WORLD TRADE  
ORGANIZATION  RESTRICTED 
S/C/W/341 
7 October 2011 
 (11-4945) 
Council for Trade in Services  Original:   English 
  
 
QUESTIONS FROM JAPAN 
 
Transitional Review Mechanism Pu rsuant to Paragraph 18 of  
the Protocol of the Accession of the People's Republic of China  
 
Questions and Comments of Japan on the Implementation by China 
of its Commitments on Trade in Services 
 
  The following communication, dated 3 Octobe r 2011, from the delegation of Japan is being 
circulated to the Members of the Council for Trade in Services.   
 
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 1. Japan appreciates China’s commitment to improve continuously the level of liberalization for 
the last ten years in accordance with the servi ces schedule made at the time of accession.  Japan 
believes that liberalization in the services sector w ill not only enhance the efficiency of the sector, but 
also contribute to China’s overall economic growth.  While regulatory framework has been upgraded, 
it seems that implementation does not keep pace with  the upgraded regulations even after this final 
TRM.  In this regard, Japan would like to reitera te that implementation of China’s commitment needs 
to be secured.  Japan also conti nues to encourage China to make fu rther efforts to enhance regulatory 
transparency, thus maximizing the benefits of liberalization.   
2. Japan is of the view that there are still rooms fo r further improvements in this area, in view of 
China’s commitment to transpar ency as described in the Report of the Working Party on the 
Accession of China.  In accordance with paragraph 18 of the Protocol on the Accession of the People’s Republic of China, which states that “C hina shall provide relevant information to each 
subsidiary body in advance of the review” and in the spirit of cooperation to render the TRM process 
most efficient and effective, Japan requests China to  provide with, in advance of the Regular Meeting 
of the Council for Trade in Services, responses and relevant information to the following questions 
and comments. 
I. OTHER BUSINESS SERVICES 
A.  C
OMPUTER AND RELATED SERVICES  
3. Japan understands that data center related works will play an important role in the future 
development of ICT industry.  On the other hand, there are certain restrictions on foreign affiliate 
company participation.  Japan would like to ask the following questions:  
(a) Regarding the installation and operation of da ta centers in China, could China explain 
what kind of restrictions are imposed on foreign affiliate companies? S/C/W/341 
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  (b) Japan would like China to explain whic h service classifications based on “the 
Catalogue for the Guidance of Foreign Investment Industries” correspond to this regulation.  In particular, Japan would lik e China to answer whether it is limited to 
the regulation on Internet Data Center service in Type one value-added services. 
(c) Japan would like China to explain which ser vice classification of W/120 is relevant to 
this regulation.  In addition, Japan would like China to explain the consistency with 
the current Schedule of China. 
(d) Japan would like China to explain if ther e are possibilities to abolish or relax the 
regulation.   
B. A
DVERTISING SERVICES  
4. In the last review, China stated that Artic le 3 of the “Implementation Rules for the 
Regulations on Advertisement Administration” re quires all companies applying for advertising 
business to have management capab ility of advertising laws and re gulations, design and products of 
advertisement, and editing.  On the other hand, only  suppliers that mainly operate advertising services 
are permitted to establish wholly foreign-owne d companies in China under the Regulations on 
Foreign Investment in Advertising Firms.  Japan believes that even suppliers that do not mainly 
operate advertising services can me et the requirements under Article 3 of the “Implementation Rules 
for the Regulations on Advertisement Administration”.  Therefore, Japan considers that the requirement for foreign suppliers un der Article 3 of the “Implementation Rules for the Regulations on 
Advertisement Administration” is more than n ecessary to ensure the quality of the service and 
imposes less favorable treatment for foreign firms than it accords to its own service suppliers.  Japan 
would like to ask China to explain the consistency of these measures. 
C. A
RCHITECTURAL /ENGINEERING SERVICES  
5. Japan understands that license approval as an architect/engineer certified by the Design 
Institute is required when a foreign company is engaged in Architectural/Engineering services in 
China.  However, for foreign architects/engineer s obtain license approval, a diploma certified by the 
Ministry of Education of the People's Republic of China is required.  Furthermore, foreign 
architects/engineers who have a degree from a forei gn university are not allowed even to take the 
examination for the license.  As a result, foreign architects/engineers face difficulties in acquiring the 
license, and this becomes an actual limitation for fo reign architects/engineers.  Japan understands that 
China has been actively concluding the mutual re cognition agreements of Architectural/Engineering 
Services related diplomas with several countries.  Ja pan would like China to explain the current status 
of such measures and initiatives. 
D. REAL ESTATE SERVICES  
6. Japan understands that real estate brokerage serv ice and rent clearing service are listed in the 
“Foreign Investments Catalogue” as restrictive servi ces.  However, it is still unclear whether this 
restriction applies to only foreign companies or to joint venture companies as well.  Japan would like 
China to clarify the foreign equity limitations on real estate related services, such as brokerages and 
clearing and property management, should there be any. 
7. When a foreign company conducts real estate bus iness in China, the co mpany needs to set up 
a local operating company or WFOE on a project-by-project basis.  Under the current regulations, foreign companies are not allowed to set up a gene ral real estate company which conducts real estate 
development and investment business in general in China, even though domestic companies can  S/C/W/341 
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  conduct these businesses.  Japan would like China to explain the consistency of these measures with 
China’s commitments in Real Estate Services under the GATS. 
8. As for projects over US$10 million, there is a burdensome capital requirement for foreign 
companies whereby over 50 per cent of the total cost shall be under its own equity, despite the fact 
that, for domestic companies, it is set at 35 pe r cent.  Japan would like China to explain the 
consistency of this measure with China’s commitm ents in Real Estate Services under the GATS.  
Japan would also like to request that China relax this regulation at least to the level of domestic 
companies. 
II. TELECOMMUNICATION SERVICES 
9. Japan would like to ask China to provide a summary of measures that are currently under 
discussion, details on the present situation, future procedures, and the schedule for the establishment 
of the Telecommunications Law, since China explai ned in the last review that it was “now under 
legislative review”.   
10. Japan understands that China has adopted license approval for entering map-searching 
services since last year and implemented a new regulation that only foreign capital corporate ventures 
with Chinese firms are allowed and that foreign i nvestment in joint ventures shall comprise no more 
than 50 per cent.  Japan would like China to confirm that this regulation has been set as a regulation 
for value-added services.  Japan would like to kno w the details of this regulation and relationship 
between the commitments in the WTO. 
11. Regarding entry into the telecommunications mark et in China by foreign affiliate companies, 
Japan welcomed the 50 per cent decrease of the mi nimum capital regulations in 2008.  However, 
Japan recognizes that the cost of basic telecommu nications services in Chin a has remained high, 
which is a billion yuan (15 billion yen) on a nati onal level and 100 million yuan (1.5 billion yen) on a 
provincial level.  Although Japan considers that this regulation does not distinguish entry into the telecommunications market in China by foreign affi liate companies, it could have a certain possibility 
of impeding vitalization of the market on a practical level.  Therefore, Japan would like to ask China 
about the possibility for abolishing or relaxing th e minimum capital regulations in the future.   
12. In the last review, China explained that permission on basic telecommunications services is 
given without relation to whether the supplier is f acility-based or resale-based.  Japan understands that 
entry into the basic telecommunications market by resale-based suppliers is the target for the 
minimum capital regulations.  China stated that “China was a vast country with an enormous 
population, which required heavier front-loaded invest ment in telecom infrastructure than those in 
most other countries.”  Nonetheless, Japan considers that this reason does not apply to market entry 
through resale.  In this regard, Japan asked the sa me question to China in the last TRM; however, it 
could not receive an answer.  Japan would like Ch ina to explain clearly the reason for imposing the 
minimum capital regulations and whether there are possibilities to relax them in the resale business. 
III. AUDIOVISUAL SERVICES 
13. Regarding Audiovisual Services, different ag encies according to each media type examine 
media content independently even if the content is  the same.  These procedures are burdensome for 
suppliers.  Japan would like China to explain its intention to simplify these procedures such as 
through one-stop service. 
14. Rights and Distribution Services for Certain Publications and Audiovisual Entertainment 
Products, at the Dispute Settlement Body held  on 25 March 2011, China reported that it had 
completed the implementation of most of the DSB's rulings and recommendations.  As this matter is a S/C/W/341 
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  major concern for Japanese industry, Japan request s of China early implementation of the DSB 
recommendations.  Japan continues to pay close atte ntion to the progress of Chinese implementation.  
Therefore, Japan would like China to explain the following. 
15. Regarding the importation of motion pictures for theatrical release, only management units 
designated by State Administration of Radio, Film and Television are permitted for import, 
management units without designation are not pe rmitted.  Subject to the DSB Recommendations, 
China is requested to amend the Regulations on the Administration of Movies, and Japan would like to know when China intends to amend the regulati on.  Furthermore, Japan would like to confirm 
whether wholly foreign-owned firms will be allo wed to import motion pictures for theatrical release 
after the amendment. 
16. China released the draft revision of the Cata logue for the Guidance of Foreign Investment 
Industries in April 2011.  Japan would like China to provide a detailed schedule for the revision.  The 
released draft revision has removed the impor ting of “newspaper, publishing and periodical 
publication” and “audiovisual services and electr onic publishing” from the catalogue prohibited from 
foreign investment.  Japan would like China to confir m that wholly foreign-owned firms will be able 
to import these services after approval of the amendment.   
IV. CONSTRUCTION AND RELATED ENGINEERING SERVICES  
17. Since China’s accession to the WTO, it has ma de proactive efforts to promote trade 
liberalization to fulfill its obligations.  However,  Japan regrets that recently no significant 
liberalization has taken place in the area of c onstruction and related engineering services.   
18. China permits the establishment of wholly fore ign-owned enterprises; however, conditions for 
employment, including the minimum employment requi rement of engineers, and minimum capital are 
imposed for establishment of foreign enterprises.  In  addition to such requirements, construction work 
that can be undertaken by foreign enterprises is limite d to four sections of work; and the ceiling of the 
contract value is restricted to five times as much as the capital of the enterprise.   
19. Japan would like to point out that the above-m entioned requirements have become obstacles 
to market access in spite of China’s intention to create an open market.  Under such circumstances, 
foreign construction enterprises are not able to acquire  construction permission, even if they are fully 
capable of obtaining them, and are not able to u tilize their expertise.  Japan considers that these 
requirements are adverse to China’s intention of liberalizing construction and related engineering 
services.   
20. China mentioned in the past review about th e future possibility of improvement of the 
restriction of minimum registered capital requireme nts while there were some difficulties.  Japan 
would like China to confirm the results of such examination. 
21. With respect to “constructor (jian zao shi)”, in order to foster a healthy market and ensure the 
quality of construction work, the Government of Chin a introduced the requirement that a “constructor 
(jian zao shi)” to be assigned to every project site .  However, there are not enough constructors to 
meet the demand so that it is difficult to empl oy a “constructor.” As a result, the lack of 
“constructors” becomes an obstacle to market access.  Japan would like China to explain the 
consistency of this actual limitation with China’s schedule of commitments.  Japan requests again that 
China clarify how many people, especially forei gn people, have passed the exam and gained 
qualification as a “constructor (jian zao shi)”, which China did not answer in the last TRM of 2009.  Japan understands that China has implemented a tr ansitional measure to allow those who possess the 
project manager certificate to obtain temporary constructor (jian zao shi) license.  Yet, as the project 
manager certificate is only issued to Chinese nati onals, no foreign people are able to obtain this  S/C/W/341 
 Page 5 
 
 
  temporary license.  Japan would like to ask China to clarify in details on this matter and to explain the 
future timeline of this transitional measure. 
22. In some provinces, local governments require construction companies to set up a local office 
when accepting orders, in addition to the existing branch  office within the same province.  This rule is 
only applied to some provinces and is not applied na tionwide.  Moreover, in registering a company, 
some local governments, such as Tianjin and Guangzhou, impose requirements on the minimum floor 
area of an office.  We believe that such requi rements have no relevance to the business-operating 
competence of the company.   
23. According to China’s WTO commitments and domestic law, the Government of China 
provides the same market conditions for both forei gn and Chinese construction companies, but, on the 
ground, foreign enterprises face difficulties by being treated differently from China’s companies.   
24. Japan requests China to provide reasonable expl anation for the rationale of those measures 
and their consistency with the Chinese commitment of  promoting free trade.  We also request that 
China eliminate or relax the restrictive regulati ons on awarding construction work, or to undo the 
abolishment of direct contracts. 
V. DISTRIBUTION SERVICES 
25. China made commitments under GATS Article XVI and Article XVII for mode 3 with regard 
to distribution services.  Household-use game machines and software are not excluded in its Schedule of Specific Commitments.  On the other hand, Chin a prohibits the distribution of household-use game 
machines and software to protect public morals an d the public order.  However, Japan’s opinion is 
that blanket prohibition of distribution of househol d-use game machines and software is beyond the 
purpose of protecting public morals and the public  order.  Japan would like China to explain the 
inconsistency of these measures with China’s comm itments in the Distribution Services sector under 
the GATS. 
VI. TRANSPORT SERVICES 
26. When there is a bilateral agreement with China,  we have heard that under national legislation 
(interim provisions on examinati on and approval of wholly-forei gn-owned shipping companies), 
wholly-foreign-owned shipping companies are permit ted to establish themselves in China under the 
condition that “there is a scheduled entering a por t where the wholly owned foreign shipping company 
is located”.  Therefore, it is impossible for fore ign shipping companies to establish wholly-foreign-
owned shipping companies in the inner part of China due to the lack of ports of call.  The condition 
constitutes barriers to supplying services for customers who reside in the inner part of China.  We 
would like to know the prospect for amendment of this condition. 
27. When there is a bilateral agreement with China,  we have heard that under national legislation 
(interim provisions on examinati on and approval of wholly-foreign-owned shipping companies), some 
wholly-foreign-owned shipping companies are permitted  to establish themselves in China.  However, 
according to the law, the activities in maritime agency services by wholly-foreign-owned shipping 
companies are limited to: 
(a) Pick-up service 
(b) Issuance of bills of lading 
(c) Fare collection S/C/W/341 
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  (d) Conclusion of service contracts 
for the ships which the parent company owns or operates.  To provide improved maritime agency 
services, Japan would like to know the prospect of including husbanding activities, issuance of 
Delivery Orders, etc. to the scope of activities allowed for the wholly-foreign-owned shipping 
companies. 
 
28. Foreign enterprises of transport services cannot  open a second branch office in one bonded 
area because of the regulation.  To have a sec ond office, they have to establish another local 
subsidiary by spending a lot of time and money on double/triple investments.  Japan requests that 
China deregulate the establishment of new bran ch offices whose companies exercise business in 
bonded areas. 
29. As to maritime export from China, “Zero-fare ” transport contracts or even “Minus-fare” 
transport contracts with kickbacks are conducted be tween Chinese low-cost shipping companies and 
cargo shippers in China, and that cost would be added as enormous premium charges over the 
transport fee for consignees overseas.  Chinese au thorities have issued a regulation for shipping 
companies; however, it seems not to be effective.  In addition, this unreasonably high fare system 
penalizes consignees outside China.  Foreign logist ics companies in China also face unfair market 
competition on unclear fare-system.  Sometimes logi stics companies overseas are charged on the price 
which is not on the list of B/L when they use the low-cost shipping service.  As a result, those 
companies very likely put the extra-cost for c onsignees and transport business companies.  The 
Logistics Companies may lose their trust from consignees and transport business partners, or 
customers .  Japan would like to know about further improvements for levying unfair premium 
charges.   
30. Regulations and operation rules vary by each cust oms office at ports in China.  If a new rule 
has been issued, such as procedur es by Chinese authorities, sometimes it is difficult to know who is in 
charge of the rule and who to ask for explanation.   Japan would like to know whether there are one- 
stop information branches on custom proce dures in the central/local government.   
 
 
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