RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/W/293 
17 November 2008 
 (08-5575) 
Council for Trade in Services Original:   English 
  
 
COMMUNICATION FROM THE EUROPEAN COMMUNITIES 
 
Transitional Review Mechanism Pursuant to Paragraph 18 of the Protocol of
 
Accession of the People's Republic of China ("China")  
 
 
 The following communication, dated 11 November 2008, from the delegation of the European Communities is being circulated to the Members of the Council for Trade in Services.   
 
_______________ 
 
 1. The EC would like to transmit, in advance of the meeting of the Council for Trade in 
Services, the following questions and comments on the implementation by China of GATS agreement, its commitments listed in the Schedule of Specific Commitments and of related provisions 
of its accession Protocol. 
2. In order to ensure effective review of the implementation by China of its commitments, the 
EC requests China to provide responses and releva nt information to the following questions in 
advance of the meeting of the Council for Trade in  Services in accordance with the paragraph 18 of 
the Protocol of Accession of China.   
3. The EC reserves its right to raise additiona l questions, upon receipt of responses to its 
questions and comments by China, in  accordance with paragraph 8 a nd paragraph IV.3 (a) of Annex 
1A of the Protocol of Accession of China. 
I. AIR TRANSPORT SERVICES 
4. In the GATS Schedule accompanying its Protocol of Accession, China made commitments 
under GATS Article XVI and Article XVII for Mode 1 on Computer Reservation Systems (CRS).  On 
16 November 2007, the Council for Trade in Services addressed the annual review of the 
implementation by China of the WTO Agreement.  On that occasion, China reported that the China 
General Administration of Civil Aviation had fini shed drafting the Interim Regulation on Approval 
and Administration of the Direct Access and U sage of Foreign Computer (Passenger) Reservation 
System by Sales Agents of Civil Air Transport En terprises (draft New Regulation).  On that occasion, 
China also reported that the Regulation had be en submitted for approval, and the time for 
promulgation remained uncertain.  The EC understa nds that this draft New Regulation has not yet 
been promulgated.  In this respect, please could China: 
(a) Confirm that the draft New Regulation has not yet been approved; 
(b) Describe what steps are required for approval of the draft Interim Regulation; 
(c) Provide a definitive timeframe for the entry into force of the draft New Regulation; S/C/W/293 
Page 2  
 
  (d) If, for any reasons, a new draft is bei ng elaborated, please provide a definitive 
timeframe for the entry into force of the draft New Regulation; 
5. The EC understands that the draft New Regula tion foresees a licensing procedure for direct 
access and use of foreign CRS by Chinese agents.  However, the draft New Regulation reportedly 
does not fully liberalise the provision of CRS ser vices.  In this respect, could China please: 
(a) Confirm that the Interim Regulation foresees possibilities for direct access to and use 
of foreign CSR by Chinese travel agents; 
(b) Describe which licensing procedures will a pply to foreign CRS providers, if any; 
(c) Describe which licensing procedures will a pply to Chinese travel agents, if any, 
(d) Describe which licensing procedures will a pply to Chinese Air Transport Enterprises, 
if any. 
(e) Describe the requirements that need to be fulfilled by any applicant (foreign CRS 
services suppliers, Chinese travel agents and/or  Air Transport Enterprises)  
(f) Describe the scope of activities allo wed under the draft New Regulation. 
6. Please could China provide a copy of the draft New Regulation? 
7. Pending the adoption of the draft New Regulation, please could China describe for period 
until the promulgation of the draft New Regulation: 
(a) How foreign CRS services suppliers may currently provide CRS services directly to 
travel agents in China as afforded by China's commitment in Mode 1(c) on CRS? 
(b) How foreign CRS services suppliers may provide CRS services directly to Chinese 
airlines in China as afford ed by China's commitment in Mode 1(c) on CRS? 
(c) The requirements and the licensing procedure, if any that must be fulfilled by Chinese 
CRS services suppliers to operate in China? 
(d) The requirements and the licensing procedure, if any that must be fulfilled by Chinese 
travel agents to enable  them to use Chinese CRS? 
8. Foreign airlines have submitted applications fo r the use of foreign CRS at their designated 
travel agents in accordance w ith the Regulation 51/1995 presen ting Provisional Administrative 
Measures on the Use of Computer Passenger Rese rvation System by Foreign Air Transportation 
Enterprises and Their Sales Agents in China.  Please could China explain: 
(a) Why backfilling applications based in Ar ticle 6 of Regulation 51/1995 submitted by 
foreign airlines for the use of foreign CRS,  despite approval being granted, have not 
allowed foreign CRS to provide CRS services directly to travel agents? 
(b) Why the 19 new applications submitted by foreign airlines in 2002 for the use of 
foreign CRS have not been answered, desp ite Regulation 51/1995 setting a time limit 
of sixty (60) days?   S/C/W/293 
 Page 3 
 
 
  II. CONSTRUCTION SERVICES 
9. In the GATS Schedule accompanying its Protocol of Accession, China made commitments 
under GATS Article XVI and Article XVII for Mode 3 with regard to construction sector.  These 
commitments are implemented throug h series of measures.  The EC w ould welcome clarifications on 
the following issues: 
10. The implementing rules of the Decree 114 include measures which are provided on a 
temporary basis: 
(a) The possibility to use "temporarily" Chinese registered architects or engineers where 
relevant foreign professionals also qua lified in China cannot be found;  
(b) The 6-month residency requirement may not be applied where foreign architects or 
engineers cannot "temporarily" satisfy it.   
11. However, there is no guidance about how the "t emporary" should be interpreted.  The EC 
would welcome any clarification about when this uncertainty which undermines the value of these 
implementing rules will be addressed.   
12. China's GATS commitments in construction ser vices do not include specific limitations on 
numbers of foreign professional staff for forei gn-invested enterprises as well as residency 
requirements; however the Decree 114 foresees such requirements.  The EC would welcome a clarification. 
13. China's GATS commitments in construction ser vices do not mention any limitation as regards 
national treatment in Mode 3.  However, the No tice No 73 on foreign personnel of construction 
enterprises foresees a three-month a year residency requirement.  This was not removed by 
Circular 159.  The EC would like to know wh en China intends to abolish these residency 
requirements. 
14. Capital requirements providing safe guarantees by contractors in the construction sector are 
excessive and hinder effective use of companies' ca pital.  The EC would like to know whether China 
is considering to relax the registered capital and net assets requirements and replace them with 
alternative financial instruments available - such as letters of guarantees, insurance bonds or bank 
guarantees.   
15. Market access barriers are particularly felt in the dredging sub-sector which faces very 
specific constraints:  practices de facto prevent foreign dredging companies from setting up foreign-
invested entities in China, thus they try to opera te as chartering companies, renting foreign dredging 
vessels to Chinese dredging companies.  However, in such a case, and for the same project, a foreign 
company chartering a dredging vessel is subject to  significantly higher taxes than a local dredging 
company directly importing a foreign dredging vessel, which hinders unfairly the competitiveness of foreign services suppliers.  The EC would like to k now whether China is considering to effectively 
open dredging services to the particip ation of foreign services suppliers. 
III. DISTRIBUTION SERVICES 
16. In the GATS Schedule accompanying its Protocol of Accession, China made commitments 
under GATS Article XVI and Article XVII for Mode 3 with regard to distribution services.   
17. As regards the distribution of refined oil products  in China, this is regulated by Measures for 
the Administration of the Refined Oil Market (Order of the Ministry of Commerce No.23 [2006]) and S/C/W/293 
Page 4  
 
  the Notice Relevant Issues about the Business Oper ation of the Private Enterprises of Refined Oil 
Products (No.  602 [2008] of the National Deve lopment and Reform Commission).  These acts 
foresee licensing procedures and criteria for wholesale and retail of refined oil products.  In this respect, could China please list any other measures th at apply to the provision of wholesale and retail 
services of oil products. 
18. The criteria in the Order No 23 [2006] on Administration of the Refined Oil Market require 
long-term and stable supply of refined oil to bot h wholesalers and retailers.  In case of wholesalers 
this can be achieved through owning a refinery, be ing an importer or having a long-term contract with 
a qualified importer or wholesaler.  In this respect, could China please: 
(a) Inform the EC how many qualified importe rs and how many qualified wholesalers 
are there in China currently, incl uding the state-trading companies. 
(b) Confirm that enterprises qualified for import of refined products that have been 
licensed to offer wholesale and/or retail servi ces of refined oil products are allowed to 
distribute the refined oil that they have imported, without any obligation to sell the product to SinoPec or Petrochina.  Clarify whether this is based on Order No 23 
[2006] on Administration of the Refined Oil Market.  If not, please provide the 
relevant Chinese legal basis. 
(c) Clarify the areas, if any, in which Chinese state-trading enterprises enjoy monopoly 
rights.  Describe what measures has China put in place to ensure that the state-trading 
enterprises of refined oil who are also active in all levels of distribution services of refined oil and hence in direct competition with foreign wholesale and retail providers 
respect China's obligations under Article VIII of the GATS, in particular to ensure 
that the state-trading enterprises do not abuse their position to act in a manner 
inconsistent with China's distribution commitments.   
19. As regards distribution of pharmaceutical products  in China, China has taken (by 2008) full 
commitments on wholesale and commission agents services and limited commitments on retail 
services, and full commitments for selling products ma nufactured in China.  The EC understands that 
foreign invested companies who wish to wholesale and retail imported products  need to get approval 
from Ministry of Commerce and also the State Food and Drug Administration (SFDA).  Could China please: 
(a) Clarify in which order the application has to be submitted to these authorities for 
approval; 
(b) Clarify in which legal act this has been established; 
(c) Clarify if wholesaler are allowed to outsource the warehousing of the imported goods 
and if not, whether China has considered introducing such a possibility; 
(d) Describe what measures it has taken to en sure the possibility for foreign invested 
companies to provide commission agents services for selling pharmaceutical goods.   
20. As regards retailing services via Internet (e-commerce), Annex 2 of China’s Accession 
Protocol in the Service Schedule states that "Retailing services consist of the sale of good/merchandise for personal or household consumpti on either from a fixed location (e.g.  store, 
kiosk, etc) or away from fixed location and relate d subordinated services".  In the Transitional Review 
of 2007, China stated (S/C/M/90) that the retaili ng away from fixed outlets is “different from the 
value-added telecommunication services, which re quired an ICP license.” However, to provide  S/C/W/293 
 Page 5 
 
 
  retailing services over Internet (e-commerce) in China,  an Internet Service Provider license authorized 
by the Ministry of Information Industry is require d.  The EC would welcome an explanation why a 
telecommunication licence is required for pr ovision of distribution services.     
IV. POSTAL & COURIER SERVICES, INCLUDING EXPRESS DELIVERY SERVICES 
21. The EC raised on 16 November 2007, when the Council for Trade in Services addressed the 
annual review of the implementation by China of  the WTO Agreement, a number of questions and 
comments with regard to the reform of postal law in  China.  The EC understands that the draft postal 
law has passed the first reading in the Nationa l Peoples Congress.  Could China provide a clear 
timeframe for the entry into fo rce of the new Postal Law? 
22. Based on the information that has been circulat ed on the drafts of the postal law, the EC 
would like to raise a number of questions regarding this reform: 
(a) When China joined the WTO, it permitted foreign companies to provide express 
delivery services under government issued licenses, with a narrowly defined 
limitation on the delivery of private letters reserved to China Post.  The Schedule of 
Specific Commitments on Trade in Servic es of China specifies the scope of 
commitments applying to all courier services that were not reserved at the time of accession.  However, it seems that the new draft postal law would include a provision that would bar foreign invested express delivery services companies from delivering 
all documents, regardless of their weight, which a more limited than the reserved area 
at the time of accession.  Can China confirm if this the case or not and explain the reasons? 
(b) The draft postal law provides for a definition of express delivery referring only to 
time aspect but not on quality or price asp ect.  Can China explain how the definition 
is in line with international practices?  
(c) The draft postal law provides for new authorisation procedure.  Can China confirm 
that companies authorised to prov ide services under current legislation: 
(i) will be able to continue their activities in the same scope; 
(ii) will not be required to go through additional authorisation/licensing 
procedures for the services they are already authorised to provide. 
23. China issued on 12 September 2007 postal indus try standards for express service, which it has 
confirmed, inter alia during its last Trade Policy Review, are voluntary.  In this respect, can China 
please clarify if regional authorities have the right to impose the postal industry standards or parts 
thereof as mandatory or as precondition for authorisation?  
24. In addition, China issued Implementing Measures in August 2008 requiring additional 
registration for express delivery service providers.  In this respect, can China: 
(a) Explain why the registration was necessary in  a situation where the provision of such 
services is already a licensed activity? 
(b) Provide information if any licensed service providers were not granted registration? S/C/W/293 
Page 6  
 
  V. TELECOMMUNICATIONS 
25. In the GATS Schedule accompanying its Protocol of Accession, China made commitments 
under GATS Article XVI and Article XVII for Mode 3 with regard to telecommunication services.  
The EC has raised on 16 November 2007 when the Council for Trade in Services addressed the 
annual review of the implementation by China of  the WTO Agreement a number of questions and 
comments with regard telecommunication services, but has not received responses to all questions. 
26. As regards basic telecommunication services, could China please: 
(a) Explain which are the requirements in China for the provision of basic services?  
(b) Confirm that China does not maintain a requi rement for foreign investors to choose a 
Chinese joint-venture partner from the b asic telecommunication sector, in accordance 
with paragraph 314 of the Working Party report?  
(c) Confirm that until present there is no single example of a foreign invested equity joint 
venture providing mobile or fixed services in China? 
27. The Regulation on the Administration of Fore ign Invested Telecommunications Enterprises 
sets minimum registered capital requirement (RMB  two billion for a nationwide provider).  This 
requirement is excessively high.  Is a reduction of  these requirements under consideration in China?   
28. As regards value added telecommunication services, could China please: 
(a) Describe which measures it has taken in order to address the problems encountered 
by foreign companies entering the VAS market, in particular as regards the transparency of applicable procedures?  
(b) Can China confirm that only online data processing and transaction processing 
business;  storage and forwarding services;  and information services are allowed to 
be provided by foreign service suppliers?  
29. Can China provide the EC with specific info rmation on the organisation (staffing, powers 
vested) of its regulatory authority responsible  for telecommunications and especially, on the 
requirements guaranteeing the independence of its regulator? 
 
__________