G/SCM/Q2/CHN/62  
 
27 April 2016  
(16-2374)  Page: 1/5  
Committee on Subsidies and Countervailing Measures    
 
SUBSIDIES 
REPLIES TO QUESTIONS1 POSED BY JAPAN REGARDING THE NEW 
AND FULL NOTIFICATION OF CHINA2 
The following communication, dated 26 April 2016, is being circulated at the request of the 
Delegation of China.  
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  General 
 
Question 1  
While we appreciate the third noti fication of China (G/SCM/N/220/CHN-
G/SCM/N/253/CHN-G/SCM/N/284/CHN), this notification only covers subsidy 
programmes at the cent ral government level. 
At the Committee meeting in October 2011, the delegate of China explained to the 
Committee that China would work towards incorporating local programmes into the 
notification (G/SCM/M/79). At the Committee meeting in October 2015, the delegate of 
China also explained to the Committee that local programmes would be notified as soon 
as possible. 
When does China submit notification wh ich includes the programmes granted or 
maintained at both the central and the local government level? 
Reply: 
 
China has already submitted its notification of programmes at the central government level up to 2014. China is preparing the subsidy notification at sub-central government level, and will submit 
it to the WTO as soon as it is completed. 
 Question 2 
Article 25.3 of the SCM Agreement requires a no tification of subsidies to be "sufficiently 
specific to enable other Members to evalua te the trade effects and to understand the 
operation of notified subsidy programmes". In  particular, the notification must contain 
"subsidy per unit or, in cases where this is not possible, the total amount or the annual 
amount budgeted for that subsidy (indicating,  if possible, the average subsidy per unit 
in the previous year)".  
However, in China's notification, "subsidy per unit, or in cases where this is not possible, 
the total amount or the annual amount budgeted  for that subsidy" of all the preferential 
taxes (No. 1-11, 13-24, 26-34, 42, 56-61, 63-64,  86) are notified as "not available". 
                                               
1 G/SCM/Q2/CHN/55. 
2 G/SCM/N/220/CHN-G/SCM/N/253/CHN-G/SCM/N/284/CHN. G/SCM/Q2/CHN/62 
 
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  As stipulated in Article 25.3, Japan would like to request China to at least specify 
subsidies with especially large amount (e.g. subsidies with a budgeted amount 
exceeding a billion RMB/per year) in China's notification. If there is any reason why 
China cannot do so, please explain. 
Reply: 
 
The statistical system for tax expenditure in Chin a has not been established yet. Therefore, the 
amount of tax forgone as a result of the implementa tion of preferential tax policies is not available 
at present. This explains the lack of information on subsidy per unit or annual amount of certain notified programmes in China's subsidy notification, mostly those in the form of preferential tax treatment. 
 
Preferential tax treatment for energy-sav ing and new energy vehicles and vessels 
(No. 22) 
Question 3 
Please explain the details of eligibility cr iteria for "energy-saving and new energy 
vehicles and vessels". Are there any di fferent criteria between domestically 
manufactured vehicles/vessels and imported  vehicles/vessels? Has there been any 
instance in which China grante d the benefit of the subsidy to imported vehicles/vessels? 
Please explain. 
Reply: 
 
There is no difference in the criteria of prefer ential tax policies applicable to domestically 
manufactured and imported vehicles/vessels. 
As for the preferential treatment of vehicle purc hase tax, according to the Announcement on the 
Exemption of Vehicle Purchase Tax on New Energy Vehicles (MOF, SAT and MIIT Announcement No. 53 of 2014): new energy vehicles exempt from vehicle purchase tax shall be administered by 
MIIT and SAT via the issuance of the Catalogue of the Models of New Energy Vehicles Exempt from 
Vehicle Purchase Tax (hereinafter referred to as the "Catalogue"). New energy vehicles listed in the Catalogue shall concurrently satisfy the following conditions: (1) pure electric vehicles, plug-in (including extended-range) hybrid vehicles or fuel battery vehicles which have obtained the 
licenses to be sold within the territory of China; (2) the power batteries used by them exclude 
lead-acid batteries; (3) The continuous driving mileage under pure electric mode shall meet the requirements of Annex 1; (4) the comprehensive fuel consumption (excluding the consumption of 
fuel converted from electrical energy) of plug-in hybrid passenger cars shall be less than 60% of 
the corresponding target value in the current national standards for conventional fuel consumption; and the comprehensive fuel consumption (excluding the consumption of fuel 
converted from electrical energy) of plug-in hybrid  electric commercial vehicles shall be less than 
60% of the corresponding target value in the current national standards for conventional fuel consumption; (5) meet the requirements of new en ergy vehicle standards in the special testing for 
new energy vehicles. Please refer to Annex 2 of the Announcement for specific requirements. 
Based on principles of openness, transparency and fairness, all domestically manufactured or 
imported eligible vehicles may apply for the preferential tax policies. In September 2015, imported BMW i3 pure electrical vehicle and i3 plug-in hybrid vehicle were listed in the Catalogue as new 
energy vehicles, enjoying the exemption of vehicle purchase tax. 
Preferential tax policies for enterpri ses making little profits (No. 27)  
Question 4 
Please explain how many companies have rece ived this subsidy in China. What is the 
rationale for subsidizing enterprises with little profits instead of subjecting such 
companies to market mechanisms? G/SCM/Q2/CHN/62 
 
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  Reply: 
 
The purpose of preferential tax policies for small enterprises making little profits is to support small enterprises' development through tax polic ies, so as to promote employment, encourage 
business start-up, and strengthen economic vitality. Small enterprises are relatively vulnerable in 
shouldering the tax burden. Therefore, subjecting them to the same tax rate as that for large 
enterprises would be a heavy burden and inconducive to their development. In addition, it is 
common international practice to offer preferential tax policies to SMEs. In 2014, about 2.8 million 
enterprises in China enjoyed this preferential tax policy.  Preferential tax policies for the research and development of enterprises (No. 33)  
 
Question 5 
What are "new technologies, new products and new techniques" that are eligible for this 
subsidy? To what enterprises and/or industri al fields has the subsidy been granted so 
far?  
Reply: 
 
According to Article 3 of the Administrative Measures for the Before-tax Deduction of Enterprise Research and Development Expenses (for Trial Implementation) (Guo Shui Fa No. 116 of 2008), 
"research and development activities" that enjoy this tax policy refer to the continuous research 
and development activities with clear objectives conducted by enterprises for the purpose of obtaining new knowledge of science or technology (excluding humanities and social sciences), 
creatively using new scientific and technological knowledge or substantially improving 
technologies, techniques or products (services). The expression "creative use of new scientific and 
technological knowledge or substantial improvement of technologies, techniques or products 
(services)" means that enterprises have made  valuable achievements in innovation of 
technologies, techniques and products (services) through research and development activities, which can promote the technologies and techniques in the relevant industries in the region (province, autonomous region, municipality directly under the Central Government or city with 
independent planning status) to a leading place, bu t such activities as conventional upgrading of 
enterprises' products (services) or direct applic ation of disclosed scientific research results and 
other activities (for instance, direct adoption of disclosed new techniques, materials, devices, 
products, services or knowledge, etc.) shall be excluded. 
 This preferential tax policy is not for enterprises in any specific industry or sector. Any enterprise 
that meets the above conditions, regardless of its ownership type, and no matter it's 
foreign-invested or domestically-invested, may be entitled to the policy.  Research and development fund for in dustrial technologies (No. 35)  
Question 6 
What kinds of "important technological rese arch and development pr ojects" are eligible 
for this subsidy? Please specify examples of "research and development projects" that 
have been approved under the programme. 
 Reply: 
 According to the Administrative Measures of Research and Development Fund of Industrial Technologies (MOF Circular Caijian No. 30 of 2002) , relevant research and development projects 
refer to those of commonweal or public interest . Enterprises engaged in approved research and 
development projects of industrial technologies may be entitled to the fund after review of 
applications or bidding procedures. Eligible enterprises shall meet the following requirements:  
(1) Registered within the territory of China with legal personality; 
(2) With a sound financial accounting and management system; (3) With a certain number of professional technicians with certain skills; 
(4) With necessary equipment for research and development; G/SCM/Q2/CHN/62 
 
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  (5) Have achieved relevant scientific research outcomes in technology research and 
development; 
(6) Meeting other necessary requirements.  
Fund for promotion of coordinated developmen t of foreign trade and economic relations 
among regions (No. 38) 
Question 7 
China explains "This fund is provided for projects aiming at exploration of international 
market , scientific innovation and information system construction in the central, 
western and north-eastern regions of China"  What are specific means by which the 
beneficiaries of this subsidy are considered  to "explor[e] the international market"? 
Please explain. 
 Reply: 
 Means to explore the international market include: promotion and advertising in the international market and international market research, etc. Th e fund for promotion of coordinated development 
of foreign trade and economic relations among regions was abolished in 2014. 
 Subsidy fund for the promotion of energy-saving products (No. 74)  
Question 8 
W h a t  i s  t h e  d e f i n i t i o n  o f  " t h e  e f f i c i e n t energy-saving products"? Could consumers 
receive grants even if they purchase impo rted products? If yes, please provide the 
requirements to qualify as the "efficient en ergy-saving products" under this promotion 
programme. 
 Reply: 
 The efficient energy-saving products for the purpos e of this subsidy program refer to the energy-
using products that are with higher energy effi ciency according to the national standards on 
energy efficiency while meeting the requirements of functions for use and quality. The efficient 
energy-saving products subject to financial subsidy shall meet the following conditions: (I) In 
compliance with national standards of energy effici ency, with grade 1 or 2 of  energy efficiency and 
other quality performances conforming to relevant national standards; (II) With a certain 
quantitative scale of promotion; (III) The actual selling price is no higher than the promotional 
price promised by the enterprise minus financial subsidy; (IV) With a unique and recognizable product code and product serial number, and with  both the external packing and product body 
marked by the logo and words of "People-benefi t Project of Energy-saving Products"; (V) The 
promotional enterprises have sophisticated after-sa le service system for fulfilling their promissory 
quality and services; (VI) The promotional enterprises have established product sales and user information management systems for providing relevant information according to requirements; 
and (VII) Other requirements specified in the implementation rules of product promotion. 
 Special fund for the development of st rategic emerging industry (No. 81) 
Question 9 
What kinds of "emerging industries" are e ligible for this subsidy? Please list all 
"emerging industries" that have re ceived funds under the programme. 
 
Reply: 
 Eligible emerging industries for this fund in clude energy-saving and environmental protection 
industry, new generation information technology  industry, bio-industry, high-end equipment 
manufacturing industry, new energy industry, new materials industry, new energy vehicle industry, etc.  G/SCM/Q2/CHN/62 
 
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  Agriculture 
Subsidy for purchasing agricultur al machinery and tools (No. 47) 
Question 10 This program does not seem to have been in cluded in the China's latest notification 
submitted to the Committee on Agricultur e (G/AG/N/CHN/28). Please explain why. 
 Reply: 
 This program has been included as "Non-Product-Specific AMS" in "input subsidies" in supporting Table DS:9 (G/AG/N/CHN/28).  
Comprehensive Subsidies for agricultural inputs (No. 48) 
Question 11 Please describe what are includ ed in "agricultural inputs". 
In China's latest notification to the Committee on Agriculture (G/AG/N/CHN/28), 
"subsidies for improved crop strains and se eds" for wheat, rice and other crops are 
reported as "Product-Specific AMS", and "i nput subsidies" are reported as "Non-
Product-Specific AMS".  
Are "agricultural inputs" in No. 48 the same as the above-mentioned supports notified to 
the Committee on Agriculture? 
Reply: 
 
The main means of agricultural production covered by the comprehensive subsides for agricultural inputs are diesel and fertilizer. This program has been included as "Non-Product-Specific AMS" in "input subsidies" in supporting Table DS:9 (G/AG/N/CHN/28 ）. 
 
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