RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/W/271 
26 September 2006 
 (06-4580) 
Council for Trade in Services Original:   English 
  
 
 
COMMUNICATION FROM THE UNITED STATES 
 
Transitional Review Mechanism Pursuant to Paragraph 18 of the Protocol on 
 
the Accession of the People's Republic of China ("China")  
 
 
 The following communication, dated 19 September 2006, from the delegation of the United States is being circulated to the Members of the Council for Trade in Services.  
 
 
_______________ 
 
 
Questions from the United States to China  
 
 I. DISTRIBUTION SERVICES:  PROCESSED OIL AND CRUDE OIL 
1. In the Services Schedule accompanying its Prot ocol of Accession, China committed to permit 
foreign service providers to engage in wholesale distribution and commission agents' services for     processed oil and crude oil within five years afte r accession, i.e. by 11 December 2006.  The United 
States is concerned about alleged draft regulations  imposing limitations on the ability of foreign 
service providers to operate in China.  
(a) Please confirm that China will circulate draft regulations for public comment as soon 
as possible so that service providers can review and become acquainted with them 
before China’s related GATS co mmitment enters into force. 
(b) What is China’s timetable for finalizing the draft regulations? 
(c) Are there provisions within the current draf t of the regulations that would require 
foreign companies to build a network of g asoline-distribution depots, or will foreign 
service providers be allowed to lease such facilities from Chinese owners? 
II. DISTRIBUTION SERVICES: PUBLICATIONS 
2. In the Services Schedule accompanying its Pr otocol of Accession, China committed that, 
within three years after accession (or by 11 Dece mber 2004), it would permit foreign service suppliers 
to supply wholesaling services, commission agen ts’ services and retail services through wholly 
foreign-owned enterprises without any market acce ss or national treatment limitations, with the 
exceptions of chemical fertilizers, processed oil and crude oil, salt and tobacco (and except with 
regard to certain chain stores).  In April 2004, the Ministry of Commerce (MOFCOM) issued the 
Measures on the Management of Foreign Investment in the Commercial Sector .  This measure lifted 
market access and national treatment limitations on wholly foreign-owned enterprises engaging in 
wholesaling services, commission agents’ services and retail services and removed then-existing product exceptions for books, news papers, magazines, pharmaceu tical products, pesticides and S/C/W/271 
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  mulching films (but not for chemical fertilizers, pr ocessed oil, crude oil, salt and tobacco) as of the 
scheduled phase-in date of 11 December 2004.  In addition, Article 39 of the Administrative 
Regulations on Publishing  suggests generally that foreign entities are permitted to distribute 
publications, including books, news papers and magazines, audiovisual products and electronic 
publications, within China without limitation.  Similarly, the Measures Governing Foreign-Funded 
Books, Newspapers and Magazines Distribution Enterprises , issued by the General Administration of  
Press and Publication (GAPP) and the Ministry of Foreign Trade and Ec onomic Cooperation (now 
MOFCOM) in March 2003, appeared to permit forei gn-funded enterprises to engage in retailing of 
books, newspapers and magazines as of 1 May 2003 and wholesa ling of books, newspapers and 
magazines as of 1 December 2004.   
3. Despite these measures, other Chinese measures appear to impose market access or national 
treatment limitations on foreign service providers seek ing to engage in the provision of wholesaling 
services, commission agents’ services and retail services for publications, i.e., books, newspapers and 
magazines, audiovisual products and electronic pub lications.  For some categories of publications, 
only Chinese-foreign joint ventures with minority foreign ownership are permitted to engage in 
distribution, and in others distribution is limited to Chinese state-owned enterprises.  In addition, in 
some situations, foreign entities face restrictiv e requirements not imposed on domestic entities. 
4. The Catalogue for the Guidance of  Foreign Investment Industries lists “wholesale or retail 
business of books, newspaper and periodicals” and “d istribution of audiovisual products (not 
including movies)” under the “restricted” category, wh ich suggests that an investment requires special 
government approvals, although a footnote states th at “wholly foreign-owned enterprises will be 
permitted no later than 11 December 2004, and can engage in the distribu tion of books, newspapers, 
[and] magazines.”  An Annex to this catalogue, howe ver, states that “[d]istribution of audiovisual 
products (not including movies)” are permitted only for “equity a nd cooperative joint ventures 
controlled by Chinese parties.”  Moreover, Article 62 of the Administrative Regulations on Electronic 
Publications  outright prohibits foreign entities from enga ging in wholesale distribution of electronic 
publications within China  
5. Further restrictions on foreign control/owner ship of distribution entities appear to be 
established by the Decision of the State Council Regarding Entrance of Public Capitals into Cultural 
Industries .  Section V of this measure states that whil e “[n]on-public capitals may be invested in the 
following cultural undertakings: . . . distributio n of publications . . . distribution businesses of 
newspapers . . . [and] distribution . . . of movies . . . the state-owned capital shall have a controlling 
interest of at least 51 percent in such undertakings.”    This language seems to suggest that, to the 
extent that foreign investment is permitted with re spect to distributing these materials, it cannot have 
more than 49 percent controlling interest. 
6. Similarly, in Article 1 of the Several Opinions on Canvassing Foreign Investment into the 
Cultural Sector , it states that foreign investors can establis h “Sino-foreign contractual equity [entity 
to] engage in the distribution of audio and video products, excluding movies,” but adds that it is 
permitted only if “the Chinese party takes the dominan t position.”  With regard to the distribution of 
movies, Article 4 of this measure is even more r estrictive; it prohibits foreign investment in the 
distribution of movies.  Article 4 prohibits foreign i nvestment in the “master distribution” of all other 
publications, where “master distribution” is defined as  the “exclusive sale of publications by an entity 
engaging in distribution of publications.”  This  treatment appears to be confirmed by the  Catalogue 
for the Guidance of Foreign Investment Industries , which lists “master distribution” of books, 
newspapers, periodicals, audiovisual products a nd electronic publications in the “prohibited” 
category. 
7. With regard to electronic publications, Article 62 of the Administrative Regulations on 
Electronic Publications  states that “[n]o wholly-foreign owned enterprise, Sino-foreign equity joint  S/C/W/271 
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  venture enterprise or Sino-foreign-cooperative join t venture enterprise shall engage in general 
wholesale or wholesale of electronic publications.”  In other words, it appears that foreign entities are not permitted to engage in wholesale distributio n of electronic publications within China. 
8. With regard to “books, magazines, and news papers published and printed in China by 
publishing enterprises that have been approved by th e State Council administrative office responsible 
for publications,” the Administrative Regulations on Management of Foreign-Invested Book, 
Magazine and Newspaper Distribution Enterprises  require in Article 7 that foreign-invested 
wholesale distribution enterprises must have a registered capital of at least RMB 30 million, and in Article 8 that foreign-invested retail distribution en terprises must have a registered capital of at least 
RMB 5 million.  Both of these articles also specify  that such enterprises must not have operating 
terms that exceed 30 years.  These restrictions are in contrast to those that apply to Chinese 
distribution enterprises.  According to Article 8 of the Administrative Regulations on the Publication 
Market , domestic wholesale distribution enterprises need only have a registered capital of RMB 2 
million, while Article 10 indicates that domestic re tail distribution enterprises have no registered 
capital requirement at all.  Domestic distribution enterprises also do not have operating term limits. 
9. Finally, the Administrative Measures on Subscription of Imported Publications , issued by the 
GAPP in September 2004, appear to restrict the ability of foreign entities to distribute imported publications on a subscription basis.  Specifically, this measure appears to  reserve the internal 
distribution of imported newspapers and magazin es by subscription to state trading enterprises 
described in the Administrative Regulations on Publishing .   
10. With respect to the above description of the va rious Chinese law related to the distribution of 
publications: 
(a) Can China confirm that it only allows fo reign service providers to distribute books, 
newspapers and periodicals through Chin ese-foreign joint ventures in which the 
Chinese partner has majority ownership and control?  If so, please describe China’s 
plans for bringing the relevant measures into  conformance with the commitments that 
China made in its Services Schedule.  
(b) Can China confirm that it does not allow foreign service providers to engage in 
wholesale distribution of electronic publications in China and only allows foreign service providers to engage in retail dist ribution of electronic publications through 
Chinese-foreign joint ventures in which th e Chinese partner has majority ownership 
and control?  If so, please describe China’s plans for bringing the relevant measures 
into conformance with the commitments that  China made in its Services Schedule.  
(c) Can China confirm that it only allows foreign service providers to distribute 
audiovisual products through Chinese-forei gn joint ventures in which the Chinese 
partner has majority ownership and contro l?  If so, please describe China’s plans for 
bringing the relevant measures into conf ormance with the comm itments that China 
made in its Services Schedule. 
(d) Can China confirm that it does not allow foreign service providers to distribute 
movies in China but rather confines distribu tion to certain state-owned enterprises?  If 
so, please describe China’s plans for bringing  the relevant measures into conformance 
with the commitments that China made in its Services Schedule. 
(e) Can China confirm that it does not allow fo reign service providers to engage in the 
“master distribution” of b ooks, newspapers, periodicals,  audiovisual products and 
electronic publications?  If so, please describe China’s plans for bringing the relevant S/C/W/271 
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  measures into conformance with the commitm ents that China made in its Services 
Schedule. 
(f) Please justify the discriminatory registered capital requirements and term limits 
applicable to foreign versus domestic entiti es with regard to the distribution of books, 
newspapers and magazines pub lished and printed in China by publishing enterprises 
that have been approved by the State C ouncil administrative office responsible for 
publications in light of China’s GATS obligations. 
(g) Please clarify the scope of the Administrative Measures on Subscription of Imported 
Publications .  Does this measure only apply to a foreign entity seeking to both import 
and distribute publications in China on a s ubscription basis?  Do es this measure apply 
to situations where a foreign entity seeks to distribute publications in China on a 
subscription basis only after they have b een imported or after foreign content has 
been printed in China?  Please explain how Ch ina justifies this measure in light of the 
commitments that China made in its Services Schedule. 
III. DISTRIBUTION SERVICES:  SALES AWAY FROM A FIXED LOCATION 
11. The United States welcomed Chin a’s issuance of regulations in August 2005 governing sales 
away from a fixed location, or direct selling, alth ough the United States is disappointed that China did 
not make a draft of the regulations publicly ava ilable for comment in advance of their release. The 
United States appreciates China’s concerted effort s to research direct selling regulations worldwide 
and supports China’s efforts to protect the public fro m fraud while opening its market to direct selling. 
These efforts, however, need not limit the growth of legitimate domestic and foreign direct selling 
operations. The United States is disappointed that, in the nine months since the direct selling 
regulations became effective in December 2005, onl y eight of the more than 30 companies that 
applied for direct selling licenses (with only two American companies among them) have received 
them. 
(a) What are China’s plans for speeding up the processing of domestic and foreign 
applications for direct selling licenses?  Will China be able to adhere to the 90-day 
time period set forth in the direct selling regulations?  If not, please explain. 
(b) To advance consumer protection, the direct selling regulations provides that a direct 
seller in a particular province must operate  a provincial office in the provincial capital 
and a “service center” in each district where a direct seller sells products to consumers.  What steps is the central govern ment taking to ensure consistent regional 
interpretation and implementation of the ser vice center requirements as set forth in 
the direct selling regulations?  Does China anticipate that the Administrative 
Procedures on Service Centers  (released in draft form on 22 August 2006) will add 
clarity to the original direct selling regulations?  Please explain. 
(c) The United States is concerned about Article 2.3 of the draft Administrative 
Procedures on Service Centers .  The United States recommends that  Article 2.3  be 
amended to make clear that no business license requirements are placed on service centers, and to provide that no more than one  service center per district is required to 
comply with the direct selling regulati ons. Will China consider these changes? 
(d) The United States is concerned that Article 7.2 of the direct selling regulations 
requires that foreign-invested companies have three years of direct selling experience 
in other markets to apply for a direct se lling license in China, but does not impose the 
same requirement on domestic companies.  The direct selling regulations also include 
a compensation cap for salespeople of 30 percent of sales revenue.  Based on  S/C/W/271 
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  international compensation practices, this cap would unnecessarily limit direct selling 
companies from sufficiently motivating thei r sales representatives.  Except for Korea, 
which has a compensation cap higher than that proposed by China, no country limits the income received by direct sellers.  Kor ea’s cap is also more narrowly defined than 
China’s, thus allowing greater economic rewa rd for direct sellers.  Will China change 
the provision in question so that the same domestic experience requirements apply to 
both domestic and foreign companies?  Also, will China increase or eliminate the 
compensation cap?  If not, why not? 
(e) The regulations also do not allow for compensation based on services rendered. This 
effectively denies payment for marketing services, and is a significant departure from 
international practice, including the Un ited Nations’ Consumer  Product Code under 
which persons engage in direct selling ma y earn compensation from the sales of both 
products and services. Will China consider am ending its compensation restrictions to 
come into compliance with internationally accepted practices regarding direct selling? 
IV. DISTRIBUTION SERVICES:  FRANCHISING 
12. During prior transitional reviews before this  Council, the United States has expressed 
concerns regarding certain  provisions of MOFCOM’s Rules on the Administration of Commercial 
Franchising , issued on 31 December 2004.  Please describ e the status of China’s review of these 
rules. 
V. DISTRIBUTION SERVICES:  FERTILIZER 
13. In the Services Schedule accompanying its Prot ocol of Accession, China committed to permit 
foreign service providers to engage in wholesale distribution and commission agents' services for     
chemical fertilizers within 5 years after accession, i.e. by 11 December 2006, with no limitations on 
market access or national treatment.   
(a) Will China use its existing distribution ser vices application and review process to 
permit foreign chemical fertilizer service pr oviders to engage in distribution services? 
(b) If not, please explain what new or additional rules or procedures will be put in place 
to meet China’s commitment, and describe China’s timetable for finalizing them.   
VI. EXPRESS DELIVERY 
14. The United States understands that China has begun circulating an 8
th draft of a new Postal 
Law.  Is that correct? If so, when will China ma ke the draft publicly available for comment?   
15. What is the State Council’s timetable for issui ng the final draft of the Postal Law to the 
National People’s Congress? 
16. At last year’s transitional review before this Council, China explained:  “As the State Council 
had approved the plan of the postal system re form, China Post had begun to undertake reforms 
vigorously and steadily, including separating the regulatory and operational functions, and setting up the National Postal Regulatory Authority.”  Please provi de an update on the status of these efforts.  
Please also explain how the Express Mail Service (EMS) will be affected by these changes.  
17. The United States understands that the postal system reform plan was approved by the State 
Council in July 2005.  The plan reportedly contains  details on important issues such as the amount of 
a universal services fund tax required from operators, how the operating divisions of China Post will S/C/W/271 
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  be managed and other details of interest to foreign companies.  When will China publish its postal 
system reform plan? 
18. The 8
th draft of the Postal Law reportedly imposes a minimum weight restriction on addressed 
letters weighing less than 150 grams.  Please explain the rationale for this restriction and how it is 
compatible with the horizontal commitment set fo rth in the Services Schedule accompanying China’s 
Protocol of Accession providing that market access will not be restrictive than as of the date of 
China’s accession to the WTO in terms of foreign companies’ scope of activities, ownership and 
operating conditions as set forth in licenses establishi ng or authorizing such operation or supply of 
services. 
19. The 8th draft of the Postal Law reportedly excludes foreign service providers from the 
domestic express delivery market.  Please explain how this restriction is consistent with the 
commitments that China made in the Services Sc hedule accompanying its Protocol of Accession with 
regard to courier services. 
20. Please provide details on China’s plans for a universal services fund tax that has been 
included in both the postal reform plan and the draf t Postal Law. What would the amount of this new 
tax be? What types of firms would it be imposed on, and how would this tax be calculated? If this tax 
would be imposed on private express delivery servi ces companies, please explain China’s rationale 
for doing so. 
21. Does China have any plans to abolish entr ustment certificates?  Please explain.  
VII. TELECOMMUNICATIONS 
22. Article 5 of the Regulation on the Administration of Foreign Invested Telecommunications 
Enterprises , issued by the State Council in Decree No. 333 on 11 December 2001 (effective 
1 January 2002), provides that, for foreign-inv ested telecommunications enterprises engaged in 
national or cross-provincial basic telecommunication services, registered capital must not be less than RMB 2 billion (US$241.2 million). As the United States has previously commented, this capital requirement is excessively high, both when viewed in relation to the norms in other economies and in 
the specific context of China's telecommunications ma rket.  Despite China’s responses on this issue at 
last year’s transitional review before this Counc il and subsequent bilateral consultations, the United 
States has heard no compelling rationale for such a re quirement, and the fact that there has been little 
or no new entry in the basic telecommunications sector suggests that this requirement is functioning as a market entry deterrent, for both Chinese and fo reign operators.  We understand that China is 
currently reviewing these requirements with a view to making them less burdensome, an initiative we 
welcome.  Does China expect revisions to these requirements to be implemented this year?  
23. In paragraph 314 of the Working Party Report accompanying China’s Protocol of Accession, 
China agreed to permit foreign app licants in any sector subject to joint venture requirements to freely 
chose a joint venture partner, even from outside the s ector being applied for.  To date, there have been 
no cases of China issuing licenses in th e basic telecom sector where th e Chinese joint venture partner 
was not also an existing basic telecom licensee.  Can China confirm that the choice of partner 
commitment extends to the basic telecommunications  sector, and thus that a foreign company is free 
to chose a Chinese joint venture partner which neither possess a pre-existing license, nor has 
experience in the sector, and could still be eligib le for a basic telecom license?  Can China also 
confirm that, to the extent that relevant experi ence is a precondition for obtaining a license, the 
foreign company’s experience (not necessarily in China) would satisfy such a requirement? 
24. In paragraph 309 of China’s Working Party Re port, China agreed that, upon its accession to 
the WTO, the organizations regulating services indu stries in China would be independent of the 
services suppliers they regulate.  Section 5 of the Basic Telecommunications Reference Paper also  S/C/W/271 
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  specifically calls for an independent telecommunica tions regulator that is separate from, and not 
accountable to, any supplier of basic telecommunicati ons and makes decisions on an impartial basis.  
What structural mechanisms within the Ministry of  Information Industry (MII) ensure that MII’s role 
in industrial promotion (e.g., for TD-SCDMA) does not conflict with its obligation to be impartial?  
What role does MII consider appropriate for itself regarding industry structure (e.g., decisions on 
market consolidation) and corporate management (e.g., personnel decision), and how does that affect 
MII’s ability to be independent and impartial? 
25. China has repeatedly stated its commitmen t to licensing wireless technologies in a 
technology-neutral manner, letting operators  choose technologies solely on commercial 
considerations.  Does this welcome commitment  extend to all wireless technologies, or only 
established “3G” technologies? 
26. The United States remains concerned because, dur ing past transitional reviews before this 
Council, China has maintained that MII is the inde pendent regulator of the telecommunications sector 
in China.  Please explain how MII will be shielded from industrial promotion and market management 
functions, which could be inc onsistent with the role of an impartial regulator.   
27. Please provide an update on China's draft telecommu nications law.  Is it still being circulated 
in draft form among China's ministries and agencies?   When will this draft law be circulated for 
public comment?  How will China provide a reasonable period for written comments to be submitted 
on the draft law? 
28. At last year’s transitional review before th is Council, the United States asked the following 
questions regarding licensing and value-added services but did not receive responses.  Could China 
please provide responses to these questions? 
(a) Since China's accession to the WTO, how ma ny applications has MII received from 
foreign carriers seeking to provide telecommunications services in the Chinese market?  How many of these applications ha ve been approved or denied in the basic 
services sector?  How many of these applications have been approved or denied in the 
value-added services sector?  What criteria ar e used to evaluate these applications? 
(b) China has reportedly licensed numerous new do mestic value-added service suppliers.  
Do these suppliers offer servi ces beyond the illustrative list of services that China set 
forth in the Services Schedule accompanying  its Protocol of Accession? If so, will 
China extend national treatment to foreign suppliers interested in offering similar 
services, not expressly noted in the illustrative list, which fall under China's domestic 
definition of value-added services?  Is  China planning on updating its domestic 
definition of value-added services?  If so, what is the timetable? Please explain why MII’s Catalogue omits “code and protocol conversion” from the list of value-added 
services, particularly when China’s Services Schedule identifies it as an example of a 
value-added service.  
VIII.  MEDIA  SECTOR 
29. The United States welcomed the October 2004 State Administration of Radio, Film and 
Television (SARFT) regulations officially permitti ng foreign and Chinese media partners to establish 
joint venture companies to produce and distribute  radio and television programs.  However, the 
February 2005 SARFT notice establishing guidelin es related to the implementation of these 
regulations seemed unnecessarily restrictive, and the United States remains concerned about the slow 
progress China has made in issuing licenses under these regulations.  The August 2005 media sector 
opinions on foreign participation in a variety of me dia fields are even more troubling.  The United 
States has not yet seen an official  copy of these media sector opinions, but it understands that they S/C/W/271 
Page 8  
 
  may cut back on prior market access liberalization and may contravene commitments set forth in the 
Services Schedule accompanying China’s Protocol  of Accession by requiring the Chinese joint 
venture partner to have operational control.  
(a) Please describe the ways in which the August 2005 media sector opinions are more 
restrictive than the October 2004 regulations.  Does China have any plans to 
withdraw the new restrictions found in the August 2005 media sector opinions? 
(b) When does China plan to release the Augus t 2005 media sector opinions publicly?  
To the extent that China h as been enforcing them, please explain how China justifies 
doing so in light of the commitment that it ma de in paragraph 2(C)(1) of its Protocol 
of Accession, which provides that “China undertakes that only those laws, regulations 
and other measures pertaining to or affecting trade in goods, services, TRIPS or the 
control of foreign exchange that are pub lished and readily available to other WTO 
Members, individuals and enterprises, shall be enforced.”   
30. The United States notes the new proposals SARFT circulated 21 June 2006 in the draft 
Revised Measures on Further Improving Assess ments and Rewards for the Distribution and 
Exhibition of Domestic Films .  One of the proposals in this draft measure would seem to require 
distributors and exhibitors to ensure that the annua l box office for domestic films is not less than 50 
percent.  If accurate, this could have serious adve rse effects on the ability of U.S. and other foreign 
film makers to take full advantage of China’s co mmitment to provide a set number of films to the 
China market annually.  Please explain this proposal and identify steps that SARFT intends to take to 
ensure that foreign film makers’ access to  the Chinese market is not impaired. 
31. Please explain China’s censorship process for video and TV broadcasting products. When 
will China begin reducing or removing restrictions  on foreign content in television programming? 
IX. CONSTRUCTION SERVICES 
32. In September 2002, Ministry of Construction (M OC) and the Ministry of Foreign Trade and 
Economic Cooperation (now MOFCOM) issued the Rules on Administration of Foreign-Invested 
Construction Enterprises and Rules on the Administration of Foreign-Invested Construction 
Engineering and Design Enterprises , known as Decrees 113 and 114.  These Rules provide a schedule 
for the opening up of construction engineering design services to joint ventures with majority foreign 
ownership and to wholly foreign-owned enterp rises, although to date the necessary implementing 
rules have not been issued.  Decree 114 creates conc erns for U.S. and other foreign firms by imposing 
new and more restrictive conditions than existed prior to China's WTO acce ssion, when they were 
permitted to work in China on a project-by-project basis pursuant to MOC rules.  In addition, 
Decree 114 for the first time requires foreign enterpri ses to incorporate in China, and it imposes high 
minimum registered capital requirements and fore ign personnel residency requirements that are 
difficult for many foreign-inv ested enterprises to satisfy. 
33. In an effort to mitigate industry adjust ment difficulties under Decree 113, MOC issued 
Circular 159 in September 2004, allowing foreign c onstruction firms to continue to operate on a 
project-by-project basis using licenses issued under Decree 32.  Project-by-project licenses were 
suspended on 1 July 2005, when Decree 113 entered into effect to regulate foreign invested firms’ 
compliance with China’s construction Qualification Grade System.  The requirements set forth include high registered capital holdings in China,  along with the proviso that firms could not use 
global assets to meet these requirements, maintenance of a staff of 200-300, and certain foreign staff 
local residency requirements. 
34. The United States welcomes recent steps taken by  MOC, including the issuance of Circular 
76 in March 2006 and the release of public comments on various rules and regulations over the past  S/C/W/271 
 Page 9 
 
 
  year. However, there remain significant concerns over the continued inability of foreign-invested 
enterprises to provide construction,  engineering and design, and project management services in the 
China market. 
35. When China responded to questions from the Unite d States at last year’s transitional review 
before this Council, it explained that it was wo rking on implementing rules for Decreee 114 and it 
was reviewing the requirement relating to the proporti on of foreign staff.  China also explained that it 
had no plans to revise Decree 114, even while acknow ledging that the market access requirements set 
forth in Decree 114 did distinguish between domestic  and foreign enterprises with regard to the 
number and the duration for foreign service providers .  The United States remains concerned over the 
national treatment implications of  these requirements for foreign service providers trying to compete 
in the Chinese market.  The United States is also  concerned that these requirements place new and 
more restrictive conditions than ex isted prior to China’s WTO accession. 
(a) Decree 114 places an unfair burden on foreign-invested enterprises, effectively only 
allowing Chinese companies the right to r eceive all classes of licenses to operate. 
Will China consider revising Decree 114 to  allow foreign and domestic companies 
the right to receive all classes of licenses?   
(b) Without finalized implementing rules for Decree 114, foreign-invested enterprises are 
effectively restricted from submitting license  applications.  When does China intend 
to issue proposed Decree 114 implementi ng rules for public comment?  What is 
China’s timetable for issuing finali zed Decree 114 implementing rules?   
(c) While the United States appreciates that some foreign firms have begun to receive 
general contractor and public works c onstruction licenses under Decree 113, there 
exist continued concerns that Decree 113,  through its onerous capitalization and 
staffing requirements, limits the ability of small and medium-sized foreign-invested 
enterprises to compete in the China ma rket.  Would China consider using 
international practices, such as perfor mance bonds, for construction licensing 
requirements in lieu of high registered capital holdings? 
(d) Under Decree 113, foreign-invested enterp rises are limited in the kinds of projects 
they can apply to undertake, raising na tional treatment issues since domestic 
enterprises face no such restrictions. Does China intend to broaden the scope of 
projects that foreign-invested  enterprises can undertake? 
(e) When does China intend to issue finali zed implementing rules for Circular 200 on 
project management in the construction sector and on the conditions applying to 
cross-border supply of integrated engineer ing services, including construction project 
management?  Will these implementing rules re move the requirement that the right to 
engage in project management is premised  on holding another construction enterprise 
qualification? Will these implementing rules clarify overlapping rules set forth in 
Decree 29, issued by the National Development and Reform Commission on 4 March 2005? 
X. LEGAL SERVICES 
36. While the United States acknowledges the steps China has taken toward opening the legal 
services sector, foreign firms continue to face onerous restrictions regarding market access and national treatment in China.  Despite China’s explana tion at last year’s transitional review before this 
Council, the United States remains concerned over China’s imposition of a three-year waiting period 
before a foreign law firm can open each additional of fice in China, particularly because it includes an S/C/W/271 
Page 10  
 
  application process that could take as long as ni ne months and requires that market need be 
demonstrated.  Please describe whether Ch ina has plans to address these concerns.  
XI. TRANSPARENCY 
37. In China’s Protocol of Accession and accompanying Working Party Report, Members 
recognized the overriding importance of transparen cy through a host of provisions.  Since China’s 
accession, China has made notable improvements in the transparency of its trade regime, particularly 
through the many notifications that it has made  to the WTO’s councils and committees as well as 
through its use of numerous official journals, othe r publications and the Internet to publicize new or 
modified trade-related laws, regulations and other m easures.  Nevertheless, there remains much to be 
done to further improve transparency in China, as China itself has acknowledged.  Transparency is a 
critically important area, both from a governmental perspective and from a business perspective.   
38. In Section 2(C) of its Protocol of Accession, China specifically committed to establish or 
designate an official journal dedicated to the pub lication of all trade-related measures, including, inter 
alia, “all laws, regulations and other measures pertaining to or affecting trade in . . . services.”  The 
term “laws, regulations and othe r measures” is defined broadly as “laws, regulations and other 
measures of the central government as well as local regulations, rules and other measures issued or 
applied at the sub-national level.”   
39. During past transitional reviews, China has stated that its official journal was the China 
Foreign Trade and Economic Cooperation Gazette , now published by MOFCOM and known as the 
MOFCOM Gazette.  Until March 2006, however, only  trade-related measures issued by MOFCOM, 
either on its own or jointly with other ministri es or agencies, were published in the MOFCOM 
Gazette; trade-related measures issued by other mi nistries and agencies were not published in the 
MOFCOM Gazette.  In March 2006, China’s State Council issued a notice directing all central, provincial and local government entities to begin sendi ng copies of all of their trade-related measures 
to MOFCOM for immediate publication in its Gazette.   
(a) Please provide an update on the progress being made by central, provincial and local 
government entities in fulfilling the Stat e Council’s directive to send measures 
pertaining to or affecting trade in services to MOFCOM for publication in the MOFCOM Gazette.  As part of that up date, please identify the government entities 
that regularly send their services measures to MOFCOM for publication in the MOFCOM Gazette.  Please also describe the types of services measures (e.g. laws, regulations, rules, measures, notices, decisions, etc.) regularly being sent to 
MOFCOM for publication in the MOFCOM Gazette.   
(b) With regard to measures pertaining to or affecting trade in services, please describe 
any progress that China has made during the past year in implementing the 
commitment that it made in Section 2(C) of its Protocol of Accession to provide a reasonable period for public comment on new or modified measures before 
implementing them, except in certain specified instances.   
 
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