WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  WT/TPR/M/199/Add.2 
13 April 2010 
 (10-1897) 
Trade Policy Review Body 
21 and 23 May 2008 Original: English/ 
 anglais/  inglés 
 
 
TRADE POLICY REVIEW 
CHINA 
Minutes of Meeting
 
Addendum  
Chairperson:  H.E. Mr. Yonov Frederick Agah (Nigeria) 
 This document contains additional responses provided by China.1 
 __________________________________________________________________________________ 
Organe d'examen des politiques commerciales 
21 et 23 mai 2008 
 
EXAMEN DES POLITIQUES COMMERCIALES 
CHINE 
Compte rendu de la réunion
 
Addendum  
Président:  S.E. M. Yonov Frederick Agah (Nigéria) 
 
 Le présent document contient des réponses additionnelles fournies par la Chine.1 
 
 __________________________________________________________________________________ 
Órgano de Examen de las Políticas Comerciales 
21 y 23 de mayo de 2008 
 
EXAMEN DE LAS POLÍTICAS COMERCIALES 
CHINA 
Acta de la reunión
 
Addendum  
Presidente:  Excmo. Sr. Yonov Frederick Agah (Nigeria) 
 
 En el presente documento figuran resp uestas adicionales facilitadas por China.1 
 
 
                                                      
1 In English only./En anglais seulement./En inglés  solamente.  WT/TPR/M/199/Add.2 
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  RESPONSES PROVIDED BY CHINA  
EC questionnaire – 1st set of questions  
 II. TRADE POLICY REGIME   
(5)TRADE AGREEMENTS AND ARRANGEMENTS  
WTO Secretariat's report, page 37, para. 60-61 
China recently signed an FTAs with New Zealand.  
Question 15
: Could China specify the coverage and scope of the Agreement, in both tariff lines and 
trade value figures? Over how many years will this Agreement be implemented? 
Answer: In the area of trade in goods, ever since th e agreement comes into force, New Zealand 
applies zero duty to 63.6% of tariff lines importe d from China. In the case of imports from New 
Zealand to China, the figure is 24.3%. After th at, both parties will continue with tariff reduction 
gradually according to the Agreement, where in 9 years, New Zealand will gradually eliminate all 
tariffs imposed on Chinese imports and in 12 years, China will eliminate 97.2% of all tariffs imposed 
on New Zealand imports. For more information, please refer to www.mofcom.gov.cn. 
Question 16 : Are liberalization commitments symmetric for both Parties?  
Answer: The China-New Zealand Free Trade Agreement is a comprehensive, high quality, and 
balanced one. Besides merchandise trade, in trade in services, New Zealand made WTO plus commitments in 16 sub-sectors of 4 sectors incl uding business, architecture, education, and 
environment, and china did the same in 15 sub-sectors of 4 sectors including business, environment, 
sports and recreation, and transportation. With re gards to movement of na tural persons, both Parties 
committed to further facilitating exchanges of pers onnel between the two countries. New Zealand will 
provide 800 work permits for Chinese doctors, chef s, teachers in Chinese language, and martial art 
coaches and tour guides, and 1000 work permits for 20 other categories of professions including 
lathemen, welders, computer application engineer s, and auditors.  Regarding investment,  the 
Agreement also sets clear requirements on invest ment promotion and protection, and establishes 
effective mechanism for investment related dis putes. In addition, the Agreement also made 
institutional arrangements for cooperation in Custom s, Inspection and Quarantine, and Intellectual 
Property between the two countries.  
III. TRADE POLICIES AND PRACTICES BY MEASURE 
(3) MEASURES DIRECTLY AFFECTING EXPORTS 
(viii) Export promotion and marketing assistance 
(b) Export finance and insurance WTO Secretariat's report, page 80, paras 139-141 
The products offered from China Eximbank (CE) are described in the same terms as that of other 
large Export Credit Institutions. However, there is no t clear information in its website regarding the 
terms CE accepts.  
Question 65
: Could China explain the rules for indi vidual products and buyer countries regarding 
credit length – apart from the commonly applied 15- year maximum period? Do these rules fully 
follow the (OECD) Arrangement's rules or are there any deviations? 
Answer:  China Exim Bank provides a detailed description of the core businesses at its website, 
including the borrowers, terms for loans and credit  lines and materials to be offered. The buyer's 
credit and seller's credit business operated by CE comp lies with the internationally accepted rule of a WT/TPR/M/199/Add.2 
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  15-year maximum period. In practice, the specific period depends on the situation of individual 
projects. The lending period for import credit, which is determined on the basis of the actual need, credit position, operating capacity, cash flow and other factors of borrowers, is usually 1 to 5 years 
and not longer than 15 years. 
As China is not a member to the OECD, the rul es of OECD are merely a reference, while other 
international practices are referenced as well.  
Question 66
: Could China furnish Members with the rul es on how the interest rates are determined 
for individual currencies / credit t erms in relation to market rates? 
Answer: As China has eased its control over financial in stitutions' interest rates of foreign currency 
loans, all foreign currency lending rates are determined  by financial institutions at their own discretion 
under commercial principles, taking into considerati on the fluctuation of inte rnational rates, capital 
cost, difference in risks and other factors. 
There is no ceiling on RMB lending rates but a floor, which is 90% of the base lending rate published 
by the People's Bank of China (PBC). Financial institutions are free to determine, based on commercial principles, their own RMB lending rate at a rate higher than the floor. 
It is known that the rates for Renminbi (RMB) are determined by People's Bank of China and are set 
as the upper limit of savings interest rates. However,  the relation of these rates to market rates is not 
clear since they are determined at a political level. 
 Question 67
: Could China provide information in this regard and the background for the 
infrequency of updating of the rate(s) fo r RMB as compared with other currencies? 
Answer: The PBC published a report on China's market b ased interest rate reform process in 2005 
(Report on Steady Progress in Market-based Interest Rate Reform). 
Regarding interest rate adjustment, the PBC, in  accordance with the monetary policy objectives 
specified in the Law on the People's Bank of Chin a and the general requirements for macro-economic 
policies, make appropriate adjustments to the base interest rates following the analysis of domestic 
macro-economic and financial situ ation and the influence of inte rnational economic and financial 
status on China. 
The EC understands that other banks can reduce inte rest rates to 0,9 times the benchmark rates.  
Question 68 : Could China provide information regardi ng which public banks are allowed to do 
that? When is the lower rate offered?  
Answer: Please refer to the reply to Question 66. 
Further to normal interest rates, the EC understa nds that there also exist preferential /concessional 
interest rates which are used in special cases.  
Question 69 : Could China explain how the preferen tial rates are determined and in which 
situations preferential rates are offered?  
The EC is aware of the fact that rates actually a pplied are often lower than the PBC benchmark rates. 
This is the case for technology products, high tech nology products, and ships. As to the latter, rates 
are close to half of the official benchmark rates. Therefore, it can be argued that these rates cannot all 
represent market rates.   WT/TPR/M/199/Add.2 
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  Question 70 : Could China justify this policy?  
Answer: If the preferential rate mentioned by the EC refers to the lending rate of Chinese policy 
banks, when choosing lending projects, Chinese polic y banks adhere to the market-based principles, 
adopt the market-based management modes and means as commercial banks, as well as standard 
project review process, implement strict authorization, accountability, cost-benefits and risk 
compensation mechanisms for credit business and dete rmine lending rates based on the interest rates 
in the market.  
Question 71 : Could China provide information regardi ng how interest rates for foreign currencies 
are determined? Is it always the CIRR, and in that  case, when is the rate locked in (before 
commercial contract, at the commerci al contract, or at the time of the signature of the loan contract? 
Answer: It is provided in the Commercial Banks Law of the People's Republic of China that 
"commercial banks shall operate independently, bear  liabilities for their own risks, profits and losses 
and apply a self-regulatory mechanism following the pr inciples of safety, liquidity and efficiency". 
Therefore, the determination of lending rates fo r foreign currency by commercial banks shall fall 
under their own development strategies. Also, please refer to the reply to Question 66. 
Question 72 : Could China provide information regarding how the credit risk premium is 
determined in particular regarding  1) sovereign risk in different rating categories, 2) commercial risk 
in different rating categories and 3) for ships?  
Answer: Take the risk assessment and pricing in expor t credit insurance of China Export & Credit 
Insurance Corporation for instance. 
1) for different sovereign risk rating categories: by  reference to the sovereign risk rating system of 
OECD, China Export & Credit Insura nce Corporation has established its own sovereign risk rating 
system, which takes into full consideration Ch inese diplomatic and economic policy as well as 
internationally accepted main parame ters and quantitative models. This system sets nine levels for 
sovereign risk assessment and w ill make periodical adjustment. 
2) for different commercial risk rating categories: commercial risk is one of the priorities in risk 
assessment of export credit insurance, and different  commercial risk rating categories have different 
weight on risk pricing. 
3) for vessels: in credit insurance for vessel export,  the place of registration (convenience flag) is the 
priority in risk assessment by China E xport & Credit Insurance Corporation. 
Question 73 : Could China explain what environmenta l guidelines apply for projects supported by 
China EXIM bank? Do they follow guidelines from the World Bank Group?  
Answer: The following is replies provided by Chin a Exim Bank. "As a financial institution 
supporting international economic c ooperation, China Exim Bank has effectively fulfilled its social 
responsibility, supported sustainable development and promoted green credit. Since its establishment, 
it has always taken the compliance with environmenta l laws and regulations as one of the important 
conditions for project appraisal and credit extensi on. In accordance with relevant Chinese laws and 
regulations and in light of the environment assessme nt rules of the World Bank and other international 
institutions as well as the environmental requirement s in host countries, China Exim Bank has worked 
out its own guidelines for environmental protection in projects." WT/TPR/M/199/Add.2 
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  Question 74
: Could China provide information regarding to what extent losses on policy banking 
transactions are covered by the Ministry of Finance rather than income from risk premia and 
recoveries from earlier transactions?  
Answer: As China has stated in its introduction to loans from policy banks in Part IX of Annex 5A in 
China's Protocol of Accession, "Policy Banks accu mulate capital by issuing treasury bonds to 
commercial banks and the market. Generally the Stat e budget does not provide interest rate subsidy to 
the State Policy Banks." As a matter of fact, si nce their establishment in 1994, Chinese policy banks 
have been operating independently and bear liab ilities for their own risks following a market-oriented 
principle, and the government does not intervene on their business operation. 
Question 75 : Could China explain how development ai d is defined (distinguishing it from 
commercial contracts)? Is there a minimum conce ssionality level? Are there special limitations on 
what kind of projects may have development aid financing? 
Answer:  China's foreign aid is different from official  development assistance (ODA). It is economic 
and technical cooperation between China and other developing countries withing the framework of 
"South-South Cooperation". As a de veloping country, China, while promoting its own economic and 
social development, also endeavors to help othe r developing countries to improve their capacities of 
independent development and promote their ec onomic development and social progress through 
various forms of intergovernmental economic an d technical cooperation like implementing aid 
projects, supplying materials and providing human  resources training. Being mutual help between 
developing countries, China's development aid follows  the principles of equality, mutual benefits and 
attaching no political conditions. 
Currently there are mainly three kinds of aid provide d by China, namely, grant, interest-free loan and 
preferential loan. The contents of the aid mainly include: complete set of projects, technical cooperation, human resources deve lopment cooperation project, dispatching foreign aid medical 
teams, provision of general goods and materials, emergency humanitarian aid, foreign currency cash 
aid, preferential loan, and sending  youth volunteers.  
China does not have special restrictions on the typ es of the projects to be aided and financed. Funding 
and aids are usually provided on the basis of th e demands of the recipient countries through full 
consultation between China and recipient countries. 
Question 76
: China seems to favour economically viable projects that should be able to attract 
normal commercial finance or export credit rather than reserving aid for the projects that are 
beneficial for the developing country but do not yield an income that allow repayment of a 
commercial credit. 
How does China justify such policy? 
Answer:  The comments do not reveal the truth.  As a matter of fact, China's aids  are, among others, 
mostly provided to help the governments of recipien t countries to construct social welfare projects, 
infrastructures and civilian facilities, such as hospi tals, schools, stadiums, low-cost housing, well 
drilling and water supply. These are projects closely rela ted to the livelihood of the general public that 
need government investments rather  than those economically viable projects that can attract normal 
commercial finance or export credit.  WT/TPR/M/199/Add.2 
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  Question 77 : Could China provide information on wheth er development aid is sometimes given in 
conjunction with commercial credits in order to finan ce different parts of the same project? Would in 
that case a minimum concessionality level  for the whole package always apply? 
Answer:  There could be such cases where the projects n eed extraordinarily larg e investment, such as 
in some highway or port projects. The foreign aids that China, a developing country, can provide are 
after all limited. When such cas es occur, China is also willing to provide commercial loans at the 
recipient country's request and after consultation wi th the country. The overall interest rate and the 
weights of different types of loans are usually de termined according to speci fic conditions such as the 
nature of the project. 
Question 78 : Could China explain what rules apply in relation to countries where the IMF has 
prescribed that only concessional lending should be used?  
Answer:  With respect to preferential loans that Chin a provides in its foreign aid, China always 
adheres to the principles of respecting the will of  the recipient countries and attaching no political 
conditions. The granting of loans is determined by the feasibility of the project itself based on 
economic evaluation. These loans are paid with the profits generated from the project, causing no 
burden to the government of the recipient country. 
Question 79 : Could China provide information regarding how interest rate and risk premia differ 
between China EXIM bank and China Development bank?  
Answer:  The China Development Bank has become a commercial bank in the system transformation 
in December 2008.  Its businesses follow general co mmercial principles and practices.  As to the 
China EXIM Bank, its interest rates of the loans granted on its own account are operated according to 
market rules. These interest rates are determined according to the costs in fundraising and operation.  
In terms of business operations, the China EXIM Bank operates independently and bears risks on its own account.  
Question 80
: Could China explain why SINOSURE has  a monopoly on export credit insurance 
which is not part of a direct lending operation? (Oth er insurers can in principle enter but not get a 
licence).  
Answer:  According to China's Schedule of services, insurance institutions, including those that are 
foreign funded, may enter the export credit insura nce market when meeting the basic qualification 
requirements and there is no discrimination on ma rket access. Insurance companies should operate 
insurance business within the business scope appr oved by insurance regulatory authorities.  
The SINOSURE is a fully-state-owned company main ly engaging in long & mid- and short-term 
export credit insurance businesses. Its operation is determined by the company itself without 
interference from the government. This operation m ode is common among the ECAs internationally. 
Examples are the Canadian EDC and the Finnish FINNVERA.  
The long & mid-term export credit insurance businesses of the SINOSURE are policy-related 
businesses. Its practice is basically the same as the cu rrent international practices of the ECAs, such as 
the French COFACE and the British ECGD. China's short-term export credit insurance businesses are 
commercial operations. China's short-term credit in surance market is open and the operation of 
commercial insurance companies is permitted. Theref ore, the issue of monopoly is irrelevant with 
respect to China's export credit insurance market. 
 WT/TPR/M/199/Add.2 
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  (vi) Intellectual Property Rights 
(b) Patents 
The Secretariat's report refers to the length of patent  protection (20 years). As it was asked by the EC 
in the previous Trade Policy Review of China in  2006, some specific products  require long additional 
periods for their development in order to obtain ma rketing authorisations. A number of countries have 
decided to compensate for these periods during which the patent cannot be exploited by an additional 
protection mechanism (in the EU: Supplementary Pr otection Certificate for pharmaceutical products). 
Question 89
: Does China plan to grant additional prot ection – in the form of patent term 
restoration or supplementary protection certificates – to products that cannot be marketed before a 
specific authorisation has been given (such as pharmaceutic al products)? 
Answer:  Currently there are no such plans. 
(c) Trademarks 
WTO Secretariat's report, pp. 104-105, para. 229 
According to the Report, China uses a "first-to -file" approach to trademark registration. For 
trademarks that have already been used in other co untries, but have not registered in China, provided 
that they are "well-known trademarks", a copy, im itation or translation of that well-known trademark 
cannot be registered and must be prohibited from use. 
Question 95 : Could China describe the scope of the concept of "well-known trademark" in the 
Chinese Trademark Law?  
Question 96 : Could China assess the compliance of Trademark Law with Paragraphs 2 and 3 of 
Article 16 of the TRIPS Agreement? 
Answer: According to the Trademark Law and the Pr ovisions on Recognition and Protection of Well-
known Trademarks which is established in pursuan t with the Implementing Regulations of the 
Trademark Law, the term "well-known trademark" refers  to the trademark that is widely known to the 
relevant public and enjoys a relatively high reputation in China. 
Article 13.2 of the Trademark Law stipulates that where a trademark in respect of which the 
application for registration is filed for use onto th e non-identical or dissimilar goods is a reproduction, 
imitation or translation of the well-known mark of anot her person that has been  registered in China, 
misleads the public and is likely to create prej udice against the interests of the well-known mark 
registrant, it shall be rejected from registration and prohibited from use. 
We confirm that Article 13.2 of the Trademark Law is completely consistent  with Articles 16.2 and 
16.3 of the TRIPs Agreement. 
(d) Copyrights and Related Rights 
WTO Secretariat's report, page 103, para. 218 
According to the Report China made reservati on on Article 14 of the WIPO Performances and 
Phonograms Treaty (WPPT). The EC is concerned rega rding this reservation. We would like to note 
that broadcasting and public performance rights are in deed crucial to the reco rding industry as sales of 
hard copies are no longer the only form  of revenue for record companies. 
Question 98 : Does China plan to propose amendments  to the Copyright Law, where sound 
recording producers should be accorded rights of communication to the public including  WT/TPR/M/199/Add.2 
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  broadcasting and public performance rights? If not, can China explain the reasons for the reluctance 
to grant these rights to sound producers? 
Answer: Since this question goes beyond the framework of  the TRIPS Agreement, it is better to be 
discussed in WIPO. 
(f) Enforcement 
WTO Secretariat's report, pp. 106-107, para. 242 
In 2006, four regulations were issued to fac ilitate the transfer of cases to be settled from 
administrative actions to judicial measures. 
Question 105 : Could China explain the mechanism of trans fer provided for in each of the four 
regulations? Please provide statistical data on the transfers from the administrative to the criminal 
authorities carried out since the last TPR review in 2006. 
Answer: In 2006, four provisions have been adopted on transfer of IPR enforcement cases from the 
administrative to the judicial authorities, which has greatly enhanced the overall effectiveness and 
potency of China's IPR protection law enforcement. Currently, China hasn't ma intained the statistics 
on the number of cases transferred since China's accessi on to the WTO. Therefore, no such data can 
be provided. Meanwhile, it's improper to measure the effectiveness of the handover and coordination 
between the administrative and the judicial author ities solely by the number of cases transferred. 
WTO Secretariat's report, page 107, para. 243 
The Report states that customs is in charge of en forcing intellectual property rights at the border. 
According to the Report, customs authorities have  been increasingly invo lved in seizures and 
investigations of infringing goods. 
Question 109 : Could China provide data on how many cu stoms actions have been undertaken on 
request /ex officio against IPR infringing imports  / exports? Are Customs authorities empowered to 
intercept infringing goods in transit / transhipment? 
Answer: In 2007, 67 customs actions on request while 8348 on self-initiatives against IPR infringed 
imports/exports have been undertaken. Customs at por ts have investigated and seized on ex officio 
330 million pieces of infringed goods with the case value amounting to 420 million RMB, accounting 
for 99% of the total seizures and 97% of the total case value respectively. 
China has established measures to protect IPR at bor ders, which provide lega l protection for imports 
and exports. 
WTO Secretariat's report, pp. 107-108, para. 244 
Provisional measures are a basic element in IPR enforcement. 
Question 112 : Could China explain how Article 50 TRIPS is implemented in Chinese legislation? 
Could China provide relevant provisions of Law?  Could China furnish statistical data regarding 
provisional measures adopted by the judicial authorities over the last two years?  
Answer:  Articles related to provisional measures in China's existing effective laws include: 
Article 74, 92-96 and 99 of the Civil Procedure Law, Article49 and 50 of the Copyright Law, 
Article 57 and 58 of the Trademark Law, Article61 of the Patent Law, Article30 of Interpretations of 
the Supreme People's Court Concerning the Applicati on of Laws in the Trial of Civil Disputes over WT/TPR/M/199/Add.2 
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  Copyright, Interpretations of the Supreme People's Court Concerning Application of Law to Pre-trial 
Suspension of Acts of Infringement of Exclus ive Right to Use Trademark and to Evidence 
Preservation, Interpretations of the Supreme Peopl e's Court Concerning People's Courts Subjecting 
Rights in Registered Trademarks to Property Preser vation and Article13 of Se veral Provisions of the 
Supreme People's Court on Issues Concerning Applicable  Laws to the Trial of Patent Controversies. 
According to preliminary statistics, in 2007, local  courts nationwide heard 134 and gave court ruling 
to 131 IPR-related cases of pre-trial suspension of infringement acts respectivel y. The actual rate of 
final court ruling in favour of the claim was 76.92%.  
EC additional comments and questions – 2
nd set of questions  
I. ECONOMIC ENVIRONMENT  
4. MAIN STRUCTURAL REFORM ISSUE (ii) Tax reforms Government Report, page11, para.42 
Question 1
: Could China provide further information with regard to the implementation of the 
new Enterprise Income Tax Law, and in particular, how  it operates with respect to the unification of 
the tax treatment, tax rates, tax incentives and tax deductions?  
Answer:  On March 16th, 2007, the fifth session of the 10th National People's Congress deliberated and 
approved the Enterprise Income Tax Law of the Peopl e's Republic of China. The Law took effect on 
January 1st, 2008. The Law applies to both domestic  and foreign-funded enterprises. The enterprise 
income tax rates are unified and lowered to an appropriate degree. Pre- tax deduction methods and 
standards are unified and standardized. Tax prefer ential policies are also unified. The reason for the 
formulation of the Enterprise Income Tax Law a nd the unification of the income tax systems for 
domestic and foreign-funded enterprises is that the or iginal separation of the income tax systems for 
domestic and foreign-funded enterprises causes larg e difference in the tax burdens of domestic and 
foreign-funded enterprises. Such arrangement is inconsistent with  the principles of unification, 
standardization and fair competition in the market economy. It is unfavourable for promoting the fair 
competition between enterprises and guaranteeing the st able and coordinated development of China's 
national economy. 
For specific information on tax incentives and reductions, please see the second comprehensive 
notification on subsidies to be submitted by the Chinese government this year. 
Question 2 : Could China indicate the timeline for extending the VAT reform pilot programme to 
the whole Chinese territory? In addition, what is Ch ina's assessment of the functioning of the pilot 
programme?  
Question 3 : Could China furnish further details on the technical arrangements they intend to 
adopt in order to convert the current VAT from a pr oduction-based tax into a consumption-based tax, 
and on the foreseen effects of these measures on imports?  
Answer:  Since January 1 2009, the conversion reform of VAT has been implemented nationwide in 
China. The specific contents of the reform incl udes: under the premise that the current VAT rate 
remains unchanged, all general VAT payers in China,  no matter what region or industry they are in, 
are allowed to deduct the input VAT amount cont ained in their newly purchased equipment. The 
remaining amount after the deduction could be carri ed forward for deduction in the next accounting 
period. At the same time, as the supporting measu res for the conversion reform of VAT, the VAT 
exemption policies for imported equipment and fo r domestically manufactured equipment purchased 
by foreign-invested enterprises have been both abol ished. The VAT rate for small-scale taxpayers has  WT/TPR/M/199/Add.2 
 Page 11 
 
 
  been unified and lowered to 3%. The VAT rate for mineral and mining products has been readjusted 
to 17%.  
As the economic and social envir onment develops and changes, it is  necessary to convert the VAT 
from a production type to a consumption type. Unde r the particular background of the unfavourable 
influence brought to China's economic development by international economic  crisis, implementing 
the conversion reform of VAT and making efforts to expand domestic demand can contribute to 
promoting the enterprises' equipment investment and production expansion and maintaining steady 
and faster economic growth.  
5. TRADE AGREEMENTS AND ARRANGEMENTS 
(iv) Unilateral preferences WTO Secretariat's report, page 38, para. 68 and Government's report, page 20, para. 103 
The EC invites China to provide more substantial replies to the questions concerning Africa's DFQF 
treatment to some African countries. It is in the in terest of all LDCs, and for the sake of transparency, 
that China discloses the details of its current regime and informs about its plans towards full 
liberalisation for all potential LDC imports. 
 Question 8
: Could China please indicate on how many  and on which tariff lines LDCs currently 
enjoy full DFQF? 
Answer:  The zero tariff treatment to 41 LDCs involves 1,209 tax items. 
Question 9 : Is this treatment similar for all 41 LDCs t hat are diplomatic relations with China or 
are there differences (in coverage and tariff reduction) for African LDCs compared to Asian LDCs for 
instance? 
Answer:  China grants full DFQF treatment to the products from different LDCs according to the 
intergovernmental exchange of notes about the agreements between China and these countries. The 
treatment for each LDC covers the majority of th e exported goods from the country. Yet the lists of 
such goods enjoying full DFQF treatment are sli ghtly different as the exported goods from these 
countries are different. 
According to the same information provided by th e WTO Secretariat, in 2005 79% of Asian imports 
from LDCs related to fuels and minerals.  
Question 10 : What is the value of Chinese agricultura l and manufacturing imports from LDCs, and 
what percentage of these imports currently enjoy DFQF? 
Answer:  The Chinese government does not have the categorized data on the imports from the 
agricultural and manufacture sectors of these 41 LDCs. During the period from 2005 to 2007, China 
imported annually USD 17.102 billion, USD 22. 514 billion and USD 25.821 billion respectively from 
41 LDCs. The majority of the imports enjoyed the DFQF treatment according to the DFQF 
agreements between China and th e governments of these countries. WT/TPR/M/199/Add.2 
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  6.  FOREIGN INVESTMENT REGIME 
Government's report, page 11, para. 41 
Question 11
: Could China provide furth er information regarding the restrictions to investment 
operations, which can be only th rough qualified domestic institutio nal investors and qualified foreign 
institutional investors? 
Answer:  According to the Measures for the Administ ration of Overseas Securities Investment by 
Qualified Domestic Institutional Investors taking effect on July 5th, 2007, relevant investors can only 
engage in overseas securities investment business through qualified domestic institutional investors. 
According to the Measures for the Administration of  Securities Investment w ithin the Territory of 
China by Qualified Foreign Institutional  Investors taking effect on September 1st, 2006, relevant 
investors can only engage in domestic secur ities business through qualified foreign institutional 
investors. 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
2. MEASURES DIRECTLY AFFECTING IMPORTS (iv) Indirect taxes affecting imports 
WTO Secretariat's report, page 56, para. 40  
EC question 23 and Brazil question 7 (as included in pages 18 and 60) relate to VAT treatment for 
non-processed agricultural products. However, the replies to both questi ons appear to be 
contradictory.   
China claims that the imported goods benefit from VAT exemption in the exporting countries and 
would therefore have to be subject to VAT upo n importation. Despite this being the general 
procedure, it appears that for domestic non-pr ocessed agricultural products no VAT is imposed 
whereas this is not the case for similar imported products. Therefore, this entails discrimination 
against such imported goods. 
Question 12
: Could China please clarify?  
Question 13 : In addition, could China be more specific regarding the Interim Regulations on value 
added tax , in particular whether it will be replaced and when? 
WTO Secretariat's report, page 56, para. 41  
Question 14 : Could China confirm whether indirect ta xes applied to imports comply with the 
provisions set out in GATT Article III.2?  
Answer (questions 12, 13 and 14):  China is a developing country with a much dispersed agricultural 
production, low level of modern ization, huge rural population and less than optimal production 
capacities. It is extremely difficult to levy VAT from farmers. Therefore, China has adopted a VAT 
exemption policy for agricultural products when they  are directly sold by farmers who produce them. 
That is to say, such a preferential policy is limite d only to agricultural products produced by those 
units and individuals engaged directly in crop growing, harvesting, animal husbandry as well as 
fishery. Once they are purchased, their next sale or  processing are subject to VAT taxation. Therefore 
this VAT exemption policy is designed only for the phase of direct production of primary agricultural 
commodities. The VAT will still be collected during other phases of wholesale and retail of agricultural products. The imported goods have enjo yed the VAT rebate from the exporting countries 
at the time of exportation and the price of import therefore does not include VAT. Such importation 
will be treated as wholesale or retail and so would be required to pay VAT as what also happens in 
China. China's VAT policy is not a barrier to tr ade of agricultural products to the Chinese market.  WT/TPR/M/199/Add.2 
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  The Interim Regulations on Value Added Tax w as revised in November 2008 and the revised 
Regulations came into effect on January 1, 2009. Th e indirect taxes in China applied to imports are 
consistent with the provisions set out in GATT Article III.2. 
(viii) Standards and other technical requirements 
While we are awaiting to receive answers to the va rious outstanding questions in this section, the EC 
would like to add the following question:  
Question 15 : Could China clarify whether or not, at levels below that of a national standard, a 
standard can be either mandatory or voluntary? In the case that a standard at these levels becomes 
mandatory, could China confirm whether they fully comp ly with provisions laid  down on Article 3 of 
the WTO TBT Agreement? 
Answer: As specified in the Standardization Law of the People's Republic of China, the following 
agencies and entities are entitled to develop standards.  These are the competent departments in charge 
of standardization under the State Council, othe r relevant competent departments under the State 
Council, the administrative departments for stan dardization in the people's governments in the 
provinces, autonomous region and municipalities direc tly under the Central Government, the division 
of the duties of the administrative departments in  charge of standardization and the relevant 
competent administrative authorities in municipaliti es and counties and companies. All sector and 
local standards should be registered with SAC so as to ensure all those standards are developed in 
accordance with WTO rules. 
(4) MEASURES AFFECTING PRODUCTION AND TRADE 
(d) Tax incentives 
WTO Secretariat's report, page 87, para. 159 
The report states that "Despite the large number of programmes notified, a breakdown of estimated 
annual revenue foregone as a result of individual tax incentives is not available: nor has China 
provided the Secretariat with an evaluation of  the cost-effectiveness of these tax incentives". 
Question 16 : Could China provide information on the co st-effectiveness of these tax incentives? 
Could China confirm whether the in tended objectives have been met?  
Answer: The amount of tax forgone as a result of the im plementation of preferential tax policies is 
not available because currently Chin a does not have a statistics system for tax expenditure. It is still in 
the process of being established. 
IV. TRADE POLICIES BY SECTOR 
(3) ENERGY  
WTO Secretariat's report, page 118, para. 43-45 
Foreign companies in the energy sector face num erous pre-conditions, which are only imposed to 
foreign investors, and which result in difficulties to enter the Chinese wholesale fuel market. These 
preconditions include the need to al ready possess majority ownership of at last 30 retail petrol stations 
and to won a certain amount of storage capacity. 
Question 38 : Could China explain the rationale for imposing those pre-conditions to foreign 
companies?  
Answer:  China does not have separate pre-conditions fo r foreign investment to enter finished oil 
product wholesale market. According to the Measur es for the Administration on Foreign Investment WT/TPR/M/199/Add.2 
Page 14  
 
  in Commercial Fields, foreign-invested companies were allowed to engage in the retail business of 
finished oil products from December 11
th, 2004 and in the wholesale business of finished oil products 
and crude oil from February 11th, 2006. The commitments of China's accession to the WTO were fully 
implemented. The requirements on storage capacities, pipelines, railways, docks and supply contracts 
are qualification requirements rather than market access restrictions. These requirements are imposed 
on domestic and foreign-invested enterprises without any distinction and discrimination.  
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