WORLD TRADE  
ORGANIZATION  G/SCM/Q2/CHN/22 
4 September 2006 
 
 (06-4210) 
Committee on Subsidies and  
Countervailing Measures Original:   Spanish 
 
 
 
SUBSIDIES  
 
Questions from MEXICO Regarding the  
New and Full Notification of CHINA1 
 
  The following communication, dated 1 September 2006, is being circulated at the request of 
the delegation of Mexico.  
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GENERAL  
 
1. Paragraph 10.1 of Part I of the Protocol of Accession (WT/L/432) states the following: 
"China shall notify the WTO of any subsidy with in the meaning of Article 1 of the Agreement 
on Subsidies and Countervailing Measures ("SCM Ag reement"), granted or maintained in its 
territory, organized by specific product, including those subsidies defined in Article 3 of the SCM Agreement.  The informati on provided should be as specif ic as possible, following the 
requirements of the questionnaire on subsidies as noted in Article 25 of the SCM Agreement." 
 
(a) Could the People's Republic of China (PRC)  please specify whether the new and full 
notification of information on programmes granted or maintained at the central 
government level in China (G/SMC/N/123/ CHN) includes all subsidy programmes 
granted at all levels of government?  C ould China please give details of any subsidy 
programmes provided that have not been reported? 
 
 (b) Could the PRC please indicate how in th e new and full notification it sought to 
organize the subsidy programmes by specific product, including the subsidies defined in Article 3 of the SCM Agreement? 
 
2. Paragraph 10.2 of Part I of the Protocol of Accession (WT/L/432) states the following: 
"For purposes of applying Articles 1.2 and 2 of  the SCM Agreement, subsidies provided to 
state-owned enterprises will be viewed as specific if, inter alia, state-owned enterprises are the predominant recipients of such subsidies or state-owned enterprises receive disproportionately 
large amounts of such subsidies."  
 (a) In the new and full notification the PRC indicates that it has included certain activities 
which arguably are not (or are not always) "s pecific subsidies" within the meaning of 
Article 2 of the SCM Agreement.  In this connection, could it please clarify why it has 
                                                     
 
1 G/SCM/N/123/CHN. G/SCM/Q2/CHN/22 
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  not provided the information showing th at state-owned enterprises are not the 
predominant recipients of such subsidies or recipients of disproportionately large 
amounts of such subsidies, in accordance with paragraph 10.2 of Part I of the Protocol 
of Accession?  
 
3. Paragraph 10.3 of Part I of the Protocol of Accession (WT/L/432) states the following:  
"China shall eliminate all subsidy programm es falling within the scope of Article 3 of 
the SCM Agreement upon accession."  
 (a) Could the PRC please specify which s ubsidy programmes have been eliminated, 
pursuant to Article 3 of the SCM Agreement,  and if some programmes have not been 
eliminated, could it explain why?  
 4. Could the PRC please indicate the degree of progress made in eliminating the subsidy 
programmes listed in Annex 5.B ("Subsidies to be  phased out ") to the Protocol of Accession?  
5. Could the PRC please indicate which are new programmes and which have been modified or 
eliminated, by comparing the programmes reported in the Protocol of Accession and those set out in 
the new and full notification?  
6. Could the PRC please explain how the subsidies in the new and full notification with no 
specified time period are to be eliminated?  
7. Could the PRC please explain how it ensured that all the subsidy programmes in effect were 
reported?  In particular, we would like to know whether there are any specific subsidy programmes in 
sectors of production such as textiles, footwear, toys , steel, chemicals and agriculture.  If so, could the 
PRC please list the subsidy programmes relating to the above-mentioned production sectors?  
8. Could the PRC please indicate whether the pr ogrammes in the new and full notification 
establish as a requirement for entitlement to benefits  under the subsidy programmes that the subsidies 
be contingent on the use of domes tic over imported products?  If so, could it explain the consistency 
of this requirement with the obligations laid down in Article 3.1(b) of the SCM Agreement? 
9. Could the PRC please provide details of the specific criteria for selecting enterprises that 
receive benefits under the subsidy programmes listed in the new and full notification?  Could it also 
indicate the number of enterprises that benef ited under these programmes in the period 2001-2004 and 
the sector(s) of production to which they belong?  
10. Does the PRC have statistics or records of which enterprises and/or sectors of industry are the 
main users or beneficiaries of the subsidy progr ammes notified (especially those contingent upon 
export performance or on the use of domestic over im ported products)?  If so, would it be possible to 
provide such statistics or records? 
11. How does the PRC monitor the use made by bene ficiary enterprises of revenue not collected 
under the preferential tax treatment programmes?  Wh at form does such monitoring take?  Are there 
mechanisms to measure the impact of the programm es in terms of production, exports, productivity, 
and so on?  If so, what do they consist of and how  do they operate?  Would it be possible to know 
their results?  If not, is any such mechanism in the process of being set up?  What would it consist of?  
When could results be anticipated? 
12. Are the notified programmes cumulative?  In ot her words, is an enterprise eligible under 
several of these programmes?  If so, how are the tax reductions or exemptions provided?  G/SCM/Q2/CHN/22 
 Page 3 
 
 
  13. What are the criteria for considering an enterprise as being "export-oriented"? 
SPECIFIC PROGRAMMES 
 Programme III 
 14. The new and full notification states that "[a] ny foreign-invested enterprises engaged in 
agriculture, forestry or animal husbandry …". 
 (a) Could the PRC please explain what are the criteria for considering that an enterprise 
is engaged in agriculture, forestry or animal husbandry?  Can enterprises that 
predominantly use inputs be regarded as falli ng in this category?  Does it also include 
enterprises whose products are used  in this type of activity? 
 
Programme VI 
 
15. The new and full notification states that "[e]nterprises with foreign investment which are 
technology-intensive and knowledge-intensive a nd whose major products are enlisted in the 
"Catalogue of High and New Technology Products of China" promulgated by MOST and the sales 
revenue of these products of that year accounts for over fifty per cent of the total annual sales revenue 
of the enterprise, may be imposed a reduced en terprises income tax rate of fifteen per cent." 
 (a) Could the PRC please indicate which hi gh and new technology products listed in the 
Catalogue are eligible under the programme? 
 
Programmes XXI, XXII and XXIV 
 
16. According to the new and full notification, pr eferential policies are established in these 
programmes for welfare enterprises, low-profit enterprises and enterprises providing jobs for the 
unemployed, respectively.  
 (a) Could the PRC please indicate these pr ogrammes include enterprises engaged in 
export production?  
 
Programmes XXVI and XXVII 
 17. According to the new and full notification, pr eferential policies are established in these 
programmes for the research and development of en terprises (including foreign-invested enterprises). 
 (a) Could the PRC please indicate whethe r these programmes include enterprises 
engaged in export production?  
 
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