WORLD TRADE  
ORGANIZATION  G/L/859 
29 October 2008 
 (08-5241) 
Committee on Trade-Related Investment Measures  
  
 
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 OF THE 
PROTOCOL OF ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA TO THE 
WORLD TRADE ORGANIZATION
1 
 
REPORT OF THE CHAIRMAN 
 
 
1. Pursuant to Paragraph 18 of the Protocol of Accession of the People's Republic of China, the 
Committee on Trade-Related Investment Measure s carried out the seventh annual review under 
China's Transitional Review Mechanism (TRM) at its meeting on 23 October 2008.   
2. Written questions regarding China's Transitiona l Review were submitted in advance of the 
review by the European Communities.  This s ubmission was circulated as document G/TRIMS/W/60, 
dated 14 October 2008.  
3. In a communication dated 8 October 2008, Ch ina submitted information on Annex 1A of its 
Protocol of Accession in connection with this revi ew.  This submission was circulated in document 
G/TRIMS/W/59, dated 9 October 2008. 
4. Annex 1 to this report reproduces the relevant section of the Minutes of the TRIMs 
Committee's meeting held on 23 October 2008 in wh ich Members' substantive discussions regarding 
China's seventh Transitional Review are reflected.  
 
 
 
     
 
   
                                                     
 
1 WT/L/432 G/L/859 
Page 2  
 
  Annex 1
 
  
Relevant Sections of the Minutes
  
of the meeting held on 23 October 2008  
 
(G/TRIMS/M/27 ) 
 
 
 
C. TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH  18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE 'S REPUBLIC OF CHINA TO THE WORLD TRADE ORGANIZATION  
7. The Chairman  recalled that under Paragraph 18 of China's Protocol of Accession (WT/L/432) 
the TRIMs Committee was required to review annua lly, over a period of eight years after China's 
accession, the implementation by China of the TRIMs Agreement and the related provisions of the 
Protocol of Accession, and to report to the Counc il for Trade in Goods (CTG) on the results of its 
review.  The sixth annual review of China had taken place on 1 November 2007, and the relevant 
report had been submitted to the CTG as document G/L/835.   
8. With respect to this year's review, he said th at, in order to discharge its reporting obligations 
in a timely manner, the TRIMs Committee needed to  undertake the review and submit its report in 
advance of the next meeting of the CTG which wa s scheduled for 18 November 2008.  Pursuant to 
paragraph 18 of China's Protocol of Accession, the CTG would in turn report to the General Council 
by the end of the year. 
9. He said that the Committee had received a communication from the European Communities 
which contained comments and questions to China in  the context of the Transitional Review.  This 
communication had been circulated in document G/ TRIMS/W/60.  The Committee had also received 
a communication from China concerning information required under Annex 1A of its Protocol of 
Accession, which had been circulated as document G/TRIMS/W/59.  
10. He proposed that, in keeping with previous pr actice, the Committee conduct the review in the 
following manner: he would first give the floor to the delegation of the European Communities that had submitted questions to China, and to any other delegation that wished to comment on this item.  
He would then invite the delegation of China to answer the questions and provide any other 
information they might wish to share with the Committee.    
11. The Committee so agreed
. 
12. The representative of the European Communities  welcomed the opportunity to participate in 
the seventh Transitional Review.  The EC contin ued to believe that the Transitional Review 
Mechanism (TRM) was a useful mechanism, and ther efore, they encouraged China to participate 
actively in this Review.  The TRM was a fundame ntal multilateral forum for exchanging concerns 
with China's WTO compliance efforts and it served to  provide further transpar ency for China's trade 
regime, which the EC believed was appreci ated by the entire WTO membership.   
13. The EC's concerns had been set out in detail and in writing in the communication circulated 
on 14 October 2008 in G/TRIMS/W/60.  His intention was to highlight their key concerns and questions at the present meeting rather than to dw ell at length on the document.  As a preliminary 
remark, he noted that his delegation was well aware of the repetitive nature of the EC's comments, 
most of which had been raised in this Committee in  the past.  However, his authorities felt that it was 
important not to ignore the issues that their ques tions addressed until they had been answered in a  G/L/859 
 Page 3 
 
 
  fully satisfactory manner.  The EC looked forward to engaging in a fruitful discussion, and hoped that 
China would be able to provide comprehensive in formation and respond to their questions in a 
substantive manner in the course of the present meeting.   
14. The first issue that the EC wished to addr ess at the present meeting concerned the clauses 
contained in contractual arrangements that were incompatible with China's obligations under its 
Accession Protocol.  In light of the EC's concerns  regarding the procedures to amend contracts which 
contained TRIMs incompatible clauses, China had no ted that investors could change the terms of a 
contract filing an application to relevant authorities.   The EC invited China to elaborate further on this 
application process, in particular how China moni tored it so as to ensure its compliance with the 
TRIMs Agreement.  In addition, the EC requested China to clarif y how it ensured that the approval 
for investment by national and sub-national aut horities was not conditioned on either performance 
requirements or local content requirements of any kind.   
15. The second issue concerned the Regulations fo r the Implementation of the Law of the 
People's Republic of China on Sino-Foreign Equity Joint Ventures.  During previous TRM exercises, China had noted that amendments had been made to the Law on Sino-Foreign Equity Joint Ventures 
of the People’s Republic of China with a view to re moving all articles that were in contradiction with 
the TRIMs Agreement.  However, the EC argued th at Articles 41 and 43 of the Regulations for the 
Implementation of this Law still imposed requirement s on technology transfer agreements concluded 
by Joint Ventures.  In reference to Article 41, in particular, China stated that it was not a performance 
requirement and it only aimed at ensuring that technology was 'appropriate and advanced'.  
Nonetheless, the EC was still concerned about the prov isions set forth in Article 43, and their linkage 
with Article 41.  The EC therefore invited China to  explain how the requirements contained in Article 
41 and Article 43 related to the relevant provi sion of the Accession Protocol and whether it 
considered that these requirements resulted in equal treatment for imported goods as compared to 
domestic products.   
16. In conclusion, he said that the EC looke d forward to written responses and additional 
information that China could provide at the presen t meeting on these, as well as all the other points 
raised in the EC communication (G/TRIMS/W/60). 
17. The representative of China
 thanked the EC for the questions received and for their interest in 
the policies and measures of his Government mentione d in their questions.  He also wished to note 
that in the transitional review carried out in the Market Access Committee in 2008 the EC had put 
forward to China a list of questions.  Many of t hose questions were difficult for his authorities to 
respond to in that Committee in view of the ma ndate of that Committee, because the questions 
concerned more or less the same policies and measu res of the Chinese Government, which, in their 
view, were more appropriate to be dealt with in the TRIMs Committee.  His responses therefore 
would also cover the questions of the EC posed in the Market Access Committee.   
18. The first substantive issue he wished to take  up was the joint venture ownership limitation, 
which seemed to be a general concern of the EC .  The EC argued on this in all the sectors it 
mentioned in its questions addressed to China, including automobile, petrochemical, energy and 
environment sectors, and even retail and wholesales.  He said that these comments and urges were 
well taken note of by his competent authorities.  The Chinese Government fundamentally had no different views with the EC in that it was in th e interests of all to fu rther liberalize trade and 
investment.  As a matter of fact, it was the policy direction that the Chinese Government had always 
been adhering to in the past 30 years and one whic h China would always stick to in the future.  The 
continual revision of the Industrial Catalogue for the Guidance of Foreign Investment  had always 
reflected China's progress in investment liberalizati on in specific sectors.  With regard to the latest 
revision of the Catalogue, he referred to documen t G/TRIMS/W/59 which contained the information 
notified by China in 2008 on Annex 1A of the Pr otocol.  However, in view of the level of G/L/859 
Page 4  
 
  development, the liberalization steps may legitimately be different in specific sectors and in different 
Members including even developed Members.  As had been repeatedly said, the Chinese Government 
believed that it had the legitimate right to independ ently judge on the level of maturity of specific 
industries and to decide on the speed of investment  liberalization which it believed would best serve 
the interests of China.  His author ities did not think that in this pa rticular respect there was such a 
question of consistency wi th WTO obligations.  In these sectors th at the EC had been pushing China, 
it was not the case that China would not further the op ening-up process, but rather that China needed a 
bit more time, as other Members also did where they believed that they needed time in the 
liberalization of certain sectors.   
19. With regard to the Steel Industry Development Policy , firstly he could clarify that Article 23 
applied equally to foreign and domest ic investors and that his delegati on had not been informed by his 
competent authority of any additional requirements or  tests applicable only to foreign investors.  
Secondly, regarding Article 18 of the Policy , it was a reflection of the ge neral guidance nature of the 
industrial policy and was not directly applicable itsel f.  In light of China’s commitments in the WTO, 
in particular those under the TRIMs Agreement, no concrete measures had been taken to require the 
use of national equipment.  Neither had ther e been any condition imposed on importation of 
equipments and technologies as to whether they could not be made in China.   
20. As concerned the Automobile Industry Development Policy , EC had asked for information on 
its latest development in its questions raised in the Market Access Committee.  There was actually not 
much information in this respect.  His authorities were not aware of the imposition of any additional 
obligations on foreign investors or of limitation c oncerning the production of auto parts.  A related 
development was that the Dispute Settlement Body of the WTO had adopted the Panel Report 
concerning China's import administration of auto  parts, and the case was now in the appellate 
procedure as his authorities disagreed with some  of the points reached in the Report.   
21. On the questions concerning the local content requi rements, firstly he wished to note that, as 
explained in the transitional reviews in previous  years, with the revision of China's laws and 
regulations on foreign investment, China had honoured its accession commitments made in the 
Accession Protocol and the Working Party Report.  He added that trade policies and measures were 
uniformly implemented in China, and that in orde r to ensure the uniform implementation, China had 
the Regulations on Submission of Regulations and Rules for Record , which required that all the local 
regulations and rules formulated be submitted to th e State Council (the Legi slative Affairs Office of 
the State Council) for record and re view within 30 days of promulgation.  This record and review 
process would identify in time potentia l inconsistency of the local regulations and rules with those of 
the Central Government and woul d have it addressed according to legislation procedures.  
Furthermore, citizens, enterprises and other entities may also propose in writing to the Legislative 
Affairs Office of the State Council to initiate a review process whenev er they identified any 
legislation inconsistency or failu re in uniform application of laws, regulations and rules.   
22. In addition to that, the systems of administrativ e review (administrative reconsideration) and 
judicial review were also available in China.  They were 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 Issues in the Tria l of International Trade Related 
Administrative Cases  issued by the Supreme People’s Court.  If a citizen, a legal person or any other 
organization considered that their lawful rights or interests had been infringed upon by a specific 
administrative act of an administrative organ or its personnel, they may apply for administrative reconsideration or may bring a suit before a peopl e’s court according to stipulated procedures.   
23. On the number of applications filed for amendi ng contracts for the purpose of eliminating the 
TRIMs incompatible clauses, the fact was that their competent authority and its designated bodies 
across the country had to process so many investme nt contracts including new and revised ones that  G/L/859 
 Page 5 
 
 
  he thought it was virtually impossible and also mean ingless for them to have statistics only for this 
specific purpose.   
24. On the questions concerning Articles 41 and 43 of the Regulations for the Implementation of 
the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures , in their view it was 
clear enough in the actual wording of the legal text of the Regulations , and also in practice, that 
Article 43 contained no compulsory requirement th at foreign investors must include a technology 
transfer agreement in their contract.  Whether or not to include technology transfer agreement in a 
contract was at the discretion of the foreign inv estors and their domestic counterparts.  If such an 
agreement was included in the business contract between the parties of the joint venture, the 
legitimate rights of all the parties woul d be better protected under Article 43.   
25. Finally, on questions concerning the new Anti-Monopoly Law , their position was that it was 
not appropriate that the TRIMs Committee addresse d competition policy issues.  However, out of 
good faith, he wished to provide some preliminary information on allocation of competence among 
relevant authorities.  This information was subject to further possible adjustment as the functioning of 
the authorities was still at a very early stage.  He said that the relevant authorities in this regard 
included the Ministry of Commerce (MOFCO M), the National Development and Reform 
Commission (NDRC), and the State Administration of Industry and Commerce (SAIC).  Among them 
the MOFCOM was responsible for the anti-monopol y review on the concentration of business 
operators, or undertakings, the SAIC was in char ge of the enforcement against such monopoly 
behaviour as monopoly agreements, abuse of dominant position in the market, with the exception of 
price-fixing activities, which would be dealt with  by the NDRC.  Moreover, the MOFCOM and the 
NDRC would form an inter-ministry joint conf erence mechanism together with other specific 
competent authorities to carry out national security  examinations on mergers and acquisitions of 
domestic enterprises by foreign investors, and in  this respect the MOFCOM was responsible for 
receiving and answering the applications of foreign investors.   
26. The Chairman  said that with regard to the Committe e's reporting obligation to the CTG, he 
understood that Members would wish the Committee to follow the same pro cedure that had been 
adopted in previous years, i.e., the Chairman would submit a brief, factual report, which would 
include references to the submissions made in conn ection with this year's Review and would contain 
in the Annex the relevant parts of the Minutes of this  meeting.  He had taken the liberty of asking the 
Secretariat to prepare a draft outline of his repor t for Member's consideration.  This had been 
circulated as document G/TRIMS/W/57.  If Members agreed to this outline, and once the relevant 
section of the Minutes had been attached to it, he would forward the report to the CTG.  
27. The Committee took note  of the statements made under this item and agreed  on the proposed 
procedure to discharge its reporting obligations concerning China's TRM.  
 
  
__________