WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  WT/TPR/M/161/Add.2 
11 September 2006 
 (06-4317) 
Trade Policy Review Body 
19 and 21 April 2006 Original:   English/Spanish 
                 anglais/espagnol                  inglés/español 
 
TRADE POLICY REVIEW 
PEOPLE'S REPUBLIC OF CHINA 
Minutes of Meeting
 
Addendum  
Chairperson:  H.E. Mrs. Claudia Uribe (Colombia) 
 This document contains additional responses pr ovided by the People's Republic of China to 
advance written questions by Members.1 
  __________________________________________________________________________________  
Organe d'examen des politiques commerciales 
19 et 21 avril 2006 
 
EXAMEN DES POLITIQUES COMMERCIALES 
RÉPUBLIQUE POPULAIRE DE CHINE 
Compte rendu de la réunion
 
Addendum  
Présidente:  S.E. Mme Claudia Uribe (Colombia) 
 
 Le présent document contient les réponses add itionnelles fournies par la République populaire 
de Chine aux questions écrites communiquées à l'avance par les Membres.1 
__________________________________________________________________________________  
Órgano de Examen de las Políticas Comerciales 
19 y 21 de abril de 2006 
 
EXAMEN DE LAS POLÍTICAS COMERCIALES 
REPÚBLICA POPULAR DE CHINA 
Acta de la reunión
 
Addendum  
Presidenta:  Excma. Sra. Claudia Uribe (Colombia) 
 
 En el presente documento figuran las res puestas adicionales facilitadas por la República 
Popular de China a las preguntas presentadas anticipadamente por escrito por los Miembros.1 
                                                      
1 In English and Spanish only./En anglais et espagnol seulement./En inglés y español solamente.  WT/TPR/M/161/Add.2 
 Page 3 
 
 
ADDITIONAL RESPONSES BY THE REPUBLIC OF CHINA  
TO ADVANCE WRITTEN QUESTIONS BY MEMBERS 
 
I. ECONOMIC ENVIRONMENT 
 
(2) M AIN DEVELOPMENTS :  POLICY AND ECONOMIC PERFORMANCE  
 Question:  
Turkey
 
 WT/TPR/G/161 (page 7, para 18) 
 
The Government report states that the agricultural tax system has undergone fundamental reform and 
as of 2006 the agricultural tax has been abolished throughout the country. 
 
• Since taxation of agricultural sector has a long history in China dating back to 48 years ago, 
we appreciate if the Chinese Delegation could give information on the experience gained? 
• We would also like seek information on the exp ectations from the introduced agricultural tax 
reform in terms of agricultural production and consumption? 
 
Answer: 
 
The agricultural tax, as an important tax form of th e country with a history of 48 years, has played an 
important role in establishing comprehensive i ndustrial system and national economic system in 
China, and promoted industrialization and urbanization.  
China has a large rural population and an underdeve loped countryside. As industrial modernization 
continues to develop, China has introduced a series of policies and measures since 1990 to reduce the 
burdens of the farmers.  The elimination of agricultural taxes since 1 J anuary 2006 has largely reduced the burdens of the 
farmers, boosted their enthusiasm in agricultural pr oduction, improved their income levels, and will 
definitely have a profound effect in narrowing the gap between urban and rural areas and achieving 
more balanced and sustainable development of the country.   Question:  
New Zealand
 
 
1. The Secretariat reports that agriculture acc ounts for a declining share of China’s economic 
activities (“13% of GDP”), but “makes the biggest  contribution to employment, some 44% in 2002”. 
Premier Wen Jiabao has recently indicated that the government plans to boost agricultural production 
and improve rural living standards.  Can China outlin e what policy changes it has in mind here? If it is 
considering subsidies and/or incentives for rural produc tion, what measures will  China take to ensure 
that these are, at most, minimally trade-distorting?   
Answer: 
 
Since  the opening up and reform policy was adopted, the industrial and service sectors have played a 
gradually important role, presently accounting for o ver 85% of total GDP. How ever, during the same 
period, agricultural sector lagged behind. It is cruci al for the realization of the goal of establishing a WT/TPR/M/161/Add.2 
Page 4  
 
better welfare society in the next 20 years to c ope with the differentiation in development between 
rural and urban areas. It is pointed out in the latest “Five-Year Development Program” that the government will attach much impor tance to the development of agriculture and rural areas. Policy 
adjustment due to such program mainly covers ge neral development and livelihood issues that are not 
contingent upon production, including expansion of the scope in rural areas eligible to public 
financial support, improving infr astructure, primary education and medical care system in rural 
areas. These measures are either categorized as “green box” under WTO framework, or exempted 
from the calculation of agricultural domestic support. Since China is now a WTO Member, the 
Chinese government will pay much attention to th e consistency of these measures with rules under 
multilateral framework.  
 
Question:  
 Turkey
 
 
WT/TPR/S/161 (page 8, para 10) 
 I. ECONOMIC ENVIRONMENT 
 (2) M
AIN DEVELOPMENTS : POLICY AND ECONOMIC PERFORMANCE  
 
The Secretariat report mentions that China’s rapi d growth among others led widening disparities in 
incomes between urban and rural areas. 
 
• Is there any specific regulation to address this probl em or any plan by Government to do so?   
 
Answer:  The Chinese government pays great attention to the narrowing of  development gap between urban 
and rural areas, and has made tremendous efforts to this end.  In January 2006, the Chinese government abolished the agricultural taxes. The Pr ogram of “construction of a new countryside” 
was launched, with more efforts and resources devoted to developing medical and health services, 
culture and education, social security, infrastructure, etc. in the rural areas.  The Chinese government 
will also continue to promote harmonized developmen t of different regions in a bid to narrow the gap 
between them. During the im plementation period of 11
th Five Year Programme, the State will 
continue its support for the implementation of th e Strategies of West Development and Revitalizing 
the North East.   
(3) M
ACROECONOMIC POLICIES  
 (ii) Fiscal policy 
 
Question:   Switzerland I
 
 
Para. 23. On March 14, China's Pa rliament endorsed the country's 11th Five-Year Plan, which focuses 
on rural development and science and technology progress. Could you elaborate on the measures 
intended to alleviate regional income disparities? What are the measures taken by the government to 
face the aging problem while avoiding a deterioration of the fiscal deficit? Is ageing a problem for the reorientation of public expe nditure towards education? 
  WT/TPR/M/161/Add.2 
 Page 5 
 
 
Answer: 
 In order to narrow the income gap between different regions, the Chinese government will continue to 
promote the harmonized development of different regions. During the 11
th Five Year Program period, 
the State will continue its support for the implemen tation of the Strategies of West Development and 
Revitalizing the North East.  
 While promoting the sustained development of the eco nomy, the government will also try to ensure the 
sustainable development of its finances by, among others, expanding the overall size of fiscal revenue, optimizing the structure of fiscal spending, preven ting and dissipating fiscal risks and maintaining the 
sustainable operation of the pension scheme. As Ch ina’s economy continues to develop, the fiscal 
revenue continues to grow, and work on pension scheme and fund raising and management further 
improves, China is capable of avoiding the wideni ng of the fiscal deficit and coping with the ageing 
issue without seriously affecting the input on education.  
 
(4) M
AIN STRUCTURAL REFORM ISSUES  
 (i) Tax reforms 
 
Question: 
 
United States I
 
 ECONOMIC ENVIRONMENT  
Main Structural Reform Issues – Tax Reforms  
2. Paragraph 29 of Chapter I of the report explains  that China’s enterprise income tax consists of 
two distinct systems, one for domestic enterprises a nd another, preferential one for a wide range of 
enterprises considered foreign-inv ested enterprises (FIEs).  Paragraph 30 of Chapter I of the report 
and paragraph 201 of Chapter III of the report sugg est that China is considering unifying its dual 
enterprise income tax system by placing domestic enterprises and FIEs on equal tax footing.  Please 
describe China’s plans for reforming these two ta x systems, including the timing currently being 
contemplated. When would be the earliest that China might undertake this reform?  
 
Japan I
 
 
(WT/TPR/S/161, p.17, paragraph 29) 
 
Q2. Please indicate the prospects for unifying direct  taxes on the income of foreign enterprises and 
domestic enterprises, which highly influences foreign participation. 
 
New Zealand  
 2 Economic environment (WT/TPR/S/161, page 17, para 29/30) 
 
The Secretariat notes that “domestic enterprises are subject to a statutory income tax rate of 33%, 
FIEs (foreign invested enterprises) operating in sp ecial economic zones and other zones enjoy reduced 
rates of 15% and 24%”.  It further notes that there are indications that “the authorities may unify the dual enterprise income tax system”.  Can China confir m whether or not it has plans to do so, and if it 
does, is it in a position to indicate the time frame in which such a change may occur and what it will 
involve?   WT/TPR/M/161/Add.2 
Page 6  
 
Korea
 
 Income tax (WT/TPR/S/161, p.121, para.201)  
 
9. Recently, there are widespread voices in China on the issue of unification of "Income Tax Law for 
Domestic Enterprises" and "Income Tax Law for Foreign Enterprises", which result in the same 
application of tax rate to domestic and foreign en terprises.  If the two laws are unified and the tax 
preferences for foreign enterprises are abolished, this may not only cause financial difficulty for the 
established foreign enterprises in China but also provide negative influence on a foreign enterprise 
wishing to invest in China.  
 
y Even if the two laws are to be unified, it may be necessary to provide a grace period for 
foreign enterprises to get adjusted to the new system. What is the position of Chinese 
government regarding this issue?  
 Answer:   
 On the above questions from US, Japan, New Zeal and and Korea on the next steps of China’s tax 
reform regarding the income tax regimes on foreign- invested and domestic en terprises, relevant 
authorities are studying the unification of the In come Tax Law for Ent erprises with Foreign 
Investment and Foreign Enterprises and Interim Re gulations on Income Tax for Enterprises and 
working on the drafting of a new law on corporate income tax which will be applicable both to domestic and foreign-invested enterprises on an equal footing.    It is an important part of the fiscal and tax refor m of the Chinese government to establish a sound 
corporate income tax system, which is universally applicable to all types of enterprises and featuring 
modern taxation system characteristics.  Such a system shall be established according to the 
overarching requirement on the establishment and im provement of the socialist market economic 
system, and will draw experiences from other countries.  
As regards the grace period for foreign investment  and the corporate income tax preferences for 
foreign invested enterprises, China takes note of the comment and will give considerations in this 
reform process.  
 Question:   Canada II
 
 
Part I. Macroeconomic Environment, The Ever Deepening Reform and Opening Up, 
paragraph 13:  
16. What is the status of the value added tax ( VAT) experiment in North East China? When is a 
broader VAT reform expected?  United States II
 
 
3. Paragraph 30 of Chapter I of the report expl ains that China is currently working on a major 
restructuring of the tax system, which may involve a switch in the basis of the value-added tax (VAT) 
from production to consumption, de pending on the success of a pilo t project in Northeast China. 
 a. How long does China plan to monitor the pilo t project in Northeast China before deciding on 
whether or not to switch to a consumption-based VAT for the rest of the country?  
b. What is China’s current assessment of the pilot project in Northeast China? 
  WT/TPR/M/161/Add.2 
 Page 7 
 
 
Answer: 
 Since the implementation on 1 July 2004, the pilo t project of VAT basis switch has been in operation 
in Northeast China for two years.  The pilot proj ect is going on smoothly now and is proven to be 
playing an important role in promoting the techno logical improvement, investment growth and the 
restructuring of this traditional industrial base of China.  The switch of the basis of the VAT is a 
complicated systematic project, involving a broad ra nge of issues.  Currently relevant authorities are 
summarizing the experiences of the pilot project in  the Northeast China in order to carry out the 
nationwide implementation of the reform at a proper time.  
Question:  
 Australia
 
 Tax Reform 
 1. We welcome the intention of the Government of  China to undertake a major restructuring of 
the tax system (paragraph 30 on page 17 of WT/TPR/S/161). a) What is the nature of the changes that are planned? 
 
2. We refer to exemptions from payment of  VAT extended to producers of unprocessed 
agricultural, forestry and fisheries products (para 197 on page 119 of WT/TPR/S/161).  a) Will the planned restructuring of the tax system address the imposition of VAT on 
imported goods where VAT is not imposed  on the internal sale of domestic like 
products?  
 
Answer:  China’s further taxation system refor m includes the following: to reali ze the switch of the basis of the 
value-added tax (VAT) from production to consum ption, appropriately adjust the consumption 
(excise) tax scope and impose vehicle fuel tax at an appropriate time, adjust th e scope of business tax, 
improve the export VAT refund system, unify corporate ta x systems, improve the individual income tax 
system, reform the tax system for th e real estate sector, phase in prop erty tax, reform the resources 
tax system, and improve the tax for urban construc tion and maintenance, tax for occupation of arable 
land, and stamp tax. 
 
On question 2-a), there might be misunderstandings from Members on the practice in China. China 
believes that the practice is a common one and is  also found in the ta xation systems in other 
Members. There were detailed exchanges with the Secret ariat on this and the issue was well clarified. 
China’s current practice is as fo llows. Where the tax payer sells or imports agricultural products, he 
or she shall pay the VAT at the rate of 13%, ex cept for agricultural producing farmers who sell their 
self-produced agricultural products. These agricultu ral products are exempt from VAT only at the 
particular stage sold by the producing farmer them selves. They are all immediately subject to VAT 
from the next stage on down the VAT chain, and the rate is the same as applied to imported 
agricultural products.  
The reason that the VAT is exempted for the agric ultural producing farmers when selling their self-
produced agricultural products is that with the larg e agricultural population in China, it is virtually 
impossible to collect VAT from th em with the existing VAT collecting method. As far as we know, a 
number of other Members adopting VAT system also have same or similar practice.  WT/TPR/M/161/Add.2 
Page 8  
 
 
Question:   EC
 
 
WTO Secretariat’s Report, page 16-17, par as 27 and 30: VAT refunds and tax reform:  it is stated that 
China applies a system of differential reimbur sement of VAT when goods are exported thus 
restraining the exports of certain goods and favouring domestic supply.  
 Does China plan to abolish these variated tax refunds with the current restructuring of the tax system? 
 Answer:  China currently does not have a plan to  abolish the export VAT refund system.  
 
Question:   Mexico II
 
 
2. El párrafo 29 de s161-1, establece la diferenc ia entre los impuestos para empresas que producen 
para el mercado dómestico vs la de exportación. Pareciera de esta información que este diferencia 
podria se considerado un subsidio a la exportación. ¿Cual es punto de vista de china al respecto? 
 3. En el párrafo 39, se establece que para algunos sectores productivos existen requisitos de 
utilización de insumos domésticos. ¿En que sector es se aplican y sus compatibilidad con los 
compromisos de adhesion de china a la OMC? 
 
4. ¿Cuáles son las medidas de promoción a las exportaciones mencionadas en el párrafo 39? ¿Su 
compatibilidad con omc? ¿Podriamos contar con c opias de estos instrumentos, existen en inglés? 
 
Answer:  
As we read, paras 29 an d 39 of S161-1 do not have such c ontent as indicating “tax differences 
between domestic market oriented companies and ex port-oriented companies” or “local materials 
requirement for enterprises in certain industries”, or “export promotions”.  For information that Mexico is interested in as reflected by these questions, please refer to China’s 
recently submitted new and full subs idy notification to the WTO. 
 
Question:  
 Switzerland I
 
 
(4) Macroeconomic Policies 
 (i) Tax reforms  
Para. 30.  One of the government’s goal is the “reducti on of the gap between the rich and the poor”. 
To this end, which products and in dustries will be affected by this restructuring of the tax system? Is 
the new consumption tax on luxury planned to be introduced by April 1 a consequence of these 
measures? The government also intends to abolish agricultural taxes by the end of 2006. Given these 
revenue losses for the local governments, what ki nd of compensation mechanism will be implemented 
and how will the government’s additiona l transfer payments be financed? 
  WT/TPR/M/161/Add.2 
 Page 9 
 
 
Answer: 
 China started to impose consumption tax from 1994. There were 11 categories of goods, including 
tobacco, wine and car, chosen as the taxable items . Over the past decade, consumption tax has played 
an important role in fiscal revenue, in encouraging  rational allocation of resources and in facilitating 
consumption and production.  With the rapid development of the economy, China, in a bid to enhance 
the tuning effect of the consumption tax to reflect  policy priorities in futu re development, made reform 
to the consumption tax in April 2006. New items added to the list subject to the consumption tax 
include golf balls and equipments, watches at pr ice over RMB 10,000 per piece, yachts, disposable 
wood chopsticks, wood floor and processed oil.  
 
The fiscal revenue losses incurred to  local government as a result of  the abolition of the agricultural 
taxes are compensated in the follo wing ways: the coastal regions in principle are to make the 
compensation by their own; the central and western regions are compensated by transfer of payment 
by the central government, with the funding needed  being included in the central government budge. 
 
Question:  
 Mexico II
 
 
6. De conformidad con los compromisos de China en  su proceso de adhesion, estaba los cambios de 
regimen sobre las zonas economicas especial es. ¿Que cambios se han realizado?  
 
Answer:  After 1 January 2001, policies concerning tax con cessions for imports and exports of the Special 
Economic Zones (SEZs) ceased to be effective. There is no difference in terms of tariff regimes 
between the SEZs and other regions in China. 
 
(iv) Capital market reforms 
 
Question:  
 
EC
 
 
WTO Secretariat’s Report, page 14, para 21: non performing loans  are estimated at 30% of GDP thus 
exceeding gross government debt of 20%.  
 
Can China please indicate to what extent these lo ans are held by state controlled banks and what 
proportion of these outstanding loans can be attributed to state owned enterprises?  
Turkey
 
 
WT/TPR/S/161 (page 21, para 42)  I. ECONOMIC ENVIRONMENT  (3) Macroeconomic Policies 
 
(iv) Capital Market Reforms 
 
Secretariat Report mentions that “State-owned co mmercial banks are among th e financial institutions 
most exposed to non-performing loans (NPLs). NPLs  amounted to about 25 % of total loans or 30 % 
of GDP by the end of 2004.  WT/TPR/M/161/Add.2 
Page 10  
 
Could Chinese Delegation kindly provide information about the sectoral breakdown of NPLs for the 
2001-2005 period, including especially the textiles and clothing sector?   
Answer: 
 
According to China’s statistics, at the end of 2005, the total non-performing loans (NPLs) of Chinese 
commercial banks was 1313.3 billion RMB Yuan, or 8.61% of the total, among which the NPLs of state-owned commercial banks registered at 1072.5 billion RMB, 10.49% of their total loans. The 
figures from the Report of the Secretariat are not up- to-date to reflect the development of the Chinese 
banking industry. The state-owned Chinese commerci al banks lend loans following the principle of 
cost and efficiency. The specific amount of loan fo r a particular enterprise or sector depends on the 
profit margin of the loan to the en terprise or sector. Sectoral breakdown of NPLs is currently not 
available.   Question: 
 
Mexico II
 
 
5. Podrian explicarnos a que tasa otorgan préstamos  los bancos del gobierno?. Normalmente a cuantos 
años son estos prestamos.? Cuales son los sectores beneficiados.?  
 
Answer: 
 In China, the Chinese government holds part of th e equities in certain commercial banks. Yet these 
commercial banks are operating fully on commercia l terms and conditions. Costs and benefits are the 
guiding factors in their issuing of loans. The amount  of credit granted to one particular enterprise or 
sector depends upon the returns and profitability. The interest rate and terms of the credit are 
determined by the issuing banks th emselves based on such market elem ents as the creditability of the 
borrowing party etc. All businesses and sectors are entitled to loans with the banks. 
 Question:  
United States I
 
 
6.  Paragraph 42 of Chapter I of the report e xplains that state-owned banks in China lend 
“mainly” to state-owned enterprises (SOEs) and that 25 percent of state-owned banks’ loans were non-performing loans (NPLs) at the end of 2004.   Pa ragraph 230 of Chapter III of the report adds that 
SOEs “account for a disproportionate share of N PLs.” Paragraphs 172 through 174 of Chapter IV of 
the report also discuss NPLs.  a. Taking into account the scope of Article 1 of the Agreement on Subs idies and Countervailing 
Measures (Subsidies Agreement), does China consider the state-owned banks’ NPLs to satisfy the two 
elements of a subsidy set forth in Article 1 of the Subsidies Agreement, i.e., a “financial contribution” 
and a “benefit”?  If not, please explain. 
 b. Taking into account paragraph 10 of Part I of Ch ina’s Protocol of Accessi on, which provides that 
subsidies will be viewed as “specifi c” within the meaning of Article 2 of the Subsidies Agreement if 
SOEs are the predominant recipients of such subsidies or state-owned enterprises receive 
disproportionately large amounts of such subsidies,  does China consider the state-owned banks’ NPLs 
to be “specific” within the meaning of Article 2 of  the Subsidies Agreement?  If not, please explain. 
  WT/TPR/M/161/Add.2 
 Page 11 
 
 
United States II  
 
1. Paragraph 42 of Chapter I of the report explains  that state-owned banks in China lend “mainly” to 
state-owned enterprises (SOEs) and that 25 percen t of state-owned banks’ loans were non-performing 
loans (NPLs) at the end of 2004.   Paragraph 230 of Chapter III of the report adds that SOEs “account 
for a disproportionate share of NPLs.”   Paragra phs 172 through 174 of Chapter IV of the report also 
discuss NPLs.  The United States understands that China’s first notification of subsidies under Article 25.1 of the Subsidies Agreement has been fi nalized and is in the process of being translated 
into English.  Does China’s subs idies notification identify the stat e-owned banks’ N PLs as subsidies 
and provide information on the natu re and extent of these subsidies in accordance with paragraph 3 of 
Article 25?  If not, please provide the information described in Article 25.3 of the Subsidies 
Agreement for the state-owned banks’ NPLs.  
 
Answer:  
On the above two questions, state-owned banks lend loans  in line with market rules, to be specific, 
depending on the solvency and creditability of the enterprises. Different borrowers, either state-
owned or non-state-owned enterprises, are subject to  the same loan terms. It is not a subsidy as 
defined by the Subsidies Agreement, nor a specific  subsidy. By the end of December 2005, NPL 
percentage of China’s state-owned banks’ loans was 10.49%.   
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 (1) Introduction  Question:  
 
Columbia
 
 
1. a)  En el párrafo 2., se menciona que: “Una esfera fundamental de las reformas ha sido la 
estructura de las leyes.  La jerarquía de las le yes de China incluye las leyes nacionales, que son 
promulgadas por el Congreso Nacional del Pueblo o su Comité Permanente, el poder legislativo, 
seguidas por reglamentos, que son aprobados por el Consejo de Estado, el poder ejecutivo.  Además 
de los reglamentos, hay normas ministeriales o de partamentales elaboradas por los departamentos de 
gobierno para aplicar los reglamentos.  Los congreso s del pueblo de nivel local y los gobiernos locales 
tienen también facultades para promulgar reglamen tos y normas locales, aunque, cuando se elaboran 
disposiciones legislativas nacionales equi valentes, estas normas se anulan o modifican 
automáticamente”.  Con el fin de hacer seguimiento y actualización a la compleja red normativa de la 
China, nos seria de utilidad conocer si: 
 
¿Cuándo se expiden las leyes, reglamentos y no rmas  se menciona ex presamente las leyes, 
reglamentos y/o normas que se están anulando o m odificando?  ¿Existe algún periódico o medio de 
comunicación oficial, en el que se publique cuál es son exactamente las normas inferiores derogadas 
por las leyes? 
 
Answer:  
 Usually, unless being promulgated for the first time,  laws, regulations and rules will contain articles 
that stipulate which related previous laws, regulations and rules are meant to be replaced or 
modified. The Legislation Law of the People’s Re public of China stipulates the procedures for making 
public those newly promulgated or modified laws, regulations and rules, but there is no specific 
requirement to designate an official journal specifica lly to publish all the abolished or invalidated 
laws regulations and rules. However, in the offic ial journals including the Bulletin of the Standing 
Committee of the National People’s Congress (for  laws) and the State Council Gazette (for WT/TPR/M/161/Add.2 
Page 12  
 
regulations) and the Gazettes of the ministries and agencies under the State Council including the 
MOFCOM Gazette, there would be announcements on lis t of laws and regulations and rules that have 
been abolished, particularly when there is a major overhaul of laws and regulations and rules such as 
the one done at the time of the accession to the WTO.   
Question:  
 
Columbia
 
 
1. b)  En párrafo 2., también se cita que: “E n ocasiones, se aplican políticas con carácter 
experimental y se promulgan periódicamente reglamentos y normas para hacer frente a las cambiantes 
necesidades económicas y a los compro misos internacionales.  El resultado es una compleja red de 
leyes, reglamentos, normas, y disposiciones provisi onales.  En muchos casos, el proceso de adopción 
y aplicación de políticas también sigue siendo complejo, al  participar varios orga nismos en diferentes 
niveles, lo que también repercute en la coherenc ia de las políticas.  Además se están elaborando 
continuamente nuevas políticas e instituciones, las antiguas se modifican sólo parcialmente, y el 
resultado es que se añaden o anexan nue vas instituciones a las antiguas”.  
 
¿Se tiene previsto establecer algún programa o plan para introducir reformas profundas para 
simplificar estos procedimientos?  Answer:  
The Chinese government is always committed to est ablishing and perfecting its legal framework and 
ensuring its WTO compliance. After China’s accessi on, the Chinese government took a series of steps 
aiming at streamlining and simplifying the cu rrent legislative process and legal framework and 
making it more open and transparent.  
 To ensure consistency within th e legal framework and uniform im plementation of trade policies 
across the nation, the Regulations on Submission of Regulations and Rules for Record stipulates that all the regulations and rules shall be submitted to the State Council (t he Legislative Affairs Office of 
the State Council) for record and review within  30 days of promulgation. The record and review 
process will identify in time any inconsistency of  the local regulations and rules with laws and 
regulations of the Central Government and have it a ddressed according to the legislation procedures. 
In addition to that, citizens, enterprises and ot her entities including government bodies may propose 
in writing to the Legislative Affairs Office of the State Council to initiate review process whenever 
they identify any legislation inconsistency or failu re in uniform application of laws, regulations and 
rules. 
 Apart from that, a massive program on legislati on review was launched nationwide around the time 
of China’s accession to the WTO. The State C ouncil (Central Government) undertook an overall 
sorting out of all the 756 pieces of existing adminis trative regulations promulgated before the end of 
2000 and announced the result in its Decree No. 319 in 2001. All the local governments also 
conducted the review of local regulations, rul es and administrative measures in line with the 
principles of uniform application, non-discrimination and transparency. 
 In addition, China has also a complete system  of administrative review (administrative 
reconsideration) and judicial review, which are embodied in the Law on Administrative 
Reconsideration and the Administrative Procedure Law and a series of judicial interpretations 
including in the trade area the Rules on Certain Is sues in the Trial of International Trade Related 
Administrative Cases issued by the Supreme People’s Court, among others. If a citizen, a legal person 
or any other organization considers that his/her or its lawful rights or interests have been infringed 
upon by a specific administrative ac t of an administrative organ or its personnel, he/she or it may  WT/TPR/M/161/Add.2 
 Page 13 
 
 
apply to administrative organs for administrati ve reconsideration or may bring a suit before a 
people’s court   
 
Question: 
 
Columbia  
 
1. c)  En el  párrafo 5., se establece que las modificaciones a la constitución incluyeron, el 
reemplazo de la "economía estatal" por una "ec onomía de propiedad estatal" y de las "empresas 
estatales" por "empresas de propiedad estatal".  Al respecto, nos parece muy interesante que nos 
precisen: ¿Cuál es concretamente la diferencia en tre la anterior “economía estatal” y la actual 
“economía de propiedad estatal”?, Así mismo, ¿Cuál es concretamente la diferencia entre las anteriores “empresas estatales” y las actua les “empresas de propiedad estatal”? 
 
Answer: 
 
The replacement of “state economy” with “state-owned economy” as we ll as “state enterprise” with 
“state-owned enterprise” embodies the orientation for establishing a socialist market economy. State 
enterprises are usually characteri zed with complete state-ownershi p, complete state management and 
complete responsibility for loss and profit by state itse lf. In the reform process, with the pursuit of 
founding a modern entrepreneurial system and with “t he separation of management from ownership” 
achieved, “state-owned enterprise” is more accurate to reflects the stackholding relationship between 
the state and an enterprise. As for the manageme nt and loss and profits of the “state-owned 
enterprises”, it is decided independently by the en terprise itself, with no state interference any longer.  
 Question: 
 
Columbia
 
 
1. d)  En el párrafo 6, se menciona que: en la modificación más reciente de la Constitución se 
especificó expresamente la protección de los derechos de propiedad privada, con la afirmación de que 
"la propiedad legal de los ciudadanos es inviolable".   Así mismo, se menciona que en la revisión se 
“incluyó también  la protección de sectores no públic os de la economía, como los sectores individual 
y privado”.   ¿De qué bienes pueden los ciudadanos chinos ser propietarios legales? ¿Los extranjeros residentes en China, pueden tener “propiedad legal”?. ¿En qué co nsiste la protección de los sectores no públicos de 
la economía ?. 
 
Answer
:  
 
Citizen’s lawfully earned income, savings, houses and other lawful properties, as well as foreigner’s 
lawful ones are protected by the law. 
 
At present, the Chinese government adopted the fo llowing measures to protect non-public sectors and 
facilitate their development: 1. widening market access for non-public economies, 2. strengthening 
financial support, 3. providing better public service, 4.  protect lawful right of non-public enterprise 
and their employees, 5. providing guidance to non-pub lic enterprises to better develop themselves, 6. 
improving governance of non-public economies.  
 WT/TPR/M/161/Add.2 
Page 14  
 
(2) Institutional and Legal Framework 
 (i) Institutional structure   Question: 
 
United States I
 
 
7.c.  Please describe the role of the Communist  Party of China (CPC) in the proceedings and 
decisions of the Supreme People’s Court. 
 
7.d.  Does the CPC play the same role in the proceedings and decisions of the lower courts? 
 
Answer:  
According to the Constitution, the Organic Law of the People’s Courts of the People’s Republic of 
China and the Judges Law of the People’s Republic of  China, the people’s courts exercise judicial 
power independently and are not subject to interferen ce by any administration,  public organization or 
individual. When exercising this power, the people’s cour ts shall strictly abide by the Constitution, the 
Organic Law of the People’s Courts of the People’ s Republic of China and other substantial and 
procedural laws related to the specific cases. 
 
(ii) Legal structure and the legislative process 
 Question:  
Thailand
 
 
1. Para 17: According to the report, China impl ements the WTO Agreement and its Protocol of 
Accession through enabling legislation.  However, China has a complex legal structure and hierarchy 
of laws and regulations, as per Chart II.1 of the report.  In which category of domestic law, for 
example, administrative regulations, local regulations , etc., is China’s enabling legislation of its WTO 
commitments? 
 
Columbia  
 
2. b)  El literal i), párrafo 17., menciona que: “E l Acuerdo sobre la OMC y el Protocolo de Adhesión 
de China se aplican en el país mediante legislaci ón de habilitación”. ¿En qué consiste exactamente la 
“legislación de habilitación”?. 
 
Answer:  To implement its accession commitment, the Chin ese government reviewed its legal framework, 
including laws enacted by the NPC and its Stan ding Committee, administrative regulations by the 
central government, i.e. the State Council, and ru les and measures promulgated by ministries and 
agencies of the central government. As depicted in  the Secretariat Report, amendment and enactment 
of laws and regulations reflected the effort by th e Chinese government to bring its legal framework in 
line with the WTO rules. Besides, although trade  policies are uniformly implemented across the 
country and the local government cannot directly enac t trade related regulations and measures of its 
own, the Chinese government still required a major over haul of all rules and regulations of the local 
government at the time of a ccession following the principle of  uniform application and WTO 
consistency.   WT/TPR/M/161/Add.2 
 Page 15 
 
 
The Chinese government also has a submission for reg istration and review system of the legislation 
which covers also legislation of the local governme nt to ensure legislation consistency and uniform 
application.  Question: 
 
Columbia
 
 
2. c) El literal ii), párrafo 18., dice que: “La legislaci ón de China incluye la Constitución, las leyes, los 
reglamentos administrativos, y los reglamentos lo cales (incluidos los reglamentos autónomos y los 
reglamentos separados) y normas locales (incluid as las normas gubernamentales locales y las normas 
departamentales).  La Constitución es la ley suprema,  seguida por las leyes nacionales, y luego por los 
reglamentos administrativos;  los reglamentos administrativos nacionales tienen supremacía sobre los reglamentos y normas locales.”  
¿En caso de contradicción o aparente contradicci ón entre un reglamento o norma local y un 
reglamento administrativo nacional, cuál  autoridad define la controversia?. 
 
Answer:  The Chinese government has a submission for registra tion and review system of laws and regulations 
and rules. 
 According to the Regulations on Submission of Regulations and Rules for Record, all the regulations and rules shall be submitted to the State Council (the  Legislative Affairs Office of the State Council) 
for record and review within 30 days of promulgati on. The record and review process will identify in 
time any inconsistency of the local regulations an d rules with laws and regulations of the Central 
Government and have it addressed according to the le gislation procedures. In addition to that, 
citizens, enterprises and other entities including government bodies may propose in writing to the 
Legislative Affairs Office of the State Council to  initiate review process whenever they identify 
legislation any inconsistency or failure in uniform  application of laws, regulations and rules. 
 
Question: 
 Columbia
 
 
2.d) El literal iv), párrafo 27., especifica que: “a l elaborarse disposiciones legislativas, deben 
solicitarse las opiniones de organizaciones y el  público mediante, seminarios, reuniones de 
evaluación, y audiencias. Los proyectos de ley ta mbién se publican a efectos de que se formulen 
comentarios, cuando sea necesario.   Nos gustaría conocer ¿Cuáles proyectos de ley se publican para comentarios? ¿Cuándo no es necesario publicar un proyecto de ley?  Answer:  Transparency is the fundamental principle to be foll owed in the legislation process as requested by 
the Legislation Law. The law, the Regulations on Procedures for the Formulation of Administrative 
Regulations and the Regulations on Procedures for the Formulation of Rules which address 
systemically the formulation and prom ulgation procedures for different types of legislation in China. 
All require that in drafting legislations, and when legislation drafts are made public for comments opinions of relevant organs, organizations and citi zens shall be extensively solicited through such 
forms as written communications, forums, appraisal meetings and hearings. Th is has already been a WT/TPR/M/161/Add.2 
Page 16  
 
general practice when the State Council and minist ries and agencies subordinate to it as well as local 
governments with legislation po wer draft any legislations. 
 Question:  
Columbia
 
 
2.e) El literal iv), párrafo 30., menciona que el Gobierno ha venido promovie ndo el uso de Internet 
para aumentar la transparencia.  A finales de 2004, se habían inaugurado más de 16.000 sitios Web 
oficiales de Ministerios, comisiones y otros depa rtamentos dependientes del Consejo de Estado, así 
como de gobiernos locales.  Según las autoridades,  la legislación y las medidas administrativas del 
gobierno central y los gobiernos locales se pueden consulta r en su totalidad en Internet.  Al respecto, 
queremos precisar si la totalidad de la legisl ación y las medidas administrativas publicadas en los 
sitios Web oficiales mencionados se encuentran en alguno de los idiomas oficiales de la OMC? ¿En 
caso negativo, aproximadamente qué porcentaje ha sido traducido?  y ¿Cómo se determina cuales 
medidas deben ser traducidas a otro idioma? 
 
Answer: 
 The Chinese government attaches great importance to the transla tion of laws, regulations and 
measures into foreign languages. After China’s a ccession into the WTO, this  work has been given 
even more attention. At present, all the laws enacted by the NPC and its Standing Committee and all 
the regulations enacted by the State Council since 1979 are translated into English. As for ministerial 
measures which should be notified to the WTO as an obligation, the ministries or agencies concerned 
of the central government will translate the measures and the Ministry of Commerce will be 
responsible for its notification to the WTO.  
 
(iv) Transparency  Question:  United States I
 
 
9.b.  Please describe the scope of sub-national governme nt measures, if any, regularly published in the 
MOFCOM Gazette. 
 
Answer: 
 
The MOFCOM Gazette mainly includes trade-related laws, regulations and ru les. As trade policies 
are uniformly implemented throughout the country,  local governments do not issue regulations and 
rules on trade policies. However, if related to trade, local regulations will be included in the 
MOFCOM Gazette.  
 
Question:  Canada I
 
 
8. How is trade policy coordinated between  main departments and agencies involved? 
 Answer:  When formulating trade policies, the Chinese government will abide by the stipulations in the Foreign 
Trade Law and its WTO commitment, collecting op inions from government authorities, enterprises 
and the public. After public opinion solicitation, co mpetent authority for trade will gather all the  WT/TPR/M/161/Add.2 
 Page 17 
 
 
information. However, if important enough, decisi ons on some issues will have to be made by the 
State Council, under certain procedures stipulated by the law.  
 
(4) Trade Policy Objectives 
 
Question: 
 EC
 
 
Bilateral, regional and global trad e liberalisation is vital for promoting prosperity, growth and 
development to the benefits of the world at larg e. The EC considers that the WTO and multilateral 
liberalisation is the most certain way for promo ting global interests for industrialised countries and 
developing countries at large.   a.  How does China judge the relative importance a nd weight of bilateral/FTA policies and further 
development of the WTO system in terms of  its own trade and development needs?  
 b.  The EC would like to know more about China’ strategy for RTAs. To what extent has China analysed and compared th e efficiency and level of economic be nefits delivered by bilateral trade 
agreements by comparison with multilaterally agreed liberalisation?  Answer:  China made extensive commitments to open its market upon its WTO accession, which were 
significant contributions to the multilateral trading system.  Meanwhile, China’s fast economic growth has also benefited from the stable inter national trade environment safeguarded by the open 
multilateral trading system. Today China has beco me one of the large trading nations. The 
multilateral trading system always remains on the t op of China’s trade policy agenda. China has 
engaged in a number of bilateral and regional FT A negotiations. These trade arrangements, however, 
will not replace the multilateral trading system. Rather,  they are useful supplementation to the system. 
 
(5) Trade Agreements and Arrangements  
 
(i) WTO  Question:   
United States I
 
 
10. Paragraph 44 of Chapter II of the report refers to  Table AII.3, which lists the status of China’s key 
notifications to the WTO.   a. When will China make its long-overdue not ification of domestic support, as required by 
Article 18.2 of the Agreement on Agriculture? 
 
Answer:  China made its domestic support no tification to the WTO in Jan 2006. 
 
Question:   
b. The United States understands that China has fina lized its long-overdue subsidies notification, as 
required by Article 25.1 of the Subsidies Agreemen t, and is in the process of translating it into 
English.  When will China be in a position to submit its notification?  Will it address all of the subsidy WT/TPR/M/161/Add.2 
Page 18  
 
programs identified in the United States’ request und er Article 25.8 of the Subsidies Agreement dated 
6 October 2004 (G/SCM/Q2/CHN/9), including the subs idies identified as prohibited under Article 3 
of the Subsidies Agreement?  If not, when will China respond to that request? 
 
Answer: 
 
China submitted in April 2006 its first notificati on of subsidy programs maintained at the central 
government level. Information collection process for preparation of the notification has made 
reference to the subsidy programs mentioned in questions from WTO Members including the U.S., 
and therefore we suggest the U.S. refer to the no tification paper for detaile d information regarding 
their questions. China would be ready to make furt her studies and clarifications in cases on which the 
U.S. has further questions. 
 
Question: 
 
Costa Rica
 
 
1. ¿Cuáles son las diferencias entre el Mecanismo de Examen de Transición  establecido en el Protocolo de Adhesión de China a la OMC, y el actual Mecanismo de Examen de las Políticas Comerciales que lleva a cabo la China? 
 
Answer:   
 Please refer to Article 18 of China’s Accession Protocol:   1. Those subsidiary bodies of the WTO which have a mandate covering China's commitments 
under the WTO Agreement or this Protocol shall, within one year after a ccession and in accordance 
with paragraph 4 below, review, as appropriate to their mandate, the implementation by China of the 
WTO Agreement and of the related provisions of this Protocol.  China shall provide relevant 
information, including information specified in Ann ex 1A, to each subsidiary body in advance of the 
review.  China can also raise issues relating to any reservations under Section 17 or to any other 
specific commitments made by other Members in th is Protocol, in those subsidiary bodies which have 
a relevant mandate.  Each subsidiary body shall re port the results of such review promptly to the 
relevant Council established by parag raph 5 of Article IV of the WTO Agreement, if applicable, which 
shall in turn report promptly to the General Council.  2. The General Council shall, within one year after accession, and in accordance with 
paragraph 4 below, review the impl ementation by China of the WTO Agreement and the provisions of 
this Protocol.  The General Council shall conduct su ch review in accordance with the framework set 
out in Annex 1B and in the light of the results of  any reviews held pursuant to paragraph 1.  China 
also can raise issues relating to any reservati ons under Section 17 or to any other specific 
commitments made by other Members in this  Protocol.  The General Council may make 
recommendations to China and to other Members in these respects. 
 
3. Consideration of issues pursuant to this Section shall be without prejudice to the rights and obligations of any Member, including China, u nder the WTO Agreement or any Plurilateral Trade 
Agreement, and shall not preclude or be a prec ondition to recourse to consultation or other 
provisions of the WTO Agreement or this Protocol.  
 
4. The review provided for in paragraphs 1 and 2 will take place after accession in each year 
for eight years.  Thereafter there will be a final review in year 10 or at an earlier date decided by the 
General Council. 
  WT/TPR/M/161/Add.2 
 Page 19 
 
 
(ii) Regional agreements 
 Question: 
 
Japan
 
 
Q6. (1) When the tariff rate for a tariff line placed by the exporting party in the Sensitive Track is over 
10%, this trade can be excluded from the coverage of tariff concessions in ACFTA in line with the 
rule of reciprocity.  This kind of case might lead to  a shrinking of the coverage of liberalization under 
the ACFTA.  In this regard, are there any possib ilities that the ACFTA can not satisfy “substantially 
all the trade” requirements in Article XXIV of the GATT? 
 
Answer:  The product coverage issue was considered in the ACFTA negotiation. However, there are several 
points that need to be clarified:  
 Firstly, in CAFTA, the “upper limit” is decided upon the import volume from a specific signatory, not 
the total trade volume with the country, which is  comprised of export and import volume. The CAFTA 
further stipulates that the import volume of produc ts in the Sensitive Track must not exceed 10% of 
the total import volume from a specific signatory in 2001, otherwise the list of products in the 
Sensitive Track proposed by a signatory should be revised. However, during the implementation 
process, the actual situation is that import volume of products in the “Sensitive Track” from a specific 
signatory is usually far lower than the “upper limit” , for example, import volume of products in the 
Sensitive Track proposed by China from Philippine a ccounts for only 1.4% of the total import volume 
from Philippine while import volume in the Sensiti ve Track by Malaysia from China accounts for only 
5.5% of total import from China.  
 Secondly, the tariff rates of most tariff headings in the Sensitive Track proposed by signatories are 
lower than 10%, for example, tariff rates of 70% of  tariff headings in the Se nsitive Track proposed by 
China are lower than 10%.   
 
Thirdly, in reality, the products d esigned to be in the Sensitive Track by a specific signatory are often 
not competitive. Export seldom occurs substantially.   Therefore, even if the exporting signa tory gives preferential treatment to  the products in the Sensitive 
Track proposed by and from the import signatory, the import signatory is not likely at all to export 
this “sensitive product”, which means the substantia l trade cannot occur no matter whether it is in 
the Sensitive Track or not and this does not create any conformity issue with Article XXIV of the 
GATT.  
 Question: 
 
Japan
 
 
Q6. (2) Are there any customs mechanisms/procedur es to give timely notification of the exporting 
Party’s tariff rate and her modification to the other Parties for reciprocity? 
 
Answer:  
 At present, modification to ta riff rate must go through the ASEAN Secretariat. China-ASEAN 
Negotiation Committee will review the modification me ntioned above.  Stakeholders may consult the 
ASEAN Secretariat to acquire the concerning information.   
 WT/TPR/M/161/Add.2 
Page 20  
 
Question: 
 
Japan
 
 
Q6.(3) There are two categories, the normal track a nd the sensitive track in the Agreement on Trade in 
Goods.  According to Annex 2 of the Agreement, there is a maximu m ceiling for the sensitive track. 
As for China and ASEAN6, is the ceiling “400 tari ff lines and 10% of total value of imports from 
China or from the ASEAN Member Countries as a whol e”?  If so, does China consider whether or not 
it is consistent with Article XXIV of the GATT agreement as from the viewpoint of a regional FTA? 
 
Answer:  
 According to HS 2002 of the WCO, there are 5,300 6-digit HS headings. Therefore, 10% equals to 530 tariff headings, and the number of tariff headings in the Sensitive Track of China-ASEAN(6) does 
not exceed 400, while not exceeding 500 with ASEAN ne w members, which is consistent with article 
XXIV of the GATT.   
 Question:  Turkey
 
 Could China kindly provide an assessment about how she views the prospect for south-south trade in 
terms of non agricultural market access negotiations? 
 
Answer: 
 
China is a developing country and has always been an active supporter and upholder of the South-
South cooperation. China follows the principle of equal and mutual beneficial, stressing effectiveness, 
long-term cooperation and joint development in its participation in the South-South cooperation. 
Cooperation with developing countries has been an im portant part of the overall opening up strategy 
of China with the content grea tly enriched and scale increasi ngly expanded. China believes that 
under the current situation developing countries shou ld strengthen solidarity and attach importance 
to the South-South cooperation from a strategi c perspective, advance policy coordination and 
participate fully in the decision-making process c oncerning the world trade and economy. Developing 
countries should also strengthen their capacity bu ilding, utilize various resources and means to 
expand cooperation channels to move forward the South-South cooperation  
 
Question:  
Costa Rica
 
 
2. ¿Cuáles son los argumentos de China para invocar  la Cláusula de Habilitación en relación con el 
Acuerdo Marco para la Cooperaci ón Económica amplia entre la ASEAN y China y la Adhesión de 
China al Acuerdo de Bangkok? 
 
Answer:  Pursuant to Article 2 and 3 of Decision on Diff erential and More Favourable Treatment Reciprocity 
of Developing Countries (L/4904), China invokes enabling clause in China-ASEAN free trade 
agreement and Bangkok Agreement.   WT/TPR/M/161/Add.2 
 Page 21 
 
 
Question:  
 Costa Rica
 
 
3. ¿Ha notificado China sus acuerdos regionales al  Comité de Acuerdos Regionales de la OMC? 
 Answer:  China notified the FTA between ASEAN and China, the CEPA between China and Hong Kong, China, 
CEPA between China and Macau, China an d the Bangkok Agreem ent to the WTO. 
 
Question: 
 
Costa Rica
 
 4. En el contexto de la Zona de Libre Come rcio ASEAN-China, ¿podría China ampliar en qué 
materias se ha llegado a Acuerdos de Reconocimiento Mutuo? ¿Qué se entiende por “trato flexible” 
para miembros como Camboya, Laos, Mynamar y Viet Nam? 
 
Answer:  
China has signed with ASEAN the Agreement on Tr ade in Goods and the Agreement on Dispute 
Settlement. The “flexible treatment” mainly refers to “Early Harvest”. The Early Harvest Framework 
was implemented in 1 Jan 2004. Under the framework,  China gives unilaterally  zero tariff treatment 
to certain products originated in or imported fr om the Laos, Cambodia and Myanmar. Tariff rates of 
the products covered in the “Early Harvest Framework” should be reduced to 0% on 1 Jan 2006, 
while for certain products enjoying this special preferential zero tariff treatment from the Laos, 
Cambodia and Myanmar, zero tariff treatment should be  given on 1 Jan 2004. Besides, China decided 
in 2005 that the list of products enjoying zero ta riff treatment from the Laos, Cambodia and Myanmar 
will be enlarged on 1 Jan 2006.     
 Question:  
 
Costa Rica
 
 
5. En los acuerdos comerciales, en especial, las z onas de libre comercio de las que forma parte China 
¿qué tratamiento ha recibido el sector textil?  Answer:  In the current FTAs which China is involved, there ar e no articles specifically designed for textiles.  
 Question: 
 
Costa Rica
 
 
6. ¿En qué consisten los progr amas de cooperación que se han desarrollado en muchos de los 
acuerdos regionales negociados por China?  Answer: 
 China has difficulty in understanding what the “coop eration projects” as raised in the question refer 
to. Please refer to China’s notifications of FTAs, wh ich have covered all the aspects of each of the 
established FTA China signed with other Members.  WT/TPR/M/161/Add.2 
Page 22  
 
 
Question: 
 
Thailand
 
 4.  Paras 70 and 71: Have the Gulf Cooperati on Council and India recognized China as a market 
economy? 
 
Answer:  
GCC and India have not yet recognized China’s market economy status.  
 
(iii) Bilateral agreements 
 Question: 
 
United States I
 
 
5.  Paragraph 71 of Chapter II of the report states that a feasibility study on a China-India Free Trade 
Agreement (FTA) was started in April 2005.  Please describe the nature of the FTA that is being 
studied and explain when China and India anticipate completing their study.   
 Answer:  In April 2005 when Premier Wen Jiabao visited India, joint declaration was made by the two 
countries to begin a joint feasibility study on free tr ade arrangement between the two countries. The 
first joint study working group meeting was held in March 2006 in New Delhi. The joint study 
working group will look into the macro economic sit uation of the two countries, bilateral investment 
and trade status as well as implications of a f ree trade arrangement on both the countries. The study 
is expected to be completed in two years  (iv) Unilateral preferences 
 
Question: 
 
Switzerland
 
 Para. 73. The text mentions China granting 39 LDCs  unilateral preferences. Are there other criteria 
than the existence of diplomatic relations for Chin a to grant preferential access to products originating 
from LDCs? In the Report by the Chinese government  it is mentioned that it provides duty-free access 
for most China-bound LDC exports. Does China main ly grant duty-free access for raw material or 
does it also grant access for higher value products? Do es the list of products contain cottons products 
and other semi-finished products for the textiles and clothing industry 
 Answer:  There is no precondition attached to the unilatera l preferences China provides to least developed 
countries that have diplomatic relations with China. Products cov ered under the unilateral 
preferences include higher value products, cotton products and others including semi-finished and 
finished products of the textiles and clothing industries.  
  WT/TPR/M/161/Add.2 
 Page 23 
 
 
Question:  
 Turkey
 
 
The Secretariat report mentions that unilateral special  preferential tariffs are offered by China to the 
least developed countries number of which increased to 39 as of September 2005.What kind of pre-
conditions does China seek to grant unilateral preferential tariffs? 
 
Answer:  
As Mr. Hu Jintao, Chinese President stated in his speech on UN’s 60th International Conference on 
Financing for Development, there is no precondition atta ched to the assistance China provides to the 
least developed countries. 
 
(6) F
OREIGN INVESTMENT REGIME  
 
(iv) FDI incentives  Question:  
United States I
 
 
11. Paragraph 89 of Chapter II of the report and paragraph 203 of Chapter III of the report explain 
that China provides tax exemptions for export-oriented  FIEs.  Does China consider this program to be 
a prohibited export subsidy under Article 3 of the Subs idies Agreement? If not, why not?  If so, please 
describe China’s plans for withdrawing this subsidy. 
 
United States I  
 
26.  Paragraph 135 of Chapter III of the re port describes a series of tax exemptions and 
concessions available for FIEs that export over 70 percent of their production volume.  Does China 
consider these programs to be prohibited export subsidies under Article 3 of the Subsidies 
Agreement?  If not, why?  If so, please describe China’s plans for withdrawing these subsidies. 
 
United States II  
  32.  Paragraph 135 of Chapter III of the re port describes a series of tax exemptions and 
concessions available for FIEs that export over 70  percent of their production volume.  Are these 
programs addressed in China’s finalized but not yet fully translated subsidies notification?  If not, please provide the information described in Article 25 .3 of the Subsidies Agreement for this program. 
 
EC
 
 WTO Secretariat’s Report, page 124, para 204: tax incentives:  the report  mentions several incentives 
which appear to contain export requirements such as 100% tax refund if profits are reinvested in export – oriented enterprises or 50% tax reduction if  more than 70% of the production is exported.  
III (4) (ii) 
 
Can China please explain how these schemes are compatible with Article 3 ASCM and if there are plans to abolish these schemes? 
 WT/TPR/M/161/Add.2 
Page 24  
 
Answer: 
 Detailed information in relation to the policies ment ioned in the above 4 questions are included in the 
Subsidy Notification China has submitted. These polic ies are part of the incen tive policies the Chinese 
government formulated in the 1980s and 90s ai ming at attracting foreign investment, whose 
beneficiaries are foreign investors including from Members which raise these questions. 
 Relevant authorities of the Chinese government are now studying the issue of adjustment of the 
income tax both for domestic and foreign-invested enterprises. During the process they will consult 
extensively with various interested parties including foreign investors.  
 
Question:  
 United States I
 
 
12. Paragraph 89 of Chapter II of the report explai ns that China provides VAT  refunds for FIEs that 
purchase domestically made equipment.  Does China c onsider this program to be a prohibited import 
substitution subsidy under Article 3 of the Subsidi es Agreement?  If not, why?  If so, please describe 
China’s plans for withdrawing this subsidy. 
 
EC 
 
WTO Secretariat’s Report, page 115, para 186  mentions that the use of locally produced inputs in 
exports is encouraged.  Can China please explain in detail the measures to wh ich this sentence is referring to and how this 
policy is compatible with Article 3 ASCM?. 
 
Answer:  Detailed information regarding the policy mentioned in  the above questions is included in the Subsidy 
Notification China has submitted. VAT refund is provided for FIEs t hat purchase domestically made 
equipment because the FIEs enjoy VAT exempti on when importing these equipments. Aiming at 
realizing same tax burden for FIEs no matter they  import equipment or purchase domestically, the 
policy does not lead to import substitution or  discriminate against import equipment.  
 
Question:  
 
United States II
 
 
6. Paragraph 81 of Chapter II of the report explai ns that foreign investors in the “encouraged” 
category of the Catalogue for the Guidance of Fore ign Investment Industries are permitted to import 
capital equipment duty free.  Is this  program addressed in China’s fina lized but not yet fully translated 
subsidies notification?  If not, please provide th e information described in Article 25.3 of the 
Subsidies Agreement for this program. 
 
Answer:   
 
Detailed information regarding the program menti oned in the question is included in the Subsidy 
Notification China submitted to the WTO Comm ittee on Subsidies and Countervailing Measures.  
  WT/TPR/M/161/Add.2 
 Page 25 
 
 
Question:  
 United States II
 
 
7. Paragraph 88 of Chapter II of the report and pa ragraph 203 of Chapter III of the report explain 
that China provides a variety of preferential tax tr eatment to FIEs (as opposed to domestic enterprises) 
invested in industries and regions where investment  is encouraged.  Are these programs addressed in 
China’s finalized but not yet fu lly translated subsidies notification?  If not, please provide the 
information described in Article 25.3 of th e Subsidies Agreement for these programs.  
 
Answer:   
 Detailed information regarding the programs menti oned in the question is included in the Subsidy 
Notification China submitted to the WTO Co mmittee on Subsidies and Countervailing Measures.  
 
Question:  
 United States II
 
 
8.  Paragraph 88 of Chapter II of the report and paragraph 203 of Chapter III of the report explain 
that China applies preferential enterprise inco me tax rates to FIEs (as opposed to domestic 
enterprises).  Is this program addressed in China’ s finalized but not yet fully translated subsidies 
notification?  If not, please provide the informati on described in Article 25.3 of the Subsidies 
Agreement for this program.  
 
Answer:   
 
Detailed information regarding the programs menti oned in the question is included in the Subsidy 
Notification China submitted to the WTO Comm ittee on Subsidies and Countervailing Measures.  
 Question:   
United States II
 
 
9.  Paragraph 89 of Chapter II of the report  and paragraph 203 of Chapter III of the report 
describe income tax exemptions and reductions for FI Es involved in manufacturing.  Is this program 
addressed in China’s finalized but not yet translated  subsidies notification?  If not, please provide the 
information described in Article 25.3 of th e Subsidies Agreement for this program.  
 
Answer:   
 Detailed information regarding the programs menti oned in the question is included in the Subsidy 
Notification China submitted to the WTO Comm ittee on Subsidies and Countervailing Measures.  
 
Question:  
 United States II
 
 10.  Paragraph 89 of Chapter II of the report , paragraph 203 of Chapter III of the report and 
paragraph 139 of Chapter IV of the report describe income tax exemptions and reductions for hi-tech 
FIEs.  Is this program addressed in China’s finalized but not yet translated subsidies notification?  If 
not, please provide the information described in Ar ticle 25.3 of the Subsidies Agreement for this 
program.   WT/TPR/M/161/Add.2 
Page 26  
 
Answer:   
 Detailed information regarding the program menti oned in the question is included in the Subsidy 
Notification China submitted to the WTO Comm ittee on Subsidies and Countervailing Measures.  
 
Question:  
 United States II
 
 
11.  Paragraph 89 of Chapter II of the report and paragraph 203 of Chapter III of the report explain 
that China provides tax exemptions for export-orient ed FIEs.  Is this program addressed in China’s 
finalized but not yet fully translated subsidies no tification?  If not, please provide the information 
described in Article 25.3 of the Subs idies Agreement for this program.  
 
Answer:   
 
Detailed information regarding the tax preferential t reatment programs for FIEs is included in the 
Subsidy Notification China submitted to th e WTO Committee on Subsidies and Countervailing 
Measures.  
 
Question:  
 
United States II  
 
12.  Paragraph 89 of Chapter II of the report explains that China provides value-added tax (VAT) 
refunds for FIEs that purchase domestically made e quipment.  Is this program addressed in China’s 
finalized but not yet fully translated subsidies no tification?  If not, please provide the information 
described in Article 25.3 of the Subs idies Agreement for this program.  
 
Answer:   
 Detailed information regarding the tax preferential t reatment programs for FIEs is included in the 
Subsidy Notification China submitted to th e WTO Committee on Subsidies and Countervailing 
Measures.  
 
Question:  
 
United States II
 
 
13.  Paragraph 90 of Chapter II of the report and paragraph 203 of Chapter III of the report refer to 
additional tax refunds and exemp tions for benefitting FIEs.  Are these programs addressed in China’s 
finalized but not yet translated subsidies notification?  If not, please provide the information described in Article 25.3 of the Subsidies Agreement for this program.   Answer:   
 Detailed information regarding the tax preferential t reatment programs for FIEs is included in the 
Subsidy Notification China submitted to th e WTO Committee on Subsidies and Countervailing 
Measures.  
  WT/TPR/M/161/Add.2 
 Page 27 
 
 
Question:  
 United States II
 
 
15. Paragraph 8 of Chapter III of the report stat es that China is trying to encourage the 
development of the non-public sector through grants  and other measures to ease access to finances.  
Are these programs addressed in China’s finalized but not yet translated subsidies notification?  If not, 
please provide the information described in Artic le 25.3 of the Subsidies Agreement for these 
programs  Answer:  Please refer to the Subsidy Notification China submitted to the WTO Committee on Subsidies and 
Countervailing Measures for existing assistance programs available for non-public sector.  
 
Question:  United States II
 
 
34.  Paragraph 186 of Chapter III of the report stat es that China continues to  encourage the use of 
locally produced inputs in exports.  If any of the meas ures is a subsidy used by China to encourage the 
use of locally produced inputs in exports, please e xplain whether it is addressed in China’s finalized 
but not yet fully translated subsidies notification.  If it is not, please provide the information described 
in Article 25.3 of the Subsidies Agreement for it.   
 
Answer: 
 
There is no Member in the WTO which does not encour age use of local products. The key lies in the 
obligation to abide by the relevant WTO rules at th e same time, in turning away from the pursuit of 
“import substitution” or use of “local content req uirements”. In this regard, China does not have 
problems. There are certain policies in the subsidi es notification China submitted that are concerned 
with the use of locally-made equipments. The rea son behind these policies is that the existing VAT 
system in China is still production-oriented inste ad of consumption-based. Th e fixed asset investment 
by enterprises in China is not subject to deduc tions in calculating VAT borne by the enterprises. 
Therefore, prior to the transformation of the VAT s ystem, some tax policies are devised to alleviate 
the tax burdens on the part of the enterprises in this  regard. In addition, in  the case where the same 
equipment is imported, it is also eligible for import VAT exemption. 
 
Question: 
 
United States II  
 
38. Paragraph 204 of Chapter III of the report states that China appear s to provide special 
preferences to priority sectors, including agricultu re, forestry, livestock and fisheries industries, 
transportation, energy, high technology industries,  industries that protect the environment, and 
“industries that use resources in an integrated manne r.”  Please describe the special preferences that 
are provided to these sectors.   Answer:   
 Detailed information regarding industry or sectoral  programs is included in  the Subsidy Notification 
China submitted to the WTO Committee on Subsidies and Countervailing Measures.  
 WT/TPR/M/161/Add.2 
Page 28  
 
Question: 
 
United States II
 
 
39. Paragraph 240 of Chapter III of the report refe rs to four programs providing assistance to 
small and medium-sized enterprises (SMEs), i.e., the “Fund for Supporting Technological Innovation 
for Technological SMEs,”  the “Development Fund for SMEs,” the “Fund for International Market 
Exploration by SMEs,” and the “Supportive Fund for SMEs on the Service System.”   a. Please describe the types of assistance provided by each of these programs.  
 
b. Are these programs addressed in China’s fi nalized but not yet translated subsidies 
notification?  If not, please explain.  
Answer:   
 
Detailed information regarding SMEs  related programs is included in the Subsidy Notification China 
submitted to the WTO Committee on Sub sidies and Countervailing Measures.  
 Question:  
Chinese Taipei
 
 
(page, 53, paragraph 81) 
 
The report states that: “Foreign investors in the ‘e ncouraged’ category are permitted to import capital 
equipment duty free.”  We would appreciate further details of how this scheme operates, as follows: 
 
ii)  We wonder also whether this duty-free scheme may be considered “revenue foregone”, benefiting 
as it does those “encouraged” ente rprises specifically, which would make it a subsidy subject to 
notification under Article 25 of the SCM Agreement.   Further clarification from China on this point 
would be most welcome. 
 
Answer:   
 Detailed information regarding the program menti oned in the question is included in the Subsidy 
Notification China submitted to the WTO Comm ittee on Subsidies and Countervailing Measures.  
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 (1) I
NTRODUCTION  
 
Question: 
 Canada I
 
 Part III. Trade Policies and Practices by Me asure, (1) Introduction, paragraph 1: 
 16.  What tools are used to provide “guidance” fo r prices and to channel credit into and away from 
certain sectors?   
  WT/TPR/M/161/Add.2 
 Page 29 
 
 
Answer: 
 The market determines the prices of almost a ll goods and services in China. There is no government 
intervention in the pricing of these goods and servi ces and therefore no “guidance” exists in this 
regard. Only a very small part of the goods and servi ces in China are subject to government-guided 
prices according to the Price Law. The Price Law sa ys that “government-guided price” refer to those 
prices that the competent authorities determin e a benchmark price and the floating range in 
accordance with their mandate. The determinati on and adjustment of “government-guided price” 
must be carried out according to the procedures written in the laws and regulations, covering such 
processes as price and cost investigation, supply and demand consideration, soliciting the opinions of 
consumers, businesses and other relevant parties, giving public notices on the media, etc. For more 
information, please refer to the Price Law of th e People’s Republic of China. The WTO Secretariat 
has the English version.   As to the tools used to channel credit into or away specific sectors, the authorities adopt “Window 
Guidance” under the credit policies, and interest discount was also used. Currently the Chinese 
government offers fiscal interest rate discount fo r banks lending to laid -off workers, government-
subsidized loans to students, and poverty relief loans  in order to channel the credit to these fields. 
Intensified “Window Guidance” aims to remind the commercial banks of the ri sks from credit input to 
industries with excessive producing capacity. In the future, self-discipline of the industries will be 
emphasized in order to exert an impact on the flow of credit to different sectors by means of better 
information disclosure and business suggestions.    
(2) Measure directly affecting imports 
 (i) Procedures 
 
Question:  United States II
 
 
16.  Paragraph 16 of Chapter III of the report  discusses data provided by the Chinese authorities 
reflecting a sharp increase in the number of rejections of administrative appeals of decisions taken by 
the General Administration of Customs (Customs  Administration), from 23 percent in 2003 to 55 
percent in 2003 and 60 percent in 2004.   a. How many appeals were rejected in absolute numbers in 2002, 2003 and 2004? 
 
Answer: 
 According to our understanding, appeal means admin istrative reviews carried out by the Customs 
and rejection means competent authority of admin istrative review does not support applicant’s 
request and maintain the original administrative decisions. In 2002, 2003 and 2004, the number of 
cases rejected was 344, 483 and 426 respectively.   
Question: 
 United States II
 
 
16. c. How many of the rejected appeals during this time period were appealed to the People’s 
Court? 
 WT/TPR/M/161/Add.2 
Page 30  
 
Answer: 
 From 2002 to 2004, 352 rejected appeals for adminis trative reviews were appealed to the People’s 
Court.  
 
Question:  Costa Rica
 
 
8. ¿De conformidad con el procedim iento aduanero cuál es el plazo que tiene la Autoridad Aduanera 
para realizar modificaciones a la obligación tributaria  aduanera en el control a posteriori, esto es, una 
vez que se ha autorizado el acto por el cual la A duana le permite a los in teresados disponer de las 
mercancías que son objeto de un despacho (levante)?  
 
Answer: 
 
Due to language barrier problems, it is not quite cl ear to us what the question actually means. We 
would be grateful if the question could be rephrased.  
 Question:  
Costa Rica
 
 
9. ¿Cuál es el plazo con que cuenta el administrado para rectificar sus declaraciones aduaneras cuando 
ha consignado información incorrecta o con omision es, cuáles son los requisitos que se establecen al 
respecto?  Answer: 
 After the declaration on imported or  exported products is accepted by  the Customs, the declaration 
paper cannot be modified nor withdrawn unless such  request can be justified. If reasons for 
modification or withdrawal are justifiable, upon application and approval, the application can be 
modified or withdrawn. 
 
Question:  Costa Rica
 
 
10. ¿Cuál es el procedimiento para la presentación de la declaración aduanera?  ¿Es factible la 
transmisión electrónica? 
 
Answer:  
Consignee of imported products or consigner of exp orted products can either choose to declare to the 
Customs by themselves or to entrust a customs br oker to declare to the Customs. Consignee of 
imported products, consigner of ex ported products or the entrusted customs broker should provide the 
concerned documents and fill in the declaration pap er according to the published requirements and 
send in electronic format to the Customs.  
 
Question:  India II
 
 
Q2. At some ports, customs officials insist on amendm ent of the entire set of documents if there is  WT/TPR/M/161/Add.2 
 Page 31 
 
 
over-landing or short landing of break bulk cargo (loo se cargo in cartons).  At other ports there is no 
such requirement of document ame ndment.  Would China consider adopting a uniform system at all 
its ports for clearance of goods?   
 
Answer: 
 
The Chinese Customs implements a uniform clearanc e system across the country. As for over-landing 
or short landing of bulk cargo, it is stipulated  in the Measures of the Customs of the People’s 
Republic of China on Administration of Taxation on Import and Export of Goods that if the quantity 
of over-landing or short landing of a bulk cargo is with in 3% of the indicated quantity in the contract 
or invoice, the bulk cargo is taxed according to the indicated quantity in the contract or the invoice. 
However, when the quantity of over-landing or sh ort landing of a bulk cargo is over 3% of the 
indicated quantity in the contract or invoice, the bulk cargo is taxed according to the actual quantity 
of the cargo. Therefore, whether th e entire set of documents should be amended or not is due to the 
“3% standard”, not discretion.  
 
Question:  India II
 
 
Q.3 Indian re-exporters, who buy imported raw mate rial and convert it to finished products and 
export out of China, are allowed to import raw materi al only through a specified port.  If they operate 
through other ports, they have to follow extremely difficult procedures to avail duty free clearance of 
cargo.  This problem is further accentuated by th e limited transport links between India and China, 
which do not allow free choice of ports for landing.  Indian companies are often the worse affected.   
Would China clarify its stand on this issue and seek to usher in system where the port restrictions on 
import are abolished?   
 
Answer:  The question relates to the coordination of destinat ion Customs and import Customs in the process of 
Customs transfer. According to the related ru les concerning Customs transfer, if consigners, 
consignees or their agents for import goods request to go through Customs procedures at Customs in 
Charge which is near them, after approval, they co uld manage it via Customs transfer procedure. 
Port Customs send data concerning tr ansportation and goods to the Cu stoms in Charge via computer 
network, and then things like bill receipt and dut y levies could be done after the goods are 
transported to the destination area. Consigners, consignees or their agents for import goods could 
also choose direct transfer or stop-over transfer, and they do not need to provide document of 
confirmation by destination Cust oms to import Customs in these two kinds of transfers. From 2005 
on, Customs in China initiated the reform of “Regional Customs Clearance”, with its aim of further simplifying supervising procedures in the process of transfer and raise efficiency of Customs 
clearance. According to the principle of fac ilitation for law-abiding enterprises, law-abiding 
enterprises could go through Cu stoms in the way of “declaring at residential Customs while 
inspection and clearance at port Customs”. Those en terprises could declare at their residential 
Customs and are free to choose any port Cu stoms for inspection and clearance. 
 
(ii) Tariffs  
 
Question: 
 Japan
 
 
Q8.(1)  Concerning the specific duties that China applied to certain products  that exceed their bound 
rates, please explain how China considers this consistent with the WTO Agreement and whether WT/TPR/M/161/Add.2 
Page 32  
 
China has any plans to take any measures to en sure compliance with its commitments under the 
GATT Article II (Concession Schedule). 
 
Answer: 
 
WTO Agreement does not restrict Me mbers to certain types of tar iffs to be levied, nor does it 
stipulates that tariffs can only be levied in the same type as committed in Members’ schedules. What 
is required is to make sure that  the tariffs levied do not exceed the level of a Member’s bound rates. 
Therefore, a Member is entitled to levy specific duties on certain products even if it made its 
commitments in the form of ad valorem duties in its Schedule. Although AVE has been and is 
currently well below committed level in the Schedule,  China has held several consultations with the 
parties concerned for technical discussion and clarifica tion. We did careful calculations and gave due 
consideration to the statistics provided by the parties concerned. In 2003, under the strong and 
enduring request, China took great efforts to low er the rates of specific duties for 35 products. It 
clearly shows the willingness and initiative of th e Chinese government to cooperate with WTO 
Members in face of differences.  
 Question:  Japan
 
 Q8.(2)  Please indicate the HS codes, descriptions and specific duties of the 49 items that have applied 
specific duties which exce ed their bound duties. 
 
Answer:  
China has not levied specific duties wh ich exceed their bound rate on any item.  
 Question:  Japan
 
 Q9. Japan appreciates that China has established GSP schemes for LDCs.  In this regard, please 
indicate whether China has certain concrete  plans to improve the GSP scheme or not. 
 
Answer:  
At present, assistance provided to LD Cs by the Chinese government includes: 
 1. China will give duty-free treatment to products from the 39 LDCs that have diplomatic relations 
with China, covering most China-bound exports from those countries.  
 2. China will further expand its aid programs to the Heavily Indebted Poor Countries (HIPCs) and 
LDCs. Through bilateral arrangements over the next tw o years, we will write off all the overdue parts 
as of year-end 2004 of our concessionary loans owed  by HIPCs having diplom atic relations with 
China.  
 3. Over the next three years, China will pr ovide US$10 billion in concessionary loans and 
preferential credits to developing co untries to improve infrastr ucture development and promote 
business partnership.  
 4. China will provide more medical assistan ce to developing countries by supplying more anti-
malaria drugs and other medicines, building medica l facilities and training medical staff. Specific  WT/TPR/M/161/Add.2 
 Page 33 
 
 
programs will be implemented through such mec hanism as the Forum on China-Africa Cooperation 
as well as bilateral channels.  
 5. China will contribute more in human resources development by committing itself to train 30,000 
personnel of various professions for devel oping countries over the next three years.   
 
Question:  Thailand
 
 6.  Paras 19 – 20: Does China publish its interim ta riff rates in advance? If so, what information is 
included in the publication, for e.g., does it specify the period of application for each interim tariff? 
 
Answer:  
The Chinese government publishes its interim tariff in advance each  year. Application period for 
interim tariff is one year. Interim tariff is in cluded in the Import and Export Tariff of the People’s 
Republic of China an annual  government publication. 
 
(iii) Other charges affecting imports 
 
Question:  
 Switzerland
 
 
How do you justify the fact that the inward duty rate  can be higher than the MFN applied rate? Is the 
inward duty rate higher than the bound rate? If yes,  this would be a breach of WTO obligation under 
article II GATT and should be remedied without delay. 
 
Answer:  Inward duty is a combined tax wh ich includes import tariff, impo rt VAT and excise, so the inward 
duty rate is inevitably higher than the MFN applied ra te, which indicates solely tariff. Inward is 
levied on goods carried by passengers themselves or transported via mail, the amount of which 
exceeds a reasonable level or the level of personal use.  
 
Question:  
 
Switzerland I
 
 
Para 39. We have been informed that China will introduce a new tax on luxury watches at the rate of 
20% from April 1, 2006. Could China confirm that this new tax is an excise tax? Are domestically 
produced luxury watches also touched by this measure?  
 
Answer: 
 China started to levy an excise tax on luxury watches as  of 1 April 2006. Products subject to this tax 
are watches of various kinds that are priced at ten thousand RMB yuan (10,000 RMB yuan) or above 
per piece (VAT not included), including both local and imported luxury watches.  WT/TPR/M/161/Add.2 
Page 34  
 
(iv) Customs valuation and rules of origin 
 Question:  United States II
 
 
20. Paragraph 43 of Chapter III of the report discu sses appeals of Customs Administration decisions 
in the area of rules of origin.  The report also  explains that the Customs Administration does not 
maintain statistics on these appeals.  
b. In the interest of increased transparency , would China consider collecting and making 
available statistics on these appeals and their outcomes? 
 
Answer:  
The Customs of China does not keep data of administr ative appeals or reviews in this regard. China 
takes note of the comment.  
 Question: 
 India II
 
 Q.1 Customs officials continue to use minimum refe rence price instead of actual transaction price 
for valuation of goods.  This makes customs valua tion unpredictable and uncertain and consequently 
affects imports.  Furthermore, the valuation procedur e followed at different levels  (national and sub-
national) is not uniform, as a result of which, th e duty on products becomes subject to negotiations 
between traders and customs officials leading to indirect cost5s, proliferation of middlemen and time 
delays.  In addition, depending u pon the port of entry the same product may be subject to case-by-case 
determination of customs value.  Would China cons ider streamlining their customs valuation system? 
 
Answer: 
 
Customs valuation applied by the Chinese Customs is transparent, open and uniform. Major laws and 
regulations related to customs valuation include th e Customs Law of the People’s Republic of China, 
The Rules of General Administration of Customs of  the P.R.C. Regarding Determination on Customs 
Valuation of Imported and Exporte d Goods, The Customs Regulations of the P.R.C. Regarding 
Determination on Customs Value of Royalties and Li cences Fees Related to the Imported Goods and 
Customs’ Decree No.66 and No.67 of 2003 wh ich were published on December of 2003 in 
accordance with the Agreement on Implementation of Article VII of GATT 1994.  Question:  Costa Rica
 
 
11. En el informe de la Secretaría (página 92 en español) se señala que con arreglo a las Medidas de la 
Administración General de Aduanas sobre la aplicac ión de la Ley de Revisión Administrativa pueden 
recurrirse las decisión sobre el origen adoptadas por la Administración de Aduanas ¿Cuál es la fase 
recursiva al respecto, esto es, cuáles recursos  caben contra ese acto y cuál es su trámite? 
 Answer: 
 In case of failure in passing Customs examination on import or export due to  dispute on origin, 
importers or exporters can apply for administrative reconsideration (review) according to the Law on  WT/TPR/M/161/Add.2 
 Page 35 
 
 
Administrative Reconsideration, or bring a suit before the court pursuant to the Administrative 
Procedure Law. 
 
Question:  
Costa Rica
 
 
13. ¿Las disposiciones relevantes para el sector comercial (leyes, reglamentaciones, circulares, resoluciones), se encuentran disponi bles en Internet?  ¿Se encuentran disponibles tales disposiciones 
en alguno de los idiomas oficiales de la OMC? 
 
Answer: 
 Trade related laws, regulations, measures or  government announcements are available on 
government websites, i.e. the websites of the cen tral government and MOFCOM. At present, all the 
laws enacted by the National People’s Congress and its Standing Committee and all the regulations 
enacted by the State Council since 1979 are transla ted into English. As for ministerial measures 
which should be notified to the WTO as an obligati on, the ministries or agencies of the central 
government will translate the measures and the Ministry of Commerce will be responsible for 
notification to the WTO.  
(v) Import restrictions 
 Question:  United States II
 
 
21. Paragraph 52 of Chapter III of the report explai ns that an application for an import license 
under the Measures on the Administration of Import licen ses for Goods may be refused if the Ministry 
of Commerce (MOFCOM) believes the asserted justif ication for importation is “unconvincing.”  The 
report further explains that an importer may app eal an adverse MOFCOM decision, but the Chinese 
authorities do not keep statistics on appeals or their outcomes. 
c.  In the interest of increased  transparency, would China consider collecting and making available 
statistics on these appeals and their outcomes? 
 
Answer: 
 
MOFCOM does not keep data of administrative appeal or review in this regard. China takes note of 
the comment.  
 Question:  United States II
 
 
23. In paragraph 58 of Chapter III of the report, the Secretariat explains that disputes arising from 
decisions made by MOFCOM and its provincial an d local offices on automatic import licensing are 
subject to mediation and that a party dissatisfi ed with the mediation outcome can appeal for 
administrative reconsideration with MOFCOM or take  an appeal to a court.  However, the report 
states that the Secretariat could not identify the ru les governing these disputes.  The report adds that 
the Chinese authorities do not collect any statistics on these disputes. b. In the interest of increased transparency , would China consider collecting and making 
available statistics on disputes in this area, incl uding the outcomes of mediation, administrative 
reconsideration and appeals?  WT/TPR/M/161/Add.2 
Page 36  
 
Answer: 
 MOFCOM does not keep data of administrative appeal or review in this regard. China takes note of the comment.  
 
Question: 
 Australia 
 
 
4.(c) Could China provide details of the import licen sing regimes – including, for example, the nature 
and purpose of the measures implemented by th e import licensing regime and the applicable 
restrictions on eligibility to receive import licenses – that are operated in relation to the following 
products: 1.Iron ore; 2.Alumina; 3.Copper. 
 
Answer: 
 
All the three products listed above are subject to automatic import licensing. The automatic import 
licenses for alumina and cooper are issued by Quota and License Administrative Bureau of 
MOFCOM, local commissioner offices of MOFCOM  in 16 provinces or Commissions of Commerce 
(or of Foreign Economic Relations and Trade) at th e provincial level. The automatic import license 
for iron ore is issued by Quota and License Admi nistrative Bureau of MOFCOM or Commissions of 
Commerce (or of Foreign Economic Relations a nd Trade) at the provincial governments.  
 
Question: 
 India
 
 
Q6.  In February, 2005 the Chinese Ministry of Commerce notified a plan to implement 
Automatic Import Permit Management System for Iron Ore from 1st March, 2005. This marked a 
change in Chinese policy on imports of iron ore, wh ich were hitherto not subject to any permit or 
licensing system. In a meeting with the Chinese Mini stry of Commerce in February, 2005, India had 
specifically asked about the criteria and the modalit ies of the implementation of the Import Permit 
Management System but no satisfactory reply was r eceived. The Indian industry apprehends that 
through this notification, Chinese Government has r estricted import licenses to 48 traders and 70 steel 
producers. The list of these traders and steel producer s has not been made public so far. Would China 
clarify its position on Automatic Import Permit Management System for Iron ore since it is a major 
NTB faced by Indian iron ore exporters?  Answer:  Automatic import licensing is required for produc ts whose import information and import data are 
collected for trade monitoring. What India asks see ms not related to automatic import licensing, but 
an industry self-discipline measures carried out by industrial associations. Please refer to China Iron 
and Steel Association for more information,  the website is www.chinaisa.org.cn.  
 Question:  Turkey
 
 
In the Secretariat Report it is underlined that accord ing to China’s notification to the WTO, if the 
justification for importation is believed to be “ unconvincing” the application may be refused. Could 
Chinese delegation explain what is  meant by “unconvincing”  
  WT/TPR/M/161/Add.2 
 Page 37 
 
 
Answer: 
 Import license administration is only imposed upon ch emicals that can be used to produce chemical 
weapons or narcotics and ozone depl eting substances. Therefore, importers have to show that their 
imported goods will not be used for illicit purpose when applying for the license.  
 
Question: 
 Mexico II
 
 13. En el párrafo 36 de la pagina 73, se estipula el caso de que en casos especiales se puede importar 
insumos libres  de arancel y exportar. ¿que pasa si se quedan en China, pagan todo el arancel de bien 
o unicamente el arancel de los insumos importados? 
 
Answer: 
  
When the products manufactured for processing trade  are not exported, tariff will be levied. For 
finished products manufactured by enterprises estab lished in the export-processing zone, the Customs 
only levies import duty on the raw materials of the finished product if the product is to be imported. 
For finished products manufactured by enterprise s with the qualification to engage in processing 
trade but not established in the export-processing z one, the Customs levies import duty on the finished 
product.   
Question: 
 Argentina
 
 
3. En la página 94, párrafo 48, el informe hace re ferencia a que desde su adhesión a la OMC, China ha 
introducido varios cambios en su régimen de licen cias de importación, pero que éste sigue siendo  
intrincado y opaco. ¿Tiene previsto el gobierno cont inuar con el proceso de reforma de este sistema a 
fin de mejorar y transparentar su funcionamiento? 
 
Answer: 
 The Chinese government does not regard its impor t license regime complex and opaque. At present, 
China applies import license only to products of cont rolled chemicals that can be made into narcotics 
or chemical weapons, and ozone depleting material s. For other products whose import statistics are 
collected for purpose of trade monitoring, Ch inese government implements automatic import 
licensing. All the related laws, regulations or measures have been notified to the WTO.  
 Question:  Argentina
 
 
6.  En la página 240 párrafo 106, el informe señala que, según el CNTAC (Consejo Nacional de la 
Industria de los Textiles y las Prendas de Vestir de China) existen restricciones cuantitativas a la 
importación de materias primas para el sector de los textiles y las prendas de vestir, consistentes en 
contingentes arancelarios para el algodón y que el  mismo CNTAC ha cuestionado el fundamento de 
dichos contingentes. ¿El gobierno contempla la pos ibilidad de eliminar estos contingentes para el 
futuro? 
 
Answer: 
 
The Chinese government has no plan to abolish TRQ on cotton.   WT/TPR/M/161/Add.2 
Page 38  
 
 
Question: 
 Costa Rica
 
 7. La Ley de Comercio Exterior (2004) de Chin a establece que el comercio de Estado para algunos 
productos se realiza, entre otras razones, para asegur ar el suministro interno, estabilizar los precios, 
salvaguardar la seguridad alimentaria, proteger el me dio ambiente y los recursos agotables. ¿A  través 
de que instrumentos de políti ca se procuran estos objetivos? 
 
Answer: 
 These objectives are achieved through state trading.  
 
(vi) Trading rights 
 
Question:  Turkey
 
 
As stated in the Secretariat Report, under the “Rul es for the Registration of Foreign Trade Operators” 
foreign traders engaged in the impor t and export of goods or technologi es are required to register with 
MOFCOM or authorized bodies. Could Chinese delega tion explain what does registration of foreign 
traders serve for? Is there any plan to abolish this requirement of registration? What are the 
formalities required for registration?   
 
Answer: 
 Rules for Registration of Foreign Trade Operators wa s enacted and came into force on 1 July 2004 as 
required by the revised Foreign Trade Law of the Pe ople’s Republic of China of 2004 to implement 
the accession commitment to liberalize trading ri ght within 3 years after WTO accession. The 
registration of foreign trade opera tors serves the purpose of statisti cs and information collection and 
facilitation of customs procedures, and there is no approval or verification requirement. At present, 
China does not have any plan to abolish this registration system.  As for information required in the registration proc ess, please refer to the Rules for Registration of 
Foreign Trade Operators, of which a full text E nglish translation was provided to the WTO Council 
for Trade in Goods when the Council had its an nual China transitional review in November 2004.  
 
Question:  Chinese Taipei
 
 
In page 81, paragraph 61, in light of the statement “Any liberalization in distribution services is to be 
carried out in accordance with China’s schedule of specific commitments in the GATS.”, some further 
clarification from China on the following aspects would be appreciated: China committed to allow 
wholly foreign-owned companies to engage in  distribution services before 11 December, 2004.  
According to China’s “Administrative Measures on Foreign Investment in the Commercial Sector”, 
issued after the US-China Joint Commission on Co mmerce and Trade (JCCT) meeting in April 2004, 
wholly foreign-owned companies are allowed to  engage in wholesale trade services, commission 
agents’ services, retailing services, franchising, and maintenance and repair services. However, the 
procedure for applying for the various kinds of operating rights of distribution services remains 
unclear.     WT/TPR/M/161/Add.2 
 Page 39 
 
 
We should be grateful for further clarification fro m China of the relevant application procedures for 
foreign distribution services suppliers? 
 
Answer:  
Administrative Measures on Foreign Investment in the Commercial Sector was formulated and 
published as MOFCOM Decree No. 8 of 2004 to im plement China’s accession commitment regarding 
the distribution sector. The distribution sector of China has already been very open. China believes 
that relevant provisions regarding the licensing requirement in the Administrative Measures on Foreign Investment in the Commercial Sector are de tailed and clear. China has no plan to formulate 
an implementing rule for the Administrative Meas ures. Nor does China deem it necessary to do so. 
 Question:  Chinese Taipei
 
 
According to Article 33 of the “Administrative Measures on Commercial Franchising Operations”, 
issued by China’s Ministry of Commerce in Decembe r 2004, after foreign-invested enterprises (FIEs) 
that intend to engage in commercial activities by franchising apply to expand  their business scope to 
include “engaging in commercial activities by franc hising”, and receive approval by the relevant 
registration agency, then “FIEs shall register w ith the Administration for Industry and Commerce for 
amendment to their registrations within one m onth after the receipt of the new FIE approval 
certificate.” Could China please advise how much time is required for the amendment to the 
registration of an FIE to be approved?  
Answer: 
 
FIEs that intend to engage in commercial ac tivities by franchising shall apply to expand their 
business scope to include “engaging in commercia l activities by franchising” with the foreign 
investment administration authorities. After appro ved by the foreign investment administration 
authorities, the FIEs then shall register with the Administration for Industry and Commerce for 
change of their business scope. The later is a registr ation procedure, not an approval procedure and 
it takes no more than 30 days as long as all the documentation meets the published requirement.  
 Question:  Thailand
 
 
7. Para 61:  Please provide the latest status on the liberalization of the scope and availability of trading 
rights granted to foreig n invested enterprises.  
 
Answer:  
The Chinese government liberalized trading rights on 1 July 2004 . Foreign trade operators only have 
to register with competent authoriti es in order to involve in foreign  trade. For details, please refer to 
Rules for Registration of Foreign Trade Operators which was enacted and came into force on 1 July 
2004 as required by the revised Foreign Trade Law of  the People’s Republic of China of 2004 to 
implement the accession commitment to liberalize tr ading right within 3 years after WTO accession. A 
full text English translation of the rule was pr ovided to the WTO Council for Trade in Goods.  
 WT/TPR/M/161/Add.2 
Page 40  
 
Question: 
 Indonesia
 
 
3.  Indonesia fully understands that China impos es tariff rates for certain products for specific 
purpose. However, Indonesia has a grave concern on the imposition of tariff rate quota on palm oil 
which is of great interest to Indonesia. Indonesia needs to have justification on the idea behind this 
imposition on this particular product.  
Answer: 
 
During the Uruguay Round negotiation and China’ s accession negotiation in mid 1990s, there was a 
tremendous gap between the impor t and domestic price of vegetable oil and this phenomenon to a 
great extent distorted the domestic market and aff ected peasants’ livelihood. Therefore, Chinese 
government decided to implement TRQ on vegetable o il with reference to Uruguay Round negotiation 
module. After negotiation, China has agreed to abolish TRQ on vegetable oil within 5 years of 
accession. On Jan 1
st 2006, China abolished TRQ on vegetable oil, including palm oil. 
 (vii) State trading  Question: 
 
Switzerland
 
 
Para 65 also mentions that the review of the annua l growth in volume of processed oil imported by 
non-state trading enterprises has not taken place, one of the reasons being the inability to collect the 
data. Could the Chinese delegation please also elaborate on this issue.  
Answer: 
 Since accession, no complaint was raised with regard to Chinese government’s implementation of the 
accession commitment on expansion of import volume of non-state trading processed oil.   
Question: 
 Argentina
 
 
9. En la página 101, párrafo 64, el informe hace re ferencia a que, en virtud de la Ley de Comercio 
Exterior de 2004, determinados productos pueden ser objeto de comercio de Estado. ¿Podrían 
informarnos cuales son esos productos? 
 
Answer:  Please refer to Annex 2A/B of the Protocol on China’s Accession into the WTO.  
 
Question:  Argentina
 
 
10. En la página 92, párrafo 46 se menciona que la  Ley de Comercio Exterior permite a la autoridad 
competente de comercio Exterior del Consej o de Estado dictar prohibiciones o restricciones 
temporales a las importaciones de determinados productos. En la nota al pie el informe indica que China no tiene una lista completa de dichas prohibi ciones porque las autoridades afirman que todavía 
no han concluido su elaboración. ¿Cuándo piensa Chin a que podrá tener por concluida dicha lista?,  WT/TPR/M/161/Add.2 
 Page 41 
 
 
¿Puede China adelantar y establecer cuales son los criterios que establece la ley para ordenar dichas 
prohibiciones? 
 
Answer:  
The interim bans or prohibitions mainly cover deci sions by the Chinese government pursuant to the 
binding decision of international organizations, su ch as UN resolution, or SPS measures. There is no 
such list according to which the Chinese go vernment carries out interim prohibition.  
 Question: 
 
Argentina
 
 
9. En la página 101, párrafo 64, el informe hace re ferencia a que, en virtud de la Ley de Comercio 
Exterior de 2004, determinados productos pueden ser objeto de comercio de Estado. ¿Podrían 
informarnos cuales son esos productos? 
 
Answer:  As for non-state trading enterprises that involve in  the trade of non-state trading portion of products 
subject to state trading, the Chinese government publishes the relevant qualifications for becoming 
such an enterprise every year and enterprises can appl y to involve in the trade of non-state trading 
portion of products subject to state trading.  (viii) Contingency measures  
Question: 
 Japan I
 
 (p.83, paragraph 67) 
 Since the initiation of an investigation itself may cause an excessive burden on respondents, the 
authority should scrutinize the ac curacy and adequacy of the evid ence provided in the application 
before the initiation of an investigation, pursuan t to Article 5.3 of the ADA.  For example, the 
Ministry of Commerce (MOFCOM) initiated the i nvestigation concerning nucleotide food additives 
on 12 November 2004, based upon data  contained in the application.  However, as shown in the letter 
submitted by the Government of Japan on 4 January  2005, the alleged upward trend in exports from 
Japan did not exist; on the contrary, actual exports from Japan have steadily decreased.  
Q11. Please indicate concretely in what way the au thority examined the accuracy and adequacy of 
data provided in the application. 
 
Answer: 
 
Chinese investigating authorities conduct examinations into whether or not the applications contain 
evidences for initiating anti-dumping investigations as required by the Regulations of the People’s 
Republic of China on Anti-dumping, as well as re liability and creditworthiness of the said evidences. 
 
Question: 
 Canada I
 
 
Paragraph 68 states that Chinese regulations for provisional measures provide that such measures, 
“may not exceed four months from the effective da te set forth in the public notice regarding the WT/TPR/M/161/Add.2 
Page 42  
 
decision on provisional anti-dumping measures and, in  special circumstances, may be extended to 
nine months.” However, Paragraph 69 states that, “[t]here is no provision in the Regulations for a 
specific time limit for provisional measures”. Can Ch ina please clarify its regulation for the duration 
of provisional anti-dumping measures?  
 
Answer: 
 Our understanding is that Paragraph 69 refers to the fa ct that there is no provision in anti-dumping 
review procedures concerning a specific time limit for pr ovisional measures, or in other words, there 
are no procedures of preliminary determination for the reviews. 
 
Question: 
 Brazil
 
 In paragraph 71, on page 84, the S ecretariat´s report informs that 52 out of 79 of the investigations 
initiated in China during the period 2002-2004, or 66%,  ended up in the application of final measures, 
or definitive anti-dumping duties as result of fi nal determinations, as Br azil understands it. In 
Chart III.6, on page 85, the report splits that information yearly.  Could the Chinese Government supply further info rmation on the number of applications for anti-
dumping which were made in the period 2002-2005? How many investigations out of the 30, 22 and 
27 initiated in 2002, 2003 and 2004, respectively, were  object of provisional measures? What is the 
percentage of anti-dumping provisional and final de terminations that were based on facts available 
during the mentioned period, on annual basis? Would it be possible for China to identify a trend on the mentioned proportions in a) (investigations  / applications), b) (provisional measures / 
investigations), and c) (facts available / provisiona l measures and facts available / final measures)?  
 
Answer:  (a) Please refer to China’s notification to th e WTO Committee on Anti-dumping Measures for 
situations concerning anti-dumping case-fili ngs by Chinese investigating authorities.  
(b) With regard to cases wherein applications w ere filed by domestic enterprises but no case-
filings were established by the investigating aut horities, it is understood that they are within 
the coverage of confidentiality in accor dance with the WTO Anti-dumping Agreement.  
(c) In 2002, 2003 and 2004, 27,  21 and 22 cases out of th e 30, 22 and 27 anti-dumping 
investigations are made objects of pr ovisional measures respectively.  
(d) With regard to the proportion of preliminary /final determinations that are based on facts 
available, the Chinese side is not sure whether this question implies t hat both the margin of 
dumping and the anti-dumping duty rate of a certain enterprise concerned are determined solely on the basis of facts available, or a certain item or part of the materials are based on 
facts available in the determinations. In the c ourse of investigations, as long as the concerned 
enterprises cooperate thoroughly with the inves tigating authorities, the latter would not base 
their determinations on facts available.  
(e) The Chinese side is not in a position to make judgments on the trend on the mentioned 
proportions. 
  WT/TPR/M/161/Add.2 
 Page 43 
 
 
Question: 
 Japan I
 
 (p.86, paragraph 74) 
 
Q14. Please explain the consistency of the measures to use adverse facts available orapply at most 
more than 100% of uniform margin and high all othe rs’ rates which are not based on Article 9.4 (ii), 
and without sending questionnaires to exporters w ho did not fulfill an appearance notice, including 
"the known exporters or producers" men tioned in the petitioner’s application. 
 Answer:  
 Having made the announcement to initiate anti-dumping investigations, China will immediately issue 
a case-initiation notice to the relevant stakeholders  as has been listed out in the case-initiation 
applications. Meanwhile, it will issue an anti- dumping questionnaire to listed foreign exporters and 
producers. A margin of dumping and anti-dumping duty rate will be determined for individual 
companies who have responded to and submitted the questionnaire in announcing the determination. 
Only those companies who have failed to respond to the questionnaire will have their respective 
dumping margin and rate and anti-dumping duty determ ined on the basis on “facts available” as 
provided for by Article 6.8 of the WTO Anti- dumping Agreement. The above practices by Chinese 
investigating authorities are in conformity with the relevant provisions in the WTO Anti-dumping 
Agreement. 
 In addition, Article 9.4 (ii) of the WTO Anti- dumping Agreement refers to how to determine the 
dumping margin and anti-dumping duty rate of the enterprises that are not chosen by the 
investigating authorities in their samplings. It is diff erent from the case provided for in Article 6.8. 
 Question:  EC
 
 WTO Secretariat’s Report, page 115, para 187: subsidy notification: China’s promise in the last WTO 
Subsidy Committee to submit its subsidy notification before the end of 2005 is mentioned as well as a 
statement by the Chinese authorities that the notifi cation was being finalized and submitted before the 
end of January 2006. So far no no tification has been received.  
 
Can China please advise when it finally will submit its subsidy notification? 
 
Japan I
 
 (p.86, paragraphs 73-76)  
 Q15. Japan is concerned that China has not ye t submitted a subsidy notif ication as required under 
Article 25 of the SCM Agreement.  Please indicat e when a full notification will be submitted? 
 
Canada I
 
 Part III. Trade Policies and Practices by Measure, (4) Measures Affecting Production and Trade, (ii) 
Incentives, (a) Direct transfers and subsidies, paragraph 187: As noted in paragraph 187, China has not notifie d its subsidies, pursuant to Article 25.1 of the 
Agreement on Subsidies and Countervailing Measures,  since acceding to the WTO. Although we note 
that Chinese authorities endeavoured, in the contex t of this review, to provide a new and full WT/TPR/M/161/Add.2 
Page 44  
 
notification before the end of January 2006, we ha ve not seen that notification yet.  Could China 
provide an indication of when we can expect th e submission of this new and full notification? 
 
Australia
 
 
13. We encourage China to provide its notification under Article 25.1 of the SCM Agreement as soon 
as possible, if it has not done so already.  
Turkey
 
 
WT/TPR/S/161 (page115, para 187)  III. TRADE POLICIES AND PRACTICES BY MEASURES  (4) Measures Affecting Production and Trade  
 
(ii) Incentives 
 
(a) Direct transfers and subsidies  The Secretariat Report mentions that “Since accedi ng to the WTO, China has made no notifications 
under Article 25.1 of the WTO Agreement on Subsidi es. According to the most recent statement by 
China to the Committee on Subsidies and Counter vailing Measures in November 2005, China will 
make all efforts to submit before the end of the year”   Could China give information if she has any pros pect about the time that she will provide these 
notifications? 
 
Mexico I
 
 Subsidios 
 En el marco de la Organización Mundial de Comercio en relación con el Acuerdo sobre Subvenciones 
y Medidas Compensatorias, surge la inquietud de establecer cómo se regulará  el caso específico de 
las subvenciones respecto de los productos exporta dos por la República Popular China en condiciones 
de otorgamiento de contribuciones financieras directas o indirectas a sus diversas entidades que intervienen en el comercio y que representan un be neficio para disminuir sus costos productivos, 
siendo esta una práctica común en dicho país. Lo anterior, surge debido a la afectación por dicha 
práctica desleal de comercio exterior a diversas ramas de nuestra producción nacional.  Entendemos que el gobierno chino no ha notificado ningún subisidio conforme al 21.5 del ASCM. En 
la reunión pasada del Comité sobre Subsidios se les reclamo que no hayan cumplido con sus 
obligaciones. En el texto del informe de la Secret aría se señala en la parte correspondiente que: 
 
187. There are no precise figures on the magnitude of subsidies provided by the government, many 
of which are in the form of indirect incentives.   In 2000, China notified its subsidies (under 
Article XXV of the Agreement on Subsidies and Countervailing Measures) to the Working Party, 
while negotiating accession to the WTO.   The subsidi es include:  direct transfers from the central and 
local government budgets to certain loss-making SO Es;  subsidized loans based on a company's 
export performance in the automobile sector;  tariff preferences for locally produced cars;  subsidies 
for poverty alleviation and regional development;  and certain tax and tariff preferences extended to 
special economic and other developm ent zones and for foreign-invest ed enterprises (Table AIII.6).  
Since acceding to the WTO, China has made no notifications under Article 25.1 of the WTO Agreement on Subsidies.  According to the most  recent statement by China to the Committee on 
Subsidies and Countervailing Measures in November  2005, China "will make all efforts to submit  WT/TPR/M/161/Add.2 
 Page 45 
 
 
before the end of the year".   In the context of this review, the authorities added that the notification 
was being finalized and would be submitted before the end of January  2006.  In the interim, the 
authorities suggest that the most current informati on on China's subsidies is in China's Protocol of 
Accession to the WTO.  
Este tema es de vital importancia para México y que exhortamos a que China provea la información 
requerida por el ASMC. Por el momento, no cont amos con preguntas específicas, precisamente por 
que se carece de la información mínima para evaluar la politica industrial y comercial de China en ese 
aspecto. 
 
Chinese Taipei
 
 
Page 115, paragraph 187 of the same report, under the subheading “Incentives”,  states that: “Since 
acceding to the WTO, China has made no notifications under Article 25.1 of the WTO Agreement on Subsidies.”  
 
Answer: 
 China submitted its Subsidy Policy Notification the WTO Committee on Subsidies and Countervailing 
Measures in early April 2006. Please refer to WTO document G/SCM/N/123/CHN.  
Question: 
 Mexico I
 
  
Medidas Antidumping y Compensatorias 
  
c) Por favor, explique de qué forma la duración de una medida provisional es compatible con el 
artículo 7.4 del Acuerdo Antidumping, ya que en dicho artículo no se permite extender ese periodo en 
casos diferentes al examen para la aplicación de un  derecho inferior, mientras que en el régimen 
interno de China se permite ante la presencia de "c ircunstancias especiales" tales como la complejidad 
de una investigación.  
 
d) ¿Cuáles son las características de los exám enes para extender la vigencia de una medida 
antidumping o antisubvenciones? ¿alguno de esos exám enes ha durado más de 12 meses en China?  
 j) ¿Es suficiente que la solicitud la presente una so la persona o empresa para iniciar la investigación? 
Si es así, explique de qué forma es ello co mpatible con el artícul o 4.1 del Acuerdo sobre 
Salvaguardias, mismo que establece que debe c onsiderarse a una proporción importante de la 
producción total del producto de que se trate.  
 l) ¿Las tasas de interés aplicabl es a los créditos otorgados por el EXIM Bank son preferenciales? 
¿Qué parámetros se utilizan para saber si dichas t asas de interés son preferenciales o no? ¿El EXIM 
Bank exige garantías a los exportadores para autori zar los créditos? ¿Es posible que se autorice un 
crédito sin garantías o garantizado por una ins titución u oficina gubernamental? Si las tasas son 
preferenciales y/o no se exigen garantías y/o se autoriza un crédito garantizado por una institución u 
oficina gubernamental, explique de qué forma es el lo compatible con las disposiciones del Acuerdo 
SMC.  
 
m) Observamos que este párrafo menciona el otorga miento de garantías por parte del EXIM Bank a 
empresas chinas. ¿Esas garantías son aplicables a créditos obtenidos por empresas chinas en 
instituciones de crédito extranjeras? Explique de qué forma es ese otorgamiento de garantías 
compatible con las disposiciones del Acuerdo SMC.   WT/TPR/M/161/Add.2 
Page 46  
 
Answer: 
 (c) Article 42 of the Regulations of the People’ s Republic of China on Anti-dumping provides that 
“the amount of anti-dumping tariffs shall not exceed  the dumping margin determined in the final 
adjudication decision”. Therefore, the possibility th at antidumping duty rate is below the dumping 
margin can not be ruled out. Article 30 of the Re gulations of the People’s Republic of China on Anti-
dumping provides that “the time limit for the pr ovisional anti-dumping measures shall not exceed 4 
months as of the date of entry into force of the announcement of the decisions on provisional anti-dumping measures; however, such time limit may be extended to 9 m onths under particular 
circumstances”. This provision does not contradict Article 7.4 of the WTO Anti-dumping Agreement. 
 
(d) Review investigations conducted by Chinese  authorities are fair, just and transparent. 
Investigation authorities of China abide strictly by the relevant requirements regarding reviews as 
contained in the WTO Anti-dumping Agreement. Th e time for China’s review investigations is no 
more than 12 months. 
 
(j) Article 3 of the Regulations of the People’s Republic of China on Safeguards provides that “any 
natural person, legal person or other organiza tion related to a domestic industry (hereinafter 
collectively referred to as the applicant) may, in accordance with the provisions of these Regulations, 
make a written application to the Ministry of  Commerce for applying safeguard measures. The 
Ministry of Commerce shall promptly examine th e application made by the applicant and decide 
whether or not to initiate an investigation.” Article  4 of the same regulation provides that “if the 
Ministry of Commerce decides to initiate an investigation without having received any written 
application for applying safeguard measures, it sha ll proceed only if it has sufficient evidence of 
injury to a domestic industry due to the increase in quantity of an import.” Article 10 of the same 
regulation provides that “the term ‘domestic i ndustry’ means the domestic producers as a whole of 
the like or directly competitive products within the People’s Republic of China or those of them whose 
collective output of the like or directly competitive products constitutes a major proportion of the total 
domestic production of those products ”, which is in conformity with Article 4.1 of the WTO 
Agreement on Safeguards.  (l) (m) In its operation of credit loans, the EXIM Bank refers to relevant provisions of OECD’s 
Arrangement on Guidelines for Offic ially Supported Export Credits. The loan’s interest rate is a fixed 
one, decided with reference to OECD’s officially  published Commercial Interest Reference Rates 
(CIRRs), or a floating one with a margin added to  London Inter-Bank Offered Rate (LIBOR). This 
practice is consistent with internationally prevale nt practices of export credit loans and has not gone 
beyond the WTO Agreement on Subsidies and Countervailing Measures. 
 
To apply for international guarantee from the EXIM Bank, the applicant should be an enterprise or 
institution that has legal person status and trading ri ght, and meets requirements as provided in the 
Rules on Foreign Exchange Guarantee by Resident Institutions in China. China does not believe that there is inconsistency between the credit loan and guarantee business of the EXIM Bank and the 
provisions of the Agreement on S ubsidies and Countervailing Measures. 
 
Question: 
 Japan I
 
 Q16.  
 (1) In the past, China made a reply that the measures under Article 31 of REGULATIONS OF PRC ON SAFEGUARDS differ from tho se under Article 8.2 and 8.3 of the WTO Agreement on 
Safeguards.  In that case, we are concerned that REGULATIONS OF PRC ON SAFEGUARDS could 
be managed does not have any provisions corresp onding to Article 8.2 and 8.3 of the WTO SG  WT/TPR/M/161/Add.2 
 Page 47 
 
 
Agreement.  In this regard, please indicate the view s of the Government of the People’s Republic of 
China.  (2) REGULATIONS OF PRC ON SAFEGUARDS do es not contain any substantive provisions 
ensuring the contents related to the following provision; such as: compensation measures under 
Article 8.1 of the WTO SG Agreement, “unforeseen developments” of Article XIX:.1(a) of the GATT 
1994, and the opportunity for the interested parties to “submit their views…as to whether or not the 
application of a safeguard measure would be in public interest” under Article 3.1 of the WTO SG 
Agreement.  Please indicate when China will include  the substantive provisions consistent with the 
WTO SG Agreement in Chinese domestic la ws including REGULATIONS OF PRC ON 
SAFEGUARDS. 
 
Answer: 
 (1) Article 6 of the Foreign Trade Law of the Pe ople’s Republic China provides that the People's 
Republic of China shall, under international treati es or agreements to which the People's Republic of 
China is a contracting party or  a participating party, grant the other contracting parties or 
participating parties, or on the principles of mut ual advantage and reciprocity, grant the other party 
most-favoured-nation treatment or national treatm ent within the field of foreign trade. Article 7 
provides that In the event that any country or reg ion applies discriminatory prohibition, restriction or 
other like measures against the People's Republic of China in respect of trade, the People's Republic 
of China may, as the case may be, take counter- measures against the country or region in question. 
Article 31 of the Regulations of the People’s Repub lic China on Safeguards is a reflection of the 
reciprocity principle embodies in Article 7 of th e Foreign Trade Law in the safeguards area. As a 
WTO member, China is naturally entitled to the right s accorded by Article 8.2 and Article 8.3 of the 
Agreement on Safeguards. 
 
(2) Article 24 of the Regulations of the People’s Republic China on Safeguards shall be observed as 
far as “compensation measures” are concerned. As for “unforeseeable development”, the Chinese 
side considers “unforeseeable development” as fact in safeguard investigation and make relevant 
explanation. With regard to providing opportuniti es for other parities to present their views and 
comments, relevant stipulations can be found in Article 12 of the Regulations on Safeguards, which 
provides that “the Ministry of Commerce sha ll provide opportunities for importers, exporters and 
other interested parties to present th eir views and supporting arguments.” 
 Question:  
Mexico I
 
 
Mecanismos de Salvaguarda  
 
Será posible la aceptación por parte de China, de  este tipo de medidas excepcionales para proteger 
temporalmente a determinadas industrias nacionales que se ven dañadas o que se enfrentan a una 
amenaza de daño grave, debido a un incremento signi ficativo de las mercancías importadas que fluyen 
al mercado interno en condiciones de competencia leal. 
 
Answer:  
The Chinese side believes that the use of any trade remedy measure must be within the WTO 
framework and in strict conformity with relevant WTO agreements and legal instruments. 
 WT/TPR/M/161/Add.2 
Page 48  
 
(ix) Standards and other technical regulations 
 Question:  United States II
 
 
28. In paragraph 92 of Chapter III, the report ex plains that imported or domestically produced 
products used for research and de velopment and testing purposes a nd goods imported for processing 
and re-export, as determined by the Certificati on and Accreditation Administration (CNCA) of the 
State Administration of Quality Supervision an d Inspection and Quarantin e (AQSIQ) in accordance 
with Decree No. 3, are exempt from Chinese Com pulsory Certification (CCC) certification.  
However, the report states that Decree No. 3 was not available to the Secretariat in English.  a.  In its Protocol of Accession, China committe d that it “would make available to WTO Members 
translations into one or more of the official languages of the WTO all la ws, regulations and other 
measures pertaining to or affecting trade in goods, ser vices, TRIPS or the control of forex, and to the 
maximum extent possible would make these laws, re gulations and other measures available before 
they were implemented or enforced, but in no case la ter than 90 days after they were implemented or 
enforced.” Does China consider th is commitment to apply to Decree No. 3? If not, please explain. 
 
Answer: 
 
The Chinese government did publish Announcemen t No.3 through various media, including the 
AQSIQ website before it went into effect. As fo r the English version, the Chinese government will try 
its best to provide it to WTO Members.   
Question:  
 EC
 
 
WTO Secretariat’s Report, page 38, para 28 
 
How does the notifying authority (MOFCOM) ensure that the transparency obligations laid down in 
the TBT agreement are comprehensively respected,  covering proposed technical regulations and 
conformity assessment procedures elaborated  by the different government agencies? 
 Answer: 
 
China has put in place a mechanism for TBT notification. Relevant ministries and agencies 
responsible for drafting and issuing technical ru les and conformity assess ment procedures shall 
determine whether a notification is necessary or  not in accordance with WTO/TBT Agreement and fill 
in notification forms which will be provided to the WTO/TBT Enquiry Center located in the General 
Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) for submission to China 
WTO Notification and Enquiry Center of the Mini stry of Commerce (MOFCOM) for notification to 
the WTO. The WTO/TBT Enquiry Center and China WTO Notification and Enquiry Center will 
supervise and urge relevant ministries and agencies fo r prompt and precise notification, and provides 
them with technical guidance and advice. In addition,  the Ministry of Comme rce pays a lot attention 
to the publicity about and training for the notific ation, and has organized many seminars with 
relevant ministries and agencies and the WTO Secretariat for communications and discussions 
between them. These activities have publicized notific ation requirements and improved the capability 
of relevant ministries and agencies to fulfill the notification obligations. 
  WT/TPR/M/161/Add.2 
 Page 49 
 
 
Question: 
 United States II
 
 
31. In paragraph 103 of Chapter III of the report, th e Secretariat states that it was unable to obtain 
clarification from the Chinese authorities on any specific labeling requirements – beyond those 
contained in the Standardization Law, the Food Hygiene Law and the Law on Product Quality – for 
pharmaceuticals, Chinese medicine, cosmetics, geneti cally modified organisms or environmentally 
friendly products.  Please identify any specific labe ling requirements that apply to these products.  
 Canada II
 
 Part III. Trade Policies and Practices by Measure, (2) Measures Directly Affecting Imports, (ix) 
Standards and other technical requirem ents, (e) Labelling, paragraph 103: 
 
12. Could China clarify which laws and regulations  govern the labelling of genetically modified 
organisms (GMOs) and products derived from GM Os? Which government agency or agencies are 
responsible for the administration a nd implementation of these regulations?   
 
Answer:  
The reason that the Secretariat did not obtain clar ifications from the Chinese authorities on specific 
labelling requirements is that there were too many substantial issues and areas to be comprehended, 
clarified and discussed in the preparations for first  Trade Policy Review, leaving inadequate time to 
go deep into this kind of very detailed issu es. Relevant information is as follows: 
Drugs and traditional Chinese medicines: Rules on Administration of Packaging, Labeling and 
Instructions for Drugs issued by State Food and Drug Administration on 15 October, 2000. 
Cosmetics: 1) Rules Concerning the Hygiene Sup ervision over Cosmetics issued by Ministry of 
Health; 2) Implementing Provisions of Rules Concerning the Hygiene Supervision over Cosmetics 
issued by Ministry of Health; 3) Hygiene Standards  for Cosmetics issued by Ministry of Health; 4) 
National Standard for Instructions of Consumer Goods: General Labelling of Cosmetics (GB529.6-
1995) issued by AQSIQ; 5) Provisions on Naming of  Health-related Products issued by Ministry of 
Health; 6) Notice on Issues concerning SPF Testing and Indication of Sunscreen Cosmetics issued by 
the Ministry of Health; 7) Public Notice No. 14 of 2004 of Ministry of Health. Genetically Modified Organisms: 1) Regulations on Safety Administration of Agricultural GMOs 
issued by the State Council on 23 May, 2001; 2) Rules on Administration of Labelling of Agricultural GMOs issued by Ministry of Agriculture on 5 January, 2002 and revised on 1 July, 2004. 
 
Question:  
 Japan I
 
 
Q18. Concerning “the Administration on the Control of Pollution Caused by Electronic Information Products”:   (1) With regard to electronic information products, the contents are still indefinite. Please clarify with 
a scope of product names. 
(2) With regard to “electronic units/components” and “electronic materials”, there are no final 
products by themselves.  Therefore, Japan hopes the Government of the People’s Republic of China to 
reconsider excluding them for the sake of internationa l consistency.  In this regard, please indicate the 
views of the Government of the People’s Republic of China. (3) EU’s Directive on the Restriction of Hazardous  Substances (RoHS) does not cover these items 
reused products and spare parts of a product sold befo re the date of the implementation of the law.  
Please indicate whether reused products and spare pa rts of a product sold before the date of the WT/TPR/M/161/Add.2 
Page 50  
 
implementation of the law come out of a scope by  “the Administration on the Control of Pollution 
Caused by Electronic Information Products”.    (4) With regard to “Sectoral standards”, “Nationa l standards” and the “Catalogue of heavy Control of 
Pollution Caused by Electronic Information Products (hereinafter referred to  as “the Catalogue”)”, 
please indicate definite substances and implementation methods. 
(5) As for import products, if these products ar e certified in foreign factories, asquiring the 
certification takes a lot of times and effort.  This seems to be a technical barrier to trade.  Please indicate whether the Supplier’s Declaration of Conformity (SDoC) will be allowed. 
 
Answer: 
 
(1) For the scope of electronic information produc ts defined by the Rules on Control of Pollution 
Caused by Electronic Information Products, please refer to the Notes on Categorization of Electronic 
Information Products which is available on the we bsite of the Ministry of Information Industry 
(www.mii.gov.cn). 
(2) In China, electronic information produc ts are not always final products. “Electronic 
units/components” and “electronic materials” ar e electronic information products, which may 
contain poisonous and harmful s ubstances and cause environmental pollution. Therefore, these 
products are subject to the Rules on Control of Po llution Caused by Electronic Information Products. 
Although ROHS Directive of EU doesn’t include th ese products, requirements are made indirectly on 
electronic unit/component products and electronic material products down the industrial supply 
chain. 
(3) Products to be reused are not subject to the Rules on Control of Pollution Caused by Electronic 
Information Products. The spare parts that are sold  before the implementation of the Rules are not 
subject to it if they are used for ma intenance. However, if the spare par ts are sold as a product, they 
are subject to the Rules. 
(4) Relevant national or industrial standards in the Rules on Control of Pollution Caused by 
Electronic Information Products are presently under formulation. (5) Regarding the compulsory certification of the Ru les on Control of Pollution Caused by Electronic 
Information Products, the compulsory certification (i.e. CCC) is applied only on the poisonous and 
harmful substances of the electronic information pro ducts listed in the Priority Category before they 
enter into market. At present, the standards and pr ocedures of compulsory certification in this regard 
are under formulation. The national certification and accreditation authorities are making study on 
relevant conformity assessment methods in order to  clarify specific technical issues including limit of 
harmful substances, testing method, disassembly standard, etc.  
 
Question: 
 
Australia
 
 
6. In the context of Article 6.1 of the TBT Agre ement and paragraph 194 of the Working Party Report 
on the Accession of China to the WTO  
a) Could China advise what progress it has made in recognizing competent conformity 
assessment bodies in other WTO member countries?  
 b) Could China provide information on the extent to which it accepts the results of conformity 
assessment undertaken by bodies in  other WTO member countries? 
 
Could China advise what steps are being taken to in crease the extent to which it accepts such results? 
  WT/TPR/M/161/Add.2 
 Page 51 
 
 
Answer: 
 Regarding international mutual recognition, Chi na’s national accreditation system for conformity 
assessment has been integrated in to the international mutual recognition system of accreditation as 
represented by China’s mutual recognition with  the International Accreditation Forum (IAF), 
International Laboratory Accreditation Cooperation (ILAC), Asia Pacific Laboratory Accreditation 
Cooperation (APLAC) and Pacific Accreditation Coop eration (PAC). Up to now, China has signed 
mutual recognition agreements with 35 quality ma nagement system certification institutions and 
environmental management system certification an d accreditation institutions from other countries 
and regions. China has also signed mutual recogniti on agreements with 52 laboratory a ccreditation 
institutions of other countries and regions. 
 China will further push forward its work in this regard. It will promote arrangements of mutual 
recognition of certification results by, in the field of voluntary certification, signing Mutual 
Recognition Agreement (MRA) with international or ganizations, such as International Laboratory 
Accreditation Cooperation (ILAC) and International Accreditation Forum (IAF), and in the field of 
compulsory certification, by signing or acceding to bilateral or multilateral inter-governmental 
agreements. 
 
Question: 
 
Malaysia
 
 
3. Could China explain in detail its Compulso ry Product Certification System (CCC) Mark 
Requirement?  What does this entail a nd what are the costs involved?   
 
Answer: 
 Information regarding the procedures, requiremen ts and fees of China Compulsory Certification 
(CCC) system is available on the website of  China National Certification and Accreditation 
Administration (www.cnca.gov.cn).  
CCC procedures include: application and acceptance for certification, sampling and testing, initial 
factory inspection, evaluation and approval of  certification results, and follow-up inspection. In 
principle, the time length of certification should not exceed 3 months.  Question: 
 
Malaysia
 
 
4. Instead of complying with the existing internat ional standards, China is pursuing to set its own 
national standards on products such as IT produc ts, telecommunications equipments, and audio and 
video products.  Why are these national standards necessary when there are already internationally 
accepted standards in place?  
 
Answer:  Adoption of international standards  is encouraged by WTO/TBT Agreement, and is also an important 
principle that China adheres to in its standardiza tion work. China has a comparatively high adoption 
rate of international standards in  the world. On the other hand, active participation in international 
standardization activities by proposing drafts for in ternational standards or for revision of existing 
international standards is also encouraged by the International Standardization Organization (ISO), 
as embodied in such guiding document as the devel opment strategy of ISO. ISO has expressed its WT/TPR/M/161/Add.2 
Page 52  
 
concern on the problem that in certain fields, especially high and new technology fields, some 
standards are old and are not able to meet th e requirement of the technology development.  
In recent years, China has participated in inter national standardization activities in a more active 
and substantial manner. China is looking forward to making due contribution to the international 
standardization work and the prosperity of global trade at large. 
 
Question: 
 EC
 
 
We are concerned that China requires, for imported cosmetics, a registration with the Ministry of 
Health while domestic products are subject to a si mpler regime. Further, for Active Pharmaceutical 
Ingrediants (API), testing and sta ndards are more stringent and cos tly for imported goods compared to 
domestic products. Is China currently looking at simplifying and harmonising the importation of 
cosmetic products and for API?   EC
 
 
Concerning cosmetics, different registration require ments apply for imported ordinary cosmetics as 
opposed to Chinese products, which benefit from a facilitated regime. 
 
Does China have any plans to eliminate the discrim ination in registration requirements for imported 
ordinary cosmetics?  
 
Answer:  
There is no discriminative or more restrictiv e requirement regarding the administration and 
supervision of the Ministry of Health on importe d cosmetics compared with domestic products. With 
regard to “cosmetics for special use”, both the imported and domestic products are subject to 
examination and approval procedure. On “ordinary cosmetics products”, China has been simplifying 
the procedures on the condition that the procedures  are based on scientific evidences. In July 2004, 
Ministry of Health issued a public notice to simplify the approval procedures on the imported 
cosmetics for non-special use which provided that from 1 August, 2004 on, the examination and 
approval procedure was replaced by a registration procedure which is to be completed within 20 
working days. With this public notice issued th e simplified registration procedures are applied both 
on imported and dom estic products. 
 
Regarding requirement for imported API, according to the Drug Control Law, China maintains 
marketing approval procedures on API, the requirem ents for which are the same with those for 
pharmaceutical preparations. In Europe, Drug Master File (DMF) administration is maintained for 
API. Therefore, EU does not fully understand some of  China’s registration requirements due to the 
difference of China and Europe’s administrative reg imes. According to Rules on Administration of 
Drug Registration, the documentation requirement,  technical evaluation requirement and clinical 
testing requirement are applied on import ed and domestic API consistently.  
 
Question: 
 EC
 
 We are concerned with labelling requirements in various sectors, where we are aware of lengthy 
registration procedures and frequent changes in requirements. Does China plan to address these 
problems?   WT/TPR/M/161/Add.2 
 Page 53 
 
 
Answer: 
 China’s labelling requirement is product-based rather than sector-based. China doesn’t require 
registration of all kinds of labels, and on those la bels that are required to be registered procedural 
requirements are clear and concrete. We are unable to identify the kinds of labels and the registration 
requirements which the EC side indicates as “l engthy registration procedures and frequent changes 
in requirements”.  (x) Government procurement 
 
Question: 
 Switzerland I
 
 
General question.  Switzerland appreciates the way China takes into account the experiences made by 
other countries with a view to assure consistency of its national legislation with the GPA. What would 
be, in the opinion of China, the main issues to be  resolved in the future for complying with the 
conditions set out in the GPA? 
 
Answer:  
China has not yet acceded to the Government Pr ocurement Agreement (GPA). The Chinese side will 
amend relevant laws and regulations to make them co nsistent with the GPA at the time of accession.  
 Question:  
EC
 
 
Para 105:  could China provide statistical data (even estimates) of procurement by state-owned 
enterprises (SOEs) and public utilities, as the data provided (accounting only for 1,4% of GDP in 
2003), seem to have omitted these procurements. 
 
Answer:  
The Government Procurement Law of the People ’s Republic of China applies to government 
departments, institutions and public organizations at all levels.  Since the Law does not apply to state-
owned enterprises, no statistics on the purchasing activ ities of SOEs can be furnished at this point. 
Neither do we have figures on the procurement activities of public utilities. 
 
Question: 
 
EC
 
 
Para 112 :  Can China indicate the thresholds a pplicable to sub central entities? 
 Answer:  Governments at the provincial level will determ ine their thresholds and make them public. This 
information is available (in Chinese) also at th e government procurement website (www.ccgp.gov.cn).  
 WT/TPR/M/161/Add.2 
Page 54  
 
Question: 
 EC
 
 Para 116:  does China currently use price preferences for local companies or offsets? If yes, can China 
describe in which conditions and with which magnitude? 
 
Answer:  
China has no measures of providing price preferences for local companies or offsets. Nor does it have 
measures to restrict th e access of foreign products and suppli ers to China’s government procurement 
market.  
 
Question: 
 
Turkey
 
 WT/TPR/S/161 (page 60, para 5)   III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
(1) Introduction  
 
It is further stated in the same paragraph that th ere is a preference for state purchases of domestic 
goods, construction and services and that goods may be purchased from foreigners under exceptional 
circumstances. 
 
• How could the government procurement practi ces of China can be justified under the 
Government Procurement Agreement to which Ch ina is a party  while there is a preference 
for state purchases of domestic goods, construction and services?  
• What are exceptional circumstances to purchase goods, construction and services from 
foreigners? 
 
Answer: 
 China is not a party to the GPA yet. The Governme nt Procurement Law of the People’s Republic of 
China stipulates that the government shall proc ure domestic goods, construction and services, except 
in one of the following situations: 
 
(1) where the goods, construction or services needed ar e not available within China or, though 
available, can not be acquired on reasonable commercial terms; 
(2) where the items to be procu red are for use abroad; and 
(3) where otherwise provided for by other laws and administrative regulations.   
 
(3) M
EASURES DIRECTLY AFFECTING EXPORTS  
 (i) Procedures   WT/TPR/M/161/Add.2 
 Page 55 
 
 
Question: 
 Chile
 
 (3) Medidas que Afectan directamente a las Exportaciones 
 
(i) Procedimientos 
 
1. En el párrafo 124 del informe se indica la exis tencia de un catálogo de mercancías de importación y 
exportación  sujetas a inspección reglamentaria, que es publicado anualmente por AQSIQ. ¿Dónde se 
puede encontrar dicho catálogo?  
 
Answer: 
 The list can be found on the AQSIQ website: http://www.aqsiq.gov.cn. 
 
Question:  Columbia
 
 
A) ¿Dentro de la normatividad aduanera de China se contempla el Régimen Aduanero de 
Almacenamiento o depósito de la mercancía? ¿Cuá nto es el tiempo mínimo y máximo en que una 
mercancía puede permanecer almace nada?  El documento de la Secr etaría no contiene información 
amplia en relación con los proced imientos y sistemas aduaneros. 
 
Answer: 
 
There is a Customs supervised warehouse system. In  the system, there are two kinds of warehouses: 
the Customs bonded warehouse which accommodates bonded import products and products customs 
clearance of which is not finished, and the export supervised warehouse which provides storage, 
bonded logistics and other value added service to products the export procedures of which are 
completed.  
 
For Customs bonded warehouse, there is no shortest  time restraint for stored products, but the 
products cannot be stored for more than one yea r under usual circumstance (one-year extension upon 
application and approval). The related legal documen t is Rules of the Customs on Administration of 
Bonded Warehouse and Stored Products (C ustoms Decree No. 105 of 2003).  
For export supervised warehouse, there is no shortest time restraint for stored products either, but the 
products cannot be stored for more than six mont hs under usual circumstanc e (six-month extension 
upon application and approval).  The related legal document is Rules of the Customs on Administration of Supervised Export Warehouse and St ored Products (Customs Decree No. 105 of 
2003). 
 
However, according to the Customs Law of the Pe ople’s Republic of China, import products can be 
stored in customs supervised warehouse before the customs procedures are completed, but the 
consignee of the imported products should decla re to the Customs within 14 days upon the entry of 
conveyance into China. Fines will be levied upon failure in declaration within 14 days.  
 WT/TPR/M/161/Add.2 
Page 56  
 
Question: 
 Columbia
 
 
B) ¿El registro de operadores de comercio exterior y el registro de comerciantes extranjeros en el 
MOFCOM, es adicional al registro que debe surtir  el importador o exportador ante la Administración 
Aduanera de manera previa a la presen tación de una declaración? (párrafo 12) 
 
Answer: 
 
Declaration to the Customs is independent from  registration of foreign trade dealers at MOFCOM. 
 Question:  Columbia
 
 
C) En el párrafo 15 se comenta que el período de ex amen interno para el despacho de las mercancías 
dura máximo 48 horas. No obstante, dicho examen se  puede ver afectado por las “capacidades de los 
propietarios de los productos” y los servicios portuarios”.   ¿Podrían las autoridades de China, indicarnos que se entiende por “capacidades de los propietarios de 
los productos” en este contexto?  
 Se comenta adicionalmente que “la Administración de Aduanas no cobra der echos en concepto de 
despacho ni otros servicios”. Se incluyen aquí los servicios portuarios? ¿Cómo afecta la estructura de 
los servicios portuarios el examen interno para el  despacho? Existe una normativa única para todos los 
puertos en materia de costo de los servicios prestados?  
 
Answer: 
 “Owner ability” refers to whether th e owner of the products or agent for the owner is capable of 
being present at the scene where the Customs conducts examination and of cooperating with the 
Customs to conduct the examination. No fee is co llected in course of the examination. Ports and 
harbors are entitled to fee-collection standard themselves.   Question:  
Columbia
 
 
E) Las licencias de importación de mercancías de negadas por considerarse “no convincente la 
justificación de la solicitud”, pueden ser recurridas? ¿El acto a través de cual se niega la solicitud de licencia o se recurre la negación de la solicitud es pl enamente motivado o justificado por la autoridad 
competente?  
 Answer:  When license application is refused  by the competent authority, the enterprise can turn to either 
administrative review (administrative reconsidera tion) according to the Law on Administrative 
Reconsideration of the People’s Republic of China and relevant regulations and rules, or judicial 
review according to the Administrative Procedur e Law of the People’s Republic of China and 
relevant regulations and rules.  
  WT/TPR/M/161/Add.2 
 Page 57 
 
 
Question: 
 Columbia
 
 
F) En relación con el Reglamento sobre arancel es de importación y exportación, encontramos útil 
conocer si existe un texto unificado en inglés del Ar ancel con las distintas tarifas aplicadas que sirva 
de guía a los operadores del comercio exteri or. Si existe, donde se puede consultar? 
 Cuáles son los criterios para designar los tipos arancelarios provisionales? A qué clase de bienes y 
países se les aplica? Ha considerado China unificar  los tipos  provisionales cuando coinciden con las 
tarifas NMF?  
 
Answer:  The Chinese government publishes bot h the Chinese version and English version of its tariffs each 
year which include all kinds of tariffs. Interim tar iff rate is applied on the basis of MFN tariff rate. 
The Chinese government applies int erim tariff rates to certain products pursuant to Regulations on 
Import and Export Tariff of the People’s Republic of China. At present, the Chinese government does not plan to unify the interim tariff and MFN tariff.   Question: 
 
Columbia
 
 
G) El párrafo 21 señala que “pueden aplicarse ex enciones y reducciones de derechos a los productos 
importados o exportados a zonas designadas o desde ellas, a la s empresas designadas o para usos 
designados”.   
En la nota de pie de página 13, se especifica qué se entiende por “empresas designadas” y “uso 
designado”. No obstante, nos parece importante conocer  mayores detalles sobre la legislación que se 
aplica y los criterios que utiliza el Consejo de Esta do para determinar en “ci rcunstancias no habituales 
y especiales” las exenciones y re ducciones arancelarias. A qué tipo de empresas y productos se 
conceden determinadas exenciones sobre “la base del uso real del producto”? Se encuentran tales 
medidas en consonancia con el Acue rdo de las Medidas de Inversión relacionadas con el Comercio de 
la OMC?  
Answer: 
 
Current tariff reduction or exemption measures as we ll as the relevant laws and regulations are 
included in China’s recently-submitted new and full subsidy notification to the WTO. 
 
(ii) Export taxes 
 Question: 
 
United States I
 
 
23. Paragraph 126 of Chapter III of the report descr ibes China’s export tax regime and explains that, 
under Annex 6 to China’s Protocol of Accession, export duties apply to 84 tariff lines at the HS eight-
digit level.  Annex 6 requires China to hold consulta tions with affected Members before raising any of 
the export duties listed in Annex 6 with a view to  finding a mutually acceptable solution.  In March 
2006, China reportedly raised the export duties on re fined copper and copper al loys, both of which are 
listed in Annex 6, from 5 to 10 percent.  WT/TPR/M/161/Add.2 
Page 58  
 
a.  Did China hold consultations with affected Members in advance of increasing the export duties on refined copper and copper alloys?  If so, please identify th e Members involved, when the 
required consultations took place, and whet her a mutually acceptable solution was found 
 
Answer: 
 
 WTO Member can provide information, if of interest , to China and requests for consultation. China is 
willing to looking into the informa tion and consult with the Member.  
 Question: 
 
United States I
 
 
23.b.  Has China raised the export duties on any ot her Annex 6 products since its accession to the 
WTO?  If so, please identify each instance and explai n whether or not it held the required Annex 
consultations. 
 
Answer:  Since China’s accession to the WTO, there have been no such cases as raising export duties on any other Annex 6 products.  
 
Question:  United States I
 
 23.c.  Does China have any plans to raise the export duties on ferrous and non-ferrous scrap? 
 
Answer:  The Chinese government has no plan to raise export duty for ferrous and non-ferrous scrap.   
 
Question: 
 
United States I
 
 
24. Paragraph 126 of Chapter III of the report expl ains that one product – urea – is subject to an 
interim export duty, even though it is not on the lis t of products subject to export duty set forth in 
Annex 6 to China’s Protocol of Accession.  Please justify China’s application of an export duty on 
urea under China’s WTO obligations. 
 
Answer:  
“General Exceptions” in GATT Article 20 allows  Members to take certain measures including on 
export when conditions are met. Paragraph (j) sp ecifically refers to meas ures “essential to the 
acquisition or distribution of products in general or local short supply; provided that any such 
measures shall be consistent with the principle that  all contracting parties are entitled to an equitable 
share of the international supply of such products, a nd that any such measures, which are inconsistent 
with the other provisions of this Agreement shall be  discontinued as soon as the conditions giving rise 
to them have ceased to exist.”  Against the backdrop of a general domestic urea  supply shortage and even a supply suspension in 
some regions, China imposed a provisional tax on urea export. As a temporary measure, it will be  WT/TPR/M/161/Add.2 
 Page 59 
 
 
immediately terminated upon the settlement of the contradiction between fertilizer supply and demand 
in China.  
 (iii) Other tax measures affecting exports  
Question: 
 Columbia
 
 
A) ¿La negación de la solicitud de aprobación de un contingente de exportación a una empresa tiene 
recurso alguno? ¿El acto mediante el cual es de negada la solicitud es motivado o justificado?  
 
Answer:  When license and quota application is refused by th e competent authority, the enterprise can turn to 
either administrative review (administrative reconsid eration) according to th e Law on Administrative 
Reconsideration of the People’s Republic of China and relevant regulations and rules, or judicial 
review according to the Administrative Procedur e Law of the People’s Republic of China and 
relevant regulations and rules.  Question: 
 
Columbia
 
 
B) En el caso de los contingentes de exportación que se asignan mediante licitación ¿Extranjeros y nacionales tienen el mismo derecho de participación y valoración de sus puntajes en dicha licitación?  
 Answer:  In the bidding process, enterprises that have lawfu lly registered in China, regardless of domestic ones 
or foreign-invested ones, have equal rights to participate in.   
 
Question: 
 Japan I
 
 (p.100, paragraph 130) 
 
Q23. Concerning the AT refund scheme for copper, on the 4
th Japan-China Economic Partnership 
Meeting held on December 3, 2005 at MOFA, Japan , a Chinese representative stated that this scheme 
would be abolished on December 31, 2005.  We would like to confirm the current situation. 
 
Answer:  
 
The policy has been terminated.   Question:  
Japan I
 
 (p.100-102, paragraphs 130-135) 
 
Q24. According to the notification by the Ministry of Finance on April 29, 2005 and the notification 
on December 9, 2005, the return of the VAT was reduced or abolished in the case that nonferrous WT/TPR/M/161/Add.2 
Page 60  
 
metals such as rare earths and magnesium are expor ted.  Please indicate the purpose and the present 
return ratio of the VAT per every HS code in  export.  Please also explain the reason why the 
difference of the return ratio is ju stified in the return of the VAT. 
 
United States I
 
 
25.  Paragraph 130 of Chapter III of the report e xplains that exporters are generally entitled to 
VAT rebates, except that the VAT rebate for partic ular products has periodically been reduced or 
eliminated in order to discourage exports and meet  industrial development goa ls.  The report describes 
this practice of periodically reducing or elimina ting VAT rebates as a levy on exports, while the 
Chinese authorities reportedly disagr ee with this characterization. 
 a.  In light of the fact that exporters are ge nerally entitled to VAT rebates under China’s system, 
please explain whether China considers its peri odic reduction or elimination of VAT rebates 
for particular exported products to be a levy on exports. 
b.  Does China have any plans to discontinue its  practice of periodically reducing or eliminating 
VAT rebates on particular products?  Please explain.  
 
United States I
 
 
57. Paragraph 98 of Chapter IV of the report discusses China’s efforts to discourage exports 
through reductions of the VAT rebate normally allowed for exported products.  This paragraph 
focuses specifically on steel products.  It appears th at the largest reductions in the VAT rebate apply 
to exports of primary steel products that are used as inputs for finished steel products.    a.  Please identify the ministries and agencies i nvolved in deciding on reductions in the VAT 
rebate for steel products.  
b.  Please explain why China decided to discourage exports of the steel products in question.  
 
Answer:  
 Responses to the above questions are as follows: 
 
China currently practices two VAT rates, 17% and 13 %, and the export rebate rate ranges from 5% 
to 17%, with the ceiling rate being the statutory VAT ra te.  Therefore, this practice is not inconsistent 
WTO rules.  All the announcements on rebate rate  adjustments have been publicized through the 
China Foreign Trade and Economic Cooperation Gazette.  
 
China disagrees with the conclusion that the differen ce between the rate of VAT actually charged and 
the rate rebated constitutes a levy on exports, which is in turn an implicit subsidy to downstream 
processing of the products affected, and the statement in the Report that the VAT rebate rates have been used from time to time to meet industrial development goals. 
 
Tax rebate for export is different from export duty. Export duty is a border measure. It is a direct 
instrument to achieve trade policy objectives. Tax re bate for export is an internal tax policy, and each 
country may decide this policy according to th eir financial, economic and resources conditions. 
Application of different tax rebate rates to different commodities is due to the fact that different tax 
rates are applied when the taxes are levied. Essentially it does not represent adjustment of trade 
policies. There is also the fact that the tax collection regime in China is not perfect enough, and the 
tax revenues actually collected from exported goods are often lower than the fu nds needed to realize a 
full amount tax rebate based on the exported value and rebate rate. This is also the reason that the 
Chinese government has to adjus t the export tax rebate rate. 
  WT/TPR/M/161/Add.2 
 Page 61 
 
 
In the long run, the Chinese government is aimed at realizing full amount tax rebate for export. The 
reform of the export VAT rebate mechanism has reflect ed this policy direction. In future the Chinese 
government will further improve its policies and me chanism regarding tax rebate for export and make 
them more scientific and reasonable. 
 Chinese ministries and agencies involved in VAT rebat e rate adjustment are the Ministry of Finance, 
National Reform and Development Commission, Ministry of Commerce, and State Administration of 
Taxation. The present export rebate rate will be  adjusted periodically when changes in economic 
development require so.  
 
(iv) Export prohibitions, restrictions and licensing 
 
Question: 
 EC
 
 
Chinese taxes and quotas on export of fluorspar, th e export tax for phosphorous and irregular VAT 
refunding methods on phosphor ous derivatives all affect the competitive position of EU derivative 
producers of fluorspar and phosphorous. To date, China has refused to modify its practices in the area 
of quotas. This is a serious concern. Could China inform whether it plans to lift the export quota and licence fee for fluorspar, abolish the export ta x for phosphorus and respect normal TVA refund 
systems for its derivatives. 
 
Answer: 
 Currently the Chinese government does not intend to make any changes to the fluorspar export 
regime.   
(vii) State trading and designated trading 
 Question:  Costa Rica
 
 14. El mecanismo y los criterios que tiene China para calificar empresas comerciales del Estado a 
empresas que no son propiedad del Estado (incluidas las empresas con inversión extranjera) hace que 
el valor del comercio de Estado sea significativamen te mayor a lo estimado. ¿Qué privilegios tienen 
las empresas dentro de este régimen en relaci ón a aquellas empresas importadoras o exportadoras que 
no se acogen a dicho procedimiento?  Answer:  Compared to non-state-trading import or export companies, state trading enterprises enjoy exclusive 
right on import and export of products  which are designated by the State to be under state trading 
administration.  
 WT/TPR/M/161/Add.2 
Page 62  
 
(viii) Export promotion and marketing assistance  
 Question:  India 
 
 Q.10 VAT refund on imported inputs can take up to one year in China as against a monthly refund on 
local inputs. This clause favours local companies and is violative of National Treatment clause. 
Would China remove this anomaly?  
 
Answer: 
 The tax refund is implemented according to a unified refund management scheme by taxation 
authorities on a monthly basis. There is no difference in refund period among different types of products. 
 
Question:  United States I
 
 
30.  Paragraph 171 of Chapter III of the report d escribes the functions of the Export-Import Bank 
of China (EXIM Bank) as including, inter alia , financial support to promote exports of mechanical 
and electrical products and high and new technology products, including through export credit, as 
well as international guarantees for Chinese enterpri ses.  Paragraph 173 of Chapter III of the report 
explains that the EXIM Bank granted $59 billion in  export credits in 2003, most of which supported 
exports of mechanical and electrical products and hi gh and new technology products.  It also explains 
that the EXIM Bank’s use of international guarant ees for Chinese enterprises in creased 132 percent in 
2003 from the previous year.   a.  Please describe the eligibility criteria for expor ters of mechanical and electrical products and 
high and new technology products to receive EXIM Bank export credits.  
b.  Please describe the terms and conditions of the export credits used by the EXIM Bank to 
support exports of mechanical and electrical products and high and ne w technology products, 
and explain how these terms and conditions are WTO- consistent, particularly in light of Items 
(j) and (k) of the Illustrative List of Export Subsidies annexed to the Subsidies Agreement.  
c.  Please describe any other financial support pr ovided by the EXIM Bank to support exports of 
mechanical and electrical products a nd high and new technology products.  
d.  Please describe the terms and conditions of the international guarantees for Chinese 
enterprises provided by the EXIM Bank.  
 
Answer: 
 Enterprises that are eligible to receive export cred it from EXIM Bank are those that have completed 
business registration procedures with the Indus try and Commercial Administration of China, 
established as an independent legal person, and ob tained trading rights after registration with 
Ministry of Commerce. Other criteria include:  For mechanical and electronic products: 1. th e borrower has good credit and sound records on 
business operation, management and financial status, and has the capability to repay both the 
principal and the interest of the loan; 2. its export products are mechani cal and electronic products 
as recognized by competent authorities or as contai ned in the relevant Catalogue of Mechanical and 
Electronic Products published by relevant authoriti es; 3. the borrower’s annual export of mechanical 
and electronic products amounts to 5 million USD, or 3 million USD for private enterprises or  WT/TPR/M/161/Add.2 
 Page 63 
 
 
enterprises in the mid and western areas; 4. th e borrower provides a repayment guarantee acceptable 
to EXIM Bank; 5. the borrower meets other cr iteria deemed necessary by the EXIM Bank. 
 For high and new technology products: 1. the borrower has good credit and sound records on 
business operation, management and financial affairs, and has the capability to repay both the 
principal and the interest of the loan; 2. it’s ex port products are high and ne w technology products as 
recognized by competent authorities or as contai ned in the relevant Catalogue of High and New 
Technology Products published by relevant authorities; 3. the borrower’s annual export of high and 
new technology products amounts to 3 million USD,  or 1 million USD for software products; 4. 
software exporters have relatively strong scientific research and development capabilities, and have 
obtained CMM 2 (or above) certification or GB/T 19000-ISO9000 quality guar antee certifications; 5. 
the borrower provides a repayment guarantee acceptabl e to EXIM Bank; 6. the borrower meets other 
criteria deemed necessary by the EXIM Bank.  In its operation of credit loans, the EXIM Bank refers  to relevant provisions of OECD’s Arrangement 
on Guidelines for Officially Supported Export Credits. The loan’s interest rate is a fixed one, decided 
with reference to OECD’s officially published Co mmercial Interest Reference Rates (CIRRs), or a 
floating one, with a margin added to London Inter Bank Offered Rate (LIBOR). This practice is 
consistent with internationally prevalent practi ces of export credit loans and has not gone beyond the 
WTO Agreement on Subsidies and Countervailing Measures.  
The EXIM Bank does not provide other special support for export of machinery and electronic 
products and high and ne w technology products. 
 To apply for international guarantee from the EXIM B ank, the applicant should be an enterprise that 
has legal person status and trading rights, and meets requirements as provided in the Rules on 
Foreign Exchange Guarantee by Resi dent Institutions in China. 
 
Question: 
 United States I
 
 31. Paragraph 175 of Chapter III of the report states  that NPLs constituted 3.7 percent of the EXIM 
Bank’s outstanding loans in 2003, according to the EXIM Bank.  Does China consider these NPLs to 
be prohibited export subsidies under Article 3 of the Subsidies Agreement?  If not, please explain.  
 
United States II
 
 
33. Paragraph 175 of Chapter III of the report st ates that NPLs constituted 3.7 percent of the 
outstanding loans of the Export-Import Bank of China (EXIM Bank) in 2003, according to the Chinese authorities.  Are these NPLs addressed in Ch ina’s finalized but not yet fully translated 
subsidies notification?  If not, please provide th e information described in Article 25.3 of the 
Subsidies Agreement for this program.  
 
Answer: 
 The EXIM Bank’s NPLs do not have direct linkage w ith the export performance of the loan borrowing 
enterprises. China does not regard EXIM Bank’s NPLs as a prohibited subsidy under the Subsidies 
Agreement.  WT/TPR/M/161/Add.2 
Page 64  
 
Question: 
 United States I
 
 
32.  Paragraph 176 of Chapter III of the report states the China Export & Credit Insurance 
Corporation (SINOSURE) provides export credit insurance, including short-, medium- and long-term 
insurance as well as investment insu rance and export-related guarantees. 
 a.  Please describe the eligibility criteria for e xporters to receive the above-described insurance 
and guarantees. 
b. Please describe the terms and conditions of the above-described insurance and guarantees, 
and explain how these terms and conditions are WTO-consistent, pa rticularly in light of Item 
(j) of the Illustrative List of Export Subsidies annexed to the Subsidies Agreement. 
 
United States I
 
 
63.  Paragraph 145 of Chapter IV of the report st ates that China provides financial assistance, such 
as export credit insurance by SINOSURE, to select ed exporters in certain sectors, including the 
electronic and communications equipment industries.    a. What are the eligibility criteria for the selected exporters?  
b. Please describe the nature of the financial as sistance provided to these exporters. For financial 
assistance provided in the form of export credit insurance, please explain how the terms and 
conditions of the export credit insurance are WTO-c onsistent, particularly in light of Item (j) 
of the Illustrative List of Export Subsid ies annexed to the Subsidies Agreement. 
 Answer:  SINOSURE holds the following standards in providing insurance to exporters: 
 For middle-and-long term insurance: The exporter is a corporate legal person registered in the 
People’s Republic of China (with the Industry and Commercial Administration of China) and has 
acquired trading right, with good fin ancial situations. It has relev ant qualifications and experiences 
in the cases of large-scale contract engineering proj ects. The export project is in consistency with the 
laws and regulations of China and the importing country. The subject matter of the export is mainly capital goods that are produced by China and related services. The amount of the commercial 
contract shall be no less than 1 million USD and the commercial contract shall contain provisions of 
a prepayment or cash payment with the ratio of no less than 15%, and 20% in the case of export of 
vessels. The repayment term of the project sha ll be more than 1 year and less than 10 years, and be 
less than 12 years in the cases of large-scale project s. The political risk of the importing country shall 
be within the acceptable range of SINOSURE. The creditability of the importer and the guarantor 
shall be within the acceptable range of the SINO SURE. Economic benefits of the project shall be 
good. The project shall be in conformity with th e importing country’s environmental regulations. The 
commercial contract of export is not signed be fore application of exporter’s credit insurance. 
For short-term insurance: SINOSURE provides ex port credit insurance to exporters based on market 
terms after evaluation of the buyer’s credits and examination of the insurance limitations.  SINOSURE holds the following standards in providing guarantee to exporters: 
 
1. the exporter meets criteria set forth for warr antee in the Rules on Foreign Exchange Guarantee by 
Resident Institutions in China. 2. the product or the project has sound international competitiveness. 
3. the exporter has good operation conditions and accounting conditions. 
4. the exporter has good contract-keeping records, without any bad records.  WT/TPR/M/161/Add.2 
 Page 65 
 
 
5. the exporter has sound solvency and is capable to pay back. 
6. generally the exporter shall be the in sured party under the export credit insurance. 
The insurance and guarantee that SINOSURE provides do not involve rates or premium lower than cost, and therefore is in conformity with WTO rules. 
 
Question:  United States I
 
 
62. Paragraph 141 of Chapter IV of the report re fers to a variety of preferential policies 
supporting the development of domestic software and integrated circuit enterprises, including VAT 
rebates, tariff exemptions for imported equipment for a domestic enterprise’s own use, export loans 
provided by the EXIM Bank and export credit insurance provided by SINOSURE at favorable 
conditions, government procurement preferences, and a special fund set up by the Ministry of 
Information Industry (MII), the NDRC and the Minist ry of Finance to promote domestic enterprises’ 
research and development capabilities.  Does China c onsider the programs administered by the EXIM 
Bank and SINOSURE to be prohibite d subsidies under Article 3 of the Subsidies Agreement?  If not, 
why?  If so, please describe China’s plan s for withdrawing these subsidies.  
 
Answer: 
 
China does not consider that the programs of  the EXIM Bank and SINOSURE are prohibited 
subsidies under Article 3 of the Subsidies Agreemen t. Please refer to responses to US question I-30, 
32 and 63 for further detailed information. 
 
Question: 
 
United States I  
 
33. Paragraph 181 of Chapter III of the report stat es that exporters on the list of key export brands 
compiled by MOFCOM enjoy assistance such as export credit insurance through SINOSURE. 
 
a. Please identify the criteria used by MO FCOM for selecting key export brands.  
b. Are the terms and conditions for the export cr edit insurance terms provided to exporters of 
key export brands more favorable than tho se provided by SINOSURE to other exporters?  
Please explain.  
 
Answer: 
 The support of key export brands is administered with reference to internationally prevalent practices 
in export promotions. MOFCOM selects the bran ds, based on the published criteria including the 
companies’ operation and accounting conditions, credit condition, etc., and assistance is provided in 
the form of export credit insurance of SINOSURE. The purpose of the said practice is to improve 
China’s trade structure, to protect intellectual property rights and to promote the sustainable 
development of China’s trade relationship with its trading partners.  Question:   
United States II
 
 
14. Paragraph 7 of Chapter III of the report stat es that 3.6 percent of China’s GDP in 2002 was 
spent on extra-budgetary transfers to SOEs.  Are any of these extra-budgetary transfers addressed in China’s finalized but not yet translated subsidies notification?  If not, please provide the information 
described in Article 25.3 of the Subs idies Agreement for this program.  WT/TPR/M/161/Add.2 
Page 66  
 
 
United States II
 
 
36. Paragraph 188 of Chapter III of the report e xplains that extra-budgetary transfers to SOEs 
totaled RMB 415.64 billion in 2003.  
 
a. Please provide a breakdown of these transfers by sector. b. Please describe the purposes of these transfers. c. Are any of these transfers addressed in Chin a’s finalized but not yet translated subsidies 
notification?  If not, please explain. 
 
Answer:  
 Responses to the above two questions are as follows. 
 
Extra-budgetary fund refers to financial fund of vari ous types not covered by the regular government 
budgetary management, which is collected, alloca ted or arranged by government agencies, 
institutions and social organizations while performi ng duties delegated to them or on behalf of the 
government in accordance with laws, regulations a nd rules. It covers following items: administrative 
fees, government funds and extra charges that are s tipulated by laws and regulations; administrative 
fees approved by the State Council and provincial governments; government funds and extra charges 
established by the State Council and the Ministry of Finance; and other financial funds that are not 
covered in budgetary management 
. Extra-budgetary fund is used by government agencies and institutions and social organizations when 
performing duties delegated or on behalf of the go vernment. It has nothing to do with “transfers to 
SOEs”. The exact wording in paragraph 7 of Chapter III of the Secretariat report is that “3.6 percent 
of China’s GDP in 2002 was spent on extra-budgetary transfers”, and there is no such wording of “to the SOEs” at the end of the sentence as said in question 14. The 3.6 percent is the result of the total 
extra-budgetary expenditure of 2002, which is RMB 383.1 billion, divided by the GDP of the year RMB 10517.2 billion, and there are no “transfers to SOEs” involved at all in this regard.  
Furthermore, the Secretariat report in paragraph 1 88 of Chapter III has no such wording of “extra-
budgetary transfers to SOEs totalled RMB 415.64 billi on in 2003” as mentione d in question 36. The 
exact wording is rather that “the Central Govern ment spent some Y 416 billion in 2003 (around 3.5% 
of GDP) on extra-budgetary expenditures”. The RMB 383.1 billion leading to the 3.6 percent in question 14 and the RMB 415.64 billion in question 36 both refer to the total amount of the extra-budgetary expenditure, and sub-items after breaking down the total include capital construction, 
special expenditure, operating and administr ative expenses, urban maintenance expenses and 
expenditure by township governments.  
 
Question: 
 EC
 
 Referring to the WTO Secretariat’s Report, page 11, para 170  
 
• Could China give information about the averag e prevailing parameters of its export credits 
(currency, repayment term, interest rate, guara ntee and insurance premium rates) for different 
types of countries since 2000?    
• Could China indicate how far it follows the provisions of the Arrangement on Officially 
Supported Export Credits of the OECD?  
• Could China clarify its policy in providin g loans and guarantees for building ships and 
vessels?  WT/TPR/M/161/Add.2 
 Page 67 
 
 
 
Answer: 
 Information on the service portfolio of China Export-Import Bank (EximBank) is available at its website. The bank’s credit operation takes reference fr om articles in the Arrangement on Officially 
Supported Export Credits of the OECD (Organi zation of Economic Cooperation and Development). 
Its lending interest rate is either a fixed one taking reference from OECD-released CIRRs or a 
floating one, which is a reconciled Lo ndon Inter Bank Offered Rate (LIB OR).  Hence, the interest rate 
policy is in line with int ernational norms on export credit.  
 
China’s banking regulator requires that in offeri ng of credit service (including to ship-builders) 
commercial banks should follow market laws and bus iness principles. An independent review is 
required for any proposed lending or guarantee being offered befo re the bank reaches or overrules a 
lending decision, and before the bank decides upon the credit line, risk portfolio and controllability, 
lending modality, term and interest rate. The crit eria for assessing a borrowing application are 
among others, the compliance of the project with state laws and regulations, its feasibility and cash 
flow, the solvency of the borrower and the nature of guarantee. 
 
Question: 
 United States II
 
 
35. Paragraph 188 of Chapter III of the report explains  that China compensates SOEs for losses due to 
price controls and other government policies.  Is this program addressed in China’s finalized but not 
yet translated subsidies notification?  If not, please provide the information described in Article 25.3 
of the Subsidies Agreement for this program.   Answer:  In line with its commitment, the Chinese government has phased out a ll its subsidies/compensation to 
SOEs for their operating losses. 
 
(4) Measures Affecting Production and Trade 
 (i) Industrial policy  Question: 
 
Switzerland
 
 
Paras 183-186. The Secretariat's report indicates that there has been a shift from direct intervention to 
indirect policy tools to channel resources into certain activities that the Government believes are 
important for China's continued growth and deve lopment. Could the Chinese authorities explain on 
the basis of which criteria decisions are taken to "guide" certain activities, including through credit 
and price controls, subsidies, tax incentives or disincentives? Also, could the Chinese authorities 
indicate on what basis they seem to have come to the conclusion that decisions made by the Government are likely to be more efficient than market forces to promote economic development? 
 
Answer: 
 In recent years, the Chinese government has publ ished several industry polices which aim at: 1. 
encouraging innovation and R&D; 2. environment protection; 3.energy saving; 4. pushing forward 
reform of SOEs; 5. encouraging development of pr ivate sectors, etc. The Chinese government intends 
to provide macro-economic development guidance to  the industries through industry polices, rather WT/TPR/M/161/Add.2 
Page 68  
 
than intervening in specific resource allocation wh ich should be carried out according to market 
forces. Moreover, the industry policies are not com pulsive, but exist as a set of guidance document. 
The Chinese government does not think that gov ernment’s macro control can replace market’s 
control over itself.   
Question: 
 EC
 
 
Could China provide clarification on the relations hip between the policy documents issued by the 
National Development Reform Commission and th e laws and regulations issued by Chinese 
Ministries and regulatory bodies? How is WTO-compliance reviewed for these policies and other documents? 
 
Answer: 
 
Laws are only issued by the National People’ s Congress and its Standing Committee in China. 
Regulations are issued by the State Council, wh ich also issue policy documents. Rules and policy 
documents are issued by the mi nistries, commissions and agencies under the State Council. Industrial 
policies are a kind of policy guidance document whic h are not compulsory while the laws, regulations 
and rules are compulsory. Basic principles that Chin ese government follow when drafting legislation 
include the consistency with China’s WTO commitm ent and WTO rules. It is realized through inter-
agency consultation process.  
 
(ii) Incentives 
 
Question: 
 United States I
 
 
36. Paragraph 188 of Chapter III of  the report explains that expe nditure for “capital construction” 
is one of the largest direct transfers made by  the Chinese government to SOEs under China’s annual 
budget.  In a footnote, the report quotes from the China Statistical Yearbook in an attempt to explain 
what “capital construction” means in this context,  but the meaning is unclear.  Please clarify this 
matter. 
 
Answer:  
 
According to the Items of Receipts and Payments for Government Budget, th e capital construction 
covers the non-gratuitous use and appropr iation of funds for capital cons truction, outlay of capital as 
well as the loans on capital cons truction approved by the government  for special purpose or policy 
purpose, and the expenditure with discount paid in  an overall way within the amount of the funds 
appropriated to the departments for ca pital construction, so as to m eet the public need in economic 
development and public utility development. Capital construction includes the following items: capital 
construction for urban construction; cultural capital construction; s ports capital construction; water 
conservancy capital construction; meteorology cap ital construction; and ca pital construction for 
South-to-North water transfer, etc. The capital cons truction is an item under the fiscal expenditure. It 
is not transfer payment of central government to state-owned enterprises. Mo reover, the wording in 
US question I-36 “the capital construction……is the la rgest transfer” is incorrect (the word used in 
the question is “transfers”, not “transfer payment ”). Capital construction and transfer are different 
concepts. 
  WT/TPR/M/161/Add.2 
 Page 69 
 
 
Question: 
 Australia
 
 
2. We refer to exemptions from payment of VAT extended to producers of unprocessed agricultural, 
forestry and fisheries products (para 197 on page 119 of WT/TPR/S/161). 
Will the planned restructuring of the tax system address the imposition of VAT on imported goods where VAT is not imposed on the internal sale of domestic like products?  
Question: 
 
United States I
 
 
37. Paragraph 196 of Chapter III of the report e xplains that, according to the Chinese authorities, 
small-scale farmers selling their produce directly ar e exempt from VAT.  Paragraph 23 of Chapter IV 
of the report further explains this VAT exemption.   Meanwhile, the same products, if imported, are 
not entitled to a VAT exemption.  a. Please identify the applicable laws, regulati ons or other measures governing this program. 
b. Please explain how China defines “small-scale” farmers.  c. What percentage of domestic agricultural production is represented by sales of small-scale 
farmers?  
d. Taking into account Article III of GATT 1994 , please explain how China justifies this 
apparent discriminatory VAT treatment. 
 
Answer: 
 
On the above questions from Australia and the US, there might be some misunderstandings from 
Members about the practice in China. China believes that the practice is a common one and is also 
found in the taxation systems in other Members. There were detailed exchanges with the Secretariat 
on this and the issue was well clarified.   
China’s current practice is as fo llows. Where the tax payer sells or imports agricultural products, he 
or she shall pay the VAT at the rate of 13%, ex cept for agricultural producing farmers who sell their 
self-produced agricultural products. These agricultura l products free of VAT when sold by their 
producers are exempt from VAT only at this particular st age of being sold by their producing farmers. 
They are all immediately subject to VAT from the n ext stage on down the VAT chain, and the rate is 
the same as the one applied to  imported agricultural products. 
 The reason that the VAT is exempted for agric ultural producing farmers when selling their self-
produced agricultural products is that with the larg e agricultural population in China, it is virtually 
impossible to collect VAT from them with exis ting VAT collecting method. As far as we know, a 
number of other Members adopting VAT system al so have the same or similar practice. 
 
Due to lack of resources, China is currently unable to acquire statistics on the percentage of the sales 
value of VAT-exempted agricultural products in th e overall domestic sales value of agricultural 
products.  
The further reform of VAT system under considerati on does not cover this specific issue. Chinese 
Government’s general principal in this regard is to  maintain the consistency of its tax policy, and 
equalize the tax burden of the importe d and domestically-produced products. 
 WT/TPR/M/161/Add.2 
Page 70  
 
Question: 
 
United States II
 
 
37. Paragraph 188 of Chapter III of the report re fers to preferential loans provided by China’s 
policy banks for infrastructure and other projects.   
Are these loans addressed in China’s finalized but not yet translated subsidies notification?  If not, 
please provide the information described in Article 25.3 of the Subsidies Ag reement for these loans. 
 
Answer:  
 
As of 31 December 2005, the balance of loans by policy banks for infrastructure projects stood at 1.2359 trillion RMB. Such loans for infrastructure projects are excl usively issued by the China 
Development Bank (CDB), which fits into its market positioning strategy. On 29 October 2005, the People’s Bank of China removed the interest rate ceiling on lending for 
domestic banks. The interest rate may float down ward by 10% for some extraordinary projects. A 
policy bank issues loans within the business scope set forth in its Articles of Association. Whether a 
preferential interest rate is offered or not is entirely up to the bank itself, which will refer to the macro 
economic policies of the state and base its decision on credit-granting principles.  China sees no connection between loans given by policy banks for infrastructure and other projects 
with the Subsidy Agreement.  
 
(vi) Small and medium-sized enterprises  
 Question:  
United States II
 
 
40. Paragraph 241 of Chapter III of the report refers to a loan guarantee scheme benefitting 
mainly high-tech SMEs.  a. Please describe the terms and conditions of th e loan guarantees provided to high-tech SMEs. 
b. Is this loan guarantee scheme addressed in Ch ina’s finalized but not yet translated subsidies 
notification?  If not, please explain. 
 
Answer:  
The recipients of credit guarantee for small and medi um-sized enterprises (SMEs) are SMEs of 
various kinds which comply with state industry polic ies, offer products that have a market or market 
potential, and promote technological advancement or innovation if they are technology-intensive businesses, or promote rural and urban job crea tion if they are labor-intensive businesses.  
 
Question: 
 
United States II
 
 
41. Paragraph 241 of Chapter III of the report states that the Chinese government provides a variety of financial assistance to SMEs under the Law on the Promotion of Small and Medium-Sized 
Enterprises.   
 a. Please describe the types of assistance provided under this law. 
b. Is this law addressed in China’s finalized but not yet translated subsidies notification?  If not, 
please explain. 
  WT/TPR/M/161/Add.2 
 Page 71 
 
 
EC 
 
WTO Secretariat’s Report, page 138, para 240: assi stance to SMEs: the report mentions the “Fund for 
International Market Exploration” as one of 4 instruments  providing assistance to SMEs. 
 
Can China please explain in detail how this fund works and what the eligibility criteria for the 
beneficiaries are? 
 
Answer:   
 
Detailed information regarding SMEs  related programs is included in the Subsidy Notification China 
submitted to the WTO Committee on Sub sidies and Countervailing Measures.  
 (vii) Competition policy  
Question: 
 United States I
 
 
40.  Paragraphs 251 through 253 of Chapter III of the report describe the original mandate for, and 
a May 2005 draft of, China’s Anti-Monopoly Law.  Paragraph 44 of Chapte r I and paragraphs 244 
through 246 of Chapter III explain that China l acks a modern, comprehensive competition law and 
describes China’s main challenges as developing effec tive ways (a) to address the continuing role of 
administrative and state monopolies in the economy, (b) to ensure non-discri minatory treatment of 
private enterprises versus SOEs, and (c) to ensure non-discriminatory treatment of foreign companies 
operating in China.  Paragraph 245 of Chapter III states that there is an acknowledged problem 
concerning market “blockages” attributable to local  government administrative and regulatory actions.  
The United States understands that a more recent dr aft of the Anti-Monopoly Law is now circulating 
among China’s ministries and to select domestic enterprises.    b. Please explain how the most recent draft of the Anti-Monopoly Law addresses administrative monopolies and state monopolies.  c. Please explain whether and how the most recent draft of the Anti-Monopoly Law applies to 
monopolistic conduct of state-owned enterprises and state-invested enterprises. 
d. Please describe how the most recent draft of the Anti-Monopoly Law, and China's other 
competition laws described in paragraphs 248-250 of  Chapter III, ensure non-discriminatory treatment 
for foreign companies.  e. Please explain whether the monopolistic conduct of any sectors or industries are exempt from 
the application of the most recent draft of the Anti-Monopoly Law, and if so, whether other laws 
apply to those sectors or industries. 
 
United States I
 
 
51. Paragraph 68 of Chapter IV of the report expl ains that the biggest obstacle to the reform and 
development of the energy sector, including electricity, are anti-competitive practices and, in 
particular, the operation of monopolies and region-based market segmentation.   Does the current draft of the Anti-Monopoly Law address either of these an ti-competitive practices? 
 
Japan I
 
 
(p.22, paragraph 44)  
Japan believes that it is urgently required to estab lish rules for promoting effective competition in the 
People’s Republic of China where both the government sector and the private sector are operating.  
Japan has been requesting the Pe ople’s Republic of China to establish a competition law that is WT/TPR/M/161/Add.2 
Page 72  
 
ensured to be transparent, non-discriminatory and fair for all procedures.  In this regard, the Report by 
the Secretariat raises China’s endeavor to establis h a comprehensive competition law. Japan hopes for 
an early establishment of an effective and compre hensive competition law in order to ensure the 
effectiveness of market mechanism.    
Q5. Please indicate the present status and future pros pects, regarding the establishment of an effective 
and comprehensive competition law.   
 
Canada I
 
 
Part III. Trade Policies and Practices by Meas ure, (4) Measures Affecting Production and 
Trade, (vii) Competition policy, paragraph 243: 
 
46. As SOEs operate on a commercial basis, will they be subject to the Anti-monopoly Law in a 
manner comparable to non-public enterprises? 
 
EC 
 
The WTO Secretariat’s Report mentions in para 261  that, in 2005, 71.6 % of companies listed on 
China’s two domestic stock exchanges were state- holding companies, but the report does not include 
information on the extent of overall State Ownership in China. Please describe how China envisages in the ne w Anti-monopoly law and its implementation to treat 
publicly-owned companies as compared to privately-owned companies. 
 
Chinese Taipei
 
 
(d) The forthcoming Anti-monopoly Law 
 (page 141, paragraph 253)   
 
With reference to the draft of a new “Anti-monopoly  Law” that was released in May 2005, we note 
that “Other important considerations for its effec tiveness will be the sectoral coverage of the law and 
its application in relation to SOEs and to administrative and state monopolies.”  
 
Could China please explain which sectors, SOEs or  administrative and State monopolies may be 
exempted from the application of this new competition law? 
 
Answer: 
 The Chinese side would like to make the followi ng points regarding its competition policy. 
The aim of China’s economic reform is to estab lish and improve the socialist market economy system. 
Monopolistic practices of all forms that exclude or lim it market competition are all to be stopped. The 
Chinese Government has attached great import ance to eliminating administrative barriers and 
industrial barriers, breaking up regional block ages and building up a nationally uniformed and fair 
market system, and has made great efforts in this regard. Although the Anti-monopoly Law is still in 
preparation, the efforts of cracking down on ad ministrative barriers and industrial barriers have 
always been going on with significant achievements. The Anti-monopoly Law, as the law specifically 
dedicated to cracking down on mono polistic practices, will be applic able to monopolistic practices of 
all forms. 
 China’s competition legislation system, including the coming Anti-monopoly Law, will be equally 
applicable to all market entities including SOEs, enterprises of collective ownership, private 
enterprises and foreign invested en terprises. It will neither grant exemption to SOEs, nor provide for 
different treatment between SOEs and private ente rprises in its application. The Anti-monopoly Law  WT/TPR/M/161/Add.2 
 Page 73 
 
 
will also observe the national treatment principle, imposing no discriminatory treatment to foreign 
enterprises. The rights of all market entities to par ticipate in fair competition in China will be 
effectively protected by this competition legislation system.  The current draft of the Anti-monopoly Law does not explicitly provide the industries or areas that 
are exempt from its application. Th erefore the law will be applicable to all industries and areas. At 
the same time, based on China’s specific conditions  and with reference to internationally prevalent 
practices, the draft makes special arrangement for the operations of peasants and peasant’s 
specialized economic associations. 
 
Question:  Turkey
 
 WT/TPR/S/161 (page 22, para 44) 
 
I. ECONOMIC ENVIRONMENT  (4) Main Structural Reform Issues   (v) Competition Policy 
 
It is understood from the Secretariat Report that th ere are some challenges to adopt comprehensive 
competition law and establish an effective enforcement authority in China. However in a country in which public ownership re mains as one of the mainstays in the economy, 
need for an effective competition authority unqu estionable to address problems stemming from anti –
competitive practices. 
  What are the developments made in  enacting competition law so far? 
 How do the rights of private enterprises are protected against unfair practices ? 
 
Answer: 
 
China has put great emphasis on, through comp etition legislation enactment and enforcement, 
protecting and promoting market competition, main taining market competition order, and setting up a 
nationally uniformed market syst em with fair competition. 
 
In 1993, China promulgated Law against Unfair Competition, which has served as the legal basis for 
cracking down on various unfair competition practices. In addition to that, there are also provisions against unfair competition and monopoly practices in  the Pricing Law, Foreign Trade Law, Law on 
Bid Invitation and Bidding and Regulation on Tel ecommunications, etc. Moreover, 70 administrative 
interpretations have been made on issues of legisl ation application that the relevant authorities have 
met in anti unfair competition enforcement. 25 provinces, autonomous regions and municipalities 
have also made local regulations against unfair comp etition, which further detailed provisions of the 
Law against Unfair Competition and made the enfor cement of this Law more effective. A legal system 
against unfair competition has already taken shape in China with the Law against Unfair Competition 
as the basic law and relevant administrative and loca l regulations as the supplementary. The system 
has effectively solved practical problems in the enforcement. 
 
Currently, China is in the process of drafting a la w specifically targeting at monopolies. After 
promulgation, the law will more effectively crack  down on monopolistic practices and strengthen the 
legal safeguarding for a good market competition environment.  WT/TPR/M/161/Add.2 
Page 74  
 
China’s competition legislation system, including the coming Anti-monopoly Law, will be equally 
applicable to all market entities including SOEs, enterprises of collective ownership, private 
enterprises and foreign invested en terprises. It will neither grant exemption to SOEs, nor provide for 
different treatment between SOEs and private enterp rises in its application. The rights of all market 
entities to participate in fair competition in China will be effectively protected by this competition 
legislation system.  
Question: 
 EC
 
 In para 247, the WTO Secretariat’s Report mentions that tensions could arise in China between the 
implementation of an effective competition polic y and the government development strategy known 
as the “big-corporation and big-group” strategy.  Please describe how China will ensure the independe nce of application of the new Anti-monopoly law 
from the influence of industrial policy objectives. 
 
Answer:  The Chinese Government encourages the Chinese companies to ‘be big and be strong’ so that they 
can optimize the advantage of economy of scale, improve economic efficiency and the 
competitiveness. During the pro cess, the companies should also abide by relevant laws and 
regulations against monopoly and should not turn  to practices of excluding or restraining market 
competition. There is no contradiction between the two issues. 
 
Question: 
 
EC
 
 Cartel enforcement 
 
On the application of the current Price Law, paragraph 249 of the WTO Secretariat’s Report states : 
"Although it may be acknowledged that the ma ny challenges arising from the structural 
transformation of the Chinese economy may require careful responses on competition issues, hardcore cartels are deemed to be strictly prohibited and the existing Price Law should enable the Authorities to 
deal with them in a straightforward manner.”   
Are the Authorities (NDRC) considering any action against the recently publicized market sharing 
and pricing strategies among five of the major Chinese producers of light gauge aluminium foil?  
 
Answer:  Aluminium foil is not a commodity subject to go vernment guidance pricing or government pricing. 
The government does not intervene on price-setting or price-adjusting of the commodities and 
services not subject to government guidance prici ng or government pricing unless there are illegal 
behaviours such as unfair competition practices. Th e Chinese government is not aware of the issue 
mentioned in the question. We would appreciate if more information could be provided. If there are 
clear evidences to show that the op erators, in the process of price- setting, violate relevant laws and 
regulations and have monopolistic or price control practices, the issue will be dealt with according to 
the provisions set forth in relevant laws and regulations. 
  WT/TPR/M/161/Add.2 
 Page 75 
 
 
IV. TRADE POLICIES BY SELECTED SECTORS 
 (3) Energy  
 
(i) Petroleum  Question:  
Switzerland I
 
 
Paras 58-59 . Wholesale and retail prices of oil products are controlled and adjusted periodically. Yet 
the 2005 international oil price increase has touche d the Chinese market with considerable delay, 
causing oil operators to prefer exporting their product s rather than supplying the domestic market. But 
oil exports (and imports) are in large part State controlled. Please inform in detail about the plans to 
reform the oil price mechanism in China in order to  prevent future price-decoupling of China from the 
rest of the world oil market.   
Answer:  
 
Considerations for the next-steps of the reform of oil prices include to establish an oil price 
mechanism that both reflects global oil price changes and factors in domestic supply, production 
costs and consumer response, as well as a mechanism  of subsidy for some troubled groups and public 
service industries, a mechanism of price association with related industries, a mechanism of fiscal 
compensation for business revenues as a result of a pri ce hike and last but not the least, a mechanism 
for coordinating interests among upstream and downstream oil companies.  In so doing, China will 
gradually narrow the price difference with the glob al market and ultimately integrate the domestic 
market with the international oil market.   (ii) Electricity  
Question: 
 Canada I
 
 
Part IV. Trade Policies by Selected Sectors, (4 ) Manufacturing, (ii) Iron and steel, (a) Market 
structure, paragraph 90:  
53、 Paragraph 90 states that local governments ha ve been urged to abolish price discounts on 
electricity to the steel sector. How significan t were the price discounts and has the Central 
Government been successful in its efforts to ur ge local governments to discontinue these discounts? 
 
Answer: 
 Before 2003, there were some preferen cial policies concerning the electri city prices at the local level 
based on the power surplus conditions at that tim e. The range of preference was different depending 
on the regions. In recent years, the power suply and demand conditions have greatly changed. In 
order to streamline the administra tion of electricity prices and pr omote economical utilization of 
resources, the Chinese Government has required to abolish the prefer encial policies on electricity 
prices and normalize the electricity pricing. Such  requirement has been resp ected with support and 
cooperation.  WT/TPR/M/161/Add.2 
Page 76  
 
(4) Manufacturing  
 (ii) Iron and Steel  
Question: 
 United States I
 
 
57. Paragraph 98 of Chapter IV of the report discusses China’s efforts to discourage exports 
through reductions of the VAT rebate normally allowed for exported products.  This paragraph 
focuses specifically on steel products.  It appears th at the largest reductions in the VAT rebate apply 
to exports of primary steel products that are used as inputs for finished steel products.    a.  Please identify the ministries and agencies i nvolved in deciding on reductions in the VAT 
rebate for steel products.  
b.  Please explain why China decided to discourage exports of the steel products in question.  
 
Answer:   VAT rebate policy adjustment does not specially ta rget at steel products. Ministry and agencies 
involved in VAT rebate policy adjustment include Ministry of Finance, Ministry of Commerce, 
National Development and Reform Commission, State Taxation Administration etc. Steel products are 
among those products on which the VAT rebate on expor t was reduced. The adjustment was to reflect 
the policy orientation of protecting environm ent, reducing energy and resources consumption and 
achieving sustainable development.   
 
Question: 
 United States II
 
 
45. Paragraph 95 of Chapter IV of the report stat es that China provides assistance in the form of 
tax refunds, discounted interest rates, and funds fo r research and development, etc. to major iron and 
steel projects using newly developed domestic equi pment.  Is this program addressed in China’s 
finalized but not yet fully translated subsidies no tification?  If not, please provide the information 
described in Article 25.3 of the Subs idies Agreement for this program.  
 
Answer:  
 
 There is no assistance as mentioned for major ir on and steel projects using domestic equipment. 
 
(iii) Textiles and clothing  
 
Question: 
 United States II
 
 
46. Paragraph 102 of Chapter IV of the report states that no subsidies have been provided to 
China’s textiles industry since 2000.  
 a. Does China agree with this statement?  Please explain.  b. Paragraphs 9, 18 and 20 of the United Stat es’ request under Article 25.8 of the Subsidies 
Agreement dated 6 October 2004 (G/SCM/Q2/CHN/9) describes subsidies that China has 
provided to domestic textiles producers.  Are these programs addressed in China’s finalized  WT/TPR/M/161/Add.2 
 Page 77 
 
 
but not yet fully translated subsidies notifi cation?  If not, please provide the information 
described in Article 25.3 of the Subs idies Agreement for these programs.  
 
Answer: 
 
Textile and apparel is a fully market-based indust ry in China.  The go vernment has no policy 
whatsoever that provides direct subsidy to textile and apparel companies.  The loans from banks to 
textile and apparel project are operated on market principles and are carefully reviewed before the 
granting. 
 
Textile and apparel firms may enjoy applicable tax p references or other incentives, for example, for 
foreign invested enterprises and those in a special economic zone.  However, those policies are not 
exclusively intended for the textile industry.  For details of the incentives, please refer to China’s 
notification to the WTO Committee on Subsidies and Countervailing Measures.  
(v) Electronic and communications equipment industry  
 Question:  United States II
 
 47. Paragraph 139 of Chapter IV of the report re fers to VAT refunds provided to FIEs by local 
governments.  Are these programs addressed in Chin a’s finalized but not yet translated subsidies 
notification?  If not, please provide the informati on described in Article 25.3 of the Subsidies 
Agreement for these programs.  
 
Answer: 
 The practice of VAT refunds by local governments as  quoted in the Secretariat Report is explicitly not 
allowed by China’s central government.  Any su ch behavior will be punished once discovered. 
 Question: 
 
United States II
 
 
48. Paragraph 141 of Chapter IV of the report refers to a variety of preferential policies 
supporting the development of domestic software and integrated circuit enterprises, including VAT 
rebates, tariff exemptions for imported equipment for a domestic enterprise’s own use, export loans 
provided by the EXIM Bank and export credit in surance provided by the China Export & Credit 
Insurance Corporation at favorable conditions, g overnment procurement preferences, and a special 
fund set up by the Ministry of Information Industry (MII), the NDRC and the Ministry of Finance (MOF) to promote domestic enterprises’ research  and development capabilities.  Are all of the 
programs described above addressed in China’s finalized  but not yet translated subsidies notification?  
If not, please provide the information described in Article 25.3 of the Subsidies Agreement for those 
programs.  
 
Answer: 
 
Please refer to China’s recently submitted new and  full subsidy notification to the WTO. 
 WT/TPR/M/161/Add.2 
Page 78  
 
(5) Services 
 (iii) Financial services  
Question: 
 United States II
 
 
49. Paragraph 141 of Chapter IV of the report notes that the Chinese government has adopted 
several measures to assist the development of Ch ina’s electronics and communications industries.  
Earlier in the report, paragraph 86 of Chapter IV refers more generally to industrial policies 
promoting, inter alia , these industries. 
 a. China’s largest manufacturer of teleco mmunications equipment (Huawei Technologies) 
reportedly received a line of credit of approximately $10 billion from the China Development 
Bank for the purpose of funding export growth.  Please describe the terms and conditions of 
this line of credit, and explain whether China c onsiders the provision of this line of credit to 
have been purely commercial in nature. 
b. Are any Chinese enterprises in the telecomm unications equipment industry responsible for 
any of the NPLs of China’s state-owned commercial or policy banks?  If so, please explain. 
 Answer:  China Development Bank (CDB) and Huawei Technologies only shared a preliminary intention for a framework agreement, rather than a substantive co mmitment to a USD 10 billions line of credit.  
Should Huawei need the credit support from CDB in  the future, the credit will be provided as 
commercial loans according to relevant laws and bus iness principles. It will conduct an independent 
review for any proposed lending before reachi ng an affirmative or negative lending decision and 
deciding upon the credit line, risk portfolio and controllability, lending modality, term and interest 
rate. The criteria for assessing a borrowing applic ation are, among others, the compliance of the 
project with laws and regulations, its feasibility and cash flow, the solven cy of the borrower and the 
nature of guarantee. The loan is purely an act of business-bank collaboration without any 
intervention of government.   China currently exercises a five-grade quality system for managing its loans.  In other words, loans 
are graded as normal, having reason for concern, in ferior, suspicious and loss-bound. Bad loans are 
caused by many reasons and may occur in diff erent types of businesses, industries and different 
regions. In this sense, part of the existing non-p erforming loans may come from the electronics and 
communications sector. However, no breakdown sta tistics are available at this stage on the non-
performing loans in the electronics and communications sector.  Question: 
 
United States II
 
 
50. Paragraph 158 of Chapter IV  of the report describes the lending practices of China’s three 
policy banks, i.e., the Agriculture Development Bank of China, the EXIM Bank and the China 
Development Bank.   
 a. Does China agree that loans provided by each  of these policy banks to domestic enterprises 
are subsidies within the meaning of Ar ticle 1 of the Subsidies Agreement?  
b. Does China’s finalized but not yet fully tran slated subsidies notification identify loans from 
these policy banks as subsidies and provide info rmation on the nature and extent of these 
subsidies in accordance with Article 25.3 of th e Subsidies Agreement?  If not, please provide  WT/TPR/M/161/Add.2 
 Page 79 
 
 
the information described in Article 25.3 of th e Subsidies Agreement fo r the loans from these 
policy banks.  
 
Answer:  
The loans given out by policy banks come in many forms and do not necessarily constitute subsidies.  
For example, the Agricultural Devel opment Bank used to issue povert y-relieving loans with interest 
discount covered by the state budget.  It is an int ernationally accepted practice of subsidizing the 
vulnerable agriculture business. Another example woul d be the student loans issued by the China 
Development Bank on a trial basis in selected provinces and cities across China, where a proportion 
of the risk-based losses will be co mpensated by the state budget. This  particular loan mainly functions 
to help students from poor families finish their school  education. However, the majority of loans given 
out by policy banks are operated on universal terms without budgetary subsidies. 
 
Report by the Government of the People’s Republic of China  
III. Outlook 
 Question: 
 
Switzerland I
 
 
Para 99  stipulates that a new model of industrialisa tion will be followed, categorizing different 
regions as suitable for optimal development, prior ity development, or restricted development or 
development prohibition. What are the instrume nts the Chinese government intents to use to 
implement this “new model of industrialisation”? Does this new policy contain government measures 
that directly intervene in the market competition between regions?  
 
Answer:  
The new industrialization approach initiated by the Chinese government has at its core driving 
industrialization through informa tion and promoting IT development through industrialization.  The 
goal is to embark on a road of industrializatio n featuring high technology contents, favorable 
economic benefits, low energy consumption, l ess pollution and fully utilized human resources. 
To meet the goal, the government encourages co mpanies to develop more innovation initiatives, 
continue to play out the competitive advantages of labor-intensive industries, upgrade and optimize 
product mix, business structure and industry al ignment, and increase the general level of 
technological competency and competitiveness.  However, by developing along the road of new i ndustrialization, Chinese government will by no 
means make direct interventions in market competiti on. It would continue to allow market play the 
central role in economic development. 
 
I. ECONOMIC ENVIRONMENT 
 (3) Macroeconomic Policies   
(i) Monetary and exchange rate policies   WT/TPR/M/161/Add.2 
Page 80  
 
Question: 
 Canada 1
 
 Part I. Economic Environment, (3) Macroeconomi c Policies, (i) Monetary and exchange rate 
policies, paragraph 17:   
3. How have the authorities determined the sector s where “window guidance” is necessary to decrease 
credit growth?  Has window guidance been applie d equally across non-public enterprises and State-
Owned Enterprises?    Answer:  “Window guidance” mainly refers to the risk prompt that the People’s Bank of China and the bank regulatory agency give to all comm ercial banks according to national industrial policies and sectoral 
development situation. The first factor of concern is the situation of non-performing loan in specific 
sectors. If the non-performing loan reaches certain level, all commercial banks should extend loan cautiously. The second is the supply-demand situat ion of specific sectors, such as the production 
capacity at present, the capacity und er construction and that expected in future, as well as the market 
demand at present and in future. The third is indus trial structure condition of the specific sectors, 
such as the market access situations regarding national technical and environmental standard. 
With each commercial banks making its own concrete loan decision independently, “Window 
guidance”, which is only a kind of macro guidance and has no administrative binding force, applies 
equally across non-public enterprises and state-owned enterprises in China. 
 Question: 
 
Turkey
 
 WT/TPR/S/161 (page 13, para 19)  I. ECONOMIC ENVIRONMENT 
 
(3) Macroeconomic Policies   (i) Monetary and Exchange Rate Policies 
 In July 2005 The People’s Bank of China has declar ed that it was moving from a fixed exchanged rate 
regime towards a managed floating one. Since this  move, Secretariat Report mentions that “ the 
nominal effective exchange rate has (as of November 2005) appreciated roughly by 5 %.”   
• Could China please explain, what has been, if any,  the initial effect of exchange rate regime 
change on the foreign trade developments of China in the last two quarters of 2005?  
 Answer:   
 Please refer to response to Switzerland’s question on China’s assessment of the reform in July 2005 of its exchange rate regime. 
  WT/TPR/M/161/Add.2 
 Page 81 
 
 
Question: 
 Japan Additional
 
 
Report by the People’s Republic of China Secretariat (WT/TPR/G/161) 
 
I. MACROECONOMIC ENVIRONMENT  (p.7, paragraphs 16-17)  
 Q5.  Concerning exchange control and capital move ment, please indicate future prospects, including 
timelines for them. 
 
Answer:   
 
Please refer to response to Japan’s Q.1 (2).  
Question: 
 Japan Additional
 
 
Report by the People’s Republic of China Secretariat (WT/TPR/G/161)  I. MACROECONOMIC ENVIRONMENT  (p.7, paragraph 17)  
 
The Report by the People’s Republic of China stat es that “the RMB convertibility under the capital 
account has been increasing gradually.”  Q6. In this regard, please indicate which me asures China has taken for increasing the RMB 
convertibility. Please also indicate how these measures have been effective. 
 Answer:   
 Please refer to response to Japan’s Q.1 (2). 
 
(4) Main Structural Reform Issues  (iii) Labour market reforms 
 
Question: 
 
US 1
 
 
4. Paragraph 35 of Chapter I of the report expl ains that China initiated measures aimed at the 
gradual relaxation of the hukou registration system in the mid-1990s and the Chinese authorities 
believe that conditions are becoming more ripe for a comprehensive reform of this system.  When 
does China plan to begin a comprehensive reform of the registration system?  Is there any timetable?  
If reform of this system does not mean its abol ition, please describe what further relaxation may 
entail. 
 WT/TPR/M/161/Add.2 
Page 82  
 
Answer:   
 Now China is conducting studies on the further refo rm of its hukou registration system. At present, 
there is neither any specific schedule of further relaxa tion of the system nor a timetable to abolish the 
system. 
 
Question: 
 Bolivia
 
 
Area Laboural.  Capítulo I iii) párrafo 39 y capítulo III, párrafo 229.  
 
El porcentaje de desempleo de mano de obra altame nte calificada, también es alta, sobrepasando los 9 
millones de ciudadanos. ¿cómo solucionará el problem a del desempleo que orig ina la privatización de 
las empresas estatales, de la migración del campo a la ciudad y de los que buscan su primer empleo y, particularmente de la mano de obra graduada de universidades y centros de formación de mano de 
obra calificada? Asimismo, ¿qué medidas se están  tomando para que el de sempleo no genere un 
aumento del empleo informal? 
 
Answer: 
 In the first quarter of 2006, China’s registered unemployed population is about 8.39 million and the 
registered unemployment rate is 4.2 percent. Th e Chinese government has attached great importance 
to the employment issue and has implemented positive employment policies, promoting employment of 
the jobless through various policies and measures as follows: 
 (i) Open up new avenues of employment in th e process of economic development and structural 
adjustment.   To tackle with its employment challenges, China ha s been taking great effo rts to enhance domestic 
demand, maintain the essential growth rate of national economy, adjust the economic structure 
positively, upgrade the pulling effect of economic growth on employment expansion and to improve 
overall employment by all means.  China is to create employment opportunities mainly in six approaches:   To adjust industrial structure and develop the tertiary industry vigorously, especially 
developing the employment posts in the community  service industry and tourism as well as in the 
traditional service industries such as trade and catering business;   To adjust ownership structure and encourage the development of all kinds of ownership 
economy with big employment capacity such as in dividual economy, private sector of the economy, 
foreign-investment economy and shareholding economy;  
 To adjust enterprise structure, upgrade those sm all and medium-sized enterprises responding to 
market demand and continue to develop employment service enterprises;  
 To give full play to the advantage of China’s labour force resource and facilitate the development of those labour-intensive industries and enterprises with comparative advantage;  
 To encourage the laid-off workers to get re-em ployed through flexible means such as non-full-
time, temporary or seasonal work arrangements, and to provide service and assistance for flexible 
employment through setting up employment bases and developing better labour dispatch service;  
 To further explore the domestic and oversea s markets, encouraging trans-regional labour 
service cooperation at home and implementing the strate gy of “going global” with greater efforts to 
explore the international labour force market.   WT/TPR/M/161/Add.2 
 Page 83 
 
 
(ii) Using taxation and financial policies to  help the laid-off workers get re-employed. 
The measures adopted include: taxes and/or fees re duction or exemption in or der to encourage laid-
off workers to find jobs by themselves and set up business on their own.   (iii)  Provide free employment service and preferen tial vocational training for the urban laid-off 
workers. 
 (iv) Strengthen the employment service and training of the rural workers in cities. 
From this year, all the labour and social secu rity departments in China will implement the 
“employment plan of rural labour force with im proved skills”. With 5 years time, we will carry on 
non-agricultural vocational skill training to 40  million rural workers, i.e. 8 million per year. 
 (v) Promote the employment of college graduates. The measures adopted include: to facilitate the ta ns-regional and cross-departmental movement of 
graduates and transfer of employment information. 
 
Moreover, the Chinese government  encourages flexible employment and promotes employment 
stability in the meanwhile. The government pr ovides assistance and service for those flexibly 
employed through improving the labour relatio nship, wages payment and social security 
arrangement.    
At the same time, the government encourages orga nized employment as well, in order to secure 
employment stability. At present, many regions are developing labour dispatch service actively, which 
helps employment in the fields of household management service and community service as well as in 
labour service export. 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES   (4) Trade Policy Objectives   Question:  
EC
 
 
The EC welcomes the information pr ovided on trade and labour issues.  
 
• The World Commission on the Social Dimension of Globalisation highlighted the importance 
of linking trade with sustainable domestic policies,  in particular core labour standards. What 
policies is China implementing that specifically address the social and labour effects of trade 
liberalisation?  
 
Answer:  
Please kindly refer to the response to U.S. Q.5. 
 Question:  EC
 
 
• In view of the need for large-scale job crea tion, how does China evaluate the fact that 
employment elasticities of growth have been d ecreasing over the last years? Which measures 
are intended to improve these employment elastic ities? In particular, does China have policies 
to foster greater job creation in la bour intensive sectors of the economy? WT/TPR/M/161/Add.2 
Page 84  
 
 
Answer:    In recent years, the Chinese govern ment, encompassing economic development, has opened up multi-
channels for employment posts, implemented positive employment policy and expanded employment 
by all available means, so as to  improve employment elasticity.  
 The measures adopted mainly include:   
1. China has insisted on solving the employment pr oblem in the process of development and put in an 
effort to sound interaction of the economic growth and the expanded employment. China has 
combined the deepening of reform, in parallel with  promotion of development,  adjustment of structure 
and expansion of employment. When formulating ec onomic and social policies involving the overall 
situation and determining significant constructi on projects, China has taken job creation as an 
important factor into consideration; while giving prominence to the enhancement of competitiveness, 
China has established the economic structure and grow th pattern which is beneficial to the expansion 
of employment and analyzed the impact of the evo lving domestic and foreign economic situation on 
the employment, so as to take co rresponding countermeasures positively. 
 
2. China has implemented the policies of encour aging, supporting and guiding the development of the 
non-public sector such as individual economy and priv ate sector of the economy in an all-round way, 
carried out national policies and measures related  to the development of the tertiary and service 
industries earnestly, and opened up new avenues of employment widely in the process of propelling 
the development of the tertiary indust ry and businesses with various ownership. 
3. China has given priority to the development  of labour-intensive industries and small and medium-
sized enterprises with com parative advantage so as to increase th e employment capacity. As regard to 
the industries with great market demand and bi g employment capacity, China has correspondingly 
formulated supporting policies to encourage employment.  
4. China has advanced trans-regional labour servi ce cooperation and export of labour services, and 
encouraged mining cities and industrial and mining area s to develop relevant industries so as to help 
the labour force to shift employment.  
 
5. China has encouraged the workers to be employed  by various means, and provided assistance and 
service for the flexibly employed people through p erfecting and implementing the policies of labour 
relationship, wages payment and social security , which match up to the flexible employment.  
 6. China has persisted in the coordinated devel opment of urban and rura l economy, adjusted rural 
economic structure, speeded up the construction of small cities, and guided and organized the rural 
labour force to shift to non-agricultural indus tries and to move to cities orderly.  
 
Question:  EC
 
 
• How does China intend to manage increasing labour migration flows within the country as a 
consequence of industrial restructuring? What role does employment of Chinese abroad play 
in this context? What is the government's stra tegy on promoting labour migration? In which 
sectors, if any, does China have a need of skilled immigration?  
  WT/TPR/M/161/Add.2 
 Page 85 
 
 
Answer:   
 China believes that the labour migration flows, including domestic labour force movement and cross 
border flow, will help enhance empl oyment and alleviate poverty effec tively, as well as to facilitate 
economic and social development at home and the cultural exchange worldwide. It will also help 
optimize the efficiency of talents, technologies an d capital allocation, which are to the mutual 
interests of all parties. In order to secure the ord erly migration of the labour force, the government 
will safeguard the legitimate rights and interests of both Chinese citizens who work abroad and  
foreigners who work in China through strengthening its institutional  construction, absorbing good 
foreign practices and studying the related laws and regulations of other countries. 
 
Pursuant to the Regulations on the Management of the Employment of Foreign Workers in China, 
China implements employment-licensing system to foreign workers in China. The employment posts 
available for foreign workers are those not in violati ons of the law, with special requirements and 
lacks suitable domestic candidates for the time being.  Foreigners who come to work in China must be 
approved by labour and social security depar tments of the Chinese government, and can get 
employed legitimately after obtaining the Foreign ers Employment Permission Certificate of People's 
Republic of China. The Chinese government encourag es and welcomes foreigners to come to work in 
China particularly in the fields of advanced t echnology, management and other special posts, which 
face shortage of talents. With regard to qualified foreigners, the Chinese go vernment will facilitate 
their border entry, employment approval and reside nce application. By the end of 2005, foreigners 
who are working in China has reached more than  150,000, and over 85% of them are working in 
foreign-invested enterprises and rep resentative offices of foreign ent erprises, engaging in advanced 
technology and management posts. 
 
Question:  Japan 2
 
 
Difficulties and Challenges Confronting Development 
 (p.11, paragraph 37)  
 
In recent years, the regional economic disparity an d the disparity in individual incomes have been 
widening in China.  
 Q8. Please indicate which measures China has ta ken for reducing these disparities. Please also 
indicate how these measures have been effective.  
 
Answer: 
 The Chinese government pays great a ttention to the widening individual  income disparity in China 
and has taken all kinds of measures to address it.   Firstly, the government has been strengthening th e macro control measures. While keeping a rapid 
and stable national economic growth, the government is  making every effort to create the employment 
opportunities and lift people’s living standard in both the urban and rural areas.  
 Secondly, tremendous efforts are devoted in restruct uring the agriculture, as well as its agricultural 
economy, promoting the industrialization of agric ulture, consolidating the agricultural taxation 
reform results, intensifying the poverty relief ende avour, and increasing the income of farmers.  
 WT/TPR/M/161/Add.2 
Page 86  
 
Thirdly, the government is adopting policies aiming at pushing forward the development of the central 
and western regions, and rejuvenating the Northeas t and other old industrial bases. Greater support 
is extended to stimulate the economic and social development in the central and western regions, and 
the poverty alleviation mechanism is being impro ved to promote the coordinated development of 
different regions.  
 
Fourthly, the government is regulating the market competition order, strengthening the supervision 
over the income distribution of monopolized indus tries, deepening the in come distribution system 
reform of state-owned agencies, pushing forward the setting up of wage adjustment mechanism, and 
rationalizing the initial distribution order.  
 
Fifthly, the personal income tax and other taxation me asures are improved to alleviate the tax burden 
of low and middle-income earners, and reinforce the adjustment arm of taxation for high-income 
families.  
Sixthly, steps are continued to strengthen the ur ban and rural social security system, expand the relief 
and assistance to the poor, and to properly address the d ifficulties in the lives of low-income people in 
the urban and rural areas.   The implementation of these policies has resulted in  the preliminary curbing of the widening 
economic and income gap in-between different regions  in China, rapid growth of the farmers’ 
income, and notably fastened economic expansion of  the economically backward provinces. At the 
same time, the social redistribution mechanisms such  as taxation and social security system have been 
strengthened.  
 
Question: 
 
EC
 
 
• Does China have policies to reduce income disp arities between rural and urban workers and 
between regions, to smooth the industrial tran sition in the face of trade liberalisation? 
 
Answer: 
 
Please refer to our response to Japan’s questions on  regional economic disparity and the disparity in 
individual incomes in China.  Question: 
 
EC
 
 
• How does China intend to ensure that employme nt standards covered in national employment 
legislation (e.g. minimum wages, working hours, health and safety at work) are respected in 
all companies including in those directly or indirectly engaged in international trade? 
 Answer:    The Labour Law of People's Republic of China, comi ng into effect on January 1, 1995, established the 
basic man-hour system and the minimum wage safe guard system. The Revision of the Regulation of 
the Staff’s Working Time, issued by the State Council on March 25, 1995, set up the standard man-
hour system of 8 hours per day and 40 hours per week.  At present, all the 31 provinces, autonomous 
regions and municipalities directly under the central  government in China have issued the local 
minimum wage standard. In order to protect the special rights and interests of underage labourers  WT/TPR/M/161/Add.2 
 Page 87 
 
 
and female workers, China has also formulated the Regulations on Forbid ding the Use of Child 
Labourer and the Regulations on the Protection of Female Staff Workers. All these basic laws and 
regulations and standards apply to all enterprise s and individual economic organizations within the 
territories of China.  
In order to guarantee effective implementation of the above laws and regulations, China has 
established labour and social security supervisory  system and legal supervision mechanism of the 
trade unions. The supervisory institutions above county level supervise the situation of the employers’ 
compliance with the labour and social security laws and regulations, c onduct supervision and law 
enforcement activities by means including daily and annual inspection of the enterprises’ labour and 
social security, as well as inspection upon lead-repor ting, and investigate or even try to prevent law 
violating practices promptly. Trade unions have the right to supervise the situation of the employer’s 
implementation of the labour and social security laws and regulations, to request the employer 
concerned to stop their encroachment of the staff’s labour rights and interests. If the employer fails to 
take actions to correct its practice, the trade union  can submit to the local government for legal 
punishment. Thanks to those mechanisms menti oned above, the Chinese government guarantees the 
implementation of the national labour a nd social security laws and regulations. 
 
Question: 
 EC
 
 
• Is China taking initiatives aimed at ensuring resp ect for labour standards in Export Processing 
Zones (EPZs)? 
 
Answer:    
At present, China has started to launch activities in the industrial parks, including export-processing 
zones aimed at creating a harmonious management-labour  relationship.   China has formulated the 
foundation standards, mainly including: to set up a three-party manageme nt-labour relationship 
coordination mechanism and a labour dispute medi ation mechanism in the industrial parks, to 
coordinate labour relations; to implement contract  labour system according to law; to establish 
legitimate and sound enterprise rules and regulations ; to prevent illegal use of child labourers; to 
observes regulations on the special rights and in terests protection for female workers and the 
underage labours ; to establish collective contract system by collective negotiation, and to sign the 
content-concrete, standard-quantified and easily-operati onal collective contract on the basis of full 
consultation. China has requested the enterprise s to conduct collective negotiation of wages with 
wage standards, prompt and full payment of wages secu red, as well as to guarantee the income of the 
staff to be increased along with the growth of ec onomic efficiency and the legal participation in the 
social security system by the employees.   In the near future, the three parti es involved in coordinating the labour-capital relationship will 
promulgate documents to further lay out th e foundation work across the country to create a 
harmonious labour-capital relationship with its im plementing activities launched in all industrial 
parks so as to enable each labour standard to be  implemented faithfully. The labour and social 
security supervisory institutions will urge the ent erprises to observe the laws and regulations as well 
as the primary standard by developing supervision and law enforcement activities. 
 WT/TPR/M/161/Add.2 
Page 88  
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 (4) Measures Affecting Production and Trade   (iv) State-owned enterprises  
 
Question: 
 Canada 1
 
 
Part III. Trade Policies and practices by meas ure, (4) Measures Affecting Production and 
Trade, (iii) Legal framework for business, (d) State-owned enterprises, paragraph 217:  
 
44.  What are examples of “important matters of the company” where State Assets Supervisions and Administration Commission will make decisions on behalf of SOEs?  Answer:  According to the Company Law of the People’s Repub lic of China, the shareholders’ meeting and the 
board of directors of a limited liability company possess and perform their respective duties and mandates. Like any other shareholders, the supervising entities of state-owned assets including the 
State Assets Supervisions and Administration Commission shall only perform their due duties and 
mandates as shareholders within the scope of th eir responsibilities in accordance with the law. 
The situation pertaining to that described in the Secretariat’s Report mainly refers to solely state-
owned companies, which is just one form of limited liability companies.  
As has been stipulated by Article 67 of the Com pany Law of China: A solely state-owned company 
shall not set up the shareholders' meeting, and the functions of the shareholders' meeting shall be 
exercised by the state-owned assets supervision and ad ministration institution. The state-owned assets 
supervision and administration institution may author ize the board of directors of the company to 
exercise some of the functions of the sharehold ers' meeting and decide on important matters of the 
company, excluding those that must be decided by the state-owned assets supervision and 
administration itself such as merger, split-up, di ssolution of the company, increase or decrease of 
registered capital as well as the issuance of co rporate bonds. The merger, split-up, dissolution or 
application for bankruptcy of an important solely state-owned company shall be subject to the 
examination of the state-owned assets supervision and administration institution, and then be 
reported to the people's government at the same level for approval. 
 
(vii) Competition policy  Question:  Canada 1
 
 
Part III. Trade Policies and Practices by Meas ure, (4) Measures Affecting Production and 
Trade, (vii) Competition policy, paragraph 243: 
 
46.  As SOEs operate on a commercial basis, w ill they be subject to the Anti-monopoly Law in a 
manner comparable to non-public enterprises?  Answer:  Once promulgated, the Anti-monopoly Law will be app licable to all types of businesses, including 
SOEs, State-invested enterprises as well as foreign enterprises, except for exemptions provided for by  WT/TPR/M/161/Add.2 
 Page 89 
 
 
law.  As regards to which sectors, industries or enterprises can be exempted, the forthcoming law will 
give specific provisions on the basis of specific situations.  
 
Question: 
 
Japan  
 
Report by the People’s Republic of China Secretariat (WT/TPR/G/161) 
 I. MACROECONOMIC ENVIRONMENT 
 
(p.6, paragraph 11)  
Q2. Please indicate specifically what “corporate gov ernance structure” means.  Please also indicate 
any prospects for the establishment of corporate governance.  Answer:  “Corporate governance structure” refers to the equity-based internal organizational system 
established by an enterprise with modern corporate system as an independent legal entity to ensure its 
normal operation after the separation of owners hip from business management right. It is an 
arrangement and operational mechani sm consisting of shareholders’  general committee, board of 
directors, the management and the board of supervisors.   To improve the corporate governance structure, th e state owned companies shall, in line with the 
Company Law, set up the mechanisms of sharehol ders’ general committee, board of directors, board 
of supervisors and the management, so as to shape up a corporate governance structure with different 
parties shouldering their own responsibilities, coor dinating with each other, and effectively 
supervising each other.  For detailed information about the specific respons ibilities of the shareholders’ general committee, 
the board of directors, and the board of supervisors, please refer to the Company Law of China. In 
the process of setting up the boards of directors of  solely state owned companies, it is clearly 
provided that the board of directors shall be se parately established from the management, making 
best efforts to avoid the overlapping of directors and the managers, and to include more than half of directors from outside of the company in the board for the sake of setting up a mutually supervising 
and coordinating mechanism.  
 
Question: 
 Japan
 
 
Report by the People’s Republic of China Secretariat (WT/TPR/G/161) 
 
I. MACROECONOMIC ENVIRONMENT  (p.6, paragraph 12) 
 Q3. Regarding “multiple share holders”, please provi de the specific breakdown of share holders, such 
as each rate shared by the governme nt and by institutional investors. 
 WT/TPR/M/161/Add.2 
Page 90  
 
Answer:  
 Regarding multiple share holders, there are no officia l breakdown statistics of the percentage of 
shares by the government and by institutional investors.  
(ix) Intellectual property rights 
 Question:  EC
 
 
The EC understand that China is currently working on issuing a State Council regulation fixing tariff 
rates for broadcasting of copyright works. This re gulation is provided in 2001 Copyright Law and is 
the final step that would allow EU copyright hold ers to collect rights for the broadcasting of their 
works.  
 
• Could the Chinese authorities give a clear timeta ble for drafting and adopting this regulation? 
 
Answer:   
 The relevant Chinese government departments are st udying on the above issue. Up to now there is no 
specific timetable for the drafting and adopting of su ch a regulation, which, nevertheless, will be 
formulated and implemented when conditions are ripe. 
 Question:  US 1
 
 42. Paragraph 273 of Chapter III of the report indi cates that China is drafting regulations to 
prepare to accede to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.  Are amendments to the Copyright Law c ontemplated as part of that accession package?  
 
Answer:   
 
A bill for the accession of the WCT and WPPT will be submitted to the Standing Committee of the 
National People’s Congress in 2006.  
 
Question: 
 
Korea 
 
 
12. When a certain amount of financial losses is incurred from copyright violation, the violator is 
subject to criminal penalties.   
y What is the method of estimating the amount of financial losses and what are the thresholds?  
 
Answer:   
 
For information about the method of estimati ng the amount of financial losses incurred from 
copyright violation, please refer to Article 12 of the Judicial Interpretation of the Supreme Court and the Supreme People’s Procuratorate promulgated in December 2004. For information about the 
specific criminalization threshold, please refer to  Article 5 and 6 of the Judicial Interpretation. 
  WT/TPR/M/161/Add.2 
 Page 91 
 
 
Question: 
 Korea 
 
 
13. It seems that it is necessary fo r the Chinese government to increase its efforts to protect the online 
IPR by cracking down piracy of online games and pr ovision of online game services without license.  
 
y Please explain the current administrative measu res and any future plans to improve the 
present situation.  
 
Answer:   
 
Please refer to China’s response to US1 Q42. 
 
Question: 
 
Chinese Taipei  
 
(Page 43, paragraphs 37-40) 
 According to Article 2.1 of the TRIPS Agreemen t, all Members of the WTO should comply with 
Articles 1 through 12, and Article 19, of the Pa ris Convention (1967), which has provisions for 
priority rights in Article 4.   Therefore, all Me mbers of the WTO, including China and the Separate 
Customs Territory of Taiwan, Penghu, Kinmen and Matsu, should accept priority rights claims from each other.  However, according to Article 5 of China’s “Related Regulations for Accepting 
Taiwanese People’s Patent Applications”, our nationa ls may claim priority rights only providing that 
the patent has been filed first in a party to the Paris Convention, to which we are not a signatory.  
 
Our question to China is, if the patent is first fi led in the Separate Customs Territory of Taiwan, 
Penghu, Kinmen and Matsu, either by a national of ours or a foreign national, pursuant to Articles 2.1 
and 4 of TRIPS, can priority rights still be claimed in China? 
 
Answer:   
 
China has honored its accession commitments in stri ct accordance with Article 29 of the Chinese 
Patent Law. 
 
Question: 
 
Mexico a
 
 
Sujeción a la legislación internacional en mate ria de propiedad industrial e intelectual 
 
En este punto, consideramos importante saber cuál es la postura de China respecto de su alineación en 
la legislación internacional en las materias señal adas, y cuáles serían las medidas que estarían 
dispuestos a adoptar para prevenir y desalentar la  producción y comercialización de mercancías que se 
ostenten como productos protegidos, sin contar co n el permiso del titular de la patente o registro 
(piratería). 
 
Answer:   
 All Chinese laws on IPRs have been made fully co mpatible with TRIPS agreements. For information 
about the measures China has taken to combat IPR infringements as well as the corresponding achievements, please refer to response to Canada I’ s Q48. WT/TPR/M/161/Add.2 
Page 92  
 
 
Question:  Canada 1
 
 
Part III. Trade Policies and Practices by Meas ure, (4) Measures Affecting Production and 
Trade, (ix) Intellectual property rights, (f) Other IPRs, paragraph 296:  
47. Paragraph 296 states that “[g]eographical indi cations are registered as collective marks or 
certification marks with the Trademark Office under the same procedures as for trade marks.  It 
appears also that the AQSIQ is involved in implementation of policy concerning geographical 
indications”.  Would China please elabourate on the State General Administration of Quality Supervision, Inspection and Quarantine’s (AQSIQ) role with respect to geographical indications, 
including the June 2005 ‘Regulations on Protection of Products of Geographical Indications’? In 
particular, is AQSIQ involved in aspects of standa rdization, certification or accreditation as it relates 
to geographical indications? 
 
Answer:  According to the Quality Law of the People’ s Repub lic of China, Law of the People’ s Republic of 
China on Import and Export Commodity Inspection, Law on Standardization of the People’ s Republic 
of China and the Rules on the Protection of Geogr aphical Indications, the AQSIQ exercises protection 
over the registered geographical indication products , including accepting and approving applications 
as well as giving protections.  Please see the Rule s on the Protection of Geographical Indications for 
the specific provisions and pr ocedures at www.aqsiq.gov.cn. 
 
Question:  US 2
 
 
44.  In paragraphs 295 and 296 of Chapter III, th e report states that geographical indications are 
protected either under the Trademark Law and the  Regulations for the Implementation of the 
Trademark Law , and/or by AQSIQ.   
 a. Are foreign-owned geographical indications protected by these measures?  If so, please explain how they are protected. 
 
Answer: 
 Both Chinese and foreign geographical indications can be protected by measures stipulated in the 
Trademark Law, the Regulations for the Implementati on of the Trademark Law, as well as in the Rules 
on the Protection of Geographical Indications. For detailed information on protection, please refer to the above mentioned legislations. 
 
Question: 
 
b.  Does the AQSIQ system have a means for opposition to geographical indications by domestic enterprises or individuals?  Fore ign enterprises or individuals? 
 Answer:  According to the Rules on the Protection of Geographical Indications, the AQSIQ holds a 60-day period for public scrutiny for any product applie d for GI protection.  Any manufacturing and  WT/TPR/M/161/Add.2 
 Page 93 
 
 
operating unit, social group, organization or individ ual is entitled to raise different opinion to the 
AQSIQ during the public scrutiny period. 
 
Question: 
 
c. Does the AQSIQ system have a means for cancellation of geographical indications by 
domestic petitioners?  Foreign petitioners? 
 
Answer:  
In the event that the products already approved  geographical indications are found violating the 
Quality Law of the People’ s Republic of China, La w on Standardization of the People’ s Republic of 
China, Law of the People’ s Republic of China on Import and Export Commodity Inspection, etc., the 
AQSIQ, in response to domestic or foreign petition ers, shall cancel the geographical indications of 
the products. 
 
Question: 
 
d. Does the AQSIQ system allow for challenge of a geographical indication on the basis of a prior trademark registration?   Answer:  The GI protection system adopted by the AQSIQ is in line with the principle of voluntary choice by the applicant.  The owner of an existing common trade mark, collective trademark or certified trademark 
may still be entitled to apply to the AQSIQ for GI protection on a voluntary basis. 
 
Question: 
 
e.  What remedies are available for infringement of a geographical indication under the AQSIQ system? 
 
Answer: 
 Article 24 of the Rules on the Protection of Geographical Indications states that violators of the regulation shall be subject to administrative penalties imposed by the quality and technical 
supervision administrations and im port and export inspection and q uarantine administrations in 
accordance with the Quality Law of the People’ s Republic of China, Law on Standardization of the 
People’ s Republic of China, Law of the People’ s Republic of China on Im port and Export Commodity 
Inspection, etc. 
 
Question: 
 
f. Can decisions of AQSIQ be appealed?  If so, to  which court is the appeal taken and on what 
grounds?  
Answer: 
 
The decisions of AQSIQ can be appealed.  Applicatio ns can be made to the Legislative Affairs Office 
of the State Council for administrative reviews or to  the People’ s Court for administrative litigation.   
 WT/TPR/M/161/Add.2 
Page 94  
 
Question: 
 
g. Can geographical indications be recognized under Chinese law as famous trademarks and/or 
well-known trademarks? 
 
Answer:  
 According the Trademark Law of China, geograph ical indications can be recognized as famous 
trademarks or well-known trademarks.  For instance,  China has recognized geographical indications 
such as “Anxi Tiekuanyin” tea and “Jingde Town” porcelain as well-known trademarks.  
 
Question: 
 
h. How does China remedy misrepresentations of products as originating from a particular 
geographic region, such as identifying a product as “Made in USA” when it is not?  Which ministry or 
agency has jurisdiction in this area?  
 
Answer:  According to the Chinese Customs Law, Regula tion on the Administration of Import and Export 
Goods and Regulation on the Origins of Import and Export Goods, where there are 
misrepresentations by the Customs authority a fter the importer declares the product origin, the 
Customs shall refund the money to the importer if the duties are over-levied or request the importer to 
duly pay the duties if the duties are under-levied.  
 
Question: 
 
Mexico
 
 
10. el sistema de registro de indicaciones geogr áficas que se señala en el documento (pag 151-
152) aplica también para las IG extran jeras? Es decir, si un país esta interesado en proteger una IG en 
China utilizaría este sistema? De ser el caso, ¿quienes podrían ser las personas autorizadas para 
solicitar el registro? 
 
Answer:   
 
Under the trademark system, the geographical i ndication protection mechanism by means of 
collective marks or certification marks treats Chinese and foreign geographical indications equally 
without any discrimination both in registration and protection. If a member wants its geographical 
indication to be protected in China, it shall file  an application accordingl y. The provisions on 
application subject are clearly written in Article 3 of the Trademark Law. Group and association or 
other organization is entitled to file an application.  
 AQSIQ also accepts applications for regist ering foreign geographical indications. It is now 
formulating the relevant regulating measures in  line with the Rules for the Protection of 
Geographical Indications. Should a country intend to  have its geographical indication protected in 
China, there must be several conditions available incl uding the fact that it has been protected in its 
country of origin in the first place. The applic ant must provide the AQ SIQ with all necessary 
documents certifying that the concerned geographica l indication is protected in the originating 
country, as well as other technical, legal and stan dard-related documents. The applicant shall also 
receive the necessary modality and technical assessmen t of the AQSIQ on the conformity of the 
concerned geographical indication.  
  WT/TPR/M/161/Add.2 
 Page 95 
 
 
Question: 
 Switzerland 1
 
 
Para. 60 . The report by the People's Republic of Chin a mentions on page 14, paragraph 60 that 
import as well as export goods suspected of IPR infringe ment can be detained and dealt with by the 
Customs. Please provide statistical information on the number of cases in which such goods were 
seized in the course of importation and exportation by your customs authorities as well as on the 
quantities of the goods seized. 
 
Answer: 
 According to the Chinese Customs, it has dealt with  a total of 1,210 cases involving import and export 
goods suspected of IPR infringement.  A total of 63,782,758 items of IPR infringing goods were confiscated.  
 
Question: 
 Canada 1
 
 Part III. Trade Policy by Measure, (4) Measures Affecting Production and Trade; (ix) 
Intellectual property rights, (g) Enforcement, paragraph 309: 
 
48. Paragraph 309 states that “[i]n order to enhan ce the efficiency of seizures by Customs, the 
owner of the intellectual property right may "record" or file their right in writing with Customs.  
Customs must make a decision on whether to "record" the intellectual property right within 30 days of 
accepting all the relevant documentation from the right-holder.”  Would China please elabourate on 
how this decision is made and the difference be tween how recorded and non-recorded intellectual 
property rights are treated? 
 
Answer:   
 
In order to file their right with the Customs, the owner of the IPR must submit an application in 
writing, annexed with the intellectual property right  letter and certificate, identity documents of the 
applicant, or the letter of authorization for agency , certificates of identity or registration of the 
authorized agent.  The Customs shall decide whet her or not to approve and file the application, and 
notify the owner of the IPR in writing within  30 working days upon reception of the application 
materials.  The Customs may take the initiative to protect the intellectual property rights that are 
approved and filed.  As for the unapproved and unfilled,  the Customs shall not protect them at its own 
initiative.  The owner of the IPR shall first subm it an application to the Customs for detaining the 
goods.   
 
Question: 
 
Japan 1
 
 
Q28. We understand that there are four kinds of opportunities to apply for the recognition of a well-known mark:   
 
(a) an opposition process at the Chinese Trademark Office (CTMO);   (b) a cancellation process at the Trademark Review and Adjudication Board (TRAB);   (c) a process of trademark administration (i.e. en forcement) at the administrative authorities for 
industry and commerce;  and  
(d) a trial by the people's court.   WT/TPR/M/161/Add.2 
Page 96  
 
 (3) Please provide information on the number of cases per each year and the major reasons per each case after September 2002, for marks not bein g recognized as well-known even in the case that 
applications were made thr ough the above mentioned routes. 
 
Answer: 
 (3) At present there is no statistics availabl e in China on the approved and disapproved 
applications for well-known marks since 2002. For the numbers of well-known marks recognized in 
cases of trade mark objections, disputes and regul ation, please refer to the official website 
http://www.ctmo.gov.cn, the China Industry and Commerce Daily, etc.  
Question: 
 Japan 1
 
 
(p.153, paragraph 303)  
 
Q33.   (1) Does China has any plans to strengthen the cooperation among relevant organizations when 
multiple intellectual property rights such as copyright, industrial design and trademark are 
simultaneously infringed as in the case of character goods? 
 
Answer:    
The Chinese government has alwa ys attached great importance to the coordination amongst law 
enforcement bodies.  In October 2000, relevant depart ments jointly issued the Circular Regarding the 
Enhancement of Coordination and Cooperation in th e Handling of IPR Infringement Cases, which 
clearly stipulates the coordination issue in relation with the investigation and handling of IPR infringing cases.  
In 2004, the Chinese government formed the Na tional Working Group on IPR Protection headed by 
Madame Wu Yi, Vice Premier of the State Council.  The Working Group was charged with deploying and coordinating IPR protection efforts across the c ountry.  It consists of 12 members, including 
patent, trademark and copyright administrations, ministry of public security, SPC, SPP , and the 
General Administration of Customs, among others.  One important function of the Working Group is 
to organize and coordinate nation-wide special campaign on IPR protection.  Between August 2004 
and the end of 2005, the Working Group waged a 1. 5-year-long special campaign, with positive 
results.  Currently, in order to facilitate the public to make claims, we are working on the establishment of 
comprehensive claim centres in 50 major cities across the country.  In addition, the Ministry of Public 
Security, SAIC, SIPO, Supreme People’ s Court and Supr eme People’ s Procuratorate, amongst others, 
have regular joint conferences on IPR protection.  Th ese are substantive demonstrations of the sound 
coordination among China’ s enforcement coordinating bodies, administrative enforcement bodies, the public security and the judicial organs.  
Question: 
 
(2) Please explain the reason why “an increasing numb er of cases, especially for copyright, are 
being transferred to the courts”.  
  WT/TPR/M/161/Add.2 
 Page 97 
 
 
Answer:   
 In recent years, in order to create an environment in favour of fair comp etition and innovation, the 
Chinese government has taken a series of measures to intensify IPR protection. First, the Chinese 
government organized a nationwide special campaign on IPR protection which ratified forcefully IPR 
issues in key locations, sectors and links.  Relev ant enforcement bodies launched special supervision 
on case establishment, and set up a supervision syst em for the handling of major and important cases. 
The copyright offices launched special campaigns  to crackdown on pirated textbooks and teaching 
reference materials, pirated software and optic discs,  pirated audio-visual pr oducts as well as online 
piracy.  Second, in order to enhance coordinatio n and planning, the Chinese government promoted 
the establishment of a nationwide coordinating m echanism based on the model of the national IPR 
protection working group.  Meanwhile, regional au thorities and relevant government agencies also 
accelerated the pace of establishing cross-region and inter-departmental enforcement coordination 
mechanisms, and enhanced international exchanges and cooperation.  Third, the Chinese government 
increased its input in IPR protection work. IPR-specific tribunals were set up in the court system, 
while all enforcement organs strengthened the ins titutional setup and the equipment of manpower and 
facilities, and organized various kinds of training as  well as education activities to improve the 
professional attributes of the staff.  Fourth, the Chinese government launched all-dimensional publicity campaigns to help fortify people’ s IPR protection awareness and enhance their capacity to 
defend their own rights. Fifth, the Chinese government  further improved laws and regulations.  It 
promulgated the Interpretation of Relevant Issues Concerning the Laws Applic able to the Handling of 
IPR Infringing Criminal Cases, which adjusted the penalty criteria and lowered the criminal 
threshold for relevant infringing activities and thus  greatly enhanced the deterrence of law.  The 
Opinion Regarding the Prompt Transfer of Sus pected Criminal Cases in the Administrative 
Enforcement and other regulations published have ra tionalized the relations between administrative 
enforcement and judicial enforcement from an institutional perspective.   
 
The effective implementation of the above measures was a main cause for the increase in the number 
of IPR infringing cases, especially piracy cases, accepted and handled by the judicial organs.   
 In addition, it is Chinese people’ s courts that shall decide whether to accept a civil case brought by a 
plaintiff in strict accordance with the provisions  on case acceptance in China’ s civil litigation law.  
 
The fact that the number of cases accepted by the j udicial organs increased has fully proven that the 
IPR protection in China is effective.  It can be fo reseen that as the IPR protection mechanism in China 
continues to improve, all IPR infringing actions will be brought to justice.  The rights of the owners of 
IPR will be effective protected. 
 
Question: 
 Canada 1
 
 Part III. Trade Policy by Measure, (4) Meas ures Affecting Production and Trade, (ix) 
Intellectual property rights, (g) Enforcement, paragraph 303: 
 
48.  Paragraph 303 notes that “[t]he main probl ems identified by China’s major trading partners 
include: lack of coordination among the main en forcement agencies; local protectionism and 
corruption; inadequate deterrence provided by the system of administrative, civil, and criminal 
penalties; and a lack of sufficient training of personnel.” Canada appreciates China’s efforts on 
intellectual property but also remains concerned ab out China’s enforcement regime for intellectual 
property rights. Would China please provide more details on recent measures it has put in place for 
the enforcement of intellectual property rights? Have these measures produced noteworthy results? 
 WT/TPR/M/161/Add.2 
Page 98  
 
Answer:   
 
In recent years, the Chinese governme nt has been continuously strengthening its law enforcement, and 
investigated into and dealt with a large number of IPR infringing cases, thus effectively dampened the 
rampancy of the violators.  By the end of Decemb er 2005, in its Mountain Eagle campaign to combat 
infringement of the exclusive right to use a tradema rk, the public security organs had dealt with more 
than 3,500 cases, arrested more than 5,900 suspects.  In 2005, the procurat orial organs accepted and 
approved the arrest of suspects in more than 4, 100 IPR infringing cases, and transferred 4,600 cases 
for prosecution, up 15.86% and 24.63% as compared to the previous year respectively.  Courts at all 
levels handled more than 3,500 pieces of IPR infringing criminal cases and 13,400 first instance civil cases, up 27.9% and 44.1% respectively.   
 
Relevant administrative enforcement organs investi gated into and dealt with over 49,400 trademark 
infringing cases, over 4,700 patent infringing cases,  over 8,000 copyright infringing cases, over 1,200 
IPR infringing cases at import and export links and nearly 76,000 piracy cases. 
 All these achievements are the result of the tremendous and painstaking efforts of the IPR enforcement 
personnel.  This has sufficiently demonstrated  that the Chinese government is consistent and 
determined to combat IPR infringements and coun terfeit, and that its measures are effective. 
 
According to the Notice on Printing and Distributing the Guidelines for IPR Protection Campaign (2006-2007) by the General Office of the State Council, the following work should be well-materialized as another step forward: China will reinforce the planning and coordination to improve the joint mechanism for law enforcement in a bid to form a working mechanism featuring interaction 
form the top down; we should intensify the r esponsibility of local governments and implement the 
responsibility assigning system with accountability system and reporting system improved; we should 
set up a national IPR lead-reporting networks to establish a comprehensive service platform; we 
should strengthen the coordination system for law en forcement in governments,  local governments in 
particular, and enhance the enforcement of the departm ents in charge of areas like copyright, patent, 
trademark, culture and public security, and the law enforcement in certain justice organs in local 
governments in order to promote responsibility system on and regulate the practice of the law enforcement; we should launch broad-scale educati on and training to improve the public awareness 
and the capacity of IPR protection, where the supervision effect of media should be elevated to encourage self-discipline and self-protection of the i ndustry, making effort to have the whole society 
participate in it; we should further improve relate d laws and regulations to let them easier to be 
implemented.    
Question: 
 Korea
 
 
10. Although there has been a seri es of drives to regulate the infringement of Intellectual Property 
Rights in China, there are still many cases that bring about a suspicion of the effectiveness of this 
control. For example, some authorities still refuse  to open the documentary evidence of confiscation 
of the goods suspected of infringement.   
y Please explain what kind of actions the Chinese government has taken to effectively control 
the infringement of Intellectual Property Rights in China?  
 
Answer:   
 Please refer to response to Canada I’ s Q48. 
  WT/TPR/M/161/Add.2 
 Page 99 
 
 
Question: 
 US 1
 
 
45. With regard to the issue of inadequate deterrence referenced in paragraph 303 of Chapter III 
of the report, paragraph 10 of Chapter III of the re port states that relatively low fines and penalties 
that are not a sufficient deterrent remain among th e significant problems to be addressed.  Does China 
agree with this assessment?  Please explain. 
 
Answer:  
 
China does not agree with this assessment.  Please see China’ s answers to Japan Q.33(2) and 
Canada I’ s Q48 for specific reasons.    Question: 
 
Japan 1
 
 
Q35. Concerning the statistics of the penalties for th e infringement of intellectual property rights:   
 (1) Please provide statistics on administrative penal ties for the infringement of intellectual property 
rights per each year since China's ac cession to the WTO, including:   
 (a) The number of administrative penalties requested by right holders; and   (b) The number of administrative penalties im posed, divided by administrative bodies, types 
of IPR infringed, provinces a nd types of penalties imposed. 
 
(3) In addition to the items in (2), please provide  the following statistics for the first half of 2005: 
 (b) The number of cases which were prosecu ted on the volume of illegal business by from 3 
to 7 years of imprisonment (e.g. more than 250,000 RMB for forging registered trademarks 
by individuals) has applied, including:    (i) the number of cases submitted by admini strative bodies to the prosecutor as 
deserving criminal prosecution,  
(ii) the number of cases dealt with by the prosecutor directly as deserving criminal 
prosecution,  (iii) the number of cases that the prosecuto r actually prosecutes through the courts,  
(iv) the number of cases where criminal pena lties have been imposed and the types of 
penalties. 
 Answer:   Regarding any relevant official statistic informati on available, please kindly refer to the website www. 
ipr.gov.cn and China’ s annual White Paper on IPR Pr otection, as well as China’ s Government Report( 
WT/TPR/G/161) under the Trade Policy Review. 
 
Question:  Japan 1
 
 
(p.153-157, paragraphs 302-313)  
 
Q36. Concerning the application of criminal law:  (1) Please identify whether only administrative pena lties are imposed (i.e. no criminal penalty is 
imposed) in cases where a trademark used is "similar " to a registered trademark (Article 52 of the WT/TPR/M/161/Add.2 
Page 100  
 
Trademark Law) rather than "identical" (Article  213 of the Criminal Law) without the trademark 
owner's permission.  (2) Please confirm that not only administrative but also  criminal penalties were applicable in cases of 
service mark infringement.  Please also clarify which laws and regulations are applied to such cases. 
 
(3) We understand that the provision on recidivists stipul ated in Article 65 of the Criminal Law is also 
applied to repeat IPR offenders.  Please explain how "heavier punishment" is defined (i.e. how many 
times heavier than penalties for first offenders).   Please also provide the number of cases of IPR 
repeat offenders to which Article 65 of the Crim inal Law applies, and information on actual cases 
where "the heavier punishment" was imposed. 
 
Answer:   (1) The answer to the question whether only admi nistrative penalties are imposed in cases where a 
trademark used is similar to a registered trade ma rk is no. Article 8 of the Interpretation of the 
Supreme People’ s Court and the Supreme People’ s Procuratorate Concerni ng Some Issues on the 
Specific Application of Law for Handling Criminal  Cases of Infringement upon Intellectual Property 
Rights defines “identical trademarks” that stipulated  in Article 213 of the Criminal Law as those 
trademarks either identical to the registered tradema rks infringed on, or showing no notable visual 
difference from the trademarks infringed on and thus being misleading to the public.  
 
(2) China’ s Criminal Law has clear provisions on the criminal liabilities for trademark infringement. 
For detailed information, please refer to Articles 213, 214, 215 and 220 of the Criminal Law.  (3) According to Article 65 of the Criminal Law of China, heavier punishment shall be imposed on 
recidivists. “Heavier Punishment” refers to the appl ication of the Criminal Law articles providing for 
heavier punishment or longer term of impris onment within the extent for crime and penalty 
measurement depending on the case’ s nature, circum stance and harm to the public, which is imposed 
on recidivists as compared with other criminals.   Question: 
 
Japan 1
 
 
(p.153-157, paragraphs 302-313)  
 Concerning border measures, it is explained that th e storage fee or disposal cost deducted from the 
deposit of right holders can be compensated by way of repayment from the violator under Chinese laws.  However, the Japanese industry has concerns that it is very difficult to seek compensation from 
the violator for such a fee or cost in reality becau se the violator often disappears, the cost for civil 
action to seek compensation usually exceeds the storag e fee or disposal cost, etc.  We understand that 
the Chinese Customs realizes that the practice of as king right holders to pay for the storage fee or 
disposal cost impedes IPR protection and has made some efforts to alleviate the cost burden on right 
holders.    Q37.  
(1) Please describe any plans to minimize the cost bur den of right holders in  consideration of the 
above-mentioned situation in China.  (2) Please provide the number of cases of confiscation by Chinese Customs, and the volumes of goods 
confiscated, for the last three years, and provide the number and volume of each confiscation that 
resulted in:   WT/TPR/M/161/Add.2 
 Page 101 
 
 
 (a) transfer to a public welfare utility;   (b) transfer to IPR owners in return for adequate compensation;   (c) auction of goods after removing the infringing characteristics; and   (d) destruction, as stipulated in the Regulation of the People's Republic of China on Customs 
Protection of Intellectual Property Rights. 
 
(3) Please provide Chinese Customs seizure statistics fo r the last three years, separately by nature of 
IPR, countries of export (import seizure), a nd countries of destination (export seizure). 
 
Answer:  
 
(1) In order to alleviate the burden of the right holders, the Measures for the Implementation of the 
Regulations of the General Customs Administration on Customs Protection of IPRs request all customs offices to draw an investigation conclusion within 30 working days from the date of detaining 
the goods, which is a way to shorten the case hand ling time at the customs offices and consequently 
reduce the storage time and cost. Additionally, righ t holders do not bear the storage cost of the 
confiscated goods after 3 months from the date of confiscation. All these provisions have effectively 
helped alleviate the burden of the right holders.  (2) From 2002 to 2005, there are 3017 cases of c onfiscation by Chinese Customs. However we do not 
have statistics of the volumes of goods confiscated,  nor the volumes of goods disposed by different 
ways. 
 (3) China has no official statistics in this respect.  Question: 
 
Japan 1
 
 
(p.153-157, paragraphs 302-313)  
 
Q38. 
 
(1) Please provide us with the rational basis for providing Y. 500,000 as the upper threshold of statutory damages.  
 
Answer:   
 
Article 48 of the Copyright Law of China stipulat es: “Anyone who infringes upon the copyright or a 
right related to copyright shall pay compensation fo r the actual losses suffered by the right owner, or 
where the actual losses are difficult to calculate, pay compensation to the amount of the unlawful 
gains of the infringer. The compensation shall in clude the reasonable expenses that the right owner 
has paid for putting a stop to the infringement. 
 
Where the actual losses of the right owner or the unlawful gains of the infringer cannot be determined, the People’ Court shall, in light of the circumstances of the infringement, decide on a 
compensation amounting to not more than RMB 500 000 yuan.”  
Article 56 of the Trademark Law of China stipulates:  “the amount of compensation for infringement 
of the exclusive right to the use of a trademark shall be the amount of the profits that the infringer has 
earned as a result of the infringement during the period of the infringement, or the amount of the 
losses that the infringed has suffered as a result of the infringement during the period of the infringement, including any reasonable expenses the infr inged has paid in its effort to put an end to 
the infringement. WT/TPR/M/161/Add.2 
Page 102  
 
 
Where the profits earned by the in fringer or the losses suffered by the infringed as a result of the 
infringement, as mentioned in the preceding par agraph, are hard to determine, the People’s Court 
shall, on the basis of the circumstances of the infringement, decide to make it not more than RMB500 
000 yuan.” 
 
Pursuant to stipulations on appeal in Chinese laws: 1. The ceiling of RMB500 000 yuan on compensation applies where the pr ofits earned by the infringer 
or the losses suffered by the infringed as a result of  the infringement are hard to determine. If the 
profits earned by the infringer or  the losses suffered by the infringed as a result of the infringement 
can be determined, compensation shall be made according to th e determined amount. Therefore, 
RMB500 000 yuan is not the compensation standard applied to infringement in the first place.  2. Being fully consistent with the present s ituation of China, the ceiling of RMB500 000 yuan on 
compensation is calculated upon comprehensive c onsideration of both China’s economic and social 
development level and lessons learnt from field experi ences of the People’s Courts in trying this kind 
of infringement cases,  
3. The TRIPS Agreement stipulates that “members  may authorize the judicial authorities to order 
recovery of profits and/or payment of pre-estab lished damages by the infringer.” The relevant 
stipulations above in Chinese laws are re flecting the spirit of the TRIPS Agreement.  
 Question: 
 
(2) Please describe any efforts made or planned to  promote IPR protection in local areas and to 
educate local authorities in China. 
 
Answer:   
 
It is necessary to protect IPR in order to maintain a sound trading and investment climate and an 
environment for fair competition.  For a long time, we have been taking a series of me asures to eliminate the in terference with the IPR 
protection by the local protectionism and hence to  strengthen the protection of IPR substantially. 
 
First, we keep away the local protectionism through the setup of the organizing mechanism. The 
Customs system is under perpendicular organization to lead in the whole country, so are the 
departments of industry and commerce as well as q uality supervision below the provincial level. All 
these are objectively conducive to the prevention from local protectionism. 
 
Second, we leash the local prot ectionism through institutions. According to Chinese laws, the right 
holders are entitled to the rights of applying adminis trative review or administrative litigation if he 
perceives the enforcement action by an administration department as violation of his legal rights. The 
administrative litigation reaches the final judgemen t after two trials. The right holder can appeal 
through the procedure for supervision upon adjud ication under some special circumstances. 
 
Third, we establish regional law enforcement coordination mechan isms. The IPR departments have 
set up a national law enforcement coordination mechanism on patent.   For the next step, we will push ahead the integra tion of IPR protection into the government working 
schedule as a significant issue and into the over all planning on the local economic and social 
development across the country. The responsibility system and the responsibility assigning system of 
IPR protection should be implemented, as well as  the well-protected supervision and reporting system 
for IPR protection. The accountability system should be  formulated in a bid to publicly criticize those 
areas with serious problems and to investigate relat ed leaders with responsibility. Those who carry  WT/TPR/M/161/Add.2 
 Page 103 
 
 
out local protectionism activities, enshield or connive illegal activities should be seriously punished in 
line with laws. 
 
Question: 
 
Turkey  
 WT/TPR/S/161 (page 145 )  III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
(4) Measures Affecting Production and Trade  (ix) Intellectual Property Rights 
 The Secretariat Report mentions that “The Secretariat was unable to obtain clarification from the 
authorities on any specific labeling requirements for pharmaceuticals, Chinese medicine, cosmetics, genetically modified organism, or for environmentally friendly products.”  
 
• Please provide information about the labeli ng requirements about the above mentioned 
sectors. 
 
Answer:  
 The reason that the Secretariat did not obtain clar ifications from the Chinese authorities on specific 
labelling requirements is that there were too many substantial issues and areas to be comprehended, 
clarified and discussed in the preparations for first  Trade Policy Review, leaving inadequate time to 
go deep into this kind of very detailed issu es. Relevant information is as follows: 
Drugs and traditional Chinese medicines: Rules on Administration of Packaging, Labeling and 
Instructions for Drugs issued by State Food and Drug Administration on 15 October, 2000. Cosmetics: 1) Rules Concerning the Hygiene Sup ervision over Cosmetics issued by Ministry of 
Health; 2) Implementing Provisions of Rules Concerning the Hygiene Supervision over Cosmetics 
issued by Ministry of Health; 3) Hygiene Standards  for Cosmetics issued by Ministry of Health; 4) 
National Standard for Instructions of Consumer Goods: General Labelling of Cosmetics (GB529.6-
1995) issued by AQSIQ; 5) Provisions on Naming of  Health-related Products issued by Ministry of 
Health; 6) Notice on Issues concerning SPF Testing and Indication of Sunscreen Cosmetics issued by 
the Ministry of Health; 7) Public Notice No. 14 of 2004 of Ministry of Health. Genetically Modified Organisms: 1) Regulations on Safety Administration of Agricultural GMOs 
issued by the State Council on 23 May, 2001; 2) Rules on Administration of Labelling of Agricultural 
GMOs issued by Ministry of Agriculture on 5 January, 2002 and revised on 1 July, 2004. 
 
Question: 
 
EC
 
 
Referring to page 145 in the WTO Secretariat’s Report 
“Protection of intellectual property rights is essentia l for ensuring the continued inflow of FDI and the 
associated transfer of newly developed technologi es, as well as fostering the development of new 
technologies and services in China over the longer term.” 
 
• Will it be possible for customs authorities to improve control in cases of copies and 
counterfeiting? WT/TPR/M/161/Add.2 
Page 104  
 
• What sort of new measures does the Chinese ad ministration intend to adopt in order to 
improve the effective protection of the IPRs? 
 
Answer:   
 
The Chinese Customs have taken various types of measures to strengthen IPR protection and enhance 
law enforcement capabilities, which include th e enhancement of cooperation with other law 
enforcement organs in China, launching of interna tional cooperation in IPR protection, enhancement 
of training for Customs enforcement personnel, enh ancement of cooperation with owners of IPR, etc. 
Please also refer to our response to Japan Q.33(2) and Canada I Q48  for more detailed information 
on China’s measures and efforts to enhance IPR protection. 
 
Question: 
 Costa Rica
 
 36. ¿Podría indicar si de conformidad con la Ley de  Marcas de Fábrica o de Comercio se permite el 
registro de marcas sonoras y olfativas en China? 
 
Answer:   
 According to China’s Regulation for the Impl ementation of the Trademark Law and Rules on the 
Recognition and Management of We ll-known Trademarks, those who want to seek protection through 
the application for recognition of well-known tr ademark shall submit to relevant competent 
authorities the application for recognition in th e course of trademark  opposition, improper 
withdrawal of trademark registration a nd the trademark administration process. 
 
Question:  Costa Rica
 
 
37.¿Podría explicar si el uso de una marca ante s de su registro concede algún tipo de protección o 
garantía para su titular o si los derechos se obtiene n únicamente mediante el registro de la marca? 
 Answer:   
China exercises protection over trademarks according to  the registration principle, i.e., rights 
endowed by registration.  According Article 3 of  the Trademark Law, trademarks that are approved 
and registered at the Trademark Bureau are registere d trademarks, the owners of which are entitled 
to the exclusive rights of the trademark, which is protected by law.  However, the principle of trademark is not absolute.   Article 31 of the Trademark Law stipulates that 
in applying for trademark registration one shall not  impair other people’s prior right, nor shall they 
register through illicit means other people’s tradema rks which are already in use and have certain 
influence. 
 
Question: 
 
Costa Rica
 
 
38.¿Podría explicar en detalle como su legislación implementa el artículo 39,  párrafo 3 del Acuerdo 
sobre los ADPIC?   WT/TPR/M/161/Add.2 
 Page 105 
 
 
Answer:   
 The Article 35 of the Regulations for Implementati on of the Drug Administration Law of the People’s 
Republic of China, which fully reflects the Article  39.3 of TRIPS Agreement, stipulates as follows: 
The State protects undisclosed data of drug study and others which are independently acquired and 
submitted by drug manufacturers or  sellers to obtain production or marketing approval of the drugs 
in question which contain new chemical entities. No  one may make unfair commercial use of the said 
data.  
Within six years from the date a drug manufacturer or seller obtains the ap proval documents for 
producing or marketing a drug contai ning new chemical entities, if any other applicant uses the data 
mentioned in the preceding paragraph to apply for approval for production or marketing of the drug 
in question without permission of the original a pplicant who has obtained the approval, no approval 
may be given to any other applicant by the drug regulatory department except that the data submitted 
are acquired independently.  
 
No drug regulatory department may disclose the data set forth in the first paragraph of this Article 
except: (1) for the need of public interests; or (2) where steps are taken to en sure that the data are protected against unfair commercial use. 
 
Question: 
 Japan 2
 
 
(p.14-15, paragraphs 56-66)  
 
We recognize that there are still many problems with  the enforcement of intellectual property rights.  
 Q9. Concerning the improvement of the enforcemen t of intellectual property rights, please indicate 
which measures specifically will be taken.  Answer:  Please kindly refer to China’s response to Turkey’s questions on enforcement matters. 
 
Question:  Japan 2
 
 
(p.14, paragraph 59)  
 Q11. With regard to “internet infringement “ in lines 7 to 8 of paragraph 59:  
 (1) Are there any lawsuits concerning copyright infringement over P2P networks in China?   
(2) Is it illegal in China to download copies of wo rks from P2P networks for private use as well as to 
upload them without permission by right holders?   
(3) If available, please provide the number of cases that ISPs have taken down for copyright 
infringement, based on the notifications of right holders.  
 
Answer:  
About “Internet infringement”: No case of copyri ght infringement over P2P networks has been filed 
in China.  As far as we know, there is no such requirement in the law, neither is there any previous WT/TPR/M/161/Add.2 
Page 106  
 
cases with respect to the nature of the act of copyrighted works downloading through P2P networks 
for personal use. 
 
Question: 
 
India additional 1
 
 
While most countries have laws to provide some degree of protection of intellectual property rights 
(IPRs), a number of countries do not always adequa tely enforce these laws.  Inadequate enforcement 
of protection for IPRs can have serious negative consequences not only for automakers but also for 
the countries involved, in economic terms as well as in terms of safety.   
 Some examples of the impact of IPR infri ngement in the automotive sector include:  
 
(a) Direct impact on business operations 
 
• Reduced market performance of genuine produc ts owing to presence of counterfeit products 
in the market 
• Lost royalties 
• Damage incurred to brand image as a result of  customer dissatisfaction with counterfeit 
products  
• Cost burden of identifying IPR violators (this cost can be significant in view of the 
complexity of the distribution system) 
 (b) Indirect impact on society 
 
• There are repercussions on the public at la rge because of the safety and environmental 
implications of IPR infringement.  Would the Chinese authorities take steps to check such violation of IPRs? 
 
Question: 
 Norway
 
 Intellectual property rights 
4: Regarding the issue of intellectual property rights, Norway would like to ask what concrete measures the Chinese government authorities are planning or executing in order to: 
 A. ensure that IPR holders have effective m eans to defend their rights in court, ensuring 
legislation is in place and that the judicial system functions effectively; 
 B. make the implementation of court ruli ngs effective, this includes that penalties 
imposed must be high enough to deter criminal  acts. There must also be proper opportunities 
to request and quickly adopt temporary meas ures to stop IPR abuse, by injunctions;  
 C. ensure transparency regarding policy processes and all IPR- related legal and 
administrative procedures towards both domestic  and foreign users and stakeholders.  
 
Answer:   
 
All of China’s IPR legislation and policy formulatio n is in conformity with all the WTO agreements 
and China’s accession protocol.  China has done much work in the implementation of law to protect 
IPR. Please refer to our response to Japan Q.33(2) and Canada I Q48  for more detailed information on 
China’s new measures to enhance IPR protection.  WT/TPR/M/161/Add.2 
 Page 107 
 
 
 
IV. TRADE POLICIES BY SELECTED SECTORS  
 (3) Energy   
 
Question:  Norway
 
 
5: Prices in the energy sector are still managed or set by the government. As energy is an important production input, price setting can give certain trade advantages and cause indirect 
subsidization, as we are well aware. Given the objectives of efficient allocation of resources and 
decreasing the use of energy pr unit of GDP, coul d we receive more information about when prices 
are expected to be totally market driven?    Answer:   
 With the deepening of market economic system re form, China’s reform on energy prices is also 
quickening up. The pricing mechanism is being const antly improved. At present the coal prices are 
completely market driven. Howeve r, as the Chinese economy is experi encing a transformation period, 
the price reform of oil, natural gas, power and ot her kinds of energy must take into account the 
affordability of all parties involved. The price ma rketization process therefore depends on the Chinese 
market development degree, the market supply and demand and other factors. 
 
Question:  Norway
 
 6: Does the Chinese government have plans of givi ng targeted support to poor households that 
might be hard hit by increasing energy prices, give n the 20% annual increase in the government’s tax 
income?    Answer:   
 China has put in place a relatively sound minimum life guarantee system targeting at the poor households, which takes into consideration their daily spending on energy and food. However, given 
that in China it is the non-poverty-stricken popula tion usually with private cars and special heating 
system that is mainly hit by the energy price hike,  China now has no plan of giving additional support 
to the poor families as a response to the energy price rise.  In practice, governments at different levels have b een taking various measures, inter alia, raising 
minimum subsistence allowance, minimum wage, une mployment insurance and basic pension fund for 
the retired, to ensure that the living standard of the poor households will not go down as a result of 
energy price rise.  
 
(i) Petroleum 
 
Question: 
 Bolivia
 
 
Inciso i) Petróleo. ¿Cuál es el marco legal  para la operación de empresas extranjeras en el sector 
hidrocarburifero? Cuánto se ha avanzado para perm itir la inversión extranjera en este rubro de 
acuerdo a los compromisos contraídos con la OMC? WT/TPR/M/161/Add.2 
Page 108  
 
 Párrafo 57, Se menciona: que China permitirá la pr opiedad extranjera mayoritaria y no se aplicarán 
restricciones geográficas y cuantitativas ¿se complement ará en la legislación china vigente el alcance 
de la participación extranjera?  
 
Answer:   
 The Chinese government has established a rather co mplete legal framework in the oil sector. 
 These laws and regulations include Mineral resources Law of the People’s Republic of China, which 
is a basic law, and administrative regulations such  as Regulations for Registering to Explore for 
Mineral Resources Using the Block System, Regulati ons for Registering to Mine Mineral Resources 
and Regulations for Transferring Exploration Rights and Mining Rights, and regulations in respect of foreign economic cooperation such as Regulations of  the People’s Republic of China on Exploitation 
of offshore petroleum resources in cooperation with foreign enterprises and Regulations of the 
People’s Republic of China on Exploitation of onshore petroleu m resources in cooperation with 
foreign enterprises.  The above mentioned Laws an d Regulations constitute the legal framework 
governing China’s oil and natural gas sector.  As Ch ina’s market system continues to improve, this 
framework will become more complete.  Foreign enterprises engaging in the oil and natural gas sector in China shall abide by the above-
mentioned laws and regulations, which stipulate that China National Petroleum Corporation and 
Sinopec Group shall be responsible for contract  negotiation, signing and execution with foreign 
companies on foreign cooperation, prospecting an d exploitation of onshore oil and natural gas.  
CNOOC shall be responsible for contract negation,  signing and execution with foreign companies on 
foreign cooperation, prospecting and exploitation of  offshore oil. Chinese companies shall conduct 
the approval procedures according to law, wherea s foreign companies are entitled to their rights and 
obligations according to the contract.  At th e current stage, there are a number of companies from 
many countries which are already in partnership  with the above three Chin ese companies in joint 
prospecting, exploitation and operation of oil and natural gas projects.  As regards the percentage of shares that can be he ld by foreign companies in a joint venture, the two 
regulations on foreign cooperation do not specify on this.  The regulation on the ceiling of foreign 
share ownership is not within the jurisdiction of the Ministry of Land and Resources. 
 
Question: 
 
Chinese Taipei
 
 
(page 181, footnote 119 to paragraph 59) 
 
Footnote 119  states: “…it is reported that the NDR C [National Development and Reform 
Commission] changed the price adjustment m echanism in 2003. According to these changes, 
domestic prices are adjusted irregularly, according to domestic economic needs.”  
 i) Would China please elabourate on what these “domestic economic needs are”? 
 
Answer:   
 
The Price Law promulgated in 1997 clearly states:  “the State shall intr oduce and gradually improve 
the pricing mechanism mainly based on market forces and under macro economic control.”  Since 
then China has been adhering to the market-oriente d pricing mechanism set in the law. China does 
not understand which report the footnote 119 to paragraph 59 of the Secretariat report refers to. 
  WT/TPR/M/161/Add.2 
 Page 109 
 
 
Question: 
 
ii) Does China take into account any considerations  other than “domestic economic needs” while 
adjusting the prices of refined oil products? 
 
Answer:   
 When China reformed the pricing mechanism for cr ude and product oil in 1998, the state confirmed 
the integration of the domestic with the internatio nal prices. As the integration principle is still 
applicable to oil products, the most important refere nce for adjusting their pri ces is the international 
oil price curve. Besides, such factors as its domestic market s upply and demand, production cost, and 
affordability are also taken into consideration.   Question:  
iii) What is the procedure for adjusting prices? 
 
Answer:   
 During the pricing process, investigations on prices and cost should be carried out first. The opinions 
of the consumers, businesses and other parties concerned  should be solicited through, inter alia, cost 
review, expert testimony, or public he arings, should the law provide as necessary.  At the end of this 
process, the price shall be publicized to th e general public through relevant media.  
 
Question: 
 
Chinese Taipei
 
 
(page 181, paragraph 59)  
 
Even though the pricing mechanism envisages price adjustments, pri ces of refined oil products in 
China have been adjusted only three times in 2004 a nd five times in 2005, despite the increase in the 
international crude oil price. 
 
Could China therefore please advise us of any NDRC pl ans to mitigate the infl exibility in pricing of 
domestic oil products and what methods it would pr opose to make these prices follow more closely 
the fluctuations in the international market.  Answer:   
 In recent years, China’s oil price reform has been following a market-oriented track. While China is 
honouring its WTO commitments, the domestic oil pr oducts market is more and more integrated with 
the international market. The oil distribution syst em will also undergo some changes. After a full-
fledged competition structure takes shape, China’s oil price will eventually be liberalized fully based 
on market forces.  On March 26 this year, China worked out an overall pl an for the adjustment of oil prices, which has 
improved China’s oil pricing mechanism. On the bas is of the principle of integrating with the 
international market, the pricing of oil products re flects the international oil price fluctuation on the 
one hand, and on the ot her hand takes into account domestic ma rket supply and demand situation, 
production cost as well as the affordability. The new oil product pricing mechanism changed and 
improved the price adjusting basis making the pri ces of domestic oil products more closely related 
with the international oil price, and more sensiti ve to the international oil price fluctuations. 
 WT/TPR/M/161/Add.2 
Page 110  
 
Question: 
 Chinese Taipei
 
 
(page 182, paragraph 61) 
 
The report also states “… it seems that there is no comprehensive law and no proper regulatory framework for the [petroleum] sector.”  
 
Please advise whether the Chinese government is planning to establish a comprehensive law and 
proper regulatory framework for the [petroleum] sector? 
 
Answer:   
 Please refer to answer to the Question by Bolivia on China’s legal framework for the [petroleum] 
sector.  
(4) Manufacturing  
 (ii) Iron and Steel   
Question: 
 Canada 1
 
 Part IV. Trade Policies by Selected Sectors, (4 ) Manufacturing, (ii) Iron and steel, (a) Market 
structure, paragraph 90: 
 
52.  The Secretariat Report indicates that the Cent ral Government has imposed controls on bank loans 
to the steel sector. It is assumed that loan applican ts in the steel sector must adhere to China’s steel 
policy in order to receive loans.   
a. Does this policy on controlling bank loans apply to loans provided by the national 
government, provincial governments or by both levels of governments?  
b. Is the policy only applicable to state-owned banks  and what specific elements of China’s steel 
policy are considered?  c. Do state-owned banks provide loans at preferential rates to the steel sector under certain 
circumstances? 
 
Answer:   
 In 2004, some sectors, inter a lia, steel, cement, aluminium electrode and ferroalloy industries, 
suffered from overheated investment and inferi or redundant expansion. To address the problem, 
NDRC, PBOC and CBRC jointly released a public notice clearly stating that restraints will be put in 
place for lending new loans to companies in the steel, cement, aluminium electrode and ferroalloy 
sectors, which do not comply with the state industr ial policies, or do not meet the market access 
conditions. This measure is aiming at strengtheni ng the industry restructuring efforts and ensuring 
the stable economic development. From this yea r, excessive capacity in the steel, cement and 
ferroalloy sectors has started to emerge. The Stat e Council thus released a public notice asking for 
adjustment in these sectors. The industrial, fi nancing, and land regulatio n policies should also 
support the measure of the State Council in order for a strong synergy. All these regulating policies, 
to a great extent, are designed to address the probl em of “market failure”, which are not limited the 
state-owned banks only, but rather call for all fi nancial institutions to implement the national 
industrial policies in cred it resources allocation.  WT/TPR/M/161/Add.2 
 Page 111 
 
 
 
Question: 
 Canada 1
 
 
Part IV. Trade Policies by Selected Sectors, (4) Manufacturing, (ii) Iron and steel, (b) 
Regulatory framework and restru cturing, paragraphs 93--95: 
 
54.  Under paragraphs 46 and 172 of the Working Party Report accompanying China’s Protocol of 
Accession (WT/ACC/CHN/49), China agreed that the government would not influence, directly or 
indirectly, commercial decisions on the part of state-owned or state-invested enterprises, and acknowledged that state-owned enterprises, including banks, should be run on a commercial basis.  In 
light of those commitments: b. Please explain the role of China’s state-owned banks in the restructuring of China’s steel 
industry.  What steps has China taken in the past a nd is currently taking to ensure that the state-owned 
banks, which lend to state-owned steel enterprises in China, are operating in a manner consistent with 
China’s WTO obligations?  
Answer:   
 
Article 34 of the Law of the People’s Republic of China on Commercial Banks states, “The 
commercial banks, in line with the requirement of the national economic and social development, run 
the loan lending business under the guidance of th e state industry policies”. Article 35 states:“ In 
lending loans, the commercial banks shall closely check the use of the loan, and the solvency and way 
of repayment of the borrower”. Article 41 st ates, “No agencies or individuals shall force a 
commercial bank to lend loans or pr ovide guarantee”. It is fair to say that the discretion of state-
owned banks in lending loans to industries, including the steel industry, is fully protected by the 
Chinese laws. China’s state-owned banks are runni ng in a way consistent with China’s WTO 
accession commitments.  
 Currently, in order to effectively ward off the credit risks in industri es with over capacity, such as the 
steel industry, the regulatory department of the Ch inese government will give timely risk alert to the 
commercial banks in order to ensu re the quality of bank assets. As financial institutions with 
independent management, which a re responsible for their own losses and profits, the state-owned 
commercial banks have primarily set up an indust ry risk surveillance system monitoring the 
development trends and risks in such industries as  steel. The state-owned commercial banks, on the 
basis of the requirement of prudent operation, make independent decisions on the adjustment of credit 
lending policies. According to the preliminary statis tics, by the end of May 2006, the total balance of 
loans lent by the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of 
China, Construction Bank of China, and China Bank  of Communications to the steel industry is RMB 
295.3 billion yuan, 2.5% of their total loan balance.  
 
(5) Services  
 
Question:  Canada 1
 
 Part IV. Trade Policies by Selected Sectors,  (5) Services, (i) Overview, paragraph 147: 
 71. What are the criteria applied to sign an Approved Destination St atus Memorandum of 
Understanding with a WTO member?  WT/TPR/M/161/Add.2 
Page 112  
 
Answer: 
  Please refer to response to Canada’s Q .70. 
 
Question: 
 
Canada 1
 
 
72. Outbound travellers are limited in the amount of foreign exchange they can acquire and 
therefore are limited in purchasing tourism services abro ad.  Is this not a restriction on current account 
transactions?  Are there other current account restrictions on trade? 
 
Answer:   I.  China has always been strictly implementing the Article 8 of the International Monetary Fund 
Agreement and does not have restriction on the paym ent and transfer of capital under the current 
account. According to the IMF interpretation, countries can have verifications on the truthfulness of the current account transactions and give gui dance on the limited amount of foreign exchange 
allowed for individuals.  Therefore it is not a restriction on the payment and transfer of capital under the current account.   
II.  As for the foreign exchange for the tour fee,  the travel agency shall purchase it from the bank 
based on their actual need.  As for foreign exchange  of personal use, the travellers can buy directly 
from the banks themselves.  For travellers who stay in foreign countries for less than half a year, they 
can buy an equivalent to 5,000 USD of foreign exchange from the bank, providing their private 
passport and valid visas. For stays longer than (including) half a year, the travellers can buy an 
equivalent of 8,000 USD.  In addition, trave llers can also make purchases under current account in 
foreign countries using foreign currency credit cards i ssued by banks in China.  They can repay the 
bank the amount they spend through consumption or cash withdrawal in foreign countries when they 
return to China.  Under such regulations, the co nsumption need of outbound travellers can be 
satisfied. 
 
Question:  India
 
 
Q.18  To facilitate Indian investment in the IT a nd ITES sector, including software services, China 
should give priority to these sectors and undertake st eps to facilitate investment in these sectors such 
as faculty and student exchange, establishment of a Chinese language and culture centers in multiple 
cities in India and vice-versa in China, better fli ght connectivity and encour aging learning of Chinese 
language in India.  Given the increasing trade be tween China and India, would China put in place a 
liberal visa regime which would provide a definite  time frame and certainty of obtaining visa and 
work permits?  Answer:    Currently, the visa policy of China is quite relaxed , with easy and simple application procedures, 
short processing time and a high  approval rate. Chinese embassies and consulates in foreign 
countries also have the authority to issue single en try, two-year or less-than-two-year multiple entry 
visas.  For those qualified and do have the need to come to China for business purposes, as long as 
they themselves apply, they will generally granted multiple entry visas. 
 China so far has signed agreements with over 30 countries on streamlining visa procedures and 
granting multiple entry visas for each other’s bus iness people.  China signed with India in 2003 in  WT/TPR/M/161/Add.2 
 Page 113 
 
 
Beijing the China-India MOU on the Simplificati on of Visa Procedures, which covers the 
streamlining of procedures for six-month multiple entries, working, tourist, student, short-term 
academic visas and so on.  China has always been honouring its agreements with other countries, and 
has been streamlining visa procedures for and gran ting multiple entry visas to qualified applicants.  
China is willing to continue its cooperation with th e WTO members to provide greater facilitation to 
the exchanges of peoples and trade.  
Question: 
 Bolivia
 
 
Inciso 5), i), Párrafo 147 ¿Qué políticas se tienen previstas para fomentar un mayor comercio de 
servicios turísticos y de enseñanza?  
Answer:   
 
On tourism, it is allowed to set up wholly forei gn-owned subsidiaries in the sector of hotel and 
restaurant services.  As regards travel agency serv ices, joint-venture travel agencies with foreign 
majority share ownership have already been permitt ed.  By the end of 2007 wholly foreign owned 
travel agencies will be allowed, with the eliminati on of geographical restrictions.  By the end of May 
2005, a total of 22 foreign-investment travel age ncies had been approved, 5 of which were wholly 
foreign owned.  On education, China allows Si no-foreign joint-venture schools.  Currently, China has 
approved over 800 Sino-foreign joint-venture education in stitutions or projects.  Therefore, China has 
made remarkable progress in terms of the lib eralisation in the above two sectors.   
 
Question:  Colombia
 
 
Literal i) Visión general.  
En el párrafo 148., se establece: “En general, el sector de los servicios se caracteriza por la 
intervención del Estado a través de empresas de propied ad estatal y restricciones a la participación del 
sector privado.  Se está llevando a cabo una liber alización gradual en ambos aspectos, aunque se 
mantienen restricciones o prohibiciones para la inversi ón extranjera en capital social en la mayoría de 
los servicios.” .¿Cuáles son aquellos sectores en los que se está adelantando proceso de liberalización 
gradual?, ¿Cuál es el plazo de tiempo estipulado para completar este proceso? 
 
Answer:   1. The Secretariat’s judgement on the Chinese services sector only partially reflects the rapid 
development of transformation of China’s services indust ry.  It is not comprehensive.  In fact, we have 
seen in the overwhelming majority of the services sectors a picture where state-owned and private 
enterprises compete on an equal footing and develop together.    2. Due to the characteristics of China’s system and economy, the state is still the majority shareholder 
in some services sectors.  However,  those enterprises whose majority  shares are held by the state 
compete with other enterprises on an equal footing.   Therefore, the government does not interfere 
with or restriction the participation of private businesses through state-owned enterprises.  More 
importantly, as reform and opening-up continues,  the number of sectors controlled by SOEs is 
shrinking. Such sectors like telecom and banking ar e a minority.  Even in these minority sectors, we 
are also making reforms and gradually allow in st rategic investors including foreign ones in order to 
diversify the stock ownership struct ure and improve the management level. 
 WT/TPR/M/161/Add.2 
Page 114  
 
3. Except for the minority of sectors such as tel ecom, life insurance and securities, China allows the 
establishment of wholly foreign owned and foreign ma jority shareholding enterprises in other vast 
majority of services sectors.  Liberalised rapidl y are sectors such as distribution, computer, 
advertising, transportation as well as legal, acc ounting and other professional services. For instance, 
in the sector of distribution, almost all the famous  foreign retailers and wholesalers such as Wal-Mart 
and Carrefour have entered in to the Chinese market. 
 
(ii) Commitments under the General Ag reement on Trade in Services  
 Question: 
 
Japan 1
 
 
(p.207-208, paragraphs 146-149)  
 Q42. Distribution is a key part of infrastructure in the service sector and its liberalization contributes 
to the development of Members’ economies as a whol e. The liberalization of distribution services is 
one of the issues of greatest interest issues to Japan.  (1) What are China’s concrete steps towards fu rther liberalization of distribution services?  
(2) Does China have intentions to make commitments on market access and national treatment in 
mode 1 of Commission Agents’ Services, Wholesale Tr ade Services and Retailing Services, as well as 
to make reductions in the existing foreign equity limitations in mode 3 of Retailing Services?   
(3) With regard to the "Measure s for the Administration of Foreign Investment in Commercial 
Fields", Japan recognizes that licensing requirement s in the measures are unclear.  Does China have 
any plans to announce the implementing regulations for this administration soon?  Answer:   On 16 April 2004, MOFCOM published the Measures on the Administration of Foreign Investment in 
the Commercial Fields, thus timely implementing its accession commitment regarding distribution.  
The distribution sector of China has already been  very open.  Any further commitment under these 
sectors shall depend on the results of China’s ne gotiations with other members during the Doha 
round and the objective level of development of China’s distribution services.  In addition, China believes that relevant provisions regarding the licensing requirement in the Measures on the 
Administration of Foreign Investment in the Commerci al Fields are clear.  China has no plan to 
formulate an implementing rule for the Measur es.  Nor does China deem it necessary to do so. 
 
(iii) Financial services 
 Question:  
 US 1
 
 
67. Paragraph 181 of Chapter IV of the report not es that China made commitments its Services 
Schedule on advisory, intermediation and other auxi liary financial services and did not schedule any 
limitations on foreign ownership.  Taking into  account that these commitments include credit 
reference and analysis, investment and portfolio research and advice, and a dvice on acquisitions and 
on corporate restructuring and strategy, please explain China’s justification for proposing a 49 percent 
foreign equity cap for credit rating agencies. 
  WT/TPR/M/161/Add.2 
 Page 115 
 
 
Answer:  
 Firstly, China believes that whether “credit ref erence and analysis” and services provided by credit 
rating agencies are the same servic es needs to be further clarified. 
 
Secondly, China made commitments on “cred it reference and analysis, investment and portfolio 
research and advice, and advice on acquisitions and on corporate restructuring and strategy” but 
under the sub-heading of “other financial services”. China hopes that the U.S. could help clarify 
whether the “credit rating agencies” in its questio n refer to financial instit utions or non-financial 
institutions. 
 
Question:  EC
 
 As pointed out in the WTO Secretariat’s Report (para 181),  China has committed banking subsector 
(k) Provision and transfer of financial informa tion, and financial data processing and related 
software by suppliers of other financial services . China’s regulatory regime in this subsector is 
however applied only to foreign supp liers, and the current regulator, thr ough an affiliate, appears to be 
engaged in competition with other suppliers. 
• In light of China’s national treatment commitments  and the potential for conflicts of interest, 
would China be open to considering alternative supervisory approaches covering both domestic and 
foreign suppliers, e.g. having the subsector supervised by a financial services regulator? 
 We also suggest that Table II.1 (list of regulators) mentions Xinhua as the regulator of news agencies 
and financial information service providers. 
 
Answer: 
 The regulatory function assumed by Xinhua is mandate d by the Chinese government.  This is both in 
line with the national conditions of China and the WT O rules.  It has been running perfectly well so 
far.  China protects normal provision and transf er of financial information, and financial data 
processing and related software.  As long as the in formation providers operate within the business 
scope as approved and do not violate China’s law, they shall be protected.  
Question: 
 Costa Rica
 
 
44.  En términos generales, ¿en qué consiste la reforma del subsec tor de los servicios financieros? 
 
Answer:  
As an emerging market in transition, China has fulfilled commitments to liberalizing its financial 
service sector at the time of WTO accession.  Firstly, to take banking sector as an example, (1) To  promote the reform of state-owned commercial 
banks. After the shareholding system reform of the state-owned banks such as the Bank of China (BOC) and China Construction Bank (CCB) in 2003, th e same reform was initiated in the Industrial 
and Commercial Bank of China (ICBC) in 2005. At present, BOC, CCB, ICBC and the Bank of 
Communications have all achieved initial objectives.  Their financial conditions have improved 
significantly and their corporate governan ce and internal management upgraded.  
 WT/TPR/M/161/Add.2 
Page 116  
 
(2) To deepen the reform of rural credit cooperatives. Since th e pilot project of rural credit 
cooperatives reform was initiated in June 2003, pi lot projects have now penetrated 30 provinces 
throughout China (except Tibet Au tonomous Region), and the refor m has generated preliminary 
results. The new supervision and management system of rural credit cooperatives have been put in 
place. The provincial government adopted three wa ys of management, namely, the establishment of 
cooperatives at provincial level (in 26 prov inces and municipalities), restructuring into rural 
commercial banks as single legal persons in a c ity (in Beijing and Shanghai), and establishment of 
rural cooperative banks as legal persons respectively at  the municipal and townsh ip level (in Tianjin). 
The ownership reform of rural credit cooperatives  is progressing steadily. Based on their real 
situations, different localities adopted three business m odels (joint stock, cooperative and joint stock 
cooperative) in four forms (rural commercial banks,  rural cooperative banks, unified legal persons at 
city/county level, and two-layered legal persons at to wnship and village levels). This reform measure 
was taken in line with the reality and diff erent guidelines were made on each category. 
 (3) To promote the reform of other financial ins titutions. China will actively promote the reform of 
financial asset management companies, improve its  research into the system and mechanism of non-
performing asset disposal, urge asset management  companies to strengthen internal management 
while improving the effectiveness, and promote sustained and healthy development of asset management companies. Further research should focu s on the respective functions of the National 
Development Bank, Agricultural Development Bank of China and the EXIM (Export-Import) Bank, 
and the legislation process concerning policy banks s hould be carried out. As part of the package 
reform in the postal service, the reform of postal sa vings institutions has picked up at high speed, and 
the establishment of a Postal Savings Bank has been  put on the agenda. China will continue with the 
reform of non-banking financial ins titutions, so that trust and investment companies will embark on 
the right business track. China will promote regulat ed development of small and medium-sized local 
financial institutions while encouragi ng capital injection in the restructuring of financial institutions 
such as urban credit cooperatives and urban commercial banks. 
 Secondly, as to securities sector reforms, by th e end of 2005, securities exchanges in Shanghai and 
Shenzhen had 3 and 4 special members respectivel y.  39 and 19 foreign securities operators had 
directly engaged in B-share trading respectively.   CSRC had approved 7 foreign-funded securities 
firms and 20 foreign-funded fund manag ement firms.  As of December 11, 2004, foreign shareholding 
could be up to 49% in fund management join t ventures.  By the end of 2005, already 7 fund 
management companies achieved foreign shareholding of 49%.  China’s liberalization of cross-bord er securities services has reached a relatively high level.  By the 
end of 2005, Chinese companies had accumulativel y raised about 105 billion USD from issuing 
shares and public listing abroad.  In terms of monetary value, overseas financing by Chinese 
companies had remained at roughly the same level as  domestic financing over the past ten years.  The 
underwriting, financial consulting,  auditing and legal services in these share offerings were primarily 
provided by overseas intermediaries.  In this process, foreign companies have reaped quite a lot 
profits.  In addition, social security funds and in surance companies have been permitted to invest a 
part of its foreign exchange in overseas securities business.  By providing consulting, asset 
management and other overseas investment services to  the social securities funds and insurance 
companies, foreign companies have expanded their sc ope of involvement in cross-border securities 
business.  While fulfilling WTO commitments, we also partia lly liberalized the securities market on our own 
initiative.  In December 2002, we started experiment ing with the QFII (qualified foreign institutional 
investor) system.  By the end of 2005, a total of  34 foreign organizations had gained the QFII status 
with a foreign exchange credit of USD5.645 billi on.  Another 4 foreign invested banks had been 
permitted to engage in QFII depository service.  In  a separate arrangement to open the market, the 
Administrative Measures on Strategic Investment by  Foreign Investors in Listed Companies formally  WT/TPR/M/161/Add.2 
 Page 117 
 
 
took effect as of February 1, 2006, allowing fo reign investors to make strategic investment in listed 
firms which have completed their share merger reform.  In recent years, China has entered a critical phase of reform and development in the securities sector.  
Relevant laws, infrastructure and regulatory regime are in the process of upgrading and adjustment.  
The successful progression of the reform and the stab le development of the market are preconditions 
for further liberalization in the secur ities sector.  In the next period, we will abide by the principle of 
prudential regulation, fully play out the functions of existing opening policies, and explore the possibility of further securities liberalization at  appropriate time and in appropriate ways under the 
principles of “being proactive and prudent, in proper and graduated sequence, fair competition, 
mutual benefits and win-win results”.  However, we are not well-placed to make new commitments to 
securities market liberaliza tion at this moment. 
 Since opening-up and reform, the insurance sect or has, through deepening reform, expanding 
opening-up, enhancing regulation and accelerating d evelopment, made positive contributions to the 
promotion of national economy, social progress and th e improvement of the people’s living standards.  
Meanwhile, the sector itself has made remark able progress: the insurance business has been 
developing rapidly, the market system has become  more comprehensive and sound, the system reform 
has witnessed major breakthrough, the opening-up has been further promoted, the insurance legal 
system has become further perfected, and the role of insurance services to the economic and social 
development has been further played out.  
 
Question: 
 Costa Rica
 
 47.¿A quién le corresponde y cómo se apli ca los controles de capital en China? 
 
Answer:    
Since 1996, China has been rigorously implemen ting the principle of free convertibility under the 
current account and has not exercised any restriction on the payment and transfer of capital under 
the current account.  However, China still has certain control over the capital account.  According to 
the Banking Law of the People’s Republic of Chin a, the People’s Bank of China is duty-bound to 
manage China’s foreign exchange, whereas the State Foreign Exchange Administration, with the 
mandate from the PBOC, regulates the inward and outward remittance, settlement and selling of 
foreign exchange as well foreign exchange a ccounts under the capital account. 
 
Question: 
 Mexico
 
 
IV. POLÍTICAS COMERCIALES, PO R SECTORES / 5) Servicios / iii) Servicios financieros 
a) Introducción. 
 
1. En el párrafo 153 se menciona que el gobierno chino es dueño de una parte significativa del sector 
financiero. México está interesado en conocer si  existe algún plan o proyecto gubernamental que 
modifique esta situación, permitiendo una mayor apertura de este sector. 
 
Answer:  
 The rate of nationalization of a member’s financia l institutions cannot directly reflect the degree of 
competition of the member’s financial sector, nor can it reflect the competitiven ess of the nationalized 
companies.  China has no plan to change the fact that the domestic financial institutions are state WT/TPR/M/161/Add.2 
Page 118  
 
owned.  However, China is proceeding with its reform on the financial system, which includes the 
move towards diversification of stock ownership  and the gradual lifting of restrictions on foreign 
share participation.  Question: 
 
Japan 1
 
 
(p.209, paragraphs 153-154)  
 Q43. 
 (1) Please provide detailed data on government owners hip in individual banks (SOCBs and JSBs) and 
insurance companies. 
 
Answer: 
 Government ownership is 90.9% in the Industry and Commercial Bank of China (ICBC), 100% in the 
Agricultural Bank of China, 79.9% in the Bank of  China, 70.9% in China Construction Bank, 23.4% 
in the Communication Bank and 30.2% in the Indus trial Bank. Other incorporated banks do not have 
government shares.  
Question:  
(3) Please indicate how China intends to reduce NPLs.  
 
Answer:  
 
The China Banking Regulatory Commission (CBRC) has  consistently placed the lowering of non-
performing loans (NPLs) at the heart of its re gulatory and administrative endeavour. The CBRC 
actively advances institutional reform in the bank ing sector, spins off loss-making capital, and 
continuously urges commercial banks to offset non-performing loans by writing off loan losses with 
provisions to improve credit loan performance and prevent new non-performing loans. For three 
consecutive years, NPL balance and ratio in commerc ial banks have both been reduced. At the end of 
2005, the overall NPL ratio in Chinese commerci al banks fell below 10%, marking a major 
breakthrough. 
 
In this process, China has taken the following measures: 
 
First, the CBRC consistently pus hed forward banking reform, contin uously promoted institutional 
innovation in the banking sector, made great e fforts in advancing reform into state-owned 
commercial banks with a focus on corporate gover nance, and in solving problems with respect to 
ownership and management system throughout th e reform of rural credit cooperatives, steadily 
promoted the normal development of small and medium-sized banks through reform and 
restructuring.  
 Second, the CBRC unswervingly worked on “dou ble reductions” (reduction of NPLs balance and 
ratio), adapted to new thinking, methodologies and models with respect to NPL management, and 
deepened and refined NPLs administration.   
Third, under the leadership of the regulatory autho rities, commercial banks st arted to conduct their 
lending and loan management ac tivities in a rational manner. The previous management model 
featuring a simple pursuit of lending scale and ma rket shares has been switched to an insightful 
management model characterized by diversified development stra tegies and capital management.  WT/TPR/M/161/Add.2 
 Page 119 
 
 
Further improvement has been made to such mechanisms as “credit-lending and due diligence”, 
‘separation of loan approval granting” and “t riple checks for lending”, and the credit management 
system is being rationalized. Responsibilities are mo re clearly set, the efforts in collecting and 
revitalizing NPLs are intensified and the perform ance of new loans is significantly better. 
 
Question: 
 
Bolivia  
 
Párrafos 172 al 177 ¿Cuál es la estrategia Estatal pa ra tratar en forma más eficiente un problema aún 
no resuelto y de graves implicaciones, sobre todo  por la magnitud que aún representan las antiguas 
deudas incobrables y porque en todo este período han continuado apareciendo nuevos préstamos 
malos? 
 
Answer:  Please refer to response to Q43.(3) from Japan on NPLs. 
 
Question: 
 US 1
 
 
64. Paragraph 158 of Chapter IV of the report states that foreign equity in the banking sector is 
restricted and follows the commitments that Chin a made in the Services Schedule accompanying its 
Protocol of Accession.  The report explains that the equity share of a single foreign investor in a Chinese-foreign joint bank cannot exceed 20 percent, with  the proviso that the equity share of the total 
foreign investment was lower than 25 percent.  However, under banking services in its Services 
Schedule, China agreed that qualified foreign fi nancial institutions were permitted to establish 
Chinese-foreign joint banks, and China did not sched ule any limitation on the percentage of foreign 
ownership in these banks.  In light of this commi tment, please justify China’s limitations on foreign 
ownership in these banks. 
 
Answer:  
 
The existing Regulations on Administration of Foreign-funded Financial Institutions and its 
Implementing Rules allow qualified foreign-funded fi nancial institutions to set up solely-foreign-
funded banks or joint-equity banks in China, wit hout any limitations on maximum proportions of total 
or single foreign equity share in joint-equity ban ks. In practice, the requirement of foreign equity 
share in joint-equity banks is subject to Chi na’s WTO horizontal commitments. There is no such 
limitation as mentioned in the ques tions by Japan and the USA under this review. Therefore, it is not 
conflicting with China’s WTO accession commitments.   
Regarding the issue of foreign equity participati on in China’s domestic banking institutions, China 
would like to point out the following fact: Firstly, foreign investment in domestic banking institutions 
was not allowed when China acceded to the WTO in 2001; one can find no commitments were made 
in this regard in China’s WTO commitments. Seco ndly, with progress in the reform and development 
in China’s financial sector, the CBRC, approved by the State Council, issued the Administrative Rules 
Governing Equity Investment in Chinese Financial In stitutions by Overseas Financial Institutions at 
the end of 2003. The Rules allows qualified foreign financial institutions to acquire equity shares in 
domestic financial institutions with the maximum proportion being capped at 20% (previously 15%). 
Therefore, this is a measure of “autonomous libera lization” rather than a measure conflicting with 
China’s WTO Commitments.  WT/TPR/M/161/Add.2 
Page 120  
 
Question: 
 Japan 1
 
 
(p.215, paragraph 167)  
 
Q44. Please explain why China limits foreign equity participation to a maximum of 20 percent for a 
single foreign investor in existing Chinese domestic banks. This limitation appears to be in conflict 
with China’s schedule of commitments where no lim itations on the foreign equity participation in 
joint banks are scheduled.  Answer:   Please refer to response to the US1 Q 64. 
 
Question:  Costa Rica
 
 
51.¿Subsisten en la actualidad en China limitacione s geográficas, de productos y de clientes respecto 
al funcionamiento de bancos extranjeros?  Answer:  The Chinese government has faithfully honored its commitments on the financial services under the 
GATS. For information about limitations on ma rket access for foreign banks in such aspects as 
geographical coverage, products and clients, please refer to China’s commitments on banking and 
other financial services under the GATS in the China WTO Accession Protocol. For more detailed 
information, please refer to our response to Q. 43 of Costa Rica.  Question:  
India
 
 
Q.4 Many bank branches are not authorized to deal in foreign exchange remittances and the 
process of routing remittances from authorized banks is time consuming.  Would China clarify its position and try to make its system compatible with global practices?    Answer:  First, China has no market access limitations on foreign exchange remittances by foreign-invested banks in China authorized by the CBRC to enga ge in domestic and international settlement.  
 
Since its WTO accession, China has adopted many  kinds of foreign exchange regulation measures, 
including abandoning the requirement for foreign pa yment certificate and document, to simplify the 
procedures for handling foreign exchanges. All these measures further facilitated the international 
payment by domestic organizations and individuals.   
Every year China’s foreign exchange regulation system passes through the IMF consultation 
smoothly, which shows that it complies with the requirement of the IMF and relevant international 
norms.  
  WT/TPR/M/161/Add.2 
 Page 121 
 
 
Question: 
 Mexico
 
 
IV POLÍTICAS COMERCIALES, POR SECTORES / 5)  Servicios / iii) Servicios financieros b) 
Sistema bancario. 
 
2.  En el párrafo 162 se mencionan una serie de regulaciones relacionadas con el sector bancario de 
China, que dan sustento al marco jurídico del sector . México quisiera saber si existe algún sitio en 
Internet en donde se puedan consultar dichas regulaciones.  Answer:  Please log on to www.cbrc.gov.cn; http://www. pbc.gov.cn/jinrongfaguizhengce/ for detailed 
information. 
 
Question: 
 US 2
 
 
51. Paragraph 169 of Chapter IV of the report expl ains that a decision has been made to establish 
a deposit insurance system in China and that the People’s Bank of China, the China Banking 
Regulatory Commission and MOF are currently drafting implementing regulations and rules.  Please describe the contemplated timing for China’s finalization of these measures and establishment of the deposit insurance system.   
 
Answer:   
 China’s theoretical study on the establishment of the deposit insurance system started in 1997. In 
recent years, the Chinese government expedited the pr ocess for the establishment of this system. At 
present, the relevant government departments ha ve reached a consensus on setting up the deposit 
insurance system as soon as possible, and are hav ing in-depth study on the framework arrangement 
of the deposit insurance system compatible  with the actual situation of China. 
 In 2006, the 11th Five-year Program for the Na tional Economic and Social Development urges “to 
regulate the market withdrawal mechanism for fi nancial institutions, set up the corresponding deposit 
insurance, investor protection and insurance secur ity system”. China will seriously and steadily 
promote the implementation of the deposit insurance system.   
Question: 
 Colombia
 
 
A) El documento de la Secretaría señala: “párrafo  181. El suministro transfronterizo de servicios 
bancarios y otros servicios financieros (excluidos  los seguros) se ha dejado sin consolidar, con las 
siguientes excepciones:  suministro y transferenci a de información financiera y procesamiento de 
datos financieros y soporte lógico con ellos re lacionado, por proveedores de otros servicios 
financieros;  y servicios de asesoramiento, de interm ediación y otros servicios financieros auxiliares.”   
A partir de lo anterior, surgen ciertas inquietudes respecto de la prestación de servicios financieros de 
forma transfronteriza, especialmente en lo relacion ado con: i) la promoción de estos servicios por 
parte de entidades extranjeras que no cuentan con una presencia comercial en el país; y ii) el trato que 
se le otorga a las mismas con relación a las entidad es que efectivamente se en cuentran establecidas en 
China. En este sentido, ¿Cuál es el alcance del tr ato nacional que otorga China respecto de los 
proveedores de servicios fina ncieros transfronterizos? WT/TPR/M/161/Add.2 
Page 122  
 
 B) En el caso particular del suministro transfr onterizo de servicios financieros, están sometidos 
los proveedores transfronterizos a requisitos regulatorios y de registro, así como al pago de impuestos? 
 
Answer: 
 a) It is the business decision of foreign co mpanies themselves whether or not to set up 
representative offices in China. Nevertheless all foreign companies, with or without representative 
offices in China, are allowed to provide cro ss-border services according to the relevant WTO 
commitments of China and to enjoy the national treatment as China committed.  
 b) China has no provisions on the registra tion of cross-border service providers. However, in 
the financial services sector including the transfer of  financial information, the Chinese tax related 
laws and regulations have clearly defined the tax de duction obligation of domestic service receipients 
with repect to both sales tax and income tax.  
 (2) Securities  Question:  
Japan 1
 
 
(p.228, paragraph 212)  
 
Q47. Does China have any plans to further libera lize the cross-border trade in securities business as 
separate from B share business? 
 
Korea  
 
17.  Paragraph 212 indicates that China's securities market is relatively more  restricted than the 
insurance or banking sector.  y Does the Chinese government have any future plans for an additional opening of securities 
market?  
 
Answer: 
 
China has no plan to further liberalize the secu rities services at this moment. The recent years are a 
key stage for the reform and development of China’s securities market, when the relevant laws and 
basic mechanisms as well as the regulating system  are being reformed and adjusted. The smooth and 
stable market development are the prer equisites for China to further liberalize its securities industry. 
In the coming period of time, we will, following the principle of prudent regulation, give full play to 
the opening up policy, and study the possibility of reasonably liberalize the secu rities industry more at 
an appropriate time in line with the principles of “p ositive efforts, steady progress, fair competition, 
mutual benefit and win-win outcomes.  
  WT/TPR/M/161/Add.2 
 Page 123 
 
 
Question: 
 Mexico
 
 
IV. POLÍTICAS COMERCIALES, PO R SECTORES / 5) Servicios / iii) Servicios financieros 
d) Valores.  
3.  En el párrafo 207 se señala que se hicieron modi ficaciones a la Ley de Compañías y a la Ley de 
Valores, las cuales entraron en vigor el 1 de ener o de este año. México está interesado en conocer 
cuáles fueron esas modificaciones que se realizaron a dichas leyes.   Answer:   The amendment of the Securities Law and the Company  Law involves many asp ects such as securities 
issuance, listing, transaction and registered settle ment, corporate governance, investor protection, 
and market supervision and regulation. The new Securities Law has 240 articles, with 146 revised, 53 
added and 27 deleted as compared with the previous  law consisting of 214 articles. In terms of the 
structure, the new law is well connected with the Company Law as it includes the relevant articles in 
the Company Law on public issuance, listing, suspension of listing, and termination of listing of shares.  
 
(3) Insurance  Question:  Costa Rica
 
 1. ¿Cuáles son las medidas in situ y ex situ para  la supervisión y la inspección de las compañías 
de seguros?  
 
Answer:    
With regard to the spot and non-spot supervi sing and inspecting measures of the insurance 
companies, please refer to Regulation on Administration of Insurance Companies. 
 
Question: 
 58. ¿A qué se debe el poco desarro llo del mercado de seguros en Ch ina? ¿Tiene esto relación con la 
forma en que está planteada la regulación, en partic ular en materia de requisitos para obtener la 
autorización de entrada al mercado, como es el caso de aquellas que supeditan la concesión de 
licencias de acuerdo con objetivos de  desarrollo económico y regional?  
 
Answer: 
 For years, the Chinese insurance ma rket has kept a rapid growth. The insurance premium revenue 
increased from 143.03 billion RMB yuan in 2000 to 492.73 billion RMB yuan in 2005 at an annual 
growth rate of 28%. The total asset grew fr om 317.41 RMB yuan in 200 0 to 1522.59 billion RMB 
yuan in 2005 at an an nual growth rate of 36.%. The above figu res demonstrate that the argument that 
China’s insurance market has barely developed is completely groundless. The Chinese government, in 
strict compliance with its WTO commitment, appr oves qualified foreign insurance companies to set 
up offices in China. The argument of the WTO memb er concerned that China’s decisions on issuing 
business permits are based on its economic and regional development goals is groundless. 
 WT/TPR/M/161/Add.2 
Page 124  
 
Question: 
 Costa Rica
 
 
59.¿Se encuentra autorizado en Chin a el comercio transfronterizo de  algunos servicios de seguros? En 
caso afirmativo, ¿cuáles servicios y en  qué condiciones pueden prestarse?   
 
Answer:    With respect to the provision of insurance service  by means of cross-border trade, please refer to 
China’s specific WTO commitments on the insurance industry.  
Question: 
 Costa Rica
 
 
60.¿Qué función tienen las compañías de gestión de activos de seguros? 
 
Answer:  
With respect to the functions of insurance asse t management companies, please refer to Provisional 
Regulations on the Administration of Insurance Asset Management Companies. 
 
Question: 
 
Costa Rica
 
 
61.¿Cuáles son las medidas in situ y ex situ para la supervisión y la inspección de las compañías de 
seguros?   Answer:    With respect to the on-site and o ff-site monitoring of the insur ance companies, please refer to 
Regulation on Administration of Insurance companies. 
 
Question:  Costa Rica
 
 
62.¿Se piensa autorizar a los aseguradores extranjeros para que proporcionen seguros obligatorios? ¿Están los servicios de seguros en China sujetos a normas que regulan la competencia? ¿Cuál es la 
autoridad encargada de aplicar dichas normas? Además de la correduría de se guros, ¿existe en China 
la figura del agente de seguros? ¿La correduría de seguros puede ser ejercida sólo por personas 
jurídicas?  
 
Answer:   
 
China is studying on the provis ion of mandatory insurance s ervices by foreign insurers. The 
regulation on market behaviours is one of the three pillars of China’s insura nce regulation efforts. 
Regulating the market competition is a part and pa rcel of the regulation on market behaviours. To 
this end, China has set up a relatively sound legisl ative framework in insurance industry. With regard 
to the main structure of China’ s insurance market, please refer to the WTO Secretariat’s China trade 
policies review. With respect to the activities of insurance brokers, please refer to Regulation on 
Administration of Insurance Brokers.  WT/TPR/M/161/Add.2 
 Page 125 
 
 
 
Question: 
 Costa Rica
 
 
63.¿A qué obedece la restricción según la cual las empresas que se dedican a seguros de vida sólo 
pueden ser en un 50% propiedad extranjera?  ¿Para la obtención de licencias, se piden a las empresas 
de capital extranjero requisitos distintos a aquellos que se exigen a empresas chinas? ¿En qué consiste 
la diferencia?  Answer:    The requirement that foreign-invested  life insurance companies can not hold over 50% equity is based 
on the principle of prudent regulation worked out in line with the actual  situation of China’s 
insurance industry development. W ith respect to the market access requirements for foreign-invested 
insurance companies, please refer to China’s WT O commitments on the insurance industry. 
 Question:  Colombia
 
 
c) Seguros  El documento de la Secretaría se ñala: “186. En virtud de la Ley de  Seguros, todas las compañías de 
seguros que ofrecen servicios en China han de estar  debidamente registradas, y todas las personas u 
organizaciones que necesiten cobertura de seguro en China deberán contratarla con una compañía de 
seguros registrada en China.”. Lo anterior significa que está prohibido en China el comercio 
transfronterizo de servicios de seguros? 
 
Answer:    
According to China’s WTO commitments, under mode 1(cross-border supply) of the limitations on 
market access, China is unbound except for: a) reins urance, b) international marine, aviation, and 
transport insurance, and c) brokerage for large scale commercial risks, international marine, 
aviation, and transport insurance and reinsurance.  
 
(iv) Telecommunications services    Question:  US 1
 
 70. Paragraph 213 of Chapter IV of the repor t discusses deregulation and reform in China’s 
telecommunications services sector, while paragraph 214 of Chapter IV of the report explains that the 
Chinese authorities are seeking a “fair and just, effective and orderly market environment.” 
 a. In the area of mobile telecommunications ser vices and so-called “3G licenses,” the United 
States is concerned about recent reports that the Chinese government is unsure whether China’s 
market is mature enough for advanced wireless ser vices.  If these reports are accurate, is the Chinese 
government conducting an “economic needs” analysis?  Has the Chinese government decided that the 
development of the telecommunications market in China, and specifically the kind and number of suppliers present, must be mana ged through government planning?  Please explain how these actions 
would be consistent with the commitment that Ch ina made in the Services Schedule accompanying its 
Protocol of Accession to open up this sector?   WT/TPR/M/161/Add.2 
Page 126  
 
 
Answer: 
 China develops 3G mobile telecommunications in  compliance with WTO rules and its commitments. 
China will identify the scope of its 3G technical standards within the scope of the international 
standards based on the technological competence result produced by its 3G technology experiments.   
It will allow telecom operators to decide which set of technical standards to use in relation to the 
market and their individual needs as long as the standards are within the Chinese standard scope. 
The issuing of the 3G license will be done in ref erence to international pr actices (e.g. review and 
auction).  The way and quantity in whic h the license is to be issued w ill be determined on a variety of 
factors such as reasonable use of  resources and technical features. 
China now has both the infrastructure and soft c onditions for developing 3G.  In 2006, we will push 
forward the implementation of 3G in China in a well designed, sequenced and pragmatic manner. 
 
Question: 
 b. The United States is also concerned about r ecent reports suggesting that MII is sponsoring 
and helping to fund large-scale tests of the TD-SCD MA standard while halting tests of competing 
technologies.  These reports also indicate that Ch ina may provide subsidies totaling as much as RMB 
8 billion to support the TD-SCDMA standard, and th at MII may give TD-SCDMA networks priority 
in licensing.  If these reports are accurate, please justify these plans in light of China’s Services 
Schedule commitments relating to spectrum, i.e., that  “procedures for the allocation and use of scarce 
resources, including frequencies . . . will be carried out in an objective, timely, transparent and non-
discriminatory manner.”  
Answer: 
 
China takes a neutral standing upon the development of 3G telecommunications.   China developed 3G telecom and has spent heavily  on the R&D and commercialization of not only 
TD-SCDMA, but also the WCDMA and CDMA2000 technologies. China has tested the technical reliability of WCDMA and CDMA2000, as well as the technical traits of TD-SCDMA.  All these 
efforts, as we have witnessed with our own eyes,  are conducive to developing more mature and better 
3G mobile telecom technologies, products and services. 
In 2002, MII developed and publis hed a frequency program for 3G mobile telecommunication based 
on ITU classification and technical standards as well as China’s use of radio spectrum.  The 
frequency will be managed in accordanc e with China’s accession commitments. 
 
Question: 
 
71. Paragraph 217 of Chapter IV of the report states that a draft of a new Telecommunications Law is 
currently being revised.    c. Does the current draft of the Telecommunicati ons Law provide that foreign service suppliers 
required to form joint ventures with Chinese entities to  operate in China are free to chose their joint 
venture partner, and that they could choose a part ner from a sector outside the sector of operation of 
the joint venture, consistent with the commitment that China made in paragraph 314 of the Working 
Party Report accompanying its Protocol of Accession? 
 
Answer: 
 Considering that technical requirements are complicat ed in the telecom sector and that new services 
are emerging every day, the Provisions on Administ ration of Foreign Invested Telecommunications 
Enterprises sets forth requirements on major Chin ese investors in foreign-invest ed telecom companies  WT/TPR/M/161/Add.2 
 Page 127 
 
 
offering basic telecom services, with the aim of better protecting the interests of investors and 
consumers and of ensuring healthy d evelopment of the telecom sector. 
 
Question: 
 
Japan 1  
 (p.233, paragraph 219)  
 
Q50. 
 
(1) The “Provisions on Administration of Foreign Invested Telecommunications Enterprises” 
stipulates the amount of the minimum registered cap ital that Y 2 billion requires for the basic telecom 
services operator providing services across the country or across different provinces, autonomous regions, and municipalities directly under the Central Government.  We have been informed that the 
answer before that China set up the regulation of  the minimum registered capital because of the 
protection of consumer and investor for such a cas e where it needs a huge amount of investment is 
required for installation of the telecom facilities. Me anwhile, we also received the answer that it is 
possible to provide basic telecom services on a re-sal e basis without installation of facilities.  Despite 
the fact that the amount of investment differs betw een whether an enormous amount of investment to 
install the facilities is needed and whether not so mu ch money is made on the re-sale basis, it seems to 
be not reasonable that the same amount of the mini mum registered capital is applied to both cases.  
Please explain the reason for this.  
Answer: 
 
In strict compliance with its WTO commitments, China keeps its telecommunication market open. In 
the telecommunication service sector, setting a requirem ent for certain amount of registered capital is 
conducive to protecting the interests of the consume rs. We have taken note of the concern of Japan 
about this issue and will make appropriate adjustm ents to the registered capital requirement 
according to the relevant legal procedures while thoroughly evaluating and taking full account of the 
consumers’ interests.  
 
The resale is only one form of service provision but not a concrete telecommunication service. Thus 
there is no separate telecommunications operation li cense requested for resale.  After obtaining the 
operating license for basic telecom services, the company has the discretion of choosing the form of 
service provision, either by installing infrastructure  on its own or by re-selling via facilities leased 
from another telecom company.  
Question: 
 
(2) There is no reservation in the internati onal gateway for providing international 
telecommunications services in the Specific Commitment of Chin a, and we recognize that the 
international gateway was out of commitment.  Please explain the reason why China excluded the 
international gateway.  
 
Answer:  
According to China’s commitments, all interna tional telecom services should go through gateways 
established with approval of  Chinese telecom authority. 
 WT/TPR/M/161/Add.2 
Page 128  
 
Question: 
 Canada 1
 
 Part IV. Trade Policies by Selected Sectors, (5) Services, (iv) Telecommunications services, 
paragraph 214: 
 
78.  The Secretariat Report notes that the State is the majority shareholder in six telecoms service 
providers. The report goes on to say that this structur e may change in order to establish a fair and just, 
effective and orderly market environment.  What specific, current conditions are China intending to 
address with these changes? 
 
Answer: 
 China’s telecom industry will proceed from China’ s reality. We will carefully study the difficulties 
and issues facing the telecom sector while absorbing  reform experience from both home and abroad, 
continue to deepen reforms in the telecom sector , foster fair, just, effective and orderly competition 
and promote the comprehensive, coordinated a nd sustainable development of China’s telecom 
industry. 
 
Question: 
 Korea
 
 
19. Please provide the information related to on line game on the followings:   
y Censorship or contents review process for forei gn online games to be serviced in the China  
y Review agencies in charge of such review and the review criteria  
y The time required for the completion of the review process  
y Differences between foreign and domestic games in terms of review process, review agencies, 
review criteria and review time required  
y More detailed information such as relevant laws and regulations 
 
Answer: 
 
Pursuant to the Administrative Permission Law of China, the Decision of the State Council on the 
Enactment of Administrative Licensing for the C onfessedly Reserved Items Subject to Administrative 
Examination and Approval (State Council Decree No. 412) and Interim Rules on the Administration 
of Internet-based Culture revised by  Ministry of Culture on July 1st, 2004, the Ministry of Culture is 
in charge of the administrative functions relevant  to internet-based cultural products, including 
administrative review and approval of foreign on line games.  
 
The commercial internet cultural entities shall apply to Ministry of  Culture for the submission and 
review of foreign on line games and provide related materials. For those meeting the requirements 
after the content review by the authorities, a document of approval shall be issued by the Ministry of 
Culture. A decision of approval or disapproval shal l be made by the Ministry of Culture within 20 
working days (the time needed for review by external experts is not included) after formally receiving 
the application for content review.  With a positive administrative licensing decision, a document of 
approval shall be issued and a public notice will be  posted on the official website of the Ministry of 
Culture.  Compared to the review and approval system on foreign internet-based games, a record-keeping 
system applies to domestic internet -based cultural products of China, with Ministry of Culture as the 
administrative authorities as well. The administra tive regulations on domestic and foreign internet- WT/TPR/M/161/Add.2 
 Page 129 
 
 
based cultural products in China are fully consis tent with China’s commitments upon its accession 
into the WTO.  Question:  
India
 
 
Q.11  The Global Delivery Model requires companies to execute projects in multiple countries 
simultaneously for a client. A branch structure facilitates the Global Delivery Model through easier 
movement of people and better contract structuri ng. It is understood that in China only financial 
institutions are presently allowed to operate on a bran ch structure. However, there are several Indian 
IT companies who would like to operate in China on a branch structure. Would the Government of 
China review this policy and permit Indian IT companies to operate on a branch structure? 
 
Answer: 
 
China has no restrictions on the corporate struct ure of businesses in the information industry.   
 
Question: 
 India
 
 
Q.15 The Chinese Government has strict contro l on research, manufacturing and marketing of 
security related products through several certifi cate approval processes.  Foreign vendors are not 
encouraged to participate in su ch areas.  Will China allow the participation of Indian vendors on 
research, manufacturing and marketi ng of security related products?  
 Answer:  China restricts the participation of foreign compani es in national security related projects. This 
practice complies with international norms and the relevant WTO rules.  China never interferes with fo reign companies engaging in the research and manufacturing of 
security related products. China we lcomes the participation of Indian manufacturers in this area.  
 
Question: 
 EC
 
 For the establishment by foreign investors of join t ventures in the so-called “basic” telecom sector, 
there is a requirement to venture with a ma in Chinese partner in the telecom sector. 
  
• Could China please indicate when it would allow the free choice of joint ventures partners, in 
line with the current practice in many countries where new entrants come from other sectors of the 
economy?  
 
• Is China not de facto limiting the number of ope rators to those already on the “basic” market 
by restricting the choice for joint venture partners to those operators?  
 
Answer: 
 
China has no limitation on the number of basic tele com operators.  The Provisions on Administration 
of Foreign Invested Telecommunications Enterp rises sets forth requirements on major Chinese WT/TPR/M/161/Add.2 
Page 130  
 
investors in foreign-invested telecom companies off ering basic telecom services, which is to better 
protect the interests of investors and consumers and ensure the healthy development of the telecom 
sector. 
 
Question: 
 
Costa Rica
 
 
45.  En materia de telecomunicaciones, ¿quién es la autoridad encargada de fijar los controles de 
precios? ¿Cómo se determinan los precios máxi mos o precios con orientación gubernamental? 
 
Answer: 
 The Ministry of Information Industry is res ponsible for drafting policies on information service 
charges, determining the charging standards for basic postal and telecommunication services, as well 
as their implementation.  
The price ceiling or government guided price are set on the basis of average social cost of the telecommunication services and the market supply an d demand as well as th e national economic and 
social development need and the affordability to the end-users. 
 
Question:  Costa Rica
 
 
53. ¿Cómo funciona el fondo para el suministro de servicios universales de telecomunicaciones y 
la estructura de costos para compensar a los proveedores por el suministro de esos servicios? 
 
Answer: 
 In line with the Regulations of the People’s Republic of China on Telecommunication, telecommunication business operators must fu lfill their obligation to provide universal 
telecommunication services according to relevant re gulations of the state. The administrative 
measures for the universal telecommunication service cost compensation will be worked out by the 
competent authority under the State Council in charge  of the information industry in conjunction with 
the finance and price authorities of the State Council, which will be promulgated for implementation after endorsed by the State Council.  
 
International acknowledged practice in universal te lecommunication services is to set up a universal 
telecommunication services fund. To ensure th e sustainable development of universal 
telecommunication services in China, the Ministry of Information Industry, in cooperation with other 
relevant departments, is promoting the establis hment of the universal telecommunication services 
fund, and improving the universal telecommuni cation services cost compensation mechanism.  
 
China pays great attention to developing telecomm unication in the rural areas. Prior to the 
establishment of the universal telecommunication fund, as a provisional transitional step, the Ministry 
of Information Industry sponsored a Telephone Acce ss in Every Village Proj ect at the beginning of 
2004. According to the Regulations of the People’s Republic of China and the 10th Five-Year Plan, 6 
basic telecommunication business operators were designated to provide the universal 
telecommunication services to administrative villages which had no telephone access at that time. They were requested to offer two telephone terminals and the basic voice service. On this basis, the 
installation of more telephones will be encourage d, and internet service will gradually follow. The 
targets for the present stage for universal services are practical and do not go beyond the actual need 
of the social communities. 
  WT/TPR/M/161/Add.2 
 Page 131 
 
 
The Telephone Access in Every Village Project wa s launched in line with the principles of 
transparency, non-discrimination, and unbiased comp etition. The Ministry of Information Industry 
has publicized the implementation program and th e progress of the Project through its website and 
public media. It asked for quality of services that is no lower than that in other areas, and is up to the 
service quality standard set by the state. In additi on the telephone charges shall not be higher than 
charges for like services in other regions. While  coordinating the telecommunication companies to 
build communication facilities and provide telecomm unication services to the administrative villages 
without telephone access, the government does not in tervene in or restrict the specific construction 
efforts or business operation of the companies.  
Providing universal telecommunication services is a long-term and arduous project. The Telephone 
Access in Every Village Project is only a transiti onal measure aiming at realizing a breakthrough of 
making the service available on the basis of nothi ng in the rural areas, reaching the goal of 
“universal access” in the universal services obligations. China will continue to push forward the 
efforts in providing universal services in order to make available the universal services by meeting the 
objectives of universal access, lifting the telephone pene tration rate and the informatization degree of 
the whole country step by step.   Question:  Costa Rica
 
 
65. ¿La regulación de las telecomunicaciones en China tiene en cuenta el fenómeno de la 
convergencia tecnológica? ¿La regulación se basa en se rvicios o en redes? ¿Cómo se regulan en China 
los servicios de difusión? 
 
Answer: 
 In response to the challenges brought about by the technological advancement and integration, China 
has worked out a plan to intensify the constructi on of such information in frastructure as broadband 
communication network, digital TV network and next-generation internet, and to promote the 
integration of the three networks. We will intensify  our studying efforts on the policies, management 
methods and laws and regulations for the integrati on of the three networks. The good experience of 
all other countries will be borrowed, which will be appropriately combined with China’s actual 
situation so as to earnestly promote the integration of the three networks. 
 At present, China conducts licensing administr ation by categories over the telecommunication 
services mainly on the basis of th e Catalogue of Telecommunicati on Service Categories. In such 
special areas as mobile communication which is under resources restriction, different networks are 
also under consideration in the administration.   Question:  
66. ¿Cómo funciona el fondo para el suministro de servicios universales de telecomunicaciones y la 
estructura de costos para compensar a los pr oveedores por el suministro de esos servicios? 
 
Answer:  
Please refer to response to Q53 of Costa Rica. 
 WT/TPR/M/161/Add.2 
Page 132  
 
Question: 
 
67. ¿Están los servicios de telecomunicaciones en China sujetos a normas que regulan la 
competencia? ¿Cuál es la autoridad encargada de  aplicar dichas normas? ¿Se aplica una regulación 
especial a los operadores dominantes, en qué consiste esa regulación?  Answer:  In recent years, China has quickened the improvem ent of the telecommunication legislations. The 
state successively promulgated the Regulatio ns of the People’s Republic of China on 
Telecommunication, the Regulations on the Admi nistration of Foreign-Invested Telecommunication 
Companies, etc. Based on these laws and regulations, the Ministry of Information Industry publicized 
over 30 ministerial rulings such as the Me asures for the Licensing Administration of 
Telecommunication Services, Provisions on the Administration of Interconnection of Public 
Telecommunication Networks, and the Standards fo r Telecommunication Services, creating a sound 
legal environment for the telecommunica tion market competition and development.  
 With a view to encouraging the fair competition in the field of telecommunication, the Regulations of 
the People’s Republic of China on Telecommunication as well as other laws and regulations have set 
down special provisions on the interconnection obligations of incumbent telecommunication operators.  
 
Question: 
 Mexico
 
 
IV. POLÍTICAS COMERCIALES, POR SECTORES / 5) Servicios / iv) Telecomunicaciones a) Estructura 
 
4.  En el párrafo 214 se señala que existen dos proveedores de servicios de telecomunicaciones que dominan prácticamente el mercado (95 por ciento). México está interesado en saber si existen planes 
por parte del gobierno para impulsar una mayor competencia y apertura en el sector, a fin de que se 
permita el acceso a otros proveedores que así lo deseen. 
 
Answer:  In strict compliance with its WTO accession commi tments and relevant WTO rules, China keeps its 
telecommunication market open. Currently, in Chi na’s telecommunication market, there are 6 basic 
telecommunication operators providing telephone services. Due to the technical advancement and market growth, the substituting role of mobile phone for fixed 
phone is more and more noticeable. Mobile phone  subscribers have outnumbered fixed phone 
subscribers. China will, on the basis of China’s actu al situation, carefully st udy on the difficulties and 
problems challenging the telecommunication indus try development. Meanwhile, both domestic and 
international telecommunication ref orm experience will be learned to  constantly push forward the 
reforms in the telecommunication industry, so as to  establish a fair, equitable, effective and orderly 
environment for market competition facilitating the overall, coordinated  and sustainable development 
of the telecommunication industry.  
  WT/TPR/M/161/Add.2 
 Page 133 
 
 
Question: 
 IV. POLÍTICAS COMERCIALES, POR SECTORES / 5) Servicios / iv) Telecomunicaciones b) Estructura regulatoria 
 5. En el párrafo 217 se señala que China no cuenta con una ley que rija el sector de 
telecomunicaciones, sin embargo un proyecto de ley está siendo revisado. México está interesado en saber si existe alguna fecha de publicación de  la versión final de dicho proyecto.  
 
Answer: 
 
Please refer to response to Q71 of the United States 1.  
 
Question: 
 
6. En los párrafos 217 y 218 se mencionan que ex isten “Regulaciones sobre Telecomunicaciones”. 
México solicita una explicación más amplia de cu áles son y en qué consisten dichas regulaciones. 
 
Answer: 
 In September 2000, the State Council promulgated th e Regulations of the People’s Republic of China 
on Telecommunication, the main legal basis fo r the telecommunication market regulation and 
supervision, which is available on the webs ite of the Ministry of Information Industry 
(www.mii.gov.cn).  According to the Regulations of the People’s Republic of China on Telecommunication, the 
administration over the telecommunication industry is based on the principles of separating the 
government administration rules from business activities, breaking the monopoly, encouraging 
competition, promoting development, transparency, fairness, and equity.   The Regulations of the People’s Republic of China provides for key mechanisms for the administration over the telecommunication indust ry, including telecommunication business license, 
telecommunication network interconnection, te lecommunication charges management, use of 
telecommunication resources, telecommunication service quality supervision, management of 
telecommunication facilities construction, and mana gement of telecommunication equipment network 
access. 
 
Question:  
7. En el párrafo 220 se menciona que no existe una definición clara sobre qué tipos de servicios de 
telecomunicaciones son cubiertos por las licencias de operación. México solicita clarificar y profundizar sobre este punto.  
 
Answer: 
 According to the Telecommunication Regulations, the state applies a licensing control mechanism on the administration of categorized telecommunica tion services by the state. A telecommunication 
service license must be acquired in line with th e Telecommunication Regulations for offering a 
telecommunication service from the information indust ry competent authority of the State Council, or 
of the provincial, autonomous region or munici pal government directly under the State Council. 
 In February 2003, the Ministry of Information Industry publicized the Catalogue of Telecommunication Service Categories, clearly lis ting all categories of telecommunication services 
subject to the licensing control.  WT/TPR/M/161/Add.2 
Page 134  
 
 
Question:  Colombia
 
 Literal iv)  Servicios de telecomunicaciones 
 a) El  párrafo 213 señala: “El sector de los servicios de telecomunicaciones ha sido objeto de una reforma gradual a partir de 1993.  Hasta entonces, el  único proveedor era el Ministerio de Correos y 
Telecomunicaciones.  ...Desde la desreglamentac ión se ha producido un rápido crecimiento de la 
prestación de servicios de telecomunicaciones”. Tomando en consideración ese proceso de 
desreglamentación que se inició a partir de 1993, nos gustaría conocer ¿Cuál es en la actualidad la 
regulación aplicable a los servicios de valor agre gado y de Voz sobre IP, y bajo qué condiciones 
específicas pueden entrar a operar proveedores extranje ros de estos servicios en la República Popular 
China?. 
 
Answer: 
 1. About management rules on value-added services: 
 According to the Telecommunication Regulations, the state applies a licensing mechanism on the 
administration of categorized telecommunication services by the state. A telecommunication service 
license must be acquired in line with the Telecommunication Regulations for offering a 
telecommunication service  from the information indus try competent authority of the State Council, or 
of the provincial, autonomous region or municipal  government directly under the State Council. The 
Catalogue of Telecommunication Service Categories clearly lists all categories of telecommunication 
services subject to the licensing control.  
 According to the Telecommunication Regulations , telecommunication services are classified into 
basic and value-added telecommunication services, wh ile the latter refer to telecommunication and 
information services provided by using the public  network infrastructure. Foreign investment in 
value-added telecommunication services must stri ngently go through all necessary procedures as 
required by China’s WTO commitments, the Regulat ions on the Administration of Telecommunication 
Services with Foreign Investment, the Telecomm unication Regulations, the Measures for the 
Licensing Administration of Telecommunication S ervices, and other relevant laws and regulations.  
 2. About management rules on IP Phones: 
 
The VoIP service represents the development trends of the future voice services. Proceeding from the 
perspective of supporting and encouraging the devel opment, China is always active in promoting 
related researches, experiments and applications. The Chinese basic teleco mmunication operators 
officially started to provide phone-t o-phone IP long-distance call service to the general public in year 
2000, accounting for over 45% of all long-distance calls at this moment. 
 
In order to keep abreast of the VoIP technica l development trends, and facilitate the coordinated 
development of VoIP in China, in the latter ha lf of 2005, under the auspices of the Ministry of 
Information Industry, China Telecom and China Netcom conducted an experiment, in certain areas, 
on the commercial application of PC-Phone IP phone service aiming at studying on and addressing 
such technical and management issues as service quality, emergency calls, power supply on occasions 
of power cut. Before the completion of the experiment, PC-Phone IP phone service will not be extensively applied in China. 
  WT/TPR/M/161/Add.2 
 Page 135 
 
 
(v) Transport 
 Question:  Japan 1
 
 
(p.242, paragraphs 252)  
 
On the occasion of the accession to the WTO, Ch ina enacted “the Regulations of the People’s 
Republic of China on International Maritime Trans portation” which entered into force on 1 January, 
2002. According to the Regulations, any foreign shipping company that intends to engage in 
international liner services to and from China shall be registered with the Ministry of 
Communications. Article 17 of the Regulations provides that: To be engaged in international liner services, an application shall be submitted to the competent 
communications department of the State Council; 
The competent communications department of th e State Council shall complete examination and 
verification within 30 days from the date of receipt  of the application for international liner services.  
If the application documents are authentic and co mplete, registration sha ll be granted and the 
applicant shall be notified of the result; If the application documents are unauthentic and in complete, no registration sh all be granted and the 
applicant shall be notified in writing and given the reasons therefore. 
 
On 27 April 2005, a Japan-Sino joint venture incorp orated under Japanese law applied to the Ministry 
of Communications for registration, according to th e provision of the Regulations, in order to start 
international liner services between Shimonoseki a nd Shanghai.  Even after 30 days had passed and 
thereafter, the Ministry did not notify the applican t of a result or any reason why the registration was 
not granted.  As a result, the Japanese company was not able to start the international liner services 
between Shimonoseki and Shanghai as originally scheduled.   In China’s WTO commitments, no reservation was made  to the market access of mode 1 regarding the 
international maritime transport services including passenger transportation. Japan understands that 
market access for international maritime transport services of a foreign shipping company is 
substantially hampered by such action of the Gove rnment of the People’s Republic of China of not 
notifying the applicant of the result and the reason w ithin the 30 day deadline clearly stipulated in the 
Regulations. Japan believes that China should notify th e result of the review with the reason in written 
form and confirm not to repeat such process.  
Q52. In this regard, please indicate the views of th e Government of the People’s Republic of China. 
 
Answer: 
 The Chinese and Japanese maritime authorities signe d the Agreed Minutes in 1985. The Agreed 
Minutes made special arrangement for the ferry services between China and Japan operating by 
shipping companies of China and Japan.  This Agreed Minutes is still in force. 
 According to the foresaid Agreed Minutes, a ne w ferry service between China and Japan cannot be 
started until it has been mutually agreed upon by both sides. When the Ministry of Communications of 
the People’s Republic of China considers the applic ation for the ferry service between Shanghai and 
Shimonoseki, both the provisions of the Regulatio ns on International Maritime Transportation of 
China and the provisions of the Agreed Minutes si gned in 1985 are taken into consideration. The 
Ministry of Communications of China has info rmed both the applicant and the Japanese maritime 
authorities that both the provisions of the Regul ations on International Maritime Transportation and 
the provisions of the Agreed Minutes need to be observed. The Ministry of Communications has asked 
the applicant to fulfil the required procedures in the case as menti oned in the question by Japan. WT/TPR/M/161/Add.2 
Page 136  
 
 
In one word, the China has comprehensively fulfilled its WTO commitments. The ferry service 
between Shanghai and Shimonoseki is an issue of special arrangement between the Chinese and Japanese sides which is not an issue of implementati on of China’s commitments for entry into WTO.  
If Japan feels necessary, China will be willi ng to negotiate with Japan on the issue. 
 
Question: 
 Japan 1
 
 
2. In China’s WTO commitments, when a forei gn company establishes a maritime transport 
company in China, foreign investment shall not ex ceed 49% of the total registered capital of a joint 
venture.  We recognize that, based on the principle of reciprocity, if there is a bilateral agreement with 
China, “the wholly-foreign-owned shipping company is  permitted.”  In relation to this, "The interim 
provisions on examination and a pproval of wholly-foreign-owned shipping companies" provides a 
special arrangement for the establishment of a wholly-foreign-owned shipping company under special 
conditions including "more than 15 years experience as  a marine transport en terprise", "representative 
office in China more than three years", "the exis tence of a scheduled entering of a port where the 
wholly-foreign-owned shipping company is planned to  be located" and “the increase in paid-in capital 
of the wholly-foreign-owned shipping company each time it opens a branch.”  The third condition, 
"the existence of a scheduled entering of a port where the wholly-foreign-owned shipping company is 
planned to be located", constitut es substantial barriers in the su pply of services for customers who 
reside in the supply inner part of China.    Q53. Concerning this point, please indicate the view s of the Government of the People’s Republic of 
China, in particular, in light of Article VI.5 of the GATS. 
 
Answer: 
 This provision is based on the consideration of the features of the original shipping companies’ 
business in China. As usually the geographical cover age of the original shipping companies’ business 
only involves coastal ports, it was so written in the regulations when formulated. Currently, the 
business of international shipping companies has ex panded from port-to-port to  door-to-door service, 
and their geographical coverage has been expanded to  inland cities. Up to now, the Ministry of 
Communications has not received any applications  from Japanese companies for setting up branches. 
In case of such needs, the Chinese and Japanese sid es can address the issue during bilateral maritime 
transport consultations.  
 
Question: 
 Japan 1
 
 
(p.243, paragraphs 258)  
 
Q54. Regarding foreign equity limitations which ar e up to 49% for foreign investment in shipping 
agencies in China, are these limitations stipulated  in the “Regulations on International Maritime 
Transportation”?  If no, which regulation stipulates these limitations?  
 
Answer:  
 The provision is clearly written in the Regulati ons on International Mar itime Transportation, which 
accords with China’s WTO commitments.  
  WT/TPR/M/161/Add.2 
 Page 137 
 
 
Question: 
 Canada 1
 
 Part IV. Trade Policies by Selected Sectors, (5) Services, (v) Transport, (b) Maritime transport 
services, regulatory system and foreign direct investment, Table IV.9 and paragraph 259: 
 
90. There appears to be a potential inconsistency be tween Table IV.9 and paragraph 259 with respect 
to the qualification requirements for Wholly Fore ign-Owned (WFO) Shipping Companies. Table IV.9 
states that a WFO shipping company must be engage d in shipping for more than 15 years and have 
established a resident representative office in China for more than three years before it qualifies for 
registration. Paragraph 259 states that it must be in operation for more than one year for approval 
under the “Interim Provisions on Examination an d Approval of Wholly Foreign-owned Shipping 
Companies”.   
a. Are WFO shipping companies allowed to operate during the three-year residency period and if so, 
under what conditions or restrictions?   b. Does the three-year residency period count towa rd the one year of operations required for approval 
under the “Interim Provisions on Examination a nd Approval of Wholly Foreign-Owned Shipping 
Companies”?  Answer:   With respect to the residency period of representative offices provided for by the Interim Provisions 
on the Examination and Approval of Wholly Foreign-Owned Shipping Companies, according to the 
Interim Provisions, if a foreign shipping company intends to establish a wholly-owned shipping 
company in China, the applicant must run a resi dent representative office, after approved by the 
Ministry of Communications, for 3 full years in the port city it plans to set up the wholly-owned 
company. Should a wholly foreign-owned shipping co mpany intend to set up a branch, according to 
the Interim Provisions, it must operate a representa tive office for one full year in the city where the 
branch plans to be located. Therefore, the est ablishment of a representative office with certain 
residency period by a foreign shipping company is on e of the prerequisite conditions for the company 
to set up a wholly foreign-owned shipping company or a branch. 
 
Question: 
 
Hong Kong, China
 
 
(WT/TPR/S/161, P. 245, Para. 267) 
 
1.  We note from the Secretariat Report that certain  requirements would need to be satisfied under the 
Port Law for private enterprises and FIEs to have the same access to all port services as state-owned 
companies.  We would be grateful if China could let us know what these requirements are. 
 
Answer:    The Port Law and the Regulations on Port Opera tion and Management incl ude provisions on the 
prerequisite conditions for investing in the constructi on and operation of the ports, such as conformity 
with the port planning, going throug h the approval process for coastal lines, and being equipped with 
necessary machinery, etc. Port services are subjec t to national treatment. There are no special 
requirements for foreign businesses.  
 WT/TPR/M/161/Add.2 
Page 138  
 
Question: 
 
(WT/TPR/S/161, P. 246, Para. 270) 
 
1.  We understand from the Secretariat Report that China would phase out its bilateral cargo-sharing 
arrangements with Algeria, Bangladesh, Brazil and Za ire in the future.  We would like to know if 
China would consider removing the corresponding MF N exemption currently maintained for such 
arrangements.  
Answer:   
 China is ready to communicate with the countries co ncerned discussing on the elimination of bilateral 
cargo-sharing arrangements, after which we w ill positively consider removing the corresponding 
MFN exemption.  Question:  Chinese Taipei
 
 Auxiliary services 
 (page 244, paragraph 260) 
 “According to the authorities, the establishment of the China United Tally Company (CUTC) on 18 
March 2003 constituted a step to introduce competition in tally services.”   
 
Could China please provide further details of this step to introduce a competition mechanism in tally 
services?  
Answer:   
 Tally services are beyond the cove rage of China’s WTO commitments. The establishment of China 
United Tally Company is one of the reform measures in light of the requirement of the State Council 
to reform the port system. The introduction of a comp etition mechanism will go in line with the Port 
Law and other relevant regulations. 
 
Question:  
 
Chinese Taipei
 
 Port services 
 
(page 245, paragraph 267)  
 
“Foreign investment in port construction and manage ment is listed as ‘encouraged’ in the ‘Catalogue 
for the Guidance of Foreign Investment Industries’.” 
 
Please advise what advantages the investor can exp ect to enjoy by inves ting in these “encouraged” 
industries, and what are the encouragements? 
 
Answer:    The Catalogue for the Guidance of Foreign Investment Industries was promulgated by the State 
Development and Reform Commission. Encouraged ca tegory means that foreign investment in the  WT/TPR/M/161/Add.2 
 Page 139 
 
 
construction, running and management of ports is under no limitation, and is subject to national 
treatment.   Question:  
Chinese Taipei
 
 
(page 245, paragraph 269)   “In China, a port may have more than one steve doring company, but each stevedoring company is 
confined to one port.”   
 
If this is the case, we would like to ask China if  any exception is permitted for a stevedoring company 
that cannot achieve economies of scale? 
 
Answer: 
 According to the Port Law and the Regulations on Port Operation and Management, an investor can 
engage in the stevedoring business in several ports of Ch ina. However, it should apply from each of 
the port authority where it runs its business for a port operation permit. There is no limitation on 
investment or economies of scale for port operation. 
 
Question:  Norway
 
 Maritime transport services 
 1: In para 249 in the Secretariat's report it is  stated that there are no cargo preferences for 
domestic shipping companies.  However para 270 c ontains information on bilateral cargo sharing 
arrangements with Algeria, Bangladesh, Brazil and Za ire, and that there are plans to phase out these 
arrangements in the future.  We appreciate these plans, and would like to know how soon these cargo 
sharing arrangements can be phased out? 
 
Answer:  
 
The abolishment of bilateral cargo sharing arr angements needs to be confirmed by bilateral 
consultations between China and th e concerned countries or regions. China is willing to consult with 
the relevant parties on the cargo sharing arrang ements, and terminate them upon agreements 
reached.  
Question: 
 Norway
 
 Services mode 3  
 2: Para 256-259 in the Secretariats report c ontain valuable information on requirements and 
restrictions regarding FDI in the maritime transport sector.  We appreciate that from 11 December 
2005 100% foreign ownership has b een permitted for freight forwarding agencies. We would like to 
know if there are any plans to remove the restri ction on foreign investments for other auxiliary 
maritime transport services i.e. maritime transport agencies where a 49% limitation applies? 
 WT/TPR/M/161/Add.2 
Page 140  
 
Answer:  
 In line with China’s WTO commitments, wholly foreign owned companies can be established to 
provide storage services. China encourages bot h domestic and foreign commercial entities and 
individuals to invest in the construction and operation of ports. With regard to international shipping 
agency, according to bilateral arrangements, the relevant shipping companies are allowed to set up 
wholly-owned companies in China to provide ser vices for ships owned or operated by themselves, 
including the international shipping agency service.   Question: 
 
3: The Secretariats report does not contain inform ation regarding land tran sport (road and rail).  
We have noted that the revised offer from China in the services negotiations contains a commitment 
which makes it possible to set up a 100% foreign owned trucking company in China.  We would 
appreciate information regarding the possibility fo r foreign ship-owners to set up a fully foreign 
owned Multimodal Transport Operator that is a comp any that offers door to door transports offering 
all relevant modes of transport, in China. 
 
Answer:   
Multimodal transport service involves all transporta tion modes. China has made the respective 
commitments on different modes of transport upon its WTO accession. Foreign services consumers can have access to the multimodal transport service from China on the basis  of equality and non-
discrimination.  
 
Question:  Colombia
 
 
Literal v) Transporte. 
 
b) Servicios de transporte marítimo  A) El documento de la Secretaría señala en el párrafo 249.:. “Entre las medidas de desreglamentación y reforma aplicadas en el sector figuran las siguientes: actualización de la 
legislación de conformidad con los compromisos contra ídos por China en el marco de la OMC...” Nos 
gustaría poder conocer específicamente:  ¿Hací a donde está encaminada esa actualización de 
legislación para el sector de transporte marítimo? ¿Eso implica el  levantamiento de restricciones a la inversión extranjera y la eliminación de requis itos de nacionalidad para poder prestar ciertas 
actividades? Adicionalmente, ¿Cuál sería el enfo que exacto de la actualización referida en el 
párrafo 249? 
 
B) En el documento no se aclara si las naves de  bandera china reciben algún tipo de incentivos o 
ayudas de parte del gobierno para que dichas emba rcaciones realicen actividades de reparación y 
mantenimiento en talleres localiza dos en el territorio de la República Popular China. ¿Cuál es la 
situación al respecto en la actualidad? 
 
C) En el párrafo254, la Secretaría señala:  “El "Reglamento sobre el registro de buques", que entró en vigor el 1º de enero de 1995, establ ece que para navegar con pabellón nacional los buques 
deben estar registrados en China y obtener la naciona lidad del país.  Por lo general, las tripulaciones 
son chinas;  cuando es necesario contratar tripulación extranjera se requiere la aprobación del MOC.  
Además, si el buque es propiedad de un ciudadano ch ino, el propietario debe tener su domicilio u 
oficina comercial principal en China;  si el buque  es propiedad de una persona jurídica, su oficina 
comercial principal también debe estar en China... ”.  ¿Significa lo anterior que si una empresa  WT/TPR/M/161/Add.2 
 Page 141 
 
 
extranjera que  posea una serie de naves prestando ser vicios de transporte marítimo en diferentes 
partes del mundo, y tiene solamente una nave regi strada y con pabellón de la República Popular 
China, debe localizar su oficina comercial principa l en territorio chino?, ¿Qué se entiende por oficina 
comercial principal exactamente?, ¿En qué situaci ones exactamente se exige que la tripulación sea de 
nacionalidad china? 
 
D) El párrafo“255, señala:.” ....Además, se alie nta a las empresas establecidas con inversión 
extranjera a suministrar servicios de transporte mu ltimodal internacional de contenedores;  a partir del 
11 de diciembre de 2005 se permite una participación ex tranjera en el capital social del 100 por cien.”.  
¿La posibilidad de inversión extranjera del 100% se aplica únicamente para las empresas que estaban 
establecidas en la República Popular China con anterioridad al 11 de diciembre de 2005 o a cualquier 
empresa que desee invertir en el sector? E) ¿El transporte multimodal internacional de contenedores es igual al transporte multimodal 
internacional de carga? En caso de no ser así, ¿Cuál es la diferencia? 
 
Answer:  
 a) The renewed laws mentioned in the report are re visions of the existing laws and regulations that 
used to be inconsistent with China’s WTO co mmitments. After the revisions, China’s polices on 
foreign investment in transportation are fully  comply with its WTO commitments.  
 
b) The Chinese government has never adopted prefer ential policies for the repairing and maintenance 
of vessels flying the Chinese national flag. Currently , vessels flying Chinese or other national flags 
are all subject to the commercial ru les when being repaired or maintain ed in Chinese ship  yards, with 
no differential treatment.  
c) According to the Regulations of the People’s Republic of China Governing Registration of Ships 
(State Council Decree No. 155)( hereinafter referred to as the Regulations), a ship owned by a 
Chinese citizen with a residence or main business venue within the t erritory of China, or by a legal 
entity founded under the Chinese law with a main busin ess venue within the territory of China, shall 
register for acquiring the Chinese nationality, afte r which it may fly the Chinese national flag in 
sailing. The main business venue mentioned here ref ers to the venue registered under the industry and 
commerce business licence of a Chinese citizen or corporate legal entity. According to the 
Regulations, the seamen on a vessel registered in Ch ina and flying the Chinese national flag must be 
Chinese citizens.  d) This provision mentioned in  Para 255 of the Secretariat Report is also applicable to  newly 
invested foreign companies. 
 e) The difference between international multimo dal transport of containers and international 
multimodal transport of cargos lies with whether cont ainers are used in the transport. If yes, it is 
defined as the former.  
 
Question:  Australia
 
 
21. We recognize that China’s WTO commitments and subsequent reforms support the gradual 
opening up of China’s transport and logistics sector s to foreign service suppliers.  We would welcome 
additional information on China’s policies and regul ations relating to freight logistics and the 
development of the logistics industries in China since China’s accession. We would be grateful if China would indicate:  WT/TPR/M/161/Add.2 
Page 142  
 
a) how many foreign investment projects have been established under the “Notice Relating to 
the Launch of Pilot Projects for the Establishm ent of Foreign Invested Logistics Enterprises ” issued 
by MOFTEC (now MOFCOM) with effect from July 20, 2002; 
 
Answer:  
 
By the end of 2005, the Chinese government had app roved an accumulative total of 40 new foreign-
invested logistics companies in light of the Notice Relating to the Launch of Pilot Projects for the 
Establishment of Foreign Invested Logistics Ent erprises, whose aggregated investment amounted to 
USD 1,352.801 million, and registered  capital USD 611.9506 million.  
 
Question: 
 
b) n light of China’s approach to gradually open ing the transport and logistics sector, whether it 
plans to expand the trial areas in which foreign invested companies may be established under the 
Notice and/ or raise the current 50% cap on foreign equity ownership.   
 
Answer:  The Ministry of Commerce is in the process of revising the above-mentioned Notice towards 
eliminating the geographical limitation on the establis hment of foreign-invested logistics companies, 
relaxing the equity ownership and minimum regis tered capital requirements, and further liberalizing 
the logistics sector to foreign access. The relev ant document is soon to be promulgated.  
 
Question: 
 
EC
 
 
Air transport : Computer Reservations Services 
In relation to China’s commitments under the GATS for the provision of Computer Reservations 
Services (CRS), the EC notes that a regulation is unde r preparation to cover this area.  CRS providers 
need certainty about the legal environment under which they are operating, and a guarantee on their 
scope of business and on non-discriminat ory principles to be applied.   
 
• Could China please update Members on the progress of legislation that will create a legal 
framework for the sector?  
 
Answer:   
 
According to China’s WTO commitments on civil av iation, China has finished the drafting of the 
Provisional Regulations on the Examination and Approval of Ci vil Aviation Transportation Sales 
Agents to Have Direct Access and Use the Foreign Co mputer Reservations Services System, which is 
now going through the approval process. 
  WT/TPR/M/161/Add.2 
 Page 143 
 
 
Question: 
 Mexico
 
 
IV. POLÍTICAS COMERCIALES, POR SECTORES / 5) Servicios / v) Transporte a) Servicios 
de transporte aéreo  
8.  En el párrafo 233 se menciona que la particip ación del capital extranjero en empresas aéreas 
domésticas no debe ser mayor al 49 por ciento . ¿Existirá algún proyecto para cambiar dicha 
disposición, en el sentido de hacer al sector más abierto?   9.  En el párrafo 244 se menciona que los extr anjeros no podrán operar aeropuertos y servicios 
aeroportuarios de manera exclusiva, sino que un nacional de China deberá tener el control 
mayoritario. México está interesado en conocer cu ál es el porcentaje máximo permitido para que un 
extranjero pueda partic ipar en esas actividades. 
 
Answer:    In accordance with the Regulations on Foreign In vestment in Civil Engineering taking effect on 
August 1, 2002, first, in foreign-funded public air transport enterprises, the Chinese side shall 
command the controlling interest; the stakes of a fo reign investor (including affiliated enterprises) 
shall not exceed 25%. Compared with other countri es in the world, China offers a relatively large 
degree of liberalization in the civil aviation sector , we therefore are not planning to revise this 
requirement in the near future. Second, “the Ch inese side shall command the controlling interest in 
foreign-funded civilian airports”, in other words,  one Chinese shareholder must hold the largest 
proportion of the equity of the joint venture. 
 
Construction 
 
Question:  India
 
 
Q.16 In Construction and Engineer ing Services, there have been  rules issued by the Chinese 
Government on the administration of foreign invest ed construction enterprises and engineering design 
enterprises.  Recently, China issued another measu re viz., “Provisional Measures for Construction 
Project Management” which restricted the provisions of project management services.  Some of the restrictions are:   
(a) Large registered capital requirements.   
(b) Hurdles in recognition of qualifications since the testing of engineers and architects is 
conducted only in Chinese, which is a barrier.   
(c) Stringent experience, residency and qualification requirements. 
(d) In case of design enterprises stringent residency requirements as also stipulations of minimum 
employment of foreign nationals (th ese do not apply to domestic companies). 
(e) Arbitrary grounds for rejecting applications and restricting market access.  
 Will China put in place transparent and clear guidelin es which do not violate the principle of national 
treatment and enable Indian construction companies in providing services?  Will China also facilitate 
recognition of qualifications and allow the testing of architects and engineers to be done in the 
English language? 
 WT/TPR/M/161/Add.2 
Page 144  
 
Answer: 
 The Measures for the Management of Construction Engineering Projects (Trial) promulgated by the 
Ministry of Construction (MOC Decree 200) has the purposes of protecting investor interests, ensuring project quality and safety, promoting heal thy development of construction engineering in 
China and standardizing management on c onstruction engineering projects.   
 The Measures stipulates a company with one or more credentials such as  project reconnaissance, 
designing, construction, supervisi ng, costing and tendering agent may engage in engineering project 
management.  It does not require that the project management firm have a massive registered capital.  
Nor does it have requirements on foreign sta ff number and the duration of their stay. 
 Many WTO members have a strict set of rules and tests for certifying practitioners in this field.  As an 
architect or an engineer has to assume the legal liab ilities that come with the job, he or she must be 
familiar with the local laws, regulations and technica l standards.  That is also why the certifying test 
for an architect or an engineer has to be taken in  the local language.  Similar regulations can be 
found in other members too.  The residency requirement for foreign staff in forei gn construction enterprises established in China 
corresponded to enterprises’ operationa l needs in this sector.  Given the special characteristics of 
engineering construction projects, managers of such pr ojects needed to be available for management 
activities at any time, so as to guarantee the quality and safety of the projects, and to ensure that the 
design and technology would meet the needs of th e projects.  Foreign project managers needed to 
ensure that they could spend suffic ient time on project management. 
 
Legal services 
 
Question:  EC
 
 
Although this services sector is not specifically addressed in the WTO Secretariat’s Report , Legal 
services are essential for economic development through the role they play in the creation of an 
investment and business frie ndly institutional framework. 
The EC recognises the ongoing efforts of China in  implementing its WTO commitments in the area of 
the legal services. However, two main issues s till need to be addressed by Chinese authorities. 
Severe and burdensome conditions are imposed on fo reign firms, such as the need to start legal 
services operation, a feasibility study, a 9-month ex amination approval period, 3 years of consecutive 
practice before establishing an additional office, 1 partner per office. These requirements constitute a 
de facto ENT.   
• Could China please indicate when it intends to remove these requirements? 
 
The very broad definition of “Chinese legal affair s”, on which foreign law firms are not allowed to 
provide opinions, contrasts with the restrictive sc ope of “information on the impact of the Chinese 
legal environment”, the area of inter est for the European law firms.   
 
• Could China please delimit the precise ambit of “Chinese legal affairs”, and provide a 
definition and content of “information on the impact of the Chinese legal environment”? 
 
Answer:  
 1. Regarding the requirement of “actual need to establish a representative office in China”  WT/TPR/M/161/Add.2 
 Page 145 
 
 
 
It is stipulated in Item No. 3 of Article 7 of the Regulations on Administration of Foreign Law Firms’ 
Representative Offices in China that when a fo reign law firm applying to establish a representative 
office in China and post representatives thereto shall m eet the requirement of “there is an actual need 
to establish a representative office in China to co nduct legal service business.” China’s main policy 
rationale behind this requirement is that China is a developing country with imbalances in economic 
growth and level of legal services among different areas and regions. Hence, it is a duty as well as a responsible attitude for the competent Chinese authority  to set up a reference of economic growth 
level and actual need for legal services for foreign applicants under the cur rent circumstances where 
the overall legal service market has not matured, market  order has not straight ened out and a sound 
service mechanism has not been brought in place. In fact, since China’s accession to the WTO, no 
single foreign law firm’s application has been rejected on this basis.   2. Regarding the requirement of “a feasibility study”  
One of the actual needs stipulated in Item No. 3 of the Regulations is “the analysis of the business 
perspective, and the planning for future business development”. Applying for offering professional 
services to the local clients, foreign law firms thus have a direct interest relationship with the local 
legal services industry and the service consumers. Con sequently they need to  make a forecast and 
conduct a feasibility study on their development c apability and the business perspective. Many 
competent authorities of other sectors in China ha ve the same requirement for the service providers 
from abroad. It is an example to show that they are responsible administrative departments.  
 3. Regarding the duration of approval procedure  The “nine months” as defined in the Article 9 of the Regulations is calculated on the basis of the 
actual time needed to complete the whole exa mining and approving procedures for the establishment 
of foreign law firm’s representative offices. The 9 months approval duration as set down in the 
Regulations covers both the time needed to pro cess applications starting from the receipt of 
application documents, and the time required for pre-examining formalities. The latter refers to 
examining the completeness and authenticity of application documents and certificates, sending out 
notices for supplementary documents to be submitte d and verifying that relevant documents have been 
duly notarized and accredited. The experiences in the past two years show that the competent 
authorities have accelerated the approval process.   4. Regarding the requirement of “shall have be en practising for three consecutive years” when 
establishing additional offices 
 
It is stipulated in Item 1 of Article 10 of the Im plementing Rules that representative offices for foreign 
law firms established in China sha ll have practising for three consecuti ve years to be able to establish 
any additional representative office. The Impl ementing Rules do not violate China’s WTO 
commitments mainly for the following reasons: Fi rst, the representative offices are engaged in profit-
making activities. Article 10 of the Regulations and Article 34 of the Implementing Rules grant the 
right to foreign representative offices to collect charg es and to get tax invoices. The legal status of the 
representative offices decides t hat they are not foreign non-profit liaison offices. Therefore the 
conditions for a foreign law firm to set up add itional representative offi ces, especially to run 
businesses, shall include certain standards to estimat e their capability in running business.  Second, 
the ten years of history since rep resentative offices of foreign law firms started legal businesses in 
China shows that, it normally takes about three yea rs for a representative office to get license, open 
business and regularly run the office. As it is, foreign law firms shall need a transitional period before 
setting up any additional office. Third, featuring very high professional standard, the profession of 
lawyer is very important to the government in term s of protecting the interests of the general public. 
Therefore, the “three years” requirement serves as  a measure for the government to regulate the 
foreign representative offices in thei r business performance, and a necessary step to protect the WT/TPR/M/161/Add.2 
Page 146  
 
interests of the general public. Fourth, our interp retation of the elimination of quantitative limitation 
in the schedule is not elimination of the competent authorities’ right to regulate the industries according to their mandate.  In conclusion, the “three years” requirement is not a quantitative limitati on but an administrative 
measure. 
 5. Regarding the requirement of “one partner per office”  Article 18 of the Regulations says, “A represen tative of a representative office shall not be 
concurrently a full-time or part-time representative in two or more representative offices.” It is 
conducive to ensuring good legal services to the c lients and good management of the representative 
offices for the China representative offices of foreign law firms engaging in profit-making legal 
services within the territory of China to have one chief representative for ea ch office. In addition, 
according to China’s WTO commitments, the chie f representative must be a partner or someone of 
similar position in a foreign law firm. Thus it is in line with China’s WTO commitment to require for 
one partner for each rep resentative office.  
 6. Regarding the scope of “Chinese law practice”  It is set down in Article 15 of the Regulations  that a representative offi ce and its representatives may 
only conduct the activities that does not encompass Chinese legal affairs.  The implementing Rules 
stated five conducts that shall be regarde d as “Chinese law practice”, including  
 1. Participating in litigation ac tivities within China as lawyers;  
 2. Providing opinions or certifications on th e specific issues governed  by Chinese laws in 
contracts, agreements, articles of asso ciation or other written documents;  
 3. Providing opinions and certifications on the acts or events governed by Chinese laws;  
 4. Presenting agent opinions or comments on th e application of Chinese laws and the facts 
involving Chinese laws as agents in arbitration activities;  
 5. Handling the procedures for registration,  alteration, application or putting on record, and 
other procedures on the trustor's behalf, at  the government organs of China or other 
organizations authorized by laws and regul ations with administrative authorities. 
 
First, according to China’s commitments on le gal services in the schedule, the business scope of 
foreign law firms does not include Chinese law pr actice. The above Regulations and the Implementing 
Rules, as interpretations of China’s current scope of legal services, are theref ore not in breach of 
China’s WTO commitments.  
 
Second, legal services require specific quality.  It is  commonly acknowledged by most countries that 
only those who have obtained the lawyers’ qualificati on certificate may provide legal services in the 
country where he or she receives the certificate. According to the Chinese law, only those who have 
gone through undergraduate education or above in  China, passed the national lawyers’ exam, and 
acquired the lawyer’s practising certificate upon qualify ing a test after working as a trainee for one 
year can offer professional legal service to the public. The law is a core reflection of a nation’s 
political, economic, cultural and soci al life. Someone who has not received the education in China on 
law, who has been nurtured in the Chinese culture can neither accurately inte rpret the Chinese law, 
nor offer high-quality legal services to his or her clients. This is a common practice in most WTO 
members.        
 
Third, taking into consideration the common practi ce of international legal service and the actual 
need of China for high quality fo reign legal services, we defined the “Chinese legal affairs” within a 
specific scope and allowed representative offices of  foreign law firms and its foreign lawyers to 
provide services related to interna tional conventions, international practices, international business 
operation and foreign law for a case und er the jurisdiction of Chinese law.   WT/TPR/M/161/Add.2 
 Page 147 
 
 
 
Taking into consideration the new developments, and for the sake of clarity and workability, the 
Ministry of Justice amended the part in relation with arbitration in Paragraph 4 of Article 32 of the 
Implementing Rules, abolishing the restriction on th e representatives of forei gn representative offices 
to give opinions or comments in arbitrations on fact s relating to Chinese laws in the name of agents.  
7. Regarding the issue of “providing information on the impact of the Chinese legal environment” 
As stipulated in the Article 33 of the Implemen ting Rules, representative offices shall not provide 
opinions or certification on the application of Ch inese law in any specific  case in China when 
requested to provide information on the impact of the Chinese legal environment.  
 
China’s WTO commitment allowing foreign represen tative offices to “provide information on the 
impact of the Chinese legal environment” is based  on the precondition that Chinese law practice is 
not permitted. The original idea of China’s WT O commitment allowing foreign representative offices 
to provide information on the impac t of the Chinese legal environmen t is that foreign representatives 
can present the basic information about Chinese laws  and regulations. Therefore, the article in the 
Implementing Rules, which says “representative offices and the representatives shall not provide 
specific opinions or judgement on the application of Chinese law when requested to provide 
information on the impact of the Chinese legal en vironment” accords with China’s WTO commitment. 
 
Question: 
 
India  
 
Q21. There are constraints on the registration a nd operation of foreign law firms in China. 
Although China has issued detailed Regulations on the Administration of Foreign Law Firm 
Representative Offices, there are still important barrie rs that remain.  For example, the regulations 
have introduced the concept of “economic needs” requirement that grants wide discretion to the 
Ministry of Justice in determining whether th ere is an actual need for establishment of the 
representative office and development of the firm’s le gal services in China. This is violative of the 
GATS provision which prohibits economic needs tests where a WTO member makes a specific 
market-access commitment.  
Would China consider opening up its Legal Services  sector so that domestic laws are in consistence 
with the GATS provision? 
 
Answer:   
 
Please refer to response to EU’s questions on legal services.   
Question: 
 Chinese Taipei
 
 
(pages 208–209, paragraphs 149-152, ref. page 298, Table AIV.2)  
 China’s sector specific commitments in the GATS under 1.A.(a) Legal services (excluding practices 
of Chinese law) state that “There are market access limitations on the business scope of services provided by foreign representative offices as well as on the qualifications of members of 
representative offices of foreign law firms”. 
 Does China have any plans for easing these market access limitations by allowing, for example, 
foreign attorneys to hire local attorneys or fo rm partnerships with them, and for lifting the 
requirement that all representatives must reside in Ch ina for at least six months?  If so, when can such 
limitations be expected to be eased? WT/TPR/M/161/Add.2 
Page 148  
 
 
Answer:   Any new concessions of China on legal services shall be determined by the results of negotiations 
China conduct with other members during the Doha Round.  
 
Other services  Question:  
EC
 
 EXPRESS DELIVERY 
 
Express delivery services are indispensable fo r the competitiveness of businesses throughout the 
world, including in China. The preparation by the Chinese government of China’s new postal law (7
th 
draft) is of interest to foreign operators.   
• Could China please confirm that express delivery will not fall within the reserved/monopoly 
area? That the delivery of parcels, periodicals a nd newspapers will be open to competition? That 
express operators shall not be submitted to a burde nsome licensing procedure? That the independence 
of the regulator will be ensured? and that express ope rators will not be submitted to the contribution to 
a “universal postal service fund”? 
 
Answer: 
 China is revising its Postal Law. During the le gislation process, the competent authorities of China 
will proceed in the spirit of justice and transpar ency, take account of international prevailing 
practices and lessons learnt from other me mbers, and keep an open mind on comments from 
government agencies, business associations and co mpanies. We will render full protection to the 
legitimate rights and interests which foreign-in vested courier companies are entitled to.   
 Question: 
 
Colombia
 
 
Preguntas sobre otros Servicios no especificados  en el documento de la Secretaría. 
A) En el examen de política comercial no se pr esenta información relacionada con los servicios 
profesionales y su regulación. Al respecto consid eramos importante conocer la reglamentación 
existente en la República Popular China que rige la formulación de normas modelo para adelantar 
procesos de homologación y/o convalidación de títulos profesionales.  B)  Es la regulación de los servicios profesiona les establecida a nivel central del gobierno, o 
depende y es potestad de cada división territorial del país (provincias). 
C)  En materia de servicios de construcción, cu ál es la regulación (y los sectores específicos) que 
determina los tipos de obras de construcción a los que únicamente pueden acceder empresas de 
propiedad extranjera. Cuál es la razón de dicha limitación? 
 
Answer:   
At present China has been equipped with a comple te set of laws and regulations concerning the 
education service. Centred with the Education Law of the People’s Republic of China, this legislative 
framework also includes the Law of the People’s Republic of China on Promoting Non-State Education, the Regulations of the People’s Re public of China on Chinese-Foreign Cooperation in  WT/TPR/M/161/Add.2 
 Page 149 
 
 
Running Schools, and the Provis ional Measures for Running Sch ools Abroad by Higher Education 
Institutes. All the relevant laws, administrative ru lings and regulations are available on the official 
website of the Ministry of Education of China.   The gradual improvement of the legislative framew ork on the education service has further promoted 
China’s international communication and cooperation in education. The Education Law of the 
People’s Republic of China says that the governme nt encourages the international communication 
and cooperation in education. Currently China has forged cooperative ties in education with 178 
countries and regions as well as international organizations.   
The Education Law provides that recognition by Ch ina of academic degree credentials and schooling 
credentials awarded by educational institutions out of  the territory of China shall be realized subject 
to international conventions concluded or con ceded to by the People's Republic of China or 
corresponding regulations of the state. In 1983, China acceded the Regional Convention on the 
Recognition of Studies Diplomas and Degrees in Hi gher Education in Asia and the Pacific. At 
present, the mutual recognition of degree diplomas  and certificates is mainly done through bilateral 
agreements. China has signed such agreem ents with 26 countries and regions.  
 In line with the relevant principles of the Education Law of the People’s Republic of China, the central government is in charge of working out the basic guidelines, principles and policies with 
regard to the national education service industry, and its overall planning, coordination and macro 
administration, while the local governments formulat e the specific implementation rules within their 
own mandate on the basis of the general polic ies and guidelines of the central authority.  
 With respect to construction an d other related services, the No. 113 Ministry Ruling jointly 
promulgated by the Chinese Ministry of Constr uction and Ministry of Commerce (formerly MOFTEC) 
stipulates the scope of projects that can be undert aken by foreign-invested construction companies, 
which is in line with China’s WTO commitments. 
 
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