operations, such as registration of the enterprise. 
53. Foreign investment in China can be made in re nminbi (RMB).  Except for investments valued 
at ¥300 million or more or in industries that re quire approval from MOFCOM, the authorities at the 
provincial level may complete the approval procedur e similar to that for investment in foreign 
currencies.  Foreign investments with RMB are not allowed "directly or indirectly" in equities and 
financial derivatives, except those used for st rategic investment in listed companies.   
54. The authorities state that there are no rest rictions on lending by domestic banks to 
foreign-invested enterprises. 
55. FDI in the form of mergers and acquisitions (M&As) of enterprises is subject to anti-trust 
reviews, as per the Anti-Monopoly Law.
58  Anti-trust reviews are intended to assess the influences on 
market competition of M&A operations.  In addition to anti-trust reviews, FDI involving M&A with 
Chinese domestic enterprises is subject to national secur ity reviews, if the FDI is related to defence, or 
is deemed to have influence on national secur ity, such as controlling firms engaged in key 
commodities (e.g. agriculture, energy, and natural resources), key infrastructures, key transports, and 
key equipment manufacturing with essential technologi es.  Anti-trust reviews and national security 
reviews are to be completed within a defined time-frame (Chapter III(3)(vi)).  In the period 
2008-2011, MOFCOM reviewed 382 cases, of which 371 were unconditionally cleared, 10 were 
cleared subject to conditions, and 1 case was rejected.59  
56. The Government encourages the development of foreign-invested high-tech enterprises60, as 
well as R&D cooperation between domestic and fo reign enterprises.  It supports eligible 
foreign-invested enterprises, jointly with domestic  enterprises and research institutes, to apply for 
government funded/sponsored R&D projects, innovation capacity-building projects, and authentication of national technology centres.  Th e authorities maintain that there are no mandatory 
requirements for technology transfer associated with  FDI approval.  Eligible foreign-invested R&D 
centres were exempted from duties, value-added ta x, and consumption tax on imported inputs needed 
                                                      
57 Projects valued at US$300 million or more in the encouraged or permitted sectors (and 
US$50 million for restricted industries) are approved by MOFCOM. Projects valued below the threshold are 
approved by the commercial departments at the provincial level (since 10 June 2010).    
58 Administrative regulations with regard to FDI involving M&As include:  the Provision on Mergers 
and Acquisition of Domestic Enterprises by Foreign Investors;  Measures on the Examination of Concentration 
of Undertakings;  Measures on the Notification of Concentration of Undertakings (entered into force in 
January 2010);  and Provisions on National Security Re view over Acquisitions of Domestic Enterprises by 
Foreign Investors (entered into force on 1 September 2011). 
59 The M&A case rejected by MOFCOM concerned an  application by Coca Cola to merge with 
Hui Yuan.  For details see MOFCOM Announcement 2009/22 (in Chinese).  Viewed at:  http://fldj.mofcom. gov.cn/aarticle/ztxx/200903/20090306108494.html. 
60 Authentic high-tech enterprises may be granted pref erential tax treatment, such as enterprise income 
tax exemption or reduction, within the validity of high-tech enterprise status.  Any enterprise registered in China for longer than one year may apply for authentication as  a high-tech enterprise;  the status of high-tech 
enterprise is valid for three years, and may be renewed.  Six conditions must be met including, products (or 
services) supplied by the enterprises must be on the list of  High-Tech Fields with Essential Support by the State;  
and the authentic high-tech enterprises must possess "self-owned" intellectual property rights over the "core 
technology" acquired through in-house R&D, transfer or  gift, M&A operation, or exclusive licence for more 
than 5 years. China WT/TPR/S/264/Rev.1 
 Page 23 
 
 
  for R&D consumables before 31 December 2010.  None theless, concerns have been raised about 
de facto  technology transfer requirements on foreign investment projects, e.g. in the new-energy 
automotive sector.61  The authorities maintain that Chin a currently has no measures that impose 
technology transfer requirements;  preferences may be accorded to innovators  depending on whether 
the relevant technology is domestically owned or licensed by foreign investors.  China plans to 
conduct studies between 2012 and 2013 on whet her to continue these measures.   
57. The State Council supports FIEs to be listed, and/or to issue corporate bonds on Chinese 
market.  It also continues to "guide" financial ins titutions to enhance credit supports to FIEs.  At the 
time of this review, details of measures were not available to the Secretariat.    
(iv) Bilateral investment treaties  
58. China had signed 131 bilateral investment ag reements by the end of December 2011.62  
Between 2010 and 2011, China conc luded bilateral investment agreements with Chad, Libya, 
Uzbekistan, and Congo (DRC).63 
 
                                                      
61 WTO documents G/L/977, 16 November 2011;  and IP/C/60, 17 November 2011.   
62 UNCTAD International Investment Agreement Da tabase.  Viewed at:  http://www.unctad.org/ 
Templates/Page.asp?intItemID=2339&lang=1 [01.12.2011]. 
63 Investment treaties with France and Switzerland entered into force in 2010.  The three newly 
concluded investment treaties have not yet entered into force.