G/SCM/Q2/CHN/72  
 
24 April 2017 
(17-2223) Page: 1/8 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
REPLIES TO  QUESTIONS1 POSED BY  THE UNITED STATES RE GARDING  
THE NEW AND FULL NOT IFICATION OF CHINA2 
The following communication, dated 21 April 2017, is being ci rculated at the request of the 
Delegation of  China . 
 
_______________  
 
 
GENERAL  
1. The United States appreciates China's answers to our previous questions.3 
However, we note that in several instances, China did not answer the question asked 
because, it appears, the programme at issue was not included in China 's latest subsidy 
notification.  This would seem to be contrary to the practice of all other Members who 
routinely ask, and answer questions about programmes  not included in a notification.4 
Refusing to answer questions simply because the program me at issue was not included 
in a notificati on would seem to be contrary to the intent of the transparency provisions 
of the Agreement on Subsidies and Countervailing Measures (Subsidies  Agreement) and 
the longstanding practice of Members and the Committee on Subsidies and 
Countervailing Measures (S ubsidies Committee).  Is it China 's position that if a 
programme was not notified, it has no obligation to answer any questions asked about 
the program me? If so, could China explain its understanding of the legal basis under the 
Subsidies Agreement for not answering such questions, as many Members routinely do?  
Reply : 
 
China attaches great importance to the implementation of the relevant provisions on transparency 
of the Agreement on Subsidies and Countervailing Measures (ASCM). According to Article 25.8 of 
ASCM, any Member may, at any time, make a written request for information on the nature and 
extent of any subsidy granted or maintained by another Member. In practice, the United States 
has raised three lists of written questions to China under Article 25. 8 since 2011 which involved a 
lot of programmes  not covered by the subsidy notifications submitted by the Chinese Government. 
In response, China has observed the obligations under Article 25.8 and spent a huge amount of 
time and energy sorting out and veri fying massive information  , and made its best efforts at 
clarification in previous regular meetings of the SCM Committee. China believes that the questions 
on notifications regarding subsidies should focus on the subsidy programmes  notified by China and 
should be discussed at special meetings of the SCM Committee as prescribed. This may avoid 
repeated discussions of the same topics at regular and special meetings of the Committee and 
ensure the working efficiency of the Committee.  
                                                
1 G/SCM/Q2/CHN/68.  
2 G/SCM/N/220/ CHN-G/SCM/N/253/CHN -G/SCM/N/284/CHN.  
3 G/SCM/Q2/CHN/57 . 
4 The United States, for example, currently has three sets of questions outstanding from three different 
Members. Two of the three sets of question s includes questions on programmes  not notified by th e United 
States.  G/SCM/Q2/USA/67; G/SCM/Q2/USA/64.  We will answer all of the questions asked of us, as we have 
always done in the past.  G/SCM/Q2/CHN/72  
 
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  QUEST IONS REGARDING NOTIF IED PROGRAMMES  
Programme 28 -- Preferential VAT policies for enterprises that employ disabled people . 
2. Given that this programme is available to a wide range of industries "regardless of 
ownership, types, industries or locations, " on what basis does China  consider this 
programme to be specific under Article 2 of the Subsidies Agreement?  
Reply : 
China submits its subsidy notification pursuant to Article 25.1 of the ASCM with a view to 
observing the transparency obligation under this agreement. China does not  prejudge the nature 
of the notified programmes . 
Programme 30 -- Preferential tax treatment for imported products exclusively used by 
the disabled people.  
3. Given that this programme is available for any product used exclusively by 
disabled people, on wha t basis does China consider this programme to be specific under 
Article 2 of the Subsidies Agreement?  What industry in China receives a benefit under 
Article 1 of the Subsidies Agreement?   
Reply : 
China believes that the products exclusively used by disable d people are specific products that 
meet the requirements of the ASCM for specificity. According to the Interim Provisions on the 
Exemption from Import Duties for Products Exclusively Used by Disabled People, units importing 
products exclusively used by di sabled people refer to (1) enterprises and public institutions directly 
under the Ministry of Civil Affairs and welfare institutions, artificial limb factories and rehabilitation 
hospitals for glory soldiers affiliated to the civil affairs departments of p rovinces, autonomous 
regions and municipalities directly under the Central Government; (2) public institutions directly 
under China Disabled Persons ' Federation (China Foundation for Disabled Persons) and welfare and 
rehabilitation institutions affiliated to the disabled persons ' federations (foundations for disabled 
persons) of provinces, autonomous regions and municipalities directly under the Central 
Government.  
Programme 60 -- Preferential tax treatment for endangered wild animals and plants as 
well as their government of Macao SAR, China to China.  
4. China states that the only beneficiary of this programme is the Office of the 
Administration of Import and Export of Endangered Species.  Why is China notifying a 
programme that only benefits a Chinese gover nment entity?  
Reply : 
China submits its subsidy notifications pursuant to Article 25.1 of the ASCM with a view to 
observing the transparency obligation under this agreement. China does not prejudge the nature 
of the notified programmes . 
Programme 86 -- Preferential tax treatment for anti -HIV-AIDS medicine.   
5. China states that both imported and domestically produced anti -HIV-AIDS 
products are exempt from payment of VAT.  If so, how does this programme provide a 
specific benefit under Articles 1 an d 2 of the Subsidies Agreement?  
Reply : 
China believes that preferential tax treatment for anti -HIV-AIDS medicines belongs to tax 
preference  for specific products. In strict accordance with the national treatment principle of the 
WTO, China provides preferential tax t reatment for both imported and domestically produced 
anti-HIV-AIDS medicines. China does not quite understand the question raised by the United 
States. Is it the United States ' view that China should treat domestic and imported products 
differently?  G/SCM/Q2/CHN/72  
 
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  OTHER PROGRAMMES  
Steel  
6. China maintains that the United States ' questions on steel program mes were 
responded to at the regular meeting of the Subsidies Committee in October 2015.  While 
China did state during that meeting that it did not have certain preferenti al tax 
programmes , questions about several other aspects of the legal measures the United 
States has counter notified under Article 25.10 of the Subsidies Agreement have not 
been answered.5 For example,  The Steel Industry Adjustment and Revitalization Plan , 
Guo Fa [2009] No. 6 (20 March 2009), issued by the State Council, states, inter alia , that 
"Special funds are available  for the investment in capital construction within the central 
budget … " (emphasis added).  The United States has reviewed the financial  statements 
of several Chinese steel companies which reveals various government funds have been 
received.  Leaving aside for the moment the steel measures counter notified by the 
United States at the sub -central levels of government (until China 's sub -centr al subsidy 
notification is reviewed next spring), please describe the nature of the special funds 
received under the Steel Industry Adjustment and Revitalization Plan . 
Reply : 
Please refer to China 's clarifications on programme item No.2 concerning the Stee l Industry 
Adjustment and Revitalization Plan in the United States ' submission (G/SCM/Q2/CHN/51) at 
the 2016 autumn regular meeting of the SCM Committee of the WTO, i.e. the plan does not 
include specific subsidies to the steel industry.  As China stated at  the above -mentioned regular 
meeting, China 's current supportive policies to the steel industry can be mainly divided into three 
categories: those aimed at encouraging environmental protection and energy conservation, those 
supporting technological researc h, development and innovation, and those aimed at facilitating 
enterprises ' structural adjustments. These policies are neither implemented for the steel industry 
or enterprises, nor contingent upon export performance. They reflect the real efforts made by 
China to address the global overcapacity and industrial restructuring.  
7. The following question was asked in the United States ' initial set of question but 
was not answered: "China has never notified a steel subsidy programme at either the 
central or sub -central level. Is it China's position that it has never provided a specific 
subsidy to the steel industry since becoming a WTO Member? " If not, could China please 
explain when it will notify such subsidies?  
Reply : 
 
The Chinese Government 's third subsidy no tification submitted in October 2015 
(G/SCM/N/220/CHN -G/SCM/N/253/CHN -G/SCM/N/284/CHN) included relevant subsidies involving 
the steel industry such as programme No. 72 on incentive fund for transformation  of energy  saving  
technology  in support  of key energy saving  projects  and projects  on the transformation  of energy  
saving  technology, and the programme No. 79 on special  fund for the development  of circular  
economy  in support  of the construction  of key projects  of circular  economy. Any eligible steel 
enter prise may apply for these programmes . 
 
Non-Ferrous  
8. China maintains that the United States ' questions on non -ferrous programmes  
were responded to at the regular meeting of the Subsidies Committee in October 2015.  
However, we see no reference in China 's intervention to most of the non -ferrous 
measures the United States has counter notified under Article 25.10 of the Subsidies 
Agreement.6 For example, the State Council issued the Non-Ferrous Metals Industry 
Adjustment and Revitalization Plan , Guo Fa [2009] No. 14 (12 May 2009).  In this plan, 
the State Council, inter alia , calls for: (1) "further  expanding the scale of state purchase 
and storage of non -ferrous metals " (Article 4.2; emphasis added); (2) "a special fund for 
the newly added central government in vestments … " (Article 4.3): and (3) "increased 
                                                
5 See G/SCM/Q2/CHN/51 . 
6 G/SCM/Q2/CHN/51 . G/SCM/Q2/CHN/72  
 
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  support to the financing of backbone non -ferrous metal enterprises " (Article 4.9).  
Leaving aside for the moment the non -ferrous measures counter notified by the United 
States at the sub -central levels of gover nment (until China 's sub -central subsidy 
notification is reviewed next spring), please describe the nature of, and support 
provided under: (1) the state purchase and storage of non -ferrous metals; (2) the 
special fund for newly -added central government inv estments; and (3) the increased 
support to the financing of backbone non -ferrous metal enterprises, received under the 
Non-Ferrous Metals Industry Adjustment and Revitalization Plan .  
9. The following question was asked in the United States ' initial set of  question but 
was not answered: "China has never notified a non -ferrous metal programme at either 
the central or sub -central level. Is it China's position that it has never provided a specific 
subsidy to the non -ferrous metal industry since becoming a WTO Member? " If not, could 
China please explain when it will notify such subsidies?  
Reply to 8 -9: 
The Non -Ferrous Metals Industry Adjustment and Revitalization Plan does not include specific 
subsidies for the non -ferrous metals industry. For a long time, the n on-ferrous metals industry has 
been regarded as the one of the major industries of energy - and resources -intensive and highly -
polluting products, and has been subject to strict limitations in project examination and approval, 
financing and other aspects.  
Semiconductors  
10. The United States acknowledges and appreciates that China has notified numerous 
semiconductor programmes  and legal measures in the past.  However, more recent 
measures have not been notified.  While China stated in its answers that it has 
responded to Article 25.8 questions posed by the United States and the Article 25.10 
counter -notification submitted by the United States during the April 2013 and October 
2015 meetings of the Committee, we see no specific reference to semiconductor 
measures  in China 's interventions during those meetings.  Leaving aside the sub -central 
programmes  for the moment (until China 's sub -central subsidy notification is reviewed 
next spring), our primary concern is the actions of the State Council in 2014 
(i.e., the Guidelines to Promote National Integrated Circuit Industry issued in June 2014 
and the approval of the establishment of  a National IC Investment Fund  Co. 
Ltd (IC Fund)),  pursuant to the  State Council Notification Regarding National Integrated 
Circuits Indust ry Investment Fund Establishment Approval (Guo Han [2014] No. 48).  
The 2014  Guidelines to Promote National Integrated Circuit (IC) Industry 
Development  appear to provide a financial contribution and benefit under Article 1 of the 
Subsidies Agreement becaus e there is a provision of government funds and the 
government investment is based upon national policy goals for the development of the 
IC industry without the expectation of specific rates of return.  In addition, this 
programme appears to be specific unde r Article 2 of the  Subsidies Agreement  because 
the funds are only provided to the IC industry.  Please explain why the measures issued 
by the State Council and related implementing measures was not included in China 's 
most recent notification.  
Reply : 
The Na tional IC Investment Fund Co ( "the Fund Co ") is a private equity investment fund 
corporation mainly engaged in equity investment businesses in the integrated circuits industry. 
The Fund is operated in a complete market -based way. Investment and business co operation are 
carried out by a fund management company according to provisions of the articles of association 
of the Fund Co and other laws and agreements. Major decisions are made by voting by the Board 
of Directors.  Governmental departments do not interv ene in the decision -making processes of the 
Board of Directors and have no jurisdictions at all. Like other private equity in the world, the 
Fund's primary task is to seek profits for its shareholders, and all its investment behavior and 
speech are only ou t of its responsibilities for the shareholders. Therefore, National IC Investment 
Fund is not a subsidy within the jurisdiction of the ASCM of the WTO.  G/SCM/Q2/CHN/72  
 
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  11. On July 28, 2016 the National IC Investment Fund Co, along with the Hubei 
Provincial Government, inv ested an unknown amount of capital into a newly established 
firm known as Yangtze River Storage Technology, which has a registered capital of 
18.9 billion RMB7. According to public statements from officials associated with the 
National IC Fund when discuss ing their investment into Yangtze River Storage, the 
investment was to address "the issue of more than one -quarter of imports are memory 
chips " thus the need to "implement the national strategy " and make a "major 
investment in Wuhan. "8 Premier Li Keqiang s ubsequently visited Wuhan XMC, a  wholly 
owned subsidiary of Yangtze River Storage, and stated, [these investments] "could 
change the situation of massively relying on imported chips ".9 Please explain the 
rationale and commercial justification for investing  in Yangtze River Storage 
Technology.  
Reply : 
The strategic investment mentioned by relevant leaders of the Fund Co meant that the company ' s 
investment behavior in the storage project of Yangtze River Storage (Wuhan XMC) is in line with 
its own corporate m arket development strategy, and is a long -term strategic investment behavior 
of it. These measures are consistent with the market -based operation mechanism of the Fund Co.  
Investment and Interest Rate Subsidies  
12. China states in response to the United St ates' questions on investment and 
interest rate subsidies in China that the United States should refer to China 's latest 
subsidy notification (covering central government programmes ). However, the 
measures cited in the United States ' questions and counter notification10 are not 
included in the referenced notification.  It appears that China did not answer the 
questions asked because the programmes  at issue were not included in China 's subsidy 
notification.  Is it China 's position that if a programme was not no tified, it has no 
obligation to answer any questions asked about the program?  Please explain.  
Reply : 
Please refer to China 's reply to the first question.  
13. There appears to be a general investment system in China funded from the central 
budget of the cen tral government (See, Interim Measures for the Administration of 
Central Budget Investment Subsidy and Interest Discount Projects , National 
Development and Reform Commission, Order No. 31 (8  June 2005); Interim Measures 
for the Administration of Central Bu dget Investment Subsidy and Interest Discount 
Projects , National Development and Reform Commission, Order  No. 3 (15 June 2013).  
Article 3 of the 2013 measure states:  
Investment subsidies mentioned in these measures refer to investment 
subsidies given to l ocal governments and investment subsidy projects given 
by the National Development and Reform Commission to qualifying 
enterprises.  
Interest discounts mentioned in these measures refer to loan interest 
subsidies given by the National Development and Reform  Commission to 
qualifying investment projects that utilize mid - to long -term bank loans.  
Investment subsidies and investment discounts are gratis investments.  
                                                
7 http://comp any.stcn.com/2016/0801/12818334.shtml . 
8 http://www.ccidcyt.com/bdtdt/62418.htm . 
9 http://www.xmcwh.com/news_detail/newsId=66.html . 
10 See G/SCM/Q2/CHN/51, program me 42 and 43 . G/SCM/Q2/CHN/72  
 
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  Article 4 of the 2013 measure lists as one of the focuses of this programme as 
"Investment proje cts for … industrialization of high and new technologies." Article 23 
states that projects that do not have confidentiality requirements "shall be open to the 
public".  
a. Please explain why this programme and other related implementing 
measures have not been notified pursuant to Article 25 of the Subsidies 
Agreement.  
b. Please describe the industries and sectors that have benefitted under these 
measures.  
c. Article 7 of the 2005 measure placed limits on the amount of the investment 
subsidy. The  2013 measure does not  have similar limits described. Are there 
limits on the amount of the investment subsidy under the 2013 measure? If 
so, please describe.  
Reply  to a-c: 
The Interim Measures for the Administration of Central Budget Investment Subsidy and Interest 
Discount Pr ojects are not specific in nature and do not involve the allocation and use of specific 
funds. For specific subsidy programmes , please refer to the notifications officially submitted by the 
Chinese Government.  
14. There also appears to be an investment sys tem for China's state -owned 
enterprises. In  2013, Article 2.1 of the Interpretation on 2013 Central State -owned 
Capital Management Budget  states:  
Expenditures for structural adjustment of the state -owned economy [account 
for] 37.988 billion yuan, [which is ] used to support strategic mergers and 
reorganizations between central enterprises, sort out equity relations in 
companies with multiple investor entities, sustain and strengthen central 
enterprises' controlling force on major subsidiaries that affect nat ional 
security and national economy lifelines, as well as resolve the historical 
legacy problem of central enterprises.  
Article 2.3 of the same 2013 budget document states:  
Expenditures for industrial upgrading and development [account for] 17.676 
billion yuan, [which is] used to enhance central enterprises' indigenous 
innovation ability, push forward major technology innovation and 
industrialization of scientific and technological achievements, carry out the 
"12th  Five-Year" energy saving and emission redu ction targets and tasks, 
support central enterprises' energy saving and emission reduction work, and 
support central enterprises' internal industrial integration. …  
For 2014, Article 2.1 of the Interpretation on 2014 Central State -owned Capital 
Management Budget  states:  
Expenditures for structural adjustment of the state -owned economy [account 
for] 61.51 billion yuan, [which is] used to provide key support to major 
structural adjustment mainly in the areas of optimizing industrial structure 
and capital layo ut, including central enterprises' strategic mergers and 
reorganizations and equity restructuring.  G/SCM/Q2/CHN/72  
 
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  Article 2.3 of the same 2014 budget document states:  
Expenditures for industrial upgrading and development [account for] 
15.425  billion yuan, [which is] used  mainly to support important industries 
involving the lifeline of the national economy and industrial upgrading and 
development  projects in key areas, including breakthroughs in industrial 
development bottlenecks,  breakthroughs  in technology bottlenecks, 
integration of industry and research, and development of new industries.  
Although outside of the relevant reporting period, in 2015, Article 3.4 of the 
Interpretation on  2015 Central State -owned Capital Management Budget  states:  
State -owned capital injectio ns [account for] 53.6 billion yuan, including: 26.5 
billion yuan expenditures for structural adjustment of the state -owned 
economy, [which is] used to sort out equity relations and support enterprise 
structural adjustment.  
Moreover, Article 3.5 describes a n 8.8 billion yuan subsidy policy for state -owned 
enterprises.  
a. Please explain why the programmes  described above (excluding the 2015 
measure) have not been notified.  
b. What type of subsidy ( e.g., grant, equity infusion) was provided under the 
subsidy policy  described in Article 3.5 of the 2015 measure? What types of 
industries have received support under this policy?  
c. What state -owned companies received capital injections and funds for 
restructuring in 2009 -2014  under the measures described above?  
d. Are any of  the funds under the measures described above provided under the  
Ministry of Finance Notice on Issuing the Measure for the Administration of 
the Central State -Owned Capital Management Budget Key Industries 
Transformation Upgrading and Development Fund , Min istry of Finance, Cai Qi 
[2013] No. 389 (29  November 2013)? Please identify any measures relevant 
to the distribution of funds under the budget provisions cited above. What 
industries benefited from these funds?  
Reply  to a-d: 
 
For the subsidy programmes  involved in central budget expenditures, please refer to the three 
notifications on central policy subsidies as of 2014 submitted by China, and please raise questions 
regarding the new & full notification submitted by China according to Article 25.1. The st ate-owned 
capital management budget is a conduct of capital injection into enterprises by the State as a 
contributor, and is operated according to market -based principles, which is the same in nature as 
additional contributions made by the shareholders of big foreign companies to relevant companies.  
 
Currently, information on the central state -owned capital management budget has already been 
made public according to the requirement of the Budget Law and the Regulations of the People 's 
Republic of China on t he Disclosure of Government Information . 
 
Wild Capture Fisheries  
15. The United States has counter notified forty -four fisheries subsidies measures.11 
Many of these measures were first raised in the context of China 's trade policy review in 
2014.  In respons e, China has noted that one measure is a commercial agreement; one 
measure is not specific; and two programmes  has been notified.  When will China notify 
the remaining forty measures in the United  States counter notification?  
                                                
11 G/SCM/Q2/CHN/52 . G/SCM/Q2/CHN/72  
 
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  16. As with other programmes , China appears to be of the opinion that if it has not 
notified a certain program, it is not obligated to answer any questions about that 
program.  Please explain.  
17. China has never notified a wild capture fisheries subsidies programme at either the 
central  or sub -central level  (with the possible exception of a preferential tax policy for a 
fish fries breeding program) . Is it China's position that it has never provided a specific 
subsidy to the wild capture fisheries industry since becoming a WTO Member?  If not, 
could China please explain when it will notify such subsidies?  
 
Reply  to 15 -17: 
 
These questions have already been raised by the United States in G/SCM/Q2/CHN/52 according to 
Article 25.8 and in G/SCM/Q2/CHN/59 according to Article 25.10, and China ha s responded to 
them in its central and local subsidy notifications, as well as at the autumn regular meetings held 
in October 2015 and 2016. Please refer to the contents of China 's notifications and relevant 
meeting minutes. China 's latest notification on central subsidy policies includes three fisheries -
related subsidies. China is currently sorting out fisheries subsidies and will carry out research 
based on the results of and the progress made in relevant work . 
__________