RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/W/287 
26 October 2007 
 
 (07-4663) 
Council for Trade in Services Original:   English 
  
 
COMMUNICATION FROM JAPAN 
 
Transitional Review Mechanism Pu rsuant to Paragraph 18 of 
 
the Protocol of Accession of the People's Republic of China ("China")  
 
 
 The following communication, dated 26 Octobe r 2007, from the delegation of Japan, is being 
circulated to the Members of the Council for Trade in Services.   
 
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Questions and Comments from Japan on the Implementation by China  
of its Commitments on Trade in Services  
 
1. Japan appreciates China's commitment to improve continuously the level of liberalization in 
accordance with the services schedule made at the time of accession.  Japan believes that 
liberalization in the services sector will not only e nhance the efficiency of the sector, but also 
contribute to China's overall economic growth.  Wh ile regulatory framework has been accordingly 
upgraded, it seems that implementati on does not keep pace with the upgraded regulations.  In this 
regard, Japan would like to reiterate that implementa tion of China's commitment needs to be secured.  
Japan also continues to encourage China to make further efforts to  enhance regulatory transparency, 
thus maximizing the benefits of liberalization.  Japan is of the view that there are still rooms for further improvements in this area, in view of Chin a's commitment to transpar ency as described in the 
Report of the Working Party on the Accession of China. 
2. In accordance with paragraph 18 of the Protoc ol of Accession of the People's Republic of 
China, which states that " China shall provide releva nt information to each subsidiary body in advance 
of the review" and in the spirit of cooperation to render the TRM process most efficient and effective, 
Japan requests China to provide, in advance of the Regular Meeting of the Council for Trade in 
Services, responses and relevant information to the following questions and comments. 
Ⅰ.  POSTAL/COURIER SERVICES 
3. According to China's accession schedule, China committed "CPC75121, except for those 
currently specifically reserved to Chinese postal authorities by law".  Could China clarify when 
"currently" refers to?  Does "currently" means December 11, 2001 when the Chinese schedule came 
into effect?  Could China clarify specifically a nd comprehensively what exactly are the exceptional 
services that are monopolized by Chinese postal au thorities, as well as the relevant laws and 
regulations conferring such reservation to Chinese postal authorities? 
4. Japan understands that Article 8 of the Postal  Law (enforced on January 1, 1987) stipulates 
that Chinese postal authorities shall monopolize services of delivering correspondence and other 
articles that have the nature of correspondence.  On the other hand, Article 8 also stipulates that the S/C/W/287 
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  above provision does not apply if the State Council decides otherwise.  Japan would like to know, if 
any, the details of such a decision specifically and comprehensively. 
5. Japan understands that China is revising the Post al Law.  Could China clarify to what extent 
there would be a change, if any, with respect to the scope of the monopoly of China Post Group as a result of the revision?  Does such a revision a ffect Chinese commitment under the current schedule? 
6. Japan understands that "Measures Governi ng Foreign-Funded International Freight 
Forwarding Agent Enterprises (enforced on Decem ber 11, 2005)" stipulates the conditions of the 
entry of wholly foreign-owned enterprises into th e courier service market in China.  This law 
classifies international freight forwarding business in to eight categories.  For seven categories, 
approval from the Ministry of Commerce is required when foreign services suppliers acquire licenses.  
However, for international express (excluding deliver y of personal letters and official documents of 
the party, government, and military at and above th e province level), foreign services suppliers need 
approvals from the provincial administrative departme nt as well as from the Ministry of Commerce.  
Could China clarify the reason why international express is treated differently and is subject to more strict conditions?  The international express does not cover the delivery service of personal letters and 
official documents of the party,  government, and military at and above the province level.  Japan 
would like to know why and how personal letters ar e distinguished from other letters (for example, 
letters for commercial use) in China. 
II. TELECOMMUNICATION SERVICES  
7. China has committed to all provisions of the Reference Paper, and has also committed to 
develop a domestic system concerning Interconn ection in article 2 of the Reference Paper.  
Furthermore, at the last TRM, China explained that the Chinese domestic law, "Regulation on the 
Interconnections between Public Telecommunica tion Networks (Decree 9 of the Ministry of 
Information Industry)", does include Leased circu its, Frame relays and IP-VPN, though these are not 
clearly stipulated in this law.  
8. Therefore, Japan would like to seek confirmati on that Leased circuits, Frame relays and IP-
VPN are included in "Other networks that the Minist ry of Information Industry defines" stipulated 
under paragraph 8 of Article 2 of "Regula tion on the Interconnections between Public 
Telecommunication Networks (Decree 9 of the Ministry of Information Industry)".  Moreover, it would be much appreciated if China provides the legal document on what "the Ministry of Information Industry defines" under paragra ph 8 of Article 2 of this regulation. 
9. If there is no legal document related to paragra ph 8 of Article 2 of this regulation, Japan 
would like to ask whether China has a intention to establish legal basis for restrictions at an early 
stage in order to ensure fairn ess and transparency in the information telecommunication markets. 
10. China has reserved the right to place a limit on fo reign capital participation of 49% in basic 
telecommunication services and of 50% in value-added telecommunication services.  Japan would like to ask the following two questions  on this point. 
(a) Internet data centre services are defined as First value-added telecommunication 
services in "Classification List for Telecommunication Services" which was amended in February 2003.  Similarly, internet connection services are defined as Second value-added telecommunication services in the same "Classification List".  Japan would like to know, under Chinese domestic la w, whether foreign enterprises are able 
to undertake these services provided that the foreign capital participation is less than 
50%.  Furthermore, could China clarify whether or not these services are included in  S/C/W/287 
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  the sub-sectors which have already been committed to at the time of China's 
accession to the WTO? 
(b) Japan requests more information on what services foreign enterprises are able to 
undertake and what services they are not able to  undertake.  With regard to the latter 
case, could China provide the legal docum ent which stipulates the reasons why 
foreign enterprises are not able  to undertake these services? 
11. China has committed to the Reference Paper, and provision 2.4 of the Reference Paper 
stipulates that "a major supplier will make publicly available either its inte rconnection agreements or 
a reference interconnection offer".  For the implem entation of this commitment, it is required to 
guarantee public availability of rules for interconnec tion by disclosing them.  In this regard, Japan 
would like to ask the following two questions. 
(a) According to article 18 of the "Regulati on on Telecommunications" and article 7 in 
"Regulation on the Interconnections betw een Public Telecommunication Networks 
(Decree 9 of the Ministry of Informati on Industry)", dominant telecommunication 
business operators are required to establish rules for interconnection and implement 
these rules after permission.  Could China explain whether these rules for 
interconnection are disclosed to the public in consistent with the Reference Paper 
which China has committed to?  If this is the case, Japan would request information 
on where to obtain appropriate documents on these rules as well as the name of the 
law and the article number that oblige operat ors to disclose them for interconnection. 
(b) If these rules for interconnection are not disclosed to the public, does China have 
intention to disclose these rules for interconnection by establishing law which 
stipulates such obligation? 
12. Could China provide details on the present situ ation, future procedures and schedule for the 
establishment of the Telecommunication Law? 
13. China has made certain reservations on the ri ght to place restriction on foreign capital 
participation in telecommunications business in th e Chinese schedule, such as, e.g., "...Foreign 
investment in joint ventures shall be no more th an (30/49/50) per cent...".  China also uses similar 
description in the present offer.  Since Japan can not  find the restrictions on indirect shareholding in 
these reservations, Japan understands that these reserv ations do not include indirect shareholding.  
Could China confirm this? 
III. CONSTRUCTION AND RELATED ENGINEERING SERVICES 
14. Upon China's WTO accession in 2001, China committed to permit the establishment of 
wholly foreign-owned enterprises in return for th e abolishment of direct contract on a project-by-
project basis. 
15. However additional requirements were intr oduced.  For example, when the foreign 
construction enterprises are examined to be qualif ied as Grade A enterprises, they are subject to 
requirements such as the minimum capital and number of engineers (no less than 300 qualified 
persons and 200 technical engineers, contracting limit up to 5 times the capital). 
16. As a result of the above requirement, although the establishment of wholly foreign-owned 
enterprises has been admitted, the scope of the projects that could be undertaken by foreign 
companies was narrowed than before. S/C/W/287 
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  17. Furthermore, qualification requirement for S uper Grade was revised this March, imposing 
construction companies to meet additional condition listed below: 
• establishment of research institute 
• acquisition of 8 or more patent rights 
• average 500 million Yuan of bank credit    
• tax payment of over 50 million Yuan  
 
18. These additional requirements constitute substa ntial barriers against foreign construction 
enterprises in establishing presence in Chinese market.  Under the new regulation, foreign companies 
are virtually restricted from obtaining the grade corresponding to their abilities.  
19. Japan considers that, China should ease or abo lish the restrictions on the types of projects 
undertaken by foreign companies and, where approp riate, to permit foreign construction enterprises 
without local presence to undertake construction projects. 
IV. DISTRIBUTION SERVICES 
20. Japan appreciates that China has undertak en commitments under GATS Article XVI and 
Article XVII for Mode 3 on Distribution Services, especially the approval of wholly foreign-owned 
enterprises (except those dealing in certain produc ts) by the Ministry of Commerce.  Regarding 
internet retailing, however, it is uncertain whethe r approval of wholly foreign-owned enterprises is 
permitted under the Regulation on Telecommunica tions promulgated in September 2000 and the 
Classified Catalogue of Telecommunication Operati ons issued by the Ministry of Information 
Industry.  An ICP license is not approved unless the enterprise has domestic capital of at least 51% 
under these regulations.  According to China's accession schedule of specific commitments on 
services (WT/ACC/CHN/49/Add.2), however, China h as committed to allow wholly foreign-owned 
enterprises to engage in commission agents' and whol esale services with exclusion of certain products 
and retailing services with exclusion of those deali ng in certain products within five years after 
China's accession to the WTO.  Therefore, whol ly foreign-owned enterprises should be permitted to 
engage in internet retailing without any limitation on the participation of  foreign capital.  If this is not 
the case, and if an ICP license is required to internet  retailing, how would China justify this situation  
vis-à-vis China's commitments. 
V. TOURISM AND TRAVEL RELATED SERVICES 
21. Could China explain whether it has already taken legal measures to implement its 
commitments, e.g., "None within six years after accession, there will be no restriction on the 
establishment of branches of the joint venture tr avel agency/tour operator and the requirement on 
registered capital of foreign-invest ed travel agency/tour operator will be the same as that of Chinese 
travel agency/tour operator."? 
 
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