WT/TPR/S/264 Trade Policy Review 
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  IV. TRADE POLICIES BY SECTOR 
(1) AGRICULTURE  
(i) Agriculture in China 
1. Despite strong growth in manufacturing and service s, agriculture is still an important part of 
China's economy:  in 2010, it contributed 10% to GDP  and represented about 37% of all employment.  
Although the number of people employed in agricu lture has been falling while output has been 
increasing, indicating rising productivity, the diffe rence between agriculture's contribution to GDP 
and to employment also indicates that productivity remains well below that found in other sectors and helps to explain the income disparity between rural and urban areas. 
2. In 2010, imports of agricultural goods (WTO definition) into China were worth about 
US$67 billion (about 5% of total imports of goods ) and exports about US$36 billion (about 2% of 
total exports of goods).
1  China is the biggest producer in th e world of several major agricultural 
products, including rice, cotton, wheat, and potatoes.2 
(a) Production 
3. The total value of production of agriculture in China has grown strongly over the past few 
years;  it reached ¥5,777 billion in 2010, with an av erage annual increase of over 12%.  This is a result 
of both rising prices and increasing quantities of pr oduction for most of the main products.  In terms 
of the value of production, vegetables are the ma in product (20% of the output value), followed by 
swine (16%), fowl (10%), rice (8%), and maize (5%)  (Table IV.1).  Production is broadly based with 
the top ten products making up just over half of the gross value of all agriculture production.   
4. The increase in production quantities has varied substantially from one product to another.  
Production of milk nearly tripled from 2002 to 2008 a nd then stabilized at ne arly 36 million tonnes, 
and production of apples, poultry meat, maize, and wheat also grew strongly.  However, production 
volumes of some major products have increased by much smaller amounts and production of beans 
declined over the same period (Table IV.2).3  Data on yields indicate that, for the main crops, most of 
the increase in production has come  from increased area  harvested, as yields (in kg/ha) have not 
increased by the same amount (Table IV.3). 
5. Practically all of China's 200 million farms are sm all family farms with an average farm size 
of only 0.6 ha.  The small size severely restricts the amount of capital that can be invested in machinery and other labour saving investments.  Unt il recently, the low cost of labour meant that this 
was not always a restriction on production.  Small fa rm sizes and high levels of labour availability 
also meant that production grew most strongly for labour-intensive crops such as fruits and 
vegetables.  However, labour shortages and ri sing labour costs may be becoming a constraint on 
production.
4 
                                                      
1 UNSD Comtrade online database.  Viewed at:  http://comtrade.un.org/ [October 2011]. 
2 FAOStat online database.  Viewed at:  http://faostat.fao.org/ [October 2011]. 
3 FAOStat online database.  Viewed at:  http://faost at.fao.org/ [October 2011 ];  and OECD Producer 
and Consumer Support Estimates database.  Viewed at:  http://www.oecd.org/document/59/0,3746,en_2649_ 
33797_39551355_1_1_1_1,00.html [October 2011]. 
4 Zhang, Yang, and Wang (2010). China WT/TPR/S/264 
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  Table IV.1 
Value of output for agriculture and selected products, 2002-10 
(¥ billion) 
 2002 2003 2004 2005 2006 2007 2008 2009 2010 
Total output value 2,339  2,441  3,031  3,292  3,361  4,078  4,863  5,025  5,777  
Vegetable 403  442  491  563  622  742  857  947  1,157  
Swine 406  444  617  644  505  813  1,096  906  920  
Fowl 256  276  328  373  377  420  488  517  564  
Rice 209  194  297  298  278  329  363  367  447  
Fruit and nut 149  157  177  209  230  280  318  352  439  
Maize 137  145  196  199  209  237  262  249  303  
Wheat 105  106  142  162  161  183  198  235  235  
Live cattle 83  95  109  125  136  136  174  183  200  
Oil-bearing crops 68  79  100  96  87  123  156  138  162  
Cotton 53  79  88  88  102  125  110  102  160  
Sheep and goats 48  56  65  74  56  90  108  118  140  
Soybean 43  50  63  65  53  49  62  57  61  
Note: 1. Total output value corresponds to data for "Agricultu re" and "Animal husbandry" from the National Statistics Bureau. 
 2. Data on "Fruit and nut" in 2009 and 2010 do not include nuts.  3. In 2009, data for agriculture and fo restry were adjusted accord ing to the new Products Catalogue for Statistics.   
Source:  Data from the National Statistics Bureau. 
Table IV.2 
Volume of agricultura l production for selected products, 2002-10 
(Million tonnes) 
 2002 2003 2004 2005 2006 2007 2008 2009 2010 
Pork 41.2 42.4 43.4 45.6 46.5 42.9 46.2 48.9 50.7 
Poultry meat 12.0 12.4 12.6 13.4 13.6 14.5 15.3 15.9 16.6 
Rice 174.5 160.7 179.1 180.6 181.7 186.0 191.9 195.1 195.8 
Apples 19.2 21.1 23.7 24.0 26.1 27.9 29.8 31.7 33.3 
Maize 121.3 115.8 130.3 139.4 151.6 152.3 165.9 164.0 177.2 
Wheat 90.3 86.5 92.0 97.4 108.5 109.3 112.5 115.1 115.2 
Beef 5.2 5.4 5.6 5.7 5.8 6.1 6.1 6.4 6.5 
Rapeseed 10.6 11.4 13.2 13.1 11.0 10.6 12.1 13.7 13.1 
Cotton 4.9 4.9 6.3 5.7 7.5 7.6 7.5 6.4 6.0 
Mutton 2.8 3.1 3.3 3.5 3.6 3.8 3.8 3.9 4.0 
Beans 22.4 21.3 22.3 21.6 20.0 17.2 20.4 19.3 19.0 
Sugar crops 102.9 96.4 95.7 94.5 104.6 121.9 134.2 122.8 120.1 
Milk 13.0 17.5 22.6 27.5 31.9 35.3 35.6 35.2 35.8 
Source:  Data from the National Statistics Bureau. 
Table IV.3 
Yields of agricultural products for selected products, 2002-10 
(Kg/ha) 
 2002 2003 2004 2005 2006 2007 2008 2009 2010 
Rice 6,189  6,061  6,311  6,260  6,280  6,433  6,563  6,585  6,553  
Wheat 3,777  3,932  4,252  4,275  4,593  4,608  4,762  4,739  4,748  
Corn 4,924  4,813  5,120  5,287  5,326  5,167  5,556  5,258  5,454  
Cotton 1,175  951  1,111  1,129  1,295  1,286  1,302  1,289  1,229  
Soybean 1,893  1,653  1,815  1,705  1,620  1,454  1,703  1,630  1,771  
Rapeseed 1,477  1,582  1,813  1,793  1,833  1,874  1,835  1,877  1,775  
Sugarcane 64,663  64,023  65,199  63,970  70,450  71,228  71,210  68,093  65,700  
Source:  Data from the National Statistics Bureau. WT/TPR/S/264 Trade Policy Review 
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  (b) Trade 
6. Over the past ten years, China's imports and e xports of agriculture products (WTO definition) 
have grown considerably.  The fall in the value of trade in 2009 compared with 2008 was more the 
result of the drop in commodity prices, as import volumes continued to rise in this period.  
Furthermore, in value terms, exports and imports resumed their growth 2010. 
7. In value terms, imports have increased by an  average of 23% per year since 2001, reaching 
US$67 billion in 2010 (Chart IV.1).  This rate of growth is only sli ghtly faster than for imports of 
goods as a whole, and agriculture still represents less than 5% of total imports of goods.  The main 
source of imports is the United States, followed by Brazil, Argentina, and Malaysia.  The rate of 
growth in imports varies considerably from one pr oduct to another.  For the main imported products, 
growth was particularly strong for cotton, soybean oi l, malt extracts, and palm oil (Table IV.4).   
010,00020,00030,00040,00050,00060,00070,00080,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Total agricultural exports
Total agricultural importsChart IV.1
Agriculture exports and imports, 1999-2010
US$ million
Source: UNSD Comtrade, http://www.comtrade.un.org.
 
8. For over a decade soybeans have been by far the most important import, making up over one 
third of all agriculture imports, followed by cotton,  palm oil and wool.  The United States is the main 
supplier of soybeans, followed by Brazil and Argentin a.  The United States is also the main supplier 
of cotton, followed by India and Uzbekistan.  Mala ysia is the main supplier of palm oil, followed by 
Indonesia. 
9. Exports have also increased considerably ove r the past ten years, nearly tripling to 
US$36 billion in 2010 (Table IV.5).  The structure of exports changed consid erably during this time 
as exports of some products, such as vegetables, fruit s and food preparations in creased at much faster 
rates than more traditional exports, such as rice and raw silk.  The main destination for exports of 
agricultural products is Japan, followed by the United States, and Hong Kong, China. 
 
 China WT/TPR/S/264 
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  Table IV.4 
Imports of selected agricultural products, 2001-10 
(US$ million, '000 tonnes, and %) 
HS 
Code Commodity description 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 
1201  Soybeans US$ million 2,810  2,483 5,417 6,979 7,778 7,489 11,473  21,815  18,787 25,093 
'000 tonnes 13,939   11,314 20,741 20,230 26,590 28,237  30,817   37,436  42,552  54,798 
5201  Cotton US$ million 71   180 1,163 3,166 3,191 4,867  3,477   3,491  2,114  5,655 
'000 tonnes 56   171 870 1,901 2,568 3,641  2,458   2,110  1,526  2,836 
1511  Palm oil US$ million 425   849 1,443 1,868 1,782 2,274  3,683   5,213  4,219  4,711 
'000 tonnes 1,517   2,221 3,325 3,857 4,330 5,069  5,095   5,282  6,441  5,696 
5101  Wool US$ million 790   815 753 1,077 1,210 1,260  1,790   1,686  1,461  1,955 
'000 tonnes 250   192 165 221 247 277  309   280  305  315 
4101  Hides  US$ million 606   565 712 959 1,023 1,204  1,290   1,413  1,142  1,514 
'000 tonnes 437   437 532 622 649 705  680   757  974  893 
0402  Milk, cream 
concentrated US$ million 115   162 217 274 235 291  326   401  584  1,396 
'000 tonnes 60   112 135 146 108 136  99   102  249  417 
0714  Roots and 
tubers US$ million 153   143 195 344 421 621  660   393  890  1,207 
'000 tonnes 1,951   1,761 2,368 3,442 3,336 4,951  4,621   1,979  6,109  5,764 
1507  Soybean oil US$ million 24   408 1,015 1,549 908 800  2,146   3,334  1,842  1,203 
'000 tonnes 70   870 1,884 2,516 1,694 1,543  2,823   2,586  2,391  1,341 
1901  Malt extract US$ million 71   105 101 145 175 282  355   581  847  979 
'000 tonnes 18   27 28 38 46 68  75   91  119  125 
0207  Poultry meat US$ million 444   426 462 154 334 462  945   1,088  984  963 
'000 tonnes 707   574 644 185 383 588  804   833  750  542 
Total agriculture imports   10,473   10,842  17,003  25,608  25,738  28,790  37,534   54,597   47,570  67,463 
Source:   UNSD Comtrade.  Viewed at:  http://comtrade.un.org/. 
Table IV.5 
Exports of selected agricultural products, 2001-10 
(US$ million and %) 
HS 
Code Commodity description 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 
0703  Onions US$ million 269 403 462 541 714 996 1,048 797 1,269 2,612 
'000 tonnes 852  1,337 1,646 1,605 1,784 1,863 2,133  2,114  2,152 2,060 
0712  Dried 
vegetables US$ million 349 374 446 573 702 846 935 931 1,040 1,882 
'000 tonnes 202  188 214 230 242 274 318  318  316 369 
2008  Fruit, nuts, 
preserved nes US$ million 507 551 712 830 947 1,128 1,484 1,809 1,565 1,868 
'000 tonnes 568  699 861 961 1,063 1,136 1,348  1,312  1,246 1,308 
1602  Other 
prepared/ 
preserved meat 
products US$ million 593 666 711 838 1,109 1,172 1,214 1,003 1,036 1,316 
'000 tonnes 231  263 281 302 390 420 407  276  278 352 
2309  Animal feed US$ million 92 89 98 125 183 282 541 921 873 1,234 
'000 tonnes 186  145 144 161 174 210 424  666  550 748 
0808  Apples, pears, 
quinces US$ million 141 209 290 365 428 520 674 913 933 1,075 
'000 tonnes 486  682 906 1,092 1,192 1,179 1,425  1,600  1,635 1,561 
2005  Other 
vegetables 
prepared/ 
preserved US$ million 358 400 434 552 671 776 938 892 795 965 
'000 tonnes 485  528 582 705 811 879 983  930  835 936 
Table IV.5 (cont'd) WT/TPR/S/264 Trade Policy Review 
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  HS 
Code Commodity description 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 
2009  Fruit juices US$ million 179 199 285 366 525 671 1,353 1,259 762 864 
'000 tonnes 258  323 453 533 707 746 1,141  794  897 896 
0713  Dried 
vegetables US$ million 280 319 359 331 388 406 542 826 816 836 
'000 tonnes 719  860 1,041 795 868 801 859  1,031  1,096 1,000 
0504  Offal US$ million 284 291 399 505 510 548 574 843 791 832 
'000 tonnes 52  56 65 63 64 71 69  68  70 76 
 Total agricultural exports  11,954 13,519 15,978 16,435 19,655 22,067 27,355 30,088 28,936 35,649 
Source:  UNSD Comtrade.  Viewed at:  http://comtrade.un.org/. 
(ii) Agriculture policies 
10. Agriculture policies continue to evolve in the same direction as that seen in the last TPR of 
China.  The 12th Five-Year Plan (2011-2015) reaffirms the commitments in earlier plans to build a 
Socialist New Countryside through strengthened support,  more benefits to farmers, and the promotion 
of modernization in order to improve living standa rds for farmers.  The main objective of domestic 
policy is to safeguard food security by increasi ng production capacity and improving competitiveness.  
More specific objectives are set out in the plan and include an increase in production capacity for 
grains (defined as rice, wheat, maize, and soybeans)  by 50 million tonnes.  This increase is to be 
achieved through higher investment in and paym ents to grain producing areas while improving 
agricultural production conditions.  The plan also emph asizes the need to increa se farm mechanization 
as well as the development and adoption of biotechnolog y.  Other measures set out in the plan include 
increased minimum purchase prices for key grains, and improving temporary purchase and storage of 
bulk agricultural commodities. 
11. Diversification of the rural economy is also stressed through the development of tourism, 
alternative-fuels, investment in infrastructure, improved town and village planning, and better public 
services (including education and training). 
12. Agriculture policy at the national level is the responsibility of the Ministry of Agriculture.  
However, as in many countries, a number of other ministries and government agencies are also involved.  In principle, the inputs of different ag encies are coordinated at the level of the Communist 
Party and the State Council.  Subnational authoritie s also affect policy as they are responsible for 
implementing and co-financing some policy measures.  The basic law on agriculture remains the Agriculture Law of 1993, which sets out the divisi on of responsibilities from the national to local 
level, including that of farmers.   
13. All farm land in China is owned by the State or  by collectives, and administered by the local 
authorities for the area.  Under the Agriculture Law of 1993 and the Law on Land Contract in Rural 
areas of 2003, contracts for farming may be awarded to farm households.  The length of contract is 
30 years for arable land, 30-50 years for grassland ranges, 30-70 years for forestland ranges and 
possibly longer than 70 years for forestland ranges w ith special trees.  At the end of the contract, 
priority is to be given to the current  contractor over other applications.
5  Land rights were given 
greater clarity by the Property Rights Law of 2007, which essentially provides similar rights to private ownership.  However, land may not be sold or su blet and may not be used as collateral for loans, 
                                                      
5 Ministry of Agriculture online information.  Viewed at:  http://english.agri.gov.cn/ga/plar/ 
[October 2011]. China WT/TPR/S/264 
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  which is a serious impediment to investment and restructuring.6  In October 2008, the 17th Party 
Congress approved The Decision on Certain Issues Concerning the Advancement of Rural Reform 
and Development, which indicated that land policy could change, with greater rights to holders to 
transfer, rent or trade land.  The Decision al so seeks to prevent further loss of farmland to 
development.7  As of end 2011, the Decision had not been translated into law and it remains to be 
seen if, and how, it may be implemented. 
14. Since its previous Review, China has not ma de any major changes to its policies or 
programmes to support agriculture.  It continues to use a broad range of measures that include tariff 
protection, minimum purchase prices for rice and wheat, government purchase and storage for these 
commodities, government temporary purchasing and stockpiling for some other commodities, input 
subsidies, and direct payments.   
(a) Import measures 
15. China has 1,097 tariff lines at the HS eight -digit level for agriculture products (WTO 
definition) with an average tariff of 15.1%, comp ared with 8.6% for all other products.  Applied 
tariffs vary a lot from one product category to anot her with the highest tariffs applied to cereals 
(HS Chapter 10), sugars (Chapter 17), and tobacco (C hapter 24).  The lowest tariffs are applied to 
fodder, and residues and waste from the food industry (Chapter 23), and live animals (Chapter 01).   
16. Within each HS Chapter, tariffs may vary cons iderably, particularly in chapters with the 
highest average protection.  Tariffs on cereals (HS Chapter 10) range from zero to 65%, and tariffs on 
sugars (Chapter 17) from 8% to 50%, with standard  deviations of 32 and 17 respectively.  Tariff 
variability in other HS Chapters is lower, for example tariffs on live animals range from 0 to 10% 
with a standard deviation of 4.9. 
17. In line with its accession commitments, sin ce 2006, China no longer operates tariff quotas for 
soybean oil, palm oil or rape seed oil.  Howeve r it continues to operate seven tariff quotas covering 
39 tariff lines for wheat, maize, rice, sugar, wool, and cotton.   
18. According to the authorities, there has been no change to tariff quota administration since 
China's last notification to the Committee on Agriculture in 2003.8  Under that notification, applicants 
had to meet some basic criteria including registration with the Administration of Industry and Commerce, and passing an annual review of the enterprise by the Administration of Industry and Commerce and the inspection and quarantine authoriti es.  Quotas were then allocated based on the 
volumes requested, previous imports, production capacity , or on a first-come, first-served basis.  
State-trading enterprises continue to dominate acc ess to tariff quotas, being allocated 90% of the 
wheat quota, 60%  of the maize quota, 50% of the rice quota, 70% of the sugar quota, and 33% of the 
cotton quota.   
19. As of February 2011, the most recent notifi cation for in-quota imports was for calendar year 
2009.  Along with earlier notifications, this shows that in-quota imports for rice, wheat, and maize 
have been low compared to the quota quantity.
9  In response to questions in the Committee on 
Agriculture, China indicated that it did not intend to  review its methods for allocating quotas, and the 
                                                      
6 OECD (2009a), p. 90. 
7 Communist Party of China (2008). 
8 WTO document G/AG/N/CHN/2, 25 September 2003. 
9 WTO documents G/AG/N/CHN/19, 15 April 2010;  G/AG/N/CHN/16, 10 August 2009;  and 
G/AG/N/CHN/14, 19 February 2009. WT/TPR/S/264 Trade Policy Review 
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  low level of imports relative to the size of th e tariff quota was due to high levels of domestic 
production coupled with high international prices.10  
(b) Export measures 
20. According to notifications to the Comm ittee on Agriculture and based on its WTO 
commitments, China does not provide e xport subsidies for agricultural products.11 
21. In order to reduce food-price inflation, export ta xes were applied to grains and their products 
from the beginning of 2008 and were phased out, starting in December 2008, with the last ones removed by the end of June 2009.  However, the VAT rebate rate on exports of most agricultural 
products is currently 5% compared with the statut ory rate of 13%, which means VAT is not refunded 
in full.  Furthermore, in December 2007 the reba te was removed entirely for a number of products, 
including cereals, soybeans, and their flours, with  vegetable oils added to the list in June 2008
12, and 
alcohol and maize starch in July 2010.13 
22. Exports of rice, maize, cotton, and tobacco are through state-trading enterprises and, along 
with other grains, are subject to export quotas. 
(c) Domestic support 
Direct payments 
23. China's policy on direct payments to agricultu ral producers has not changed since its last 
TPR.  According to the notification to the WTO Committee on Agriculture, it is based on the area of 
land contracted by the farm household a nd is decoupled from production and prices.14  D i r e c t  
payments now cover almost the entire countryside , although local authorities have the responsibility 
to decide, which areas under their jurisdiction may r eceive payments, and the subsidy level may also 
vary from one locality to another.  The total amount provided for under the direct payments 
programme was ¥15.1 billion annually in the 2007-10 period. 
Insurance programmes 
24. In response to the very low insurance coverage  for farming in China and the high degree of 
risk of drought or flooding, a pilot insuran ce scheme was introduced in 2007 with geographical 
coverage limited to six provinces.15  Coverage had been extende d to 28 provinces by end 2010.  
Insurance premiums are subsidized by the central  and local governments with  farm households paying 
the balance of about 20-30%. 
                                                      
10 WTO document G/AG/R/56, 10 November 2009. 
11 WTO document G/AG/N/CHN/20, 15 April 2010;  G/AG/N/CHN/15, 10 August 2009;  
G/AG/N/CHN/13, 18 February 2009;  G/AG/N/CHN/12, 14 September 2007. 
12 OECD (2011), p. 231. 
13 World Tax Rates 2010/2011 online information.  Viewed at:  http://www.taxrates.cc/html/07d-
export-vat-refund.html [November 2011]. 
14 WTO document G/AG/N/CHN/18, 25 March 2010. 
15 World Bank (2007). China WT/TPR/S/264 
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  Input subsidies 
25. China uses several types of input subsidy.  The Comprehensive Subsidy on Agricultural 
Inputs was established in 2006 to compensate grain producers for increases in the price of inputs.  
However, the payments are not contingent on th e consumption of inputs and, according to the 
authorities, are made on the basis of taxable arable  area;  thus the authorities consider that they 
function as direct payments rather than as input  subsidies.  The amount available under this 
programme increased steadily from ¥12 b illion in 2006 to ¥71.6 billion in 2010. 
26. The New Variety Extension Payment scheme, wh ich was introduced in 2006 to improve the 
quality of seeds and livestock, has been extended from the original wh eat, rice, maize, and soybeans, 
to include:  rapeseed and cotton in 2007;  potatoes in 2009;  and barley in 2010 and, on a trial basis, 
peanuts.  Livestock covered by the scheme includ e pigs, dairy cows, beef cattle, and sheep.  In 
addition to increasing the product coverage, the scheme has been extended to cover greater areas, with 
all land sown with rice covered from 2008, and a ll land sown with wheat, maize, and cotton covered 
from 2009, and substantial expa nsion of the eligible area for soybeans in 2008 and 2009.16  The rate of 
subsidy varies depending on the crop, from ¥10 per mu for early rice, to ¥15 per mu for cotton, and middle and late rice.   
27. Although the support is provided through lower priced inputs in some areas, it has been 
reported that there is a growing tendency to pay subs idies directly to farmers without monitoring.  If 
this is the case, then the New Variety Extens ion Payment scheme may be operating as a direct 
payment linked only to area planted.
17  The total amount provided under the scheme has increased 
along with the area covered and number of products included. 
28. In 2008, the subsidy for reproductive sows was doubled to ¥100 but then restricted to high 
quality breeding sows in 2010.18 
29. Fertilizer costs are controlled and subsidized th rough several measures.  Exports are subject to 
export taxes, which have been adjusted a numbe r of times in recent years and stood at 75% in 
October 2011.19  Import measures taken to reduce the cost of fertilizers and fertilizer production 
include:  reductions in tariffs on fertilizers and fertilizer raw materials;  VAT reductions and 
exemptions; preferential prices for electricity, natu ral gas, and railway transport; and an exemption 
from the railway construction fund.   
30. Purchases of agricultural machin es are also subsidized at rates between 20% and 30% of the 
sale price.  In 2008, the scheme was extended to cover the whole country.  The local authorities are 
responsible for running the scheme and deciding wh at machines are covered pursuant to a catalogue 
of agricultural machines issued by the central government.  The amount provided for the purchase of 
agricultural machines has increased  steadily, from ¥2 billion in 2007 to ¥15.5 billion in 2010. 
                                                      
16 USDA FAS (2011b). 
17 OECD (2011), p. 228. 
18 USDA FAS (2011c). 
19 Special export duty rates applied to HS 31021000, 31043000, 31049010, 31049090, 31052000, 
31053000, and 3105400.  Otherwise fertilizers have an in terim export duty rate of up to 35% (HS 31502000). WT/TPR/S/264 Trade Policy Review 
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  Internal price supports 
31. In addition to border measures that, to some  extent, protect the internal market from 
competition from imports, China has a number of programmes that support domestic prices.  
Minimum purchase prices for rice and wheat are set each year by the National Development and Reform Commission.  Although the prices have been rising each year (Table IV.6), the purchase price 
for rice has usually been below the world market pr ice.  According to the authorities, under ordinary 
circumstances, farmers sell grains at market prices;  it is only when the prices of rice and wheat in the 
principal growing areas fall below the minimum purchase prices that farmers may sell grains at the 
minimum purchase prices to enterprises designated by the State.  
Table IV.6 
Minimum prices for rice and wheat, 2007-11 
(¥ per tonne) 
2007 2008 2009 2010 2011 
Wheat  
White wheat 1,440 1,540 1,740 1,800 1,900 
Red wheat 1,380 1,440 1,660 1,720 1860 
Rice  
Early indica  1,400 1,540 1,800 1,860 2,040 
Middle and late indica 1,440 1,580 1,840 1,940 2,140 
Japonica 1,500 1,640 1,900 2,100 2,560 
Source:  USDA and the Chinese authorities. 
32. Up until 2010, Sinograin was responsible for all purchases under the Minimum Purchase 
Prices scheme, but since that year China Nati onal Cereals, Oils and Foodstuffs Corporation 
(COFCO), and China Grain and Logistics Corpor ation (CGLC) became entitled to make such 
purchases. 
33. In addition to the Minimum Purchase Prices Sche me, the State takes other measures to adjust 
the supply and demand of certain agricultural produc ts, such as purchasing and stockpiling on an ad 
hoc basis, and stock releasing for sugar cane and su gar beet, soybeans, maize, rapeseed, and cotton.  
The main distributors of grains are state-tradi ng enterprises, such as Sinograin, which purchase from 
producers, and sell to processors through weekly auc tions.  In order to reduce demand and prices for 
grains, the State decided in November 2010 to restri ct auctions to flour millers, feed millers, and 
livestock producers.20  According to the authorities, purchases and sales from the national grain 
reserves by the State Administration of Grain take place at market prices. 
34. For sugar cane, provincial governments administer and set purchase prices.  The purchase 
price varies from one province to a nother but has increased steadily ove r the past six years and is now 
about ¥500 per tonne.  The Government and local au thorities hold stocks of sugar, with purchases and 
sales aimed at stabilizing prices based on decisions from the National Development and Reform Commission.  For the year ending 30 September 2010, 1.71 million tonnes were auctioned from State 
sugar reserves.
21 
                                                      
20 USDA FAS (2011b). 
21 USDA FAS (2011e). China WT/TPR/S/264 
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  Conservation 
35. The Green for Grain programme was introduced on  a pilot basis in 1999 with the objective of 
encouraging afforestation, reversing ecological  degradation and soil erosion, and reducing 
over-cultivation of sensitive land.  In 2002, the prog ramme was extended to cover all of China but, in 
2007, it was restricted to afforestation of barre n land due to concerns about its impact on grain 
production.  Originally, farmers participating in th e programme were given cash subsidies and grains 
to compensate for land taken out of production.  Since 2004, the allocation of grains has been 
converted to cash.  The cash subsidy is ¥20 per mu a nd the grain allocation (now converted to cash at 
the rate of ¥1.4 per kg) varies from one region to another. 
36. By the end of 2008, 8.2 million ha of cropland had been converted to forest and 27 million 
rural households were participating in the progr amme.  The Green for Grain programme was the 
biggest of several afforestation measures and, in the 1998-08 period accounted for over half of total 
spending of ¥284 billion on afforestation.22  
37. Current spending on the Green for Grain progra mme is mostly for land already converted to 
pasture or forest, and total support for the progr ammes fell to ¥24.3 billion in 2011 from ¥42.8 billion 
in 2009. 
(d) Support levels 
38. The most recent notification on domestic s upport to the Committee on Agriculture was in 
October 2011 for the calendar years 2005-08.23  Along with earlier notifications, this shows that 
support has increased significantly over the past te n years in both the Green and Amber Box with 
Green Box support at ¥593 billion in 2008, a nd Amber Box support at ¥89 billion (including 
de minimis  and subtracting negative product-specific support). 
39. Most support notified as being in the Green B ox is provided for general services, where 
infrastructure and other general services together repr esent nearly half of the total.  While expenditure 
under all headings has increased (except for financ ial assistance to low-income households), it has 
been particularly rapid for compensation for losses du e to natural disasters and for direct payments to 
farmers (which were introduced  in 2004) (Chart IV.2(a)). 
40. Amber Box support as notified to the WTO has also risen over the past few years as 
budgetary outlays increased for:  improved crop strains and seeds;  transport subsidies;  and subsidies 
for maintaining national reserves.  According to the notifications, the minimum purchase prices of 
wheat and rice between 2005 and 2008 and the pr otective price for maize between 1999 and 2003 
were below the external reference price (the base pe riod price for 1996-98).  Therefore, in some years 
product-specific support was negative (Chart IV.2(b)).  Since 2005, the value of input subsidies has 
increased significantly and reached nearly ¥79 bi llion in 2008.  Although the level of support is 
increasing, it remains below de minimis  levels as product-specific support is less than 8.5% of the 
value of production for each product and non-product- specific support is less than 8.5% of the total 
value of agricultural production. 
 
                                                      
22 Liu and Wu (2010) . 
23 WTO document G/AG/N/CHN/21, 13 October 2011. WT/TPR/S/264 Trade Policy Review 
Page 108 
  
  0100,000200,000300,000400,000500,000600,000700,000
2001 2002 2003 2004 2005 2006 2007 2008Chart IV.2
(a) Green Box support, 2001-08
(b) Amber Box support in China, 2001-08
Source:   WTO notifications.¥ million
Other general services
Payments for relief from natural disasters
Extensions and advisory servicesInfrastructural services
Public stockholding for food security purposes
¥ million
Wheat
CottonCorn
PigRice
Soybean
Rapeseed
Non-product specificupled income support
-80,000-60,000-40,000-20,000020,00040,00060,00080,000100,000120,000
2001 2002 2003 2004 2005 2006 2007 2008Environmental programmes
Regional assistance programmes
OtherDecoupled income support
Wheat
CottonCorn
PigRice
Soybean
Rapeseed
Non-product specific support
 China WT/TPR/S/264 
 Page 109 
 
 
  41. The OECD has been publishing reviews of agri culture policies in China and other emerging 
economies for several years.24  In these publications, the value of  transfers to agricultural producers 
are measured using the Producer Support Estimate (PSE) and associated indicators.  The methodology for calculating these indicators is different from that  used to calculate the AMS and the two sets of 
data are not compatible or comparable.  The me thodology used by the OECD is evolving and was 
revised for the 2007 Monitoring and Evaluation repor t resulting in several changes, including to 
estimates of support of specific commodities.
25  The total PSE is "the annual monetary value of gross 
transfers from consumers and taxpayers to agricultur al producers, measured at the farm gate level, 
arising from policy measures that support agriculture, regardless of their nature, objectives or impacts 
on farm production or income.  It includes mark et price support, budgetary payments and budget 
revenue foregone, i.e. gross transfers from consum ers and taxpayers to agricultural producers arising 
from policy measures based on: current out put, input use, area planted/animal 
numbers/receipts/incomes (current, non-current),  and non-commodity criteria."  Thus, the PSE 
includes estimates for the value of protection provide d by market access measures, such as tariffs and 
tariff quotas, as well as input subsides, direct payments to producers that are coupled to prices or 
production, and direct payments decoupled from prices and production.26 
42. However, the authorities also pointed out th at the research theories and methodologies of 
various international organizations , while having value, also have limitations.  With respect to 
agriculture policies, different countries have diffe rent situations and face different problems, 
especially developed countries comp ared with developing countries at  different stages of development 
with different policy objectives.  Interpreting th e OECD's reports should take these factors into 
account.  
43. As measured by the PSE, support to agricultu re producers in China has increased over the 
past decade, rising from 5% of gross farm receipts in 2001 to 17% in 2010 (with a sharp drop to 3% in 
2008 when international prices peaked).  At the sa me time the value of agriculture production has 
been increasing in China, so the monetary value of  transfers to agricultura l producers increased from 
¥65 billion to ¥995 billion over the same period.  Alt hough the total value of support was less than the 
OECD average of 18% in 2010, the difference has na rrowed considerably over the past ten years as 
support in the OECD declined from 28% in 2001 while support in China increased from 5%. 
44. Transfers to specific commodities vary widely with the highest support given to cotton and 
sugar, where it may exceed half of the value of farm receipts.  The lowest levels of support are for rice 
and eggs, where support is actually negative as State purchases are at prices below import prices, 
implying a net tax on producers (Table IV.7). 
45. There appears to be some conflict among the different policy objectives for agriculture and 
the measures taken to achieve those objectives.  On the one hand, protection of the natural 
environment is stressed in the 12th Five-Year Plan while subsidies and price-based measures have 
contributed to high use of fertilizers which has, in  turn, meant they are one of the principle causes of 
surface and groundwater pollution.27  On the other hand, the authorities stated that government 
policies are not intended to increase the use of fertiliz ers but to prevent seasonal shortages.  The use of 
minimum prices and other price-based mechanisms to reduce price fluctuations at different levels for 
different crops, while also maintaining tariffs at  various levels depending on the product, may also 
distort price signals for producers, which means they may not be reacting to real demand.   
                                                      
24 OECD (2009a) and (2011). 
25 OECD (2007). 
26 OECD (2010a). 
27 OECD (2009a), p. 88. WT/TPR/S/264 Trade Policy Review 
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  Table IV.7 
Total producer support estimate and single commodit y transfer values for selected commodities, 2002-10 
(¥ million and % of gross farm receipts for respective products) 
 2002 2003 2004 2005 2006 2007 2008 2009 2010
Producer Support Estimate    
¥ million 203,004 255,613 239, 543 295,244 436,230 440,89 9 168,762 708,642 994,780
of which MPS 121,357 157,586 96,383 109,406 205,310 142,193 -139,352 342,526 609,209
PSE as % gross farm receipts 8 10 8 8 12 10 3 13 17
Single Commodity Transfers    
Common Wheat    
¥ million -17,844 -14, 429 -11,962 -15,364 53,569 20,818 26,774  65,161 66,149
SCT as % gross farm receipt s -19 -15 -9 -11 34 13 14 31 28
Rice    
¥ million 12,980 17,582 38, 669 3,288 -11,167 -2,433 - 239,880 -168, 599 -14,026
SCT as % gross farm receipts 7 9 14 1 -4 -1 -66 -44 -3
Maize    
¥ million 25,349 31,741 11,611 32,161 43,598 32,833 - 35,896 40, 468 68,079
SCT as % gross farm receipts 25 29 9 22 26 17 -15 16 23
Soybeans    
¥ million 5,885 10,417 -3,619 2,852 5,927 3,715 -4,620 12, 210 12,767
SCT as % gross farm receipts 17 25 -8 7 16 9 -8 23 24
Cotton    
¥ million 15,836 37,015 -2,383 35,101 33,434 44,405 10,841 45, 892 54,002
SCT as % gross farm receipt s 34 51 -3 47 37 44 14 54 51
Rapeseed    
¥ million -162 1, 948 3,056 407 2,326 601 15, 010 11,477 8,122
SCT as % gross farm receipts -1 7 9 1 9 2 25 24 16
Pig meat    
¥ million -10,803 -14,110 -4,409 -11,440 -14,656 -5 ,433 138,272 96,134 87,712
SCT as % gross farm receipts -3 -3 -1 -2 -2 -1 16 13 12
Sugar    
¥ million 6,245 2,509 6,562 12,200 1,617 12,577 6,447 25, 482 10,715
SCT as % gross farm receipts 41 18 39 54 7 46 20 70 29
Source :  OECD (2011), Agriculture Policy Monitoring and Evaluation 2 011:  OECD Countries and Emerging Economies, 
Paris. 
46. According to the OECD, nearly all support fo r the main commodities is provided through 
market price support measures (including tariffs) with a significant amount for input subsidies.  The OECD has noted that these are among the less efficient and more trade-distorting forms of support to agricultural producers and that such policies are less efficient than alternativ es, such as decoupled or 
area-based payments, because a large part of the bene fits are lost to higher input and resource costs, 
and that these policies can also distort trade to a gr eater extent than their more efficient alternatives.
28 
(2) FISHERIES  
(i) Fisheries in China 
47. The fisheries sector in China is small compared with the agriculture sector, with gross output 
in 2010 of ¥642 billion out of a total of ¥6,932 bil lion for farming, forestry, animal husbandry, and 
                                                      
28 OECD (2002). China WT/TPR/S/264 
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  fisheries.  However, China has the biggest fisheries sector in the wo rld:  according to the FAO, total 
production in China in 2009 was over 60 million to nnes, compared with world production of 
163 million tonnes.  This lead applies in both the capture and aquaculture sectors where China has 
16% and 62% of world production by weight respectively.29  FAO data differ from national data;  
according to the National Bureau of Statistics,  total production was over 51 million tonnes in 2009 
(Table IV.8).  However, both sets of data indicat e that total production has increased considerably 
over the past few years, particularly for acquacultu re, while the capture (or naturally grown) sector 
has remained stable. 
Table IV.8 
Fisheries production, 2002-09  
(Million tonnes) 
 2002 2003 2004 2005 2006 2007 2008 2009 
All aquatic products 39.5  40.8  42.5  44.2  45.8  47.5  49.0  51.2  
Seawater 23.0  23.3  24.0  24.7  25.1  25.5  26.0  26.8  
Naturally grown 12.4  12.4  12.5  12.6  12.5  12.4  12.6  12.8  
Cultured 10.6  11.0  11.5  12.1  12.6  13.1  13.4  14.1  
Fish 8.9  8.9  8.8  9.1  8.9  8.9  8.6  8.8  
Shrimps, prawns, crabs 2.7  2.6  2.7  2.8  3.0  3.0  2.9  3.0  
Shellfish 9.7  9.6  9.7  10.1  10.5  10.7  10.7  11.2  
Algae 1.2  1.2  1.3  1.3  1.4  1.4  1.4  1.5  
Others 0.5 0.9 1.5 1.3 1.3 1.5 1.2 1.3 
Freshwater 16.6  17.4  18.4  19.5  20.7  22.0  23.0  24.3  
Naturally grown 1.9  2.1  2.1  2.2  2.2  2.3  2.2  2.2  
Cultured 14.6  15.3  16.3  17.3  18.5  19.7  20.7  22.2  
Fish 14.8  15.5  16.3  17.4  18.2  19.1  20.0  21.1  
Shrimps, prawns, crabs 1.1  1.2  1.3  1.4  1.7  2.0  2.1  2.3  
Shellfish 0.5  0.5  0.5  0.5  0.5  0.5  0.5  0.5  
Others 0.2  0.3  0.3  0.3  0.3  0.4  0.4  0.4  
Source:   National Bureau of Statistics, China Statistical Yearbook 2010.  Viewed at: http://www.st ats.gov.cn/english/  
[February 2011]. 
48. Based on FAO data, the total value of aquacu lture production (including aquatic plants) was 
US$57 billion in 2009, more than d ouble the value in 2001 when it was worth US$27 billion.  A wide 
variety of species are produced in both marine and inland aquaculture.  The value of inland 
aquaculture production was US$44 billion in 2009, ha ving doubled in value since 2005, when it was 
US$22 billion.  The main products are various t ypes of carp, tilapia, bream, and shrimps.  
Traditionally, inland aquaculture was based on po nds, lakes and reservoirs, and paddy-cum-fish 
fields, and it has been expanding to cages and pens in rivers, lakes, and reservoirs.  Marine 
aquaculture was worth about US$12-13 billion over the 2004-09 period, despite steadily increasing 
quantities.  The main products are fish, shrimps, crust aceans, shellfish, and kelp.  Production of 
marine aquaculture is mostly in ponds , cages, and in intertidal zones. 
49. Data on the value of capture fishing are not ava ilable from the FAO.  In terms of the quantity, 
a large variety of species are landed, including la rgehead hairtail, croakers, scads, shrimps and 
prawns, squids, and molluscs.  According to the FAO, China had 220,000 vessels in 2002, with plans 
to reduce the number to 192,000 by 2010. 30  The most common fishing gear used was the trawl net, 
                                                      
29 FAO, Fisheries and Aquaculture Department, onlin e statistics.  Viewed at:  http://www.fao.org/ 
fishery/statistics/en [November 2011]. 
30 FAO (2002-2011). WT/TPR/S/264 Trade Policy Review 
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  although gill nets, set nets, lines and hooks and purse seines are also used.  In 2005 and in 2010, it was 
reported that China had 90 enterprises engaged in distant-water fishing with 1,700 vessels operating 
throughout the world.31 
(ii) Trade 
50. China has a trade surplus in fisheries products with exports of US$13.2 billion and imports of 
US$6.2 billion in 2010.  Both im ports and exports have increased over the past few years, except in 
2009 when they fell, before picking up again in 2010 (Table IV.9).  The main exports are fish fillets 
(HS 0304), aquatic invertebrates (e.g. crustaceans and molluscs) (HS 1605), a nd caviar and substitutes 
(HS 1604).  The main imports are frozen fish (HS 0 303), and flours, meals, and pellets not for human 
consumption (HS 2301).  Japan, the United States, th e EU, and South Korea are the main markets for 
China's exports of fish products, and Peru, Chile, Russia, and the United States are the main sources 
for imports. 
Table IV.9   
Trade in fisheries products, 2002-10  
(US$ million) 
HS 
Code  2002 2003 2004 2005 2006 2007 2008 2009 2010 
 Total exports 4,509 5,268 6,658 7,538 8,981 9,264 10,117 10,249 13,228 
 o f  w h i c h           
0304 Fish fillets and other fish meat 
fresh 928 1,161 1,469 1,920 2,286 2,435 2,599 3,106 3,689 
1605 Aquatic invertebrates, 
prepared/preserved 762 1,101 1,405 1,846 2,401 2,362 2,599 1,782 2,360 
1604 Prepared/preserv ed fish; caviar 
and substitutes 867 823 1,189 1,331 1,815 2,128 2,318 1,638 2,042 
 Total imports 2,251 2,430 3,133 4,003 4,162 4,544 5,158 4,998 6,206 
 o f  w h i c h           
0303 Fish, frozen, excluding fish 
fillets 1,005 1,195 1,519 2,194 2,414 2,635 2,729 2,711 3,132 
2301 Flours, meals and pellets, etc, 
unfit for human consumption 676 545 770 1,098 969 1,042 1,436 1,344 1,746 
Note: For the purposes of this section of the report, fish pr oducts are defined as HS headings 03, 1603, 1604, 1605, and 2301. 
Source:   UNSD Comtrade.  Viewed at:  http://comtrade.un.org/   
51. Applied tariffs on imports of fish and fish produc ts vary from 0 to 17.5%.  In general, the 
lowest tariffs apply to inputs, such as fish fry and other cultivation material. 
(iii) Fisheries policy 
52. Fisheries policy is the responsibility of the Bureau of Fisheries in the Ministry of Agriculture.  
The main law governing fisheries is the Fishery La w of 1986, which was revised in 2004 to place 
greater emphasis on the conservation of fishery resources.32  Under this Law, the State Council gives 
management instructions and targets to various de partments and ministries.  Below the Bureau of 
Fisheries, there are local fisheries authorities r esponsible for implementing the Fishery Law.  The 
                                                      
31 Ministry of Agriculture online information, Featured Fishery.  Viewed at:  http://english.agri.gov.cn/ 
sa/ca/fa/201001/t20100112_1572.htm [February 2012];  and Guifang Xue (2006), pp 651-658. 
32 The Fisheries Law of the People's Republic of China (2004 Revision) is available in English at:  
http://www.fdi.gov.cn/pub/FDI_EN /Laws/GeneralLawsandRegulations/BasicLaws/P020060620320441563935.
pdf [February 2012]. China WT/TPR/S/264 
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  Fisheries Law Enforcement Command of China is in  charge of the coordination of fisheries law 
enforcement, while Fisheries Management and Fishing Port Superintendence Bureaux of each 
regional sea (Yellow Sea and Bohai Bay, East China Sea, South China Sea) are in charge of law 
enforcement.  The Bureau of Fishing Vessel Inspecti on in the Ministry of Agriculture is responsible 
for technical inspections of fishing vessels.33  
53. China has fishing activity agreements with Japan (1997), South Korea (2000), and Viet Nam 
(2005), which are designed to address the creatio n of cooperative management regimes for their 
shared fisheries stocks.  
54. China's fisheries policy generally restricts the development of coastal and inshore fisheries, 
and encourages the improvement of aquaculture and di stant-water fisheries.  Management of domestic 
marine fisheries is based on the 'minus growth' obj ective put forward in 2001 with a goal of gradually 
reducing the number of marine fishing vessels comp ared to 2002.  Under this objective, China has 
implemented a series of measures including closed zones, seasonal closures, fleet buybacks and licensing schemes.   
55. It has been claimed that there is some unregul ated fishing, particularly among the fisheries 
operating within neighbouring EEZs.
34  In order to reduce illegal fishing, China requires all vessels to 
have valid fishing licences.  In 2005, China opera ted 41 enforcement vessels to monitor its EEZ for 
illegal operations, and is implemen ting more control on vessel c onstruction.  Additionally, the 
Chinese Fishery Enforcement Command is cooperating with other countries' fisheries enforcement 
agencies to prevent illegal fishing in the North Pacific Ocean.   
56. Under the revised Fisheries Law, the State may support the development of ocean fishery 
industry by taking measures in finance, credit, and ta xation (Chapter III, Article 21).  Furthermore, in 
2006, the Ministry of Agriculture set out an Ac tion Plan to encourage oceanic and transoceanic 
fishing and to speed up the development of distant-water fishing during the 11th Five-year Plan and 
beyond.35 
57. Under the 11th Five-Year Plan, the Government provi ded funds for scrapping old vessels and 
encouraging fishermen to expand aquaculture or ge t involved in non-fisheries-related industries.  
Extra funding from local governments,  and additional funds were made  available for enforcement of 
fisheries legislation as well as retraining, job creation, and tax breaks for ex-fishermen and for stock enhancement and habitat improvement .  It was reported that ¥270 million per year was allocated for 
compensation to fishermen withdrawing from offshore fishing.
36 
58. Official data on the value of support to the fish eries sector were not available.  Estimates of 
the value of these supports vary widely depending on the source and methodology used.  One report 
stated that the total value of support by the Stat e to fishing was estimated to be US$4.1 billion in 
2003, of which US$2.2 was for vessel construction, fu el infrastructure, and other supports to fishing 
activities, with fuel accounting for US$1.8 billion.37  It has also been reported that, under a 
programme introduced in 2006, a fuel subsidy is paya ble when the price of petrol exceeds ¥4,400 per 
tonne and that of diesel exceeds ¥3,870 per tonne.  The subsidy covers 50% of the price over these 
                                                      
33 FAO (2002-2011). 
34 Yu and Yu (2007). 
35 Ministry of Agriculture online information, Featured Fishery.  Viewed at:  http://english.agri.gov.cn/ 
sa/ca/fa/201001/t20100112_1572.htm [February 2011]. 
36 Zhou (2007), and Guifang Xue (2005), p. 197. 
37 Sumaila et al. (2009). WT/TPR/S/264 Trade Policy Review 
Page 114 
  
  thresholds and 100% for prices over ¥5,480 for petrol and ¥5,070 for diesel.  It was reported that the 
fuel subsidy covers fishery enterprises and fisher s that use motorized fishing vessels for near-shore 
and inland fishing and aquatic production, as well as state-owned forestry and urban public 
transportation companies.  According to some media reports, in 2006, two batches of fuel subsidies at 
¥3.18 billion were allocated, and the implementati on of the policy is to be strengthened under the 
12th Five-Year Plan (2011-2015).38   
(3) ENERGY  
(i) Policy objectives for the sector 
59. China's medium- and long-term objective for its energy sector is "to establish a stable, 
economical, clean and secured energy supply system so to meet the demand from social and economy 
development".  Since its previous Review, China has further emphasized cleanness, safe use of energy, and energy security in its objectives.  
60. China has established a state-level organizati on on energy, the National Energy Commission 
(NEC), headed by the Premier of the State Counc il.  The NEC acts as coordinating and consultation 
body, responsible for drafting the national energy strategy, and reviewing key issues associated with 
national energy security and development.  The National Energy Administration (NEA)
39, under the 
NDRC, performs executive functions as the regulator , and as the general office of the NEC.  In 
principle, the NEA has a broad mandate over the whole energy sector, i.e. coal, oil, gas, electricity 
(including nuclear power), new energy, and renewabl e energy (including hydro power).  The NEA is 
also the regulator of oil refinery, coal fuel, and fuel ethanol industries.  Petrochemical and 
coal-chemical industries that are not under the ju risdiction of the NEA are regulated by MIIT.40  The 
State Electricity Regulatory Commission (SERC) is the regulator of the electricity sector.  In energy pricing, NEA has a consulting role for NDRC. 
61. The NEA issued the National 12
th Five-Year Plan for Energy Technology on 
5 December 2011, with the aim of supporting the deve lopment of "strategic emerging industries" and 
of the energy sector.  Implementation measures for th e plan were not available to the Secretariat. 
62. The authorities indicate that the Energy Law, wh ich is intended to be comprehensive for the 
energy sector, is in the final stages of drafting. 
(ii) Electric utilities 
63. The revised Law on Renewable Energy entered in to force on 1 April 2010;  the revised law 
stipulates that the Government is to implemen t unified administration of the development and 
utilization of  renewable energy, including to adopt  a system of guaranteed full purchase of electricity 
generated from renewable energy.  The law also stat es that development and utilization of renewable 
energy is the priority for national energy deve lopment, and "encourages" all enterprises, including 
foreign firms, to participate in the development of renewable energy.   
                                                      
38 English.xinhuanet.com.  Viewed at:  http://new s.xinhuanet.com/english2010/china/2011-03/07/c_ 
13765575.htm;  and People's Daily  online, "20 mln fishermen benefit from China's subsidy mechanism:  
official" , 7 March.  Viewed at:  http://english.peopledaily.com.cn/90001/90778/90860/7311555.html 
[November 2011]. 
39 The Institutional Reform Programme of the State Council, 2008.  Viewed at:  
http://www.gov.cn/2008lh/content_921411.htm. 
40 Online information.  Viewed at:  http://w ww.gov.cn/gzdt/2008-07/29/content_1058473.htm. China WT/TPR/S/264 
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  64. The Administration Measures on Power Grid Enterprises' Full Purchase of Electricity 
Generated by Renewable Energy41 provides that on-grid electricity generated by renewable energy 
power plants must be purchased by distributors (regi onal monopolies) within the coverage of the their 
power grids.  In terms of power generation sch eduling, changes are being made to operational 
procedures for distributors whereby power plants with lower fossil fuel consumption will have 
priority access. 
65. Private investment, including foreign investme nt, is encouraged in the development of 
renewable energy sector.  In the new "36-clause on Private Investment" (State Council Circular 2010/13), domestic private capital is "encouraged" to build new energy sectors such as wind power, 
solar power, geothermal power, a nd biomass power.  Electricity ge neration from wind power, solar 
power, or biomass power is also listed in the "encouraged" section of the Catalogue for the Guidance 
of Foreign Investment Industries . 
66. While nuclear energy is not included in the la w's definition of renewable energy, China also 
promotes electricity generation with nuclear energy;  as in the case of renewable energy, FDI is encouraged.  
(iii) Oil and gas 
67. Since 1 November 2011, the resources tax
42 with ad valorem  rates between 5% and 10% of 
sales has been levied on crude oil and natural gas produced in China, and tax preferences have been 
given to thickened oil, high pour point oil, high su lfur-containing natural gas, and other oil and gas 
products;  this applies equally across domestic  firms (including contractual joint-ventures).43  
Previously, domestic oil and gas producers paid th e resources tax at specific rates on outputs, while 
contractual joint-ventures exploiti ng petroleum resources, onshore or offshore, paid mine usage levies 
at excess progressive rates on total outputs.44   
68. The price of refined oil is capped under the gui ded "ceiling price" decided by NDRC.  The 
current pricing mechanism, introduced in May 2009,  allows NDRC to adjust the guided price when 
the moving average of prices over 22 consecutive tr ading days fluctuates more than 4% in the 
international oil markets.45  The authorities are currently st udying a new pricing mechanism for 
refined oil. 
69. Pricing for gas is also under government "gui dance".  The current pricing mechanism for 
onshore natural gas is "cost plus" to determine "the benchmark ex -factory price" of gas;  the 
benchmark ex-factory price is adjusted once a year.  There are no relevant rules on the ex-factory 
price of offshore natural gas.  The authorities indicate th at there is to be a review of the current pricing 
                                                      
41 SERC Decree 2007/25. 
42 The resources tax, levied on offshore oil produced in China, belongs to central government's 
revenues. 
43 Relevant regulations include:  the revised Interim Regulation on Resources Tax;  revised Regulations 
on Exploitation of Offshore Petroleum Resources in Co operation with Foreign Enterprises (State Council 
Decree 607);  and revised Regulations on Exploitation of On-shore Petroleum Resources in Cooperation with Foreign Enterprises (State Council Decree 606). 
44 Under the revised regulation, contractual joint-ventures with petroleum exploitation contracts signed 
before 1 November 2011 will continue to pay the mine usage levies (but not resources tax) until the contracts expire;  operations under new contracts or contracts renewed on or after 1 November 2011 are to be subject to 
resources tax. 
45 Interim Administration Measures for Oil Prices (Fa Gai Jia Ge 2009/1198). WT/TPR/S/264 Trade Policy Review 
Page 116 
  
  mechanism and a study on a new price formula mech anism for gas;  pilot reform programmes on gas 
pricing are currently being carried out in Gu angdong Province and Guangxi Autonomous Region.  
70. Oil companies in China are subject to reser ve requirements under the national oil reserve 
programme.  The current capacity under th e programme is 16.4 million cubic meters. 
71. China has no legal provisions on energy trade through pipelines.  Currently, there are 
three pipelines for oil and gas imports to China, w ith Kazakhstan, Turkmenistan, and Russia.     
(4) MANUFACTURING  
(i) Recent development 
72. During the period under review, the Govern ment continued to implement industrial 
revitalization plans for ten sectors announ ced in 2009 (for the period 2009 to 2011).46  Policy devices 
used in the revitalization plans include tax- a nd non-tax incentives.  Tax incentives include tax and 
tariff reductions, VAT exemption, and export tax re bates.  Non-tax incentives include measures to:  
encourage and support industry restructuring thro ugh M&As;  enhance the finance and credit-support 
environment;  and strengthen R&D activities.  The authorities state that these polices are applied 
equally to domestic and foreign-invested enterprises.   
73. On 10 October 2010, the State Council annou nced that it intended to accelerate the 
development of seven "strategic emerging industri es", aiming to increase their GDP share to 15% by 
2020.47  Detailed implementation guidance is being drafted at the cent ral level.  China has established 
a number of funding programmes and funds for "strat egic emerging industries" since 2011.  These are 
financed by the central or provincial budgets.  They aim to provide funding support for common 
technology development in the "strategic emergi ng industries", such as energy conservation and 
environmental protection, new-generation informat ion technology, biotechnology, new materials, 
intelligent equipment manufacturing, new energies,  and new-energy vehicles.  These funding 
programmes are open for all enterprises established in China, and are through equity participation in 
venture investment funds.  On a local government  level, Beijing, Heilongjia ng, Anhui and Guangdong 
have established special funds to support "emerging industries".48 
74. As part of the revitalization plans for ten sect ors, China announced policies of "two going to 
countryside; two part-exchange", i.e. "domestic appliances and automobile vehicles going to 
countryside" and "domestic appliances and automobile  vehicles part-exchange".  Under these policies, 
a total of ¥12 billion was spent as consumption subsidies for 2009-10.49  Subsidies for automobiles 
                                                      
46 The ten sectors are:  automobiles;  iron and steel;  equipment manufacturing;  petrochemical 
industry;  non-ferrous metals;  textiles and clothing;  electronics and information;  shipbuilding;  light industries;  
and logistics.  Viewed (in Chinese) at:  http://www.gov.cn/zwgk/2009-04/02/content_1276054.htm. 
47 State Councils' Decision to Accelerate the Devel opment of Strategic Emer ging Industries (State 
Council Circular 2010/32).  The seven industries targ eted in the Decision are:  new-generation information 
technology;  high-end equipment manufacturing;  advanced materials;  new-energy cars;  energy saving and 
environmental protection;  alternative energy;  and biotechnology. 
48 Press release by MOF, 31 October 2011.  Vi ewed at:  http://www.mof.gov.cn/xinwenlianbo/ 
quanguocaizhengxinxilianbo/201110/t20111031_603378.html. 
49 ¥5 billion was assigned for automobiles going to the countryside, for the period 1 March 2009 to 
31 December 2009 (the automobile industry revitalizatio n plan);  ¥5 billion for automobile part-exchanges for 
2009;  and ¥2 billion for domestic appliance part-exchanges for 2009 (the Circular on Implementation of 
Encouraging Automobile and Domestic Appliance Part-Exchange, Guo Ban Fa 2009/44). China WT/TPR/S/264 
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  going to the countryside terminated in 2011.50  The authorities indicate that the policy of "two going 
to countryside" generated domestic  sales of over ¥50 billion and the policy of "two part-exchange" 
generated consumption of over ¥17 billion for 2009-10.51 
75. Industries with excess capacities or industries of intensive energy consumption or high 
pollution, such as iron and steel, automobiles, textil es and clothing, petrochemicals, and light industry, 
face the need for structure adjustment.52  The authorities intend to implement structural adjustment 
through the revision of the industry catalogues53 and administrative orders.54   
76. With a view to supporting R&D activities, Chin a continues to provide eligible enterprises 
(including FIEs) with preferential tax treatme nt, such as reductions or exemptions, and cash 
subsidies.55  In addition, certified high-tech enterprise s are granted tax concessions.  Any enterprise 
registered in China may apply for certification of hi gh-tech enterprise status (Table IV.10).  To be 
certified, an applicant must have "self-owned" in tellectual property rights over the "core technology", 
acquired through in-house R&D, transfer or gift, M& A operations, or exclusive licence for more than 
five years.56  
Table IV.10 
Certified high-tech enterprises by sector, 2009-11 
 2009 2010 2011 
Electronics and IT    
Number of applicant enterprises 566 791 771 
Number of authenticated enterprises  459 507 121 
SOEs 42 24 7 
Domestic private 95 342 83 
FIEs 322 141 31 
Advanced materials    
Number of applicant enterprises 347 458 489 
Number of authenticated enterprises  278 315 114 
SOEs 47 28 3 
Domestic private 50 150 56 
FIEs 181 137 55 
Source:  Information provided by the authorities.  No statistical information was available on the machinery and equipment, 
and automobile subsectors. 
                                                      
50 Subsidies for motorbikes going to the countryside continue until 31 January 2013. 
51 Minister Chen Deming's answer to journalists at a press conference during the National People's 
Congress, 7 March 2011. 
52 For information on industries with excessive capacities see State Council's Circular of Several 
Opinions about Suppressing Certain Industries with Excessive Capacities and Duplication so to Guide a Healthy 
Development of Industries (State Council Circular 2009/38);  and State Council's Circular on Further 
Strengthening the Work of Back ward Capacities Elimination (State Council Circular 2010/7). 
53 Catalogues of processing trade industries have been revised twice since the last Review of China.  A 
new version of the Catalogue of Industrial Structure Adjustment Guidance  was released by NDRC in March 
2011. 
54 Administrative orders include closure of high energy consumption/highly polluting SMEs, and denial 
of applications for "purely" new investment projects that are of high energy consumption or high pollution. 
55 WTO documents G/SCM/N/155/CHN, 21 October 2011 and G/SCM/N/186/CHN, 21 October 2011. 
56 For detailed criteria, please see Administra tive Measures for Authentication of High-Tech 
Enterprises;  and the Operational Guideline for Admi nistration of High-Tech Enterprises Authentication. 
Viewed at http://www.most.gov.cn/gxjscykfq/wj/200810/t20081029_64626.htm.   WT/TPR/S/264 Trade Policy Review 
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  77. China maintains a policy to develop adva nced machinery manufacturing, optimize 
natural-resources processing, and upgrade consumer goods industries.57  During the review period, the 
Government continued to employ measures to "guide " resources into certain sectors of the economy, 
particularly manufacturing.  The Ministry of Indus try and Information Technology (MIIT) is the main 
regulator for the manufacturing sector.  MIIT is r esponsible for developing industrial strategies, 
making industry plans and standards, and monitoring the operations of the industry.  The National Development and Reform Commission is also res ponsible for coordinating industry development, 
promoting the use of key technology and equipment,  and developing industry upgrade strategies.  The 
Ministry of Science and Technology (MOST) is also  involved in industrial policies for the high-tech 
manufacturing.   
(ii) Selected subsectors 
(a) Automobiles, automotive parts, and components 
78. China has abolished local-content requirement s for automobile manufacturing enterprises 
since August 2009.
58  The local-content requirements containe d in the Management Measures for the 
Import of Auto Parts Used to Complete a Car we re eliminated on 1 September 2009.  Other import 
and export measures in the automotive sector rema in unchanged;  an automatic import licence is 
required from the MOFCOM, and the importation of  used vehicles, parts and components are 
prohibited.  Three ports have b een opened for imports of complete  vehicles since 2009, Khorgos (land 
route), Qinzhou (costal), and Jiangyin Port Zone of Fuzhou Harbour;  previously, imports of complete 
vehicles were permitted only through four coastal por ts, two terrestrial ports, and Alataw Pass.  
79. Production of "new-energy cars" is subject to  approval by NDRC and MIIT.  In order to 
qualify, enterprises must "master" core technology in at least one of the following:  vehicle energy 
systems, drive systems, or control systems.  Th e qualified enterprises must have the capacity to 
produce prototypes of new-energy cars.59  The authorities state that no technology transfer 
requirement is imposed;  they consider that th e requirement to "master" core technology of 
new-energy cars is necessary to guarantee the safety and quality of products.60 
80. China also launched a series of new polices in January 2009 to promote the use of 
energy-efficient and new-energy automobiles.61  T h e  Promotion Catalogue of Energy-saving 
Automobiles  is published jointly by NDRC, MIIT and the Ministry of Finance.62  Consumers that 
                                                      
57 Chapter 9 of the 12th Five-Year Plan. 
58 Articles 52, 53, 55, 56, 57 of the Automobile Industry Development Policy (2004 version) ceased 
effect from 1 September 2009. 
59 For details see the NDRC Rules on Access Admini stration of New Energy Automobiles Production 
(with effect 1 November 2007), the MIIT Rules on Access Administration of New Energy Automobiles 
Manufacturing Enterprises and their Products (with effect 1 July 2009).   
60 WTO document G/L/963, 10 October 2011. 
61 See the Circular on the Pilot Programs for Demonstrating and Popularizing Energy-saving and New 
Energy Cars, and the Interim Measures for the Management of Financial Aid to Demonstrate and Popularize 
Energy-saving and New Energy Cars, issued jointly by MOF and MOST in January 2009;  the Interim 
Administration Measures for Financial Aid for Private Pu rchase of New Energy Cars, enacted by MOF, MOST, 
MIIT and NDRC in May 2010;  the Detailed Implementation Measures for Promoting Energy Efficient 
Automobiles (vehicles with a cylinder capacity of 1,600  cc and below) under the pr oject of Energy Efficient 
Products Benefit People, issued jointly by MOF, NDRC, and MIIT (Cai Jian 2010/219) on 26 May 2010. 
62 The current version of the Promotion Catalogue of Energy-saving Automobiles  is Version 7.  See 
Announcement 2011/26, issued jointly by NDRC, MIIT, and MOF. China WT/TPR/S/264 
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  purchase new cars listed in the catalogue are entitled to  a lump sum subsidy of ¥3,000 (up to ¥60,000 
for new-energy cars).63   
81. MIIT announced making industrial standard for new-energy automobiles one of the key tasks 
in 2010 and 2011.  The Industrial Planning for New Energy Automobiles is being drafted.  
82. The Opinions to Promote the Development of Remanufacturing Industry, issued jointly by 
NDRC and some other ministries and agencies64, in May 2010, lists manufacturing of auto parts as a 
key project for development, and introduces a pilot programme to deepen the remanufacturing of auto 
parts. NDRC also adds producing key parts of ne w-energy cars under the category of automotive in 
the newly revised Catalogue of Industrial Structure Adjustment  (2011 version).  Manufacturing parts 
for new-energy cars is also added in to the encouraged category in the Catalogue of Guidance for 
Foreign Investment  (2011 version).  The authorities note that a revision of the Automobile Industry 
Development Policy is being drafted.    
(b) Electronics and information technology (IT) 
83. Domestic private and foreign-invested enterpri ses are active in the electronics and IT sector.  
In 2010, FIEs accounted for 72.3% of the sector's total sales. 
84. The Circular on Certain Policies for Further Encouragement to Development of Software 
Industry and Integrated Circuit Industry65, promulgated on 28 January 2011, "further encourages to 
develop" manufacturing of integrated circuits.  U nder the Circular, eligible companies are accorded 
preferential tax treatment, including business tax exemption, enterprise income tax exemption and 
reduction for five years, and tariff exemptions for imported critical equipment.  For enterprises that 
invest more than ¥8 billion or manufacture integrated circuits with line width less than 0.25 mu, more 
favourable tax concessions will be granted.66 
85. The authorities expect the Development Fund for Electronics (IT Fund) to enhance its support 
to core technology development.67  The Fund was established in 1986 with a view to supporting R&D 
activities in software, integrated circu its, and other informatics industries. 
(c) Machinery and equipment 
86. The machinery and equipment subsector accounted  for about 19% of China's total industrial 
value added, and more than 9% of GDP in 2010.  Under the 12th Five Year Plan, the subsector is 
projected to grow at an average annual rate of 12%.   
87. Large equipment, "critical" parts and compone nts for large equipment, and complementary 
equipment for large equipment were listed as "encouraged" in the Catalogue of Industrial Structure 
                                                      
63 MOF Circular on Adjusting Subsidy Policy for Energy-saving Automobile Promotion (Cai Jian 
2011/754), promulgated on 7 September 2011.  Details of subsidies on new-energy cars are in the Interim 
Administration Measures for Subsidies to Private Purchase  of New Energy Cars (Cai  Jian 2010/230), issued 
jointly by MOF, MOST, MIIT, and NDRC on 31 May 2010. 
64 These include MOST, MIIT, Ministry of Public Security, MOF, Ministry of Environment Protection, 
MOFCOM, General Administration of Customs, SAT, SAIC, and AQSIQ. 
65 State Council Circular 2011/1. 
66 For detailed information on tax preference for th e manufacture of integrated circuits, see WTO 
documents G/SCM/N/155/CHN and G/SCM/N/186/CHN, 21 October 2011. 
67 Minister Miao Xu of MIIT at the Exhibition of Achievements Supported by the Electronics 
Development Fund during the 11th Five-year Plan on 26 June 2011. WT/TPR/S/264 Trade Policy Review 
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  Adjustment .  For example, manufacture of aircraft, aircra ft parts and components, and other airborne 
equipment was listed in the "encouraged" machin ery manufacturing in the catalogue.  New-energy 
and energy-saving equipment were added to the 20 11 version of the catalogue as "encouraged".  On 
17 August 2011, MIIT announced the Agricultu ral Machinery Development Policies (MIIT 
Announcement 2011/26) with the aim of optimizing th e manufacture of agricultural machinery;  the 
policies also identified key areas of technology de velopment for agricultural machinery;  tax 
incentives are granted for manufacturing and R&D activities concerning agricultural machinery.68 
88. In the Certain Opinions on Actively Implemen ting the Promotion Strategies for Imports of 
Electrical & Machinery Products during the 12th Five-Year Plan, issued on 4 March 201169, the 
authorities specified strategies for machinery imports  as:  to optimized the structure of imported 
products composition by gradually increasing the import share of advanced technologies, key 
equipment, and key parts and components70;  to satisfy the need for development of strategic 
emerging industries.71  Details were not available to the Secretariat on how the import promotion 
strategies are to be implemented. 
(d) Iron and steel 
89. In 2010, the gross output of the iron and steel  subsector was ¥5,760 billion, of which about 
35% was contributed by SOEs, and about 12.3% by FIEs.  In the same year, 42.56 million tonnes of 
steel materials were exported, while 16.43 million t onnes were imported, with net crude steel exports 
of 27.26 million tonnes.  Some 32 enterprises had cr ude steel output of over 5 million tonnes per year, 
accounting for about 76% of China's crude steel output.  
90. The iron and steel subsector is characteriz ed by excess capacity.  The Steel Industry 
Revitalization Plan showed the capacity of steel production at end-2008 at  660 million tonnes while 
domestic demand was about 560 million tonnes.  The authorities noted that the excess capacity is 
mainly in "lower-end" steel production.   
91. The Steel Industry Revitalization Plan set the goal of eliminating 72 million tonnes of iron 
production capacity and 25 million tonnes of steel production by the end of 2011.  These included the elimination of 25 million tonnes of iron productio n capacity, and 6 million tonnes of steel production 
capacity in 2010.  The authorities stated  that the targets for 2010 was achieved.
72  
92. MIIT issued elimination targets for "backward capacity" to provinces, and published a list of 
outdated equipment, and of enterprises with backwa rd production technology to be closed down.  The 
outdated equipment was to be demolished by the end of 2011.  Failure to do so would result in the 
revocation of permits and licences concerning pr oduction, safety, and the use of sewage, or 
suspension of power supplies.73  Regulations also limited the number of approvals for new investment 
                                                      
68 WTO documents G/SCM/N/155/CHN and G/SCM/N/186/CHN, 21 October 2011. 
69 Shang Chan Fa 2011/48. 
70 This is expected to be achieved through revisions of various catalogues, including the Catalogue of 
Encouraged Imported Technologies and Products . 
71 This would complement other industrial policies. 
72 Joint Announcement by MIIT and NEA (MIIT Announcement 2011/36) on 29 October 2011. 
Viewed at:  http://www.miit.gov.cn/n11293472/n11293877/n13138101/n13138118/14323368.html. 
73 For details see MIIT Circular on the Implementa tion Plan for Elimination of Backward Production 
Capacity (GONG XIN BU LIAN CHAN YE 2011/46, 26 January 2011). China WT/TPR/S/264 
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  in the steel sector so as to strictly control new production capacity.  Nonetheless, the capacity of crude 
steel production continues to rise;  the actual capacity was 683 million tonnes as of the end of 2011.74   
93. On the other hand, the authorities intend to increase the output proportion of "higher-end" 
steel.  Production of high-end steel materials is  listed in the "encouraged" category of the 2011 
Catalogue for the Guidance of Foreign Investment Industries .  China imported 16.43 million  tonnes 
of "higher-end" steel in 2010. 
(5) SERVICES  
(i) Overview 
94. China's trade in services (imports and exports) reached US$362.4 billion in 2010, a five-fold 
increase compared with 2001 (US$71.9 billion) and year-on-year growth of 26.4% (US$286.71 billion in 2009).  Services trade accounts for 10.9% of the total value of exports and 
imports of goods and services, slightly less than in  2009 (11.5% of the total).  Exports accounted for 
US$170.25 billion while the imports accounted for US$192. 17 billion;  therefore, China continued to 
run a structural services deficit.  In 2010, ove rall, services accounted for 43.4% of Chinese GDP, an 
increment of nearly three percentage points in six years (2004, 40.5%) and of 0.4% over 2009.  Some 14,852 foreign-invested services enterprises were est ablished in China in 2010, an increase year on 
year of 21.6%, while the stock of foreign servi ces investment was US$49.96 billion, a year-on-year 
increase of 29.6%. 
95. According to the authorities, China's general policy is of gradual, progressive, and managed 
opening, with a view to promoting development through a win-win strategy for both domestic and 
foreign services suppliers.  Since 2009, the Chinese Government has formulated or revised at least 
these regulations and policies to promote further ser vices liberalization in:  travel agencies (via the 
Regulations on Travel Agency, January 2009, an d the Interim Measures for the Supervision of 
Outbound Tourist Business Operated by Sino-foreign Joint Venture as A Pilot Program, 
August 2010), financial information services (via th e Regulations for the Management of Financial 
Information Services Provided by Foreign Institutions  in China, April 2009);  financial services (via 
the Interim Measures for the Management of Fina ncing Bonding Companies, March 2010);  medical 
services (via the Opinions on further Encouraging and Directing Social Capitals to Establish Medical 
Institutions, November 2010;  and publishing (v ia the Regulations for the Management of 
Publications Market, March 2011).  In addition,  the Opinions of the State Council on further 
Utilization of Foreign Investment, April 2010 have fu rther liberalized investment in several services 
sectors/areas.  
(ii) Financial services 
96. The structure of China's financial services remains dominated by banks over other types of 
financial institutions.  In terms of market capitali zation, the Chinese stock market accounted for about 
66.69% of GDP in 2010.  The ratio of total bank credit to GDP in China was about 19.81%.   
97. During the period under review, China further opened its financial services to foreign 
investors.
75   
                                                      
74 China Construction Journal  report.  Viewed at:  http://www.nbcb.com.cn/zxqyzq/sczx/ 
xykx/09/18455.shtml. WT/TPR/S/264 Trade Policy Review 
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  (a) Banking 
Recent development 
98. Since its previous Review, there has been little change in the market structure of China's 
banking sector, which is dominated by state-owned banks.  The five largest state-owned commercial 
banks (SOCBs)76 accounted for about 50% of the total assets of financial institutions during the 
review period.  The remainder is attributed to  foreign-owned commercial banks, joint-stock banks 
(JSBs), city commercial banks (CCBs), and rura l commercial banks;  recent policies encourage 
private investment in CCBs and rural commercial banks.77   
99. The authorities consider that the "big four" SO CBs completed their corporatization when the 
Agricultural Bank was listed in July 2010.78  According to the authorities, lending decisions by 
SOCBs are based entirely on commercial considerati on.  Policy banks in China are the Agriculture 
Development Bank of China and the Export-Import Bank of China. 
100. As of end 2010, there were 37 wholly fore ign-owned banks, 2 joint-venture banks, and 
1 wholly foreign-owned finance companies establishe d in China.  There were also 74 foreign banks 
with a total of 90 branches.79  In addition to local currency busin ess, foreign presences in the Chinese 
banking sector can be seen as strategic investor s in Chinese domestic banks.  Except for the 
Agriculture Bank of China, the "big four" SOCBs, eight JSBs and 11 CCBs have foreign strategic 
investors as of March 2011.  The main foreign inv estors in a Chinese bank typically appoint one or 
two directors and do not take a management role.  
101. The disposal of NPLs has progressed.  The aut horities maintain that the five largest SOCBs 
did not transfer any NPLs to asset management comp anies in 2009 and/or 2010.  At end 2010, the 
five largest SOCBs had total NPLs of ¥312.52 bill ion, and their NPL ratio was 1.3.  The rapid 
accumulation of debts of local governments in r ecent years, together with loose credits to 
infrastructure through the 2009 stimulate package,  raised concerns of another surge of NPLs.80 
                                                                                                                                                                     
75 In the State Council's Certain Opinions on Further Improvement of Utilizing Foreign Capitals (State 
Council Circular 2010/9, promulgated 13 April 2010), China encourages foreign banks to operate in the 
mid-west region, and foreign investors to establish venture capital enterprises;  China also supports foreign capital investment in domestic equities, and encourages  FIEs to issue stocks, bonds, and commercial papers. 
76 These are:  Bank of China, Industrial & Commerc ial Bank of China, Agricultural Bank of China, 
Construction Bank of China, and Bank of Communications. 
77 Relevant policies include:  the State Council's Certain Opinions on Encouraging and Guiding the 
Sound Development of Private Investment (State Council Circular 2010/13, promulgated 7 May 2010), and 
CBRC's Guiding Opinions on M&As over High Risk Rural Credit Cooperatives (CBRC Circular 2010/71, promulgated 1 September 2010). 
78 The "big four" are Bank of China, Industrial & Commercial Bank of China, Agricultural Bank of 
China, and Construction Bank of China.  The Agricultu ral Bank of China, the Bank of China, the Construction 
Bank of China, and the Industrial and Commercial Bank of  China are listed on the Shanghai Exchange and the 
Hong Kong Exchange. 
79 WTO document S/FIN/M/71, 4 November 2011. 
80 The operation to clean-up loans to the local government financing platform started during the 
drafting of this review.   New loans to these platforms are strictly controlled.  For existing loans, cash flow 
fully-covered loans will be treated as corporate loans. China WT/TPR/S/264 
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  102. Large commercial banks had met the standards of the Basel II Accord by the end of 2010.81  
The China Banking Regulatory Commission (CBRC) is currently carrying out assessment, examination, and approval in relation to large banks' implementation of new Basel Accord.  In 
April 2011, the CBRC issued a Guideline for Impl ementation of New Regulatory Standards (CBRC 
Circular 2011/44), and required the start of the im plementation of Basel III on 1 January 2012.  Basel 
III standards are expected to be met by the end of 2013 for "systemically important banks", and by the 
end of 2016 for "non-systemically important banks".
82  The guideline explicitly stresses the definition 
of "systemically important banks" a nd prudential surveillance.  Systemic ally important banks are to be 
required to issue self-salvage bonds.  The authoriti es noted that the list of domestic systemically 
important banks has not published, and the Bank of  China was on the list of 29 global systemically 
important banks as of November 2011.83  
103. Deposits at the China Postal Savings Bank amount ed to ¥3,919.59 billion at end 2011.  The 
Bank is subject to the same laws , regulations, and rules as other banks, as well as enterprise income 
tax.  According to the authorities, the bank is recognized as a community bank or rural bank with 
extensive outlets across the nation,  especially in the countryside. 
Non-bank financial institutions 
104. Since 12 February 2010, foreign investors ha ve been allowed to establish wholly owned 
personal consumption finance companies;  previous ly foreign investment in personal finance was 
allowed only in the subsector of auto loans, thr ough establishment of wholly owned or joint-venture 
auto-finance companies.  Personal consumption finan ce companies are not allowed to engage in auto 
loan business. 
105. "Financing bonding companies", which conduct credit guarantees, are regulated by the 
Interim Administration Measure for Financing Bonding Companies (CBRC Decree 2010/3).  The regulator for financing bonding companies is a competent agency appointed by the Government at the provincial level (including minority autonomous re gions, and municipalities).  The authorities noted 
that foreign investment in financial bonding co mpanies is neither prohibited nor restricted. 
106. Since 22 July 2009, foreign financial institu tions, with presence in China for more than 
two years, have been allowed to become principa l investors (up to 100% ownership) of a consumer 
finance company, in accordance with the Administration Measures for the Pilot Programme of 
Consumer Finance Companies (CBRC Decree 2009/3).
84  Previously, investment by foreign financial 
                                                      
81 "Large commercial banks" are banks that play an active role in other countries' or regions' financial 
markets, and whose overseas business constitutes a substantial share of their total business activities.  Other 
commercial banks, including foreign bank subsidiaries in China, may implement Basel II on a voluntary basis. 
82 The new regulatory standards introduce three new capital requirements to replace the current 
two minimum capital adequacy ratio requir ements, i.e. core tier 1 capital ratio ≥5%, tier 1 capital ratio ≥6%, and 
total capital ratio ≥8%;  introduce a counter-cyclical capital superv ision framework:  2.5% conservation buffer, 
and 0-2.5% counter-cyclical capital buffer;  set the gross leverage ratio (4%) as a back-stop control measure;  
and establish the loan provision rate and the provision coverage rate:  loan provision rate ≥2.5%, provision 
coverage rate ≥150%. 
83 Financial Stability Board (2011). 
84 As per the Administration Measures for the Pilot Programme of Consumer Finance Companies 
(CBRC Decree 2009/3), the principal investors of a consumer finance company must satisfy the following 
conditions:  (1) more than 5 years of business experience in consumer finance;  (2) gross assets not less than ¥60 billion (or equivalent value in other convertible currencies) at the end of the most recent year;  
(3) continuously making profits in the most recent 2 consecutive fiscal years;  (4) no record of  major violations 
in the most recent 2 years;  (5) legal investment capital, i.e. loans or trusted funds ar e allowed;  (6) guarantee for WT/TPR/S/264 Trade Policy Review 
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  institutions was only allowed in auto finance companies.85  At the end of 2010, there were 
four consumer finance companies, includi ng one fully foreign-owned company and two 
joint-ventures.86  Subsidiaries of foreign banks are allowe d to engage in personal loans business as 
provided in the Interim Administration Measu res for Personal Loans (CBRC Decree 2010/2, 
12 February 2010).  Credit to individuals (through consumer loans, housing mortgages, and auto 
loans) has grown significantly si nce China's previous Review.87  The average NPL ratio in this sector 
was 0.17%.  Foreign presence is significant in the auto loans sector;  11 out of 13 auto-loans companies are foreign invested, including 6 wholly foreign-owned and 5 joint ventures. 
107. The authorities state that bankcard interbank clear ing services fall in the category of "financial 
settlement and clearing services for financial asset s", which China has not committed to liberalize 
since its accession to the WTO in 2001. 
Regulatory framework 
108. The laws and regulations in China's banki ng sector, including the licensing requirement and 
procedures, have remained largely unchanged sin ce its previous Review.  The main legislation 
regulating the sector includes:  the Law on the People's Bank of China, the Law on Commercial 
Banks, the Law on Regulation and Supervision of the Banking Sector, and the Anti-Money 
Laundering Law.  The authorities noted that all regu latory measures apply equally to domestic and 
foreign enterprises.   
109. Commercial banks in China are subject to a multi-layered regulatory framework involving: 
the People's Bank of China (PBC) (e.g. fixing interest  rates, and regulating and supervising interbank 
transactions), the China Banking Regulatory Commission (CBRC, most aspects of banking activities), 
the China Securities Regulatory Commission (CSRC, conducting fund custodian business), the China Insurance Regulatory Commission (CIRC togeth er with CBRC, conducting bancassurance business), 
and SAFE (e.g. regulations dealing with foreign exchange business).  Additionally, the Ministry of 
Finance oversees the management of SOCBs' NPLs through asset management companies established to that effect (see below).
88  Among them, the CBRC is the primary authority responsible for the 
regulation and supervision of banki ng institutions, as well as overseas operations of local institutions.  
The PBC is responsible for maintaining financial stability in the market and has the authority to 
regulate against money laundering and payment se ttlement;  it also has some broad supervisory 
powers, beyond the normal macro-prudential control of the financial sector.89   
                                                                                                                                                                     
a 3-year lockup period of equities of the consumer finance company in question;  (7) healthy corporate 
governance, and risk management;  and (8) meet other compliance standards. 
85 Investors of auto-finance companies must be en terprises that manufacture or market complete 
automobiles;  or non-bank financial institutions (now including foreign institutions).  
86 The four consumer finance companies are:  Bank of Beijing Consumer Finance Co. Ltd (wholly 
owned by Bank of Beijing);  Bank of China Consumer Finance Co. Ltd (jointly owned by Bank of China, 
Brilliance Group, and Shanghai Lujiazui Finance & Development Co. Ltd);  Sichuan Jincheng Consumer Finance Co. Ltd (joint-owned by Bank of Chengdu and Hong Leong Bank, Malaysia);  and PPF Consumer 
Finance Co Ltd (wholly owned by PPF Group, Cze). 
87 As of October 2011, consumption loans outstanding were at ¥8,630 billion, accounting for 64.8% of 
total loans to households, compared with ¥5,121 billion in October 2009. 
88 In addition to the regulators, there are associ ations (for example, the National Association of 
Banking Industry and National Association of Finance Companies) that, according to  the authorities, ensure 
industrial self-discipline, business cooperation, and innovation. 
89 The PBC has the power to inspect and supervise:  the implementation of regulations on reserve 
requirements;  activities related to special loans grante d by the PBC;  implementation of foreign exchange China WT/TPR/S/264 
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  110. China does not have a deposit insurance scheme;   the authorities are currently drafting a 
scheme.   
Licensing requirements and procedures 
111. It would appear that the licensing requiremen ts and procedures have remained unchanged 
since China's previous Review.  The Law on Commercial Banks and the CBRC Rules on the 
Implementing Procedure for Administrative Licensing define the business scope, and set out licensing and other requirements for domes tic-funded commercial banks.  The establishment of a commercial 
bank requires CBRC approval and the issuance of an operating licence.
90  The licensing procedure 
comprises two steps:  the applicant must submit a wr itten application, along with a feasibility study, 
and "other documents" that may be specified by the CBRC;  and the applicant is called upon to 
complete the application, by providing the required information.91  If the establishment is approved, 
the CBRC issues a banking permit.  The applicant must then register with the State Administration of 
Industry and Commerce (SAIC) a nd obtain a business licence.92  The expansion of the branching 
network domestically or overseas also requires CBRC approval, and the issuance of a business licence by the SAIC for domestic branches.
93 
112. Approval by the CBRC is required for changes, inter alia,  to the institution's name, the 
amount of registered capital, the location of the head office or any branch, the scope of business 
(including the introduction of new products or services) , shareholders with 5% or more of the bank's 
shares, and the articles of association.94  A change in senior management  must also be notified to the 
                                                                                                                                                                     
regulations;  implementation of regulations on inter-bank lending and the inter-bank bond market;  
implementation of regulations aimed at controlling clearing;  and implementation of the regulations against 
money laundering.  In addition, the PBC has specific powers concerning the inspection and supervision of 
banks.  In that regard, it may propose the inspection and supervision of specific institutions by the CBRC, and it may conduct such an inspection on its own if the situation of a specific financial institution is likely to increase 
overall systemic risk. 
90 Under the law, commercial banks may engage in, inter alia :  taking deposits from the general public;  
granting loans;  handling domestic and foreign settlement s;  acceptance and discounting negotiable instruments;  
issuing financial bonds;  buying and selling government and financial bonds;  interbank lending;  buying and 
selling foreign exchange;  providing letter-of-credit servi ces and guaranty;  acting as an insurance agent;  and 
other business operations as approved by the banking regulatory authority under the State Council (Article 3 of 
the Law on Commercial Banks, including the amendment of 27  December 2003). 
91 The required information includes:  a draft of the articles of association of the company;  certificates 
of the qualifications of the director;  an investment verification certificate issued by a statutory investment 
verification organization;  a list of the names, capital contributions, and shares of shareholders;  credit worthiness certificates and relevant information on share holders with 5% or more of the company's shares;  and 
business policies and plans, and other documents as specified by the CBRC. 
92 Articles 14-16 of the Law on Commercial Banks. 
93 The same procedure applies for opening each add itional branch.  A branch must have sufficient 
operating funds for the scale of its business.  The sum of operating funds allocated to all the branches must not 
exceed 60% of total capital of the head office.  The applying bank must have maintained a favourable balance in 
the three most recent accounti ng years, and fulfil other regulatory requ irements (capital adeq uacy ratio no lower 
than 8%;  balance of equity invest ments does not generally exceed 50% of net assets;  and balance of year-end 
assets at least ¥100 billion in the year prior to the appli cation).  In addition, the applying bank:  must have lawful 
and sufficient sources of foreign exchange funds;  must have a good corporate governance structure and a sound 
and effective internal control system; and its main pr udential supervisory indices must meet the supervisory 
requirements. 
94 Other matters requiring approval of the CBRC include changes in operating funds of local branches 
of foreign banks or of foreign-invested or joint-venture banks, or the transfer of assets by headquarters to 
foreign financial institutions in China. WT/TPR/S/264 Trade Policy Review 
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  CBRC, and the qualifications of the new management approved.95  For an SOCB, a board of 
supervisors must be established, inter alia,  to oversee its operations and its asset-liability ratio and to 
maintain and increase the value of state-owned assets.96  The Law on Regulation and Supervision of 
the Banking Sector sets out specific time limits for certain decisions.97  
113. Since China's previous Review, there has been no change in the minimum registered capital 
requirement to establish a bank, or to the capital ad equacy ratio (CAR).  Minimum registered capital 
is ¥1 billion for a commercial bank, ¥100 million for an urban commercial bank, and ¥50 million for a 
rural commercial bank.98  In addition, the CAR may not be lower than 8%.99  Other requirements 
include:  the ratio of loans outstanding by a commerc ial bank to related partie s must be no more than 
10% of the bank's total net capital (15% if the bo rrower is a group);  and inter-bank borrowing must 
be no more than 4% and lending no more than 8% of the total.100 
114. There is no umbrella licence for banks' ope rations;  nonetheless, a pilot programme on 
"comprehensive operation" by commercial banks h as been in place since 2006 in order to promote 
innovation in commercial bank operations (e.g. th e establishment of fund management companies 
owned by commercial banks).  The authorities noted  that the pilot programme does not change the 
current regulatory framework.  Commercial banks ma y need further authorization to supply specific 
services, such as derivatives and offshore client we alth management, in accordance with prudential 
principles and depending on the capacity of individu al banks.  A separate licence is required for all 
these services.  For example, according to the Provisional Administrative Rules Governing 
Derivatives Activities of Financial Institutions, co mmercial banks (including branches of foreign 
banks) seeking to conduct derivative business must obtain prior approval from CBRC;  it must meet 
various prudential requirements, including on th e composition of trading teams and qualification 
requirements of professionals involved in the supply  of these services.  According to the Provisional 
Administrative Measures on Personal Wealth Management Business of Commercial Banks, commercial banks must apply for approval from th e CBRC before they may provide certain personal 
wealth management services with guaranteed incomes.
101   
                                                      
95 Article 24 of the Law on Commercial Banks. 
96 Article 18 of the Law on Commercial Banks. 
97 For example, decisions regarding the establishment of banks must be made within six months of the 
CBRC's receipt of the application;  decisions on the introduction of new pr oducts or services must be taken 
within three months;  and decisions regarding the fit and proper test of directors and senior managers must be 
taken within 30 days (Article 22 of the Law on Regulation of and Supervision over the Banking Industry). 
98 Article 13 of the Law on Commercial Banks. 
99 Furthermore, the ratio of outstanding loans to deposits may not exceed 75%;  the balance of floating 
assets to floating liabilities may not be lower than 25%;  and the ratio of outstanding loans granted to the same 
borrower to the balance of the capita l of the commercial bank may not exceed 10% (Article 39 of the Law on 
Commercial Banks). 
100 Further details are given in the Rules on Commerc ial Banks' Connected Transactions with Insiders 
and Shareholders (CBRC Decree No. 3 of 2004) and the Rules on Monitoring Indicators and Assessments on 
Assets/liabilities Ratio Management at Commerc ial Banks (CBRC Circular No. 450 of 1996). 
101 Furthermore, the Provisional Administrative Measures on Commercial Banks Conducting Offshore 
Client Wealth Management Services (enacted by CBRC,  SAFE and the PBC) authorize commercial banks with 
the relevant business qualification from CBRC to condu ct investment in certain financial products outside 
China, on behalf of both domestic institutions and Chin a's residents.  The commercial bank must already have a 
foreign exchange business qualificati on.  SAFE will, upon application, gr ant each qualifying commercial bank a 
foreign exchange quota for its offshore client wealth ma nagement business, within which the bank may invest in 
foreign exchange financial products with foreign excha nge purchased with RMB.  Any investment by clients 
who invest directly with their own foreign exchange (as opposed to RMB-purchased foreign exchange) is not China WT/TPR/S/264 
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  115. Commercial banks are generally prohibited from:   trading and underwriting equity securities 
(unless they establish a separate subsidiary for th at purpose);  underwriting insurance policies (they 
may act as agents to sell insurance products);  ma king domestic investments (other than in debt 
instruments issued by the Government and financ ial institutions, commercial paper, and bonds issued 
by qualified non-financial institutions , and certain derivative products);  engaging in trust investment 
business, securities operations (except trading bonds);  investing in real estate other than for their own 
use;  and making equity investments in non-ba nking financial institutions and entities (unless 
otherwise specifically decided by the State Council) ;  and supplying financial leasing services directly 
(other than by establishing a separate subsidiary ).  Commercial banks must apply to relevant 
authorities for a separate licence per business in orde r to carry out the above prohibited business. 
116. In 2008, the authorities announced a pilot programme  to allow banks to invest in insurance 
companies.  Four banks have been approved to participate in the programme, among which two have 
been approved to become shareholders of insu rance companies.  There has been no foreign 
application for participation. 
Foreign banks 
117. The Regulations on Administration of Foreign -funded Banks, and the Rules for Implementing 
the Regulations on Administration of Foreign-funded Banks102, stipulate the requirements (including 
the minimum registered and paid-up capital and total operating capital) for the establishment of 
wholly foreign-funded banks, and branches of fore ign banks.  In addition, foreign investment in 
Chinese financial institutions is regulated by th e Administrative Rules Governing the Equity 
Investment in Chinese Financial Institutions  by Overseas Financial Institutions.   
118. Only foreign commercial banks that have mainta ined a representative office in China for at 
least two years prior to application, and that have  total assets of not less than US$10 billion at the end 
of the year preceding the application, may appl y to establishment a wholly foreign-funded bank 
(subsidiary).  The same asset requirement app lies for the establishment of a Chinese-foreign 
joint-venture bank.  A foreign bank wishing to estab lish a branch must have total assets of not less 
than US$20 billion at the end of the year preceding the application, and must have maintained a 
representative office in China for at least two years in the area in which it applies to establish its 
first branch.  The minimum asset requirements are higher for the establishment of branches than for 
locally incorporated entities.  In addition, foreign financial institutions wishing to establish any type 
of operational foreign-funded bank must have persistent profit-earning capacity and a good 
reputation;  have experience in international fi nancial activities;  have in place an effective 
anti-money-laundering system;  and be subject to supe rvision, and have its application approved, by 
its home country regulator.   
119. The minimum registered and paid-in capital for the establishment of a wholly foreign-funded 
bank or a Chinese-foreign joint-venture bank is ¥1 billion.  Branches opened by wholly foreign-
                                                                                                                                                                     
counted within the quota.  Investment in offshore fixed income products, as well as stocks and high-risk 
products, is governed by the Circular Concerning the Offshore Client Wealth Management Services by 
Commercial Banks, and the Circular on the Adjustment in the Scope of Offshore W ealth Management Services 
of Commercial Banks. 
102 The term "foreign-funded bank" includes:  a wholly foreign-funded bank, funded solely by a foreign 
bank or jointly with any other foreign financial institution;  a Chinese-foreign joint-venture bank, jointly funded by a foreign financial institution with a Chinese company or enterprise;  a branch of a foreign bank;  and a 
representative office of a foreign bank. The first thr ee categories are referred to by the regulations as 
"operational foreign-funded banks".   WT/TPR/S/264 Trade Policy Review 
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  funded banks or Chinese-foreign joint-venture ba nks in China must be allocated ¥100 million as 
operating capital.  Total operating capital allocat ed from a wholly foreign-funded bank or a 
Chinese-joint venture bank to all its branches must not represent more than 60% of the parent bank's 
aggregate capital.  A branch of a foreign bank mu st be allocated operating capital of ¥200 million.  
120. Wholly foreign-funded and Chinese-foreign jo int-venture banks may engage in the same 
business operations as domestic commercial banks, bot h in local and foreign currency.  However, 
branches of foreign banks may not supply bank cards;  the authorities maintain that such restrictions 
are for prudential reasons and consider that this is standard practice in many other countries.  
Branches of foreign banks may only receive time  deposits of not less than ¥1 million each from 
Chinese citizens within China.  Operational foreign- funded banks wishing to en gage in local-currency 
business must have had their business in China for at least three years, and have been profitable for 
two consecutive years, prior to the application.   
121. Foreign equity participation in domestic fina ncial institutions is restricted. Under the 
Administrative Measures on Equity Investments of  Overseas Financial Institutions in Chinese 
Financial Institutions103, no single foreign financial institution may own more than 20% of the equity 
of a Chinese financial institution.  In addition, if  the combined equity investment of all foreign 
financial institutions in a non-listed Chinese financ ial institution is equal to or exceeds 25%, the 
non-listed Chinese financial institution is regulated as a foreign-funded financial institution;  if the 
combined equity investment of a ll foreign financial institutions in a listed Chinese financial institution 
is equal to or exceeds 25%, the institution is regul ated as a Chinese financial institution.  Where the 
CBRC deems foreign financial institutions as related pa rties, they are counted as one institution when 
calculating such entities' equity inte rest in China's commercial banks. 
Lending, interest rates, and non-interest income 
122. Lending and deposit-taking by banks have been deregulated since 2004, but some constraints 
remain.104   The PBC uses dynamic adjustment of diversified legal deposit reserves as its 
macro-prudential policy tool, and states that no ad ministrative restrictions are imposed on loan 
growth.  Another instrument used by the PBC is to  influence credit direction is "window guidance".  
The PBC has held regular meetings with commerc ial banks to outline its concerns about credit 
conditions across sectors. The authorities noted  that "window guidance" is different from 
administrative means.105 
                                                      
103 "Chinese financial institutions" referred to in the Rules comprise the Chinese commercial banks, 
urban and rural credit cooperatives, trust and investment companies, financial leasing companies, finance 
companies affiliated to enterprises, and other Chinese financial institutions chartered by the CBRC that are legally incorporated within China's territory. 
104 The Law on Commercial Banks requires commercial ba nks to take into consideration "the needs of 
national economic and social development", and follow th e "guidance of the industrial policies of the State". 
Accordingly, in addition to the sector-specific lending provided by policy banks, the PBC and other 
administrative authorities encourage commercial banks to adapt their lending to specific borrowers in light of 
relevant government policies. 
105 Some researchers argue that "window guidance"  to commercial banks, though effective in 
controlling credit growth in some periods, weakens competition and undermines the market determination of 
interest rates (OECD, 2010b). China WT/TPR/S/264 
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  123. Interest rates are subject to benchmarks set by the PBC106, and lower and upper limits around 
these benchmark rates;  banking institutions must set their rates within the limits.  Commercial banks 
may charge lending rates above the benchmark (but not lower than 90% of the benchmark), and offer 
deposit rates below – but not  above – the benchmark.107  Some researchers argue that the benchmark 
rates may weaken the incentive fo r commercial banks to price ri sk appropriately and stifle 
competition in the banking sector.108  Market-based interest rates are allowed in the short-term 
interbank money markets and bond markets.   
124. In response to reports that SMEs were facing credit difficulties, especially as SOCBs had 
tightened their credit channels for SMEs109, the PBC and CBRC issued circulars in 2010110 to target 
financing operations for SMEs, calling for fast grow th in credit provisions for SMEs, and guiding 
commercial banks, in line with national industrial- and environmental protec tion policies, to support 
small enterprises with solvency and good business opportunities. 
125. The onshore market reference rates – Shanghai Inter-Bank Offered Rate (SHIBOR) – have 
been in operation since January 2007.111  HSBC and Standard Chartered are the two foreign-invested 
banks among 16 quoting banks of SHIBOR.  It is reported that SHIBOR is distorted by 
high-frequency volatility112, and a de facto  ceiling and floor caused by the benchmark rates.113  
However, according to the authorities, the SHIBOR  may on the whole reflect the capital supply and 
demand situation of the market, and has become an important benchmark of marketized product 
pricing.  Recent research shows that the PBC be nchmark lending rate does not have a significant 
effect on firm level capital formation, whereas the effective lending rate influenced by SHIBOR has a 
significant impact.114   
126. A maximum interest rate has been set for cer tain foreign-currency-denominated deposits of 
less than US$3 million with a maturity of one year or less.115  The foreign currencies involved 
                                                      
106 Banking institutions must set their rates within the limits.  Commercial banks may charge lending 
rates above the benchmark (but not lower than 90% of the benchmark), and offer deposit rates below – but not 
above – the benchmark.  Ceiling rates for loans are still applied in rural credit cooperatives. 
107 Mortgage loans have been subject to a different policy.  See WTO (2008). 
108  OECD (2010b), p. 55. 
109 It is reported that personnel policies in the banking sector make loan officers responsible for loans 
over their lifetime, without regard to risk-adjusted return s on their lending portfolios.  This may lead to banks 
prefering not to take risks and to allocate credit to their smaller clients (OECD, 2010b). 
110 The PBC, jointly with CBRC, CS RC, and CIRC, issued Certain Opinions on Further Improving 
Operations of Financing for Small-and-Medium Enterprises (PBC Circular 2010/193) on 21 June 2010;  the 
CBRC issued a Circular on Supporting Commercial Banks to Further Improve Services to Small-and-Medium 
Enterprises (CBRC Circular 2011/59) on 25 May 2011. 
111 SHIBOR is a simple, no-guarantee,  wholesale interest rate calculate d by arithmetically averaging all 
the interbank RMB lending rates offered by the price quot ation group of banks with a high credit rating. The 
price quotation group consists of 16 commercial banks. These quoting banks are primary dealers of open market 
operations or market makers in the foreign exchange market, with sound information disclosure and active RMB 
transactions in China's money market (SHIBOR onlin e information.  Viewed at:  www.shibor.org). 
112 Porter and Xu (2009). 
113 OECD (2010b), p. 51. 
114 Conway, Chalaux, and Herd (2010). 
115 There are no restrictions on interest rates for fo reign-currency-denominated loans, foreign-currency-
denominated deposits over US$3 million, or foreign-currency-denominated deposits of less than US$3 million 
with a maturity of more than one year. WT/TPR/S/264 Trade Policy Review 
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  include:  U.S. dollars, yen, euros, and Hong Kong dollars.  Regarding non-interest income, certain 
services are subject to regulated prices.116   
(b) Securities 
Recent developments 
127. The equity market and the bond market are the main components of China's securities 
market.117  Institutional investors in China's securities markets include securities firms, futures firms, 
insurance companies118, and funds (i.e. mutual funds, social se curity funds, and private equities).  In 
addition to shareholdings in join t ventures, and fund ma nagement companies, foreign presence in the 
Chinese markets may be in the form of invest ment banking, and qualified foreign institutional 
investors (QFIIs).119 
128. China liberalized certain aspects of market access in securities business during the period 
under review, by allowing subsidiaries of foreig n banks to underwrite financial bonds in the 
inter-bank market.  Qualified institutional investors registered in Hong Kong, China are also allowed 
to trade equities in the A-shar e market with offshore RMB.  
129. The pilot programme for margin trading was made permanent on 26 October 2011. Securities 
companies conducting margin trading must apply for approval from CSRC.   
130. According to the authorities, the reform pr ogramme for conversion of SOE non-tradeable 
shares was completed in May 2011.  The original  non-tradeable shares will be traded on stock 
exchanges after a lock-up period following the completion of non-tradeable share conversion.  The 
lock-up period is between one and three years.  It is not clear to the Secretariat whether there is a 
defined number for minimum state-ownership of SOEs  after the reform.  The authorities note that the 
State should guarantee "controlling power, influence, and driving force of the state capital" in SOEs 
that operate in important industries or key areas vital for people's livelihood and national economy. 
131. Policies and rules for QFIIs remain largely unch anged since the last TPR of China.  Foreign 
institutions must apply to the CSRC to become QFIIs, and apply to the State Administration of Foreign Exchanges (SAFE) for investment quotas.  Investments by QFIIs are allowed to be in 
equities, bonds, warrants, mutual funds, and stock index futures.
120  Foreign banks, securities 
companies, mutual funds, and insurance compan ies may apply to become QFIIs.  The minimum 
                                                      
116 These include:  basic RMB settlement services  (e.g. bank drafts, bank acceptances, promissory 
notes, cheques, entrusted collection);  and other commercial bank services determined by the CBRC and the 
State Development and Reforming Commission, based on the competitive situation in the market.  Fees for 
other products and services are to be determined by ba nks based on market conditions.  Regulated prices will be 
based on costs and allow for "slight profits". 
117 The proportion of bond financing has been larger than that of equity financing since 2005;  bond 
financing in 2010 accounted for 76.9% of total direct financing. 
118 Insurance companies may have direct equities holdings of not more than 10% of their total assets.  
Together with their holdings via asset management subsidiaries, insurance companies are allowed to hold no 
more than 25% of their total assets in stocks.  Their ceiling corporate bonds holdings is 30%. 
119 Qualified foreign institutional investors that inve st in equities in China using offshore RMB are 
called Renminbi Qualified Foreign Institutional Investors (RQFIIs). 
120 On 4 May 2011, the CSRC issued a Guideline for Qualified Foreign Institutional Investors' 
Participation in Stock Index Futures Trading.  Accordin g to this guideline, no QFII may hold more than its 
investment quota value of stock index futures contracts at the end of any trading day.  The transaction value of 
stock index futures within any trading day may not exceed the investment quota value for any QFIIs. China WT/TPR/S/264 
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  capital requirement for mutual funds and insura nce companies has dropped from US$10 billion to 
US$5 billion since August 2006, whilst the minimum capital requirement for banks and securities companies remained unchanged.  The investme nt quota for each QFII increased from US$800 million 
to US$1 billion in September 2009, and the global quota for QFIIs increased to US$30 billion.  The 
lock-up period of long-term capital was shortene d to 3 months from 12 months.  There were 
124 QFIIs in December 2011, 70% of which were  mutual funds and insurance companies. 
132. Under a pilot programme of Renminbi Qualif ied Foreign Institutional Investors (RQFIIs), 
subsidiaries of domestic fund management companies or securities companies that are registered in 
Hong Kong, China may invest in A-share equiti es with RMB raised in Hong Kong, China since 
16 December 2012.
121  The Hong Kong-based institutions must also apply to the CSRC to be RQFIIs, 
and apply to the State Administration of Forei gn Exchanges (SAFE) for investment quotas.  The 
investment quota for RQFIIs is administered di fferently from the quota for QFIIs;  the accumulative 
net (inbound) RMB capital of each RQFII may not be  larger than the approved quota;  the approved 
quota for individual RQFIIs may be reduced if the q uota is not "effectively" utilized within one year 
of approval.122  It was reported that 21 institutions sh are the current total quota, ¥20 billion, for 
RQFIIs.  Detailed information on the expected  business scope of RQFIIs was not available. 
133. Policies for qualified domestic institutional investors (QDIIs)123 remain largely unchanged 
since last Review of China.   
134. On 21 April 2010, China began to allow Chinese  and joint-venture securities companies and 
securities investment funds to participate in stock index futures trading.  Since 4 May 2011, qualified 
foreign institutional investors (QFIIs) have been  allowed to participate in such trading.  
Equity market 
135. The ChiNext board, established in  the Shenzhen Stock Exchange in October 2009, is a new 
"growth enterprises board" aiming to "support" innova tive firms and other growing enterprises.  It 
listed 281 companies at end 2011,  raising about ¥195.913 billion.  In accordance with relevant CSRC 
rules, prior to starting up an account and investing in  the ChiNext, investors must be familiar with the 
rules of the "growth enterprise board", be well awar e of the market risks, and have the corresponding 
risk tolerance.  
136. As agreed in the Sino-US Strategic Ec onomic Dialogue in December 2007, and the 
Sino-British Economic & Finance Dialogue in May 2 009, eligible foreign enterprises (registered 
outside China) are to be allowed to be listed on Shanghai Stock Exchange at the "appropriate" time.124  
                                                      
121 CSRC Decree 2011/76. 
122 SAFE Circular 2011/50, entered into force on 20  December 2011. 
123 The programme of QDIIs began in April 2006, and gradually allowed approved Chinese 
institutional investors to invest in foreign securitie s.  Qualified commercial banks, and fund management 
companies were first allowed in 2006;  trust companie s and insurance companies were allowed make overseas 
investments in June 2007, and securities companies in September 2009.  
124 This is also found in the St ate Council's Certain Opinions on Promoting Shanghai as an 
International Financial Centre and International Tran sport Hub by Acceleration its Development of Modern 
Services Sector and Advance Manufacturing Sector (State Council Circular 2009/19). WT/TPR/S/264 Trade Policy Review 
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  The authorities noted that preparation for the "International Board" was under way, though there is no 
strict timetable for its introduction.125  
Bond market 
137. While domestic (non-FIE) banks were already allowed to issue financial bonds in RMB, 
subsidiaries of foreign banks in China have been  allowed to issue financial bonds in RMB in the 
Mainland since May 2009 and in Hong Kong SA R since July 2009.  Between 2010 and 2011, 
two foreign invested banks were allowed to issue bonds in the Mainland's inter-bank market126, and 
two locally corporatized foreign-invested banks were allowed to issue RMB-denominated bonds in 
Hong Kong SAR.127  In addition, subsidiaries of foreign banks are allowed to underwrite financial 
bonds issued in the inter-bank market and corporat e bonds (since 2004).  The authorities noted that as 
long as certain conditions are satisfied128, there is no special licence requirement for locally 
corporatized foreign-invested financial institutions  to underwrite bonds.  Direct branches of foreign 
banks are not allowed to issue or underwrite fina ncial bonds.  Certain commercial banks have been 
allowed to set up counters at their branches, where individual investors are allowed to buy and sell 
bonds;  this "bank counter market " is still in its infancy. 
138. Treasury bills, local government bonds, corporate bonds and warrants are traded in the stock 
exchanges (Shanghai and Shenzhen).  At the e nd of 2011, 640 bonds with a total face value of 
¥842.8 billion were in the secondary market (i.e . stock exchanges), an increase of about 34.25% 
compared with the end of 2010.  Individual investors as well as institutional investors, including QFIIs, are allowed to trade bonds in the secondary ma rket.  In addition, 16 commercial banks are now 
allowed to participate, on a pilot basis, in bond tr ading in the stock exchanges.  In September 2010, 
CSRC, jointly with the PBC and CBRC, issued a Circular on Certain Issues about the Pilot 
Programme of Listed Commercial Banks' Partic ipation in Bond Trading on the Exchange.
129 
139. Since 16 August 2010, RMB clearing banks outside China, including in Hong Kong, China 
and Macao, China, have been allowed (within the approved quota) to use RMB acquired from their 
clearing operations to invest in the interbank bond ma rket.  As of end 2011, the interbank bond market 
managed ¥21.20 trillion, up 7.44% from 2010;  cumulative transaction settlements amounted to 
¥180.60 trillion, with year-on-year growth of 10.93%.     
Futures market 
140. Stock index futures started trading on 16 April 2010.  Securities companies, securities 
investment funds, trust companies130, and QFIIs are allowed to trade stock index futures.  The CSRC 
issued a series of guidelines for trading stock index futures.131 
                                                      
125 Online information.  Viewed at:  http://www .ccstock.cn/stock/gupiaoyaowen/2011-05-18/ 
A458709.html. 
126 These two banks were the Bank of Tokyo-M itsubishi UFJ, and the Bank of East Asia. 
127 These two banks were HSBC, and the Bank of East Asia. 
128 Conditions were explained in the Administrative Measures for the Issuance of Financial Bonds in 
the National Inter-bank Bond Market (PBC Decree 2005/1). 
129 CSRC Circular 2010/91. 
130 CBRC Circular on Guideline for Trust Companies' Participation in Stock Index Futures Trading 
(CBRC Circular 2011/70). 
131 On 21 April 2010, the CSRC issued the Guideline for Securities Companies' Participation in Stock 
Index Futures Trading, and the Guide line for Securities Investment Funds' Pa rticipation in Stock Index Futures China WT/TPR/S/264 
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  Regulatory and legislative framework 
141. The China Securities Regulatory Commission (CSRC) is the regulatory body for the 
securities markets in China.  The main  legislation is the Securities Law.132  Under the Law and 
administrative rules, including the Measures on the Administration of Stock Exchanges, stock 
exchanges are self-regulatory legal entities.133 
142. The CSRC implements the regulatory classification of securities companies and futures 
companies.134  Classification is determined on the basis of, inter alia , risk-management capabilities, 
competiveness of the company, and continuous  record of law-abiding operations. There are 
five categories, i.e. A, B, C, D, and E;  accord ing to the regulations, companies in category D may 
have greater risks than they are able to bear. 
143. Classifications are conducted annually by the CSRC.  The results of the exercise may be 
taken into account as prudential conditions when co mpanies apply for new business, new branches.  
These results are also used as refe rences for companies' levies paid to the China Securities Investors 
Protection Fund and the China Futures Investors Protection Fund. 
144. In the Regulations on the Investment Range and other Related Issues of Securities Companies' 
Operation on Their Capitals, which entered in forc e on 1 June 2011, the CSRC defines the range of 
business that securities companies are allowed to operate with their own capital.  Securities companies 
may establish subsidiaries to specialize in financia l products and other investments beyond the range 
of securities operation with their own capital as defined in the regulation, however, securities 
companies may not provide finance or guarantees to these subsidiaries. 
145. Securities investment consultants must acquire the qualification of securities investment 
consultant, and be registered in the Securities Associ ation of China.  Securities investment consultants 
may not simultaneously be registered as securities analysts.135  Futures investment consultations are 
being undertaken on a pilot basis in futures comp anies after approval by the CSRC.  In the Interim 
Measures for Futures Investment Consultancy Serv ices by Futures Companies, which entered into 
effect on 1 May 2011, the authorities emphasized the prevention of conflict of interests (COIs), and 
required the chief risk-officers of futures companies to report, to the authorities in the quarterly and 
annual reports, particularly on COI prevention me asures.  Individual persons are prohibited from 
providing either securities investment advisory ser vices or futures investment consultation services. 
146. The regulations on foreign capital entering Chinese securitie s markets remained largely 
unchanged during the review period.  In principle,  foreign suppliers may enter China's securities 
markets through the establishment of a new joint-vent ure with a Chinese partner or by taking a stake 
                                                                                                                                                                     
Trading. On 4 May 2011, the CSRC issued the Guide line for Qualified Foreign Institutional Investors' 
Participation in Stock Index Futures Trading. 
132 Other major laws and regulations include the Co mpany Law, the Securities Investment Fund Law, 
the Regulations on Administration of Futures Trade, and various regulations dealing with securities offering and 
listing; securities and futures tradin g;  corporate governance,  mergers and acquisitions of listed companies;  
market intermediaries;  and securities investment funds. 
133 In addition, the Securities Depository and Clearing Company provides a centralized register, as well 
as custody and clearing services for, and exerci ses self-regulation over, securities trading.   
134 The CSRC issued revised Regulations on Administration and Supervision of Securities Company 
Classification on 14 May 2010, and Regulations on Ad ministration and Supervision of Futures Company 
Classification on 12 April 2011. 
135 Article 7 of the Interim Rules on the Business of Securities Investment Advising, entered into force 
on 1 January 2011. WT/TPR/S/264 Trade Policy Review 
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  in an existing listed securities firm.136  Foreign equity participation (accumulated total foreign 
participation) in listed Chinese securities firms is li mited to 25%;  and a single foreign investor must 
not hold more than 20%.  Companies must have been in continuous operation in securities for five years in order to obtain approval for foreign equi ty participation.  Foreig n equity in joint-venture 
securities firms is limited to 33%. 
147. Since 2008, there have been no changes to th e Measures for the Administration of Securities 
Investment Fund Management Companies, which re gulate the establishment of domestically owned 
and Sino-foreign joint-venture asset management companies.
137  The aggregate equity limit of foreign 
investment (direct and indirect holdings) for joint-venture fund management companies is 49%.     
148. Since 2005, commercial banks have been allowe d to establish fund management companies 
under a pilot programme.  Currently, eight commerc ial banks have fund management companies as 
subsidiaries.  The authorities state that the pilo t programme is completed and under evaluation to 
determine whether its scope will be enlarged. 
149. Revised Administration Measures on Vital Asset Restructuring of Listed Companies, entered 
into force on 1 September 2011.  The revised measur es cover three respects with regard to M&A and 
restructuring, in particular among SOEs, namely , backdoor listing, the system of buying assets 
through issuance of shares, and supporting finance.  
(c) Insurance 
Market overview 
150. State-owned insurers dominate China's insuran ce market.  As of 31 May 2011, there were 
125 insurance companies in Chin a's insurance market, including 51 life insurance companies, 
57 non-life insurance companies, and 7 reinsuran ce companies.  Of the 125 insurance companies, 
74 were domestic companies and 51 were forei gn companies.  Since 2009, China Insurance 
Regulatory Commission (CIRC) has approved 15 new insurance companies, 10 domestic and 
5 foreign-owned.  At the end of 2010, the three la rgest life insurance compan ies held a market share 
of 55.6% and the three largest non-life insurance companies held a share of 66.5%. 
151. The Interim Administration Measures for Usage of  Insurance Funds, which entered into force 
on 31 August 2010, allows insurance companies to  place their insurance funds in bank deposits, 
securities (i.e. bonds, stocks, and fund equities) tr ading, real estate investments, and overseas 
investments. Insurance funds must be entrusted to /hosted in and supervised by a professional third 
                                                      
136 The business scope of these joint ventures include: underwriting stocks (including A, B, and 
H-shares) and bonds (including government and corporate bonds); brokerage business in only B and H-shares; and brokerage and proprietary trading of bonds (including government and corporate bonds).  Qualified joint 
ventures are allowed to gradually expand to other business, including brokerage of RMB stocks, assets 
management, and operations with their own capital. 
137 Under the measures, minimum registered capital of  ¥100 million is required to establish a fund 
management company.  Principal shareholders, i.e. those holding no less than 25% of the company's total 
registered capital, must have minimum registered capital of ¥300 million;  other shareholders must have registered capital and net assets of no less than ¥100 million.  A foreign shareholder in these companies must:  
(a) be a financial institution established according to the law of its country of origin;  (b) be located in a country 
that has "perfect securities laws an d regulatory systems", and the securities regulatory institution must have 
signed an MOU on securities regulatory cooperation w ith the CSRC, and have kept an effective regulatory 
cooperation relationship;  and (c) must have minimum paid-up capital in convertible currency equal to 
¥300 million, even if it is not a major shareholder. China WT/TPR/S/264 
 Page 135 
 
 
  party such as a commercial bank.  Insurance comp anies may entrust the f unds to insurance asset 
management companies or operate the investment activities on their own capacities. 
152. The Interim Rules on Administration of Insuran ce Asset Management Companies (revised in 
April 2011)138 allows foreign and domestic insuran ce companies to establish insurance asset 
management companies.  To be a stakeholder of an insurance asset management company, the 
insurance company must have been operation insura nce business for more than five years, and have 
total assets of not less than ¥10 billion (not less than ¥15 billion for an insurance group company) 
with a solvency ratio not less than 150%.  The regi stered capital of an in surance asset management 
company should be minimum paid-in capital of ¥100 million or equivalent valu es in other convertible 
currencies. 
153. Banks and other financial institutions that ac quire concurrent business agency licences are 
allowed to serve as insurance sales agencies.139 
Regulatory and legislative framework 
154. The China Insurance Regulatory Commission (CIRC) is the regulatory authority for the 
insurance market in China.  It is responsible  for granting permission to establish new insurance 
companies, new branches of insurance company,  and to supply new produc ts and engage in new 
activities.  The CIRC is also responsible for prudential surveillances over the whole market. 
155. The main legislative framework  for the insurance sector incl udes the Insurance Law (revised 
in October 2009)140, the Regulations on Administration of Foreign-funded Insurance Companies 
(State Council Decree 336, entered into for ce 1 February 2002), the Detailed Rules for 
Implementation of Regulations on Administration of Foreign-funded Insurance Companies (CIRC 
Decree 2004/4, entered into force 15 June 2004)141;  and the Rules on Administration of Insurance 
Companies (CIRC Decree 2009/1, entered into force 1 October 2009).  The latest revised law and regulations treat foreign-funded insurance compan ies the same as domestic insurance companies.  
156. The Insurance Protection Fund of China was set up since 2008.
142 All insurance companies 
operating in China, i.e. domestic and foreign-fu nded, must pay levies to the Insurance Protection 
Fund. 
157. The Provisional Measures for the Administ ration of Insurance Group Companies, 
promulgated on 12 March 2010 , defines the range of business of in surance group companies, which is 
mainly in equity investment and management.  It  sets investment caps fo r insurance group companies 
and their subsidiaries, non-insurance financial ente rprises, insurance-related non-financial enterprises, 
and overseas investments.  The measures also aim to  strengthen internal control of insurance groups' 
                                                      
138 CIRC Circular 2011/19. 
139 CBRC Circular on Further Strengthening Sales Compliance and Risk Management of Insurance 
Agent Services Provided by Commercial Banks (CBRC Circular 2010/90).  CIRC's proposed Administration 
Rules on Insurance Companies' Appointment of Financial Institutions as Insurance Agents (in consultation from 
7 April 2011). 
140 Article 185 of the Insurance Law states that th e Law also applies to foreign-funded insurance 
companies. 
141 Foreign-funded insurance companies include wholly foreign-owned insurance companies, 
Sino-foreign joint ventures, and branch es of foreign insurance companies. 
142 The Administration Measures on Insurance Protection Fund, jointly issued by CIRC, MOF, and 
PBC, entered into effect on 11 September 2008. WT/TPR/S/264 Trade Policy Review 
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  affiliates.  Capital management and information disclosure of insu rance groups are subject to the 
measures. 
158. Insurance companies and their branches must ope rate business activities within the territorial 
boundary of the province/municipality/autonomous  region in which they are registered.143  Insurance 
companies must establish at least one branch in the territory at the provincial level where they intend 
to operate business.  However, re-insurance compan ies, including branches of foreign re-insurance 
companies, are allowed to operate nationwide. 
159. Regulations and requirements for foreign in vestors to establish insurance companies, 
including wholly foreign-funded and joint vent ures, remain the same.  In the Measures for 
Administration of Equities of Insurance Companies (CIRC Decree 2010/6, entered into force on 
10 June 2010), states that the threshold to determin e whether an insurance company is classified as a 
foreign-funded insurance company is 25% of equity holding by foreign investors.  No single investor 
(including its affiliated parties) may possess more than 20% of the insurance company's registered 
capital.  Investors in insurance companies must be domestic legal persons , or foreign financial 
institutions.144  Key shareholders that possess more than 15% of equity, or less than 15% but gain 
control (directly or indirectly) over an insurance company must:  have continuously made profits in 
the most recent three consecutive fiscal years;  ha ve net assets of not less than ¥200 million;  and hold 
a leading position in the industry.  Any change or alteration of a single shareholder that possesses 
more than 5% equities requires CIRC approval.  If a single investor acquires more than 5% of the stocks of a listed insurance company from the exchange, the company must report to CIRC for 
approval within five days of the acquisition.  
160. Foreign financial institutions that invest in equities of insurance companies in China must 
have:  continuously made profits in the most recent three consecutive fiscal years;  have gross assets at the end of most recent year of not less than US$2 billion;  have a long-term credit rating by international rating agencies of level A or above for th e most recent three consecutive years;  have had 
no major regulatory violation in the most recent three consecutive years;   meet the prudential 
supervisory standards in the country of origin ;  and meet other requirements of Chinese laws, 
regulations, and CIRC rules. 
161. A foreign-funded insurance company is not allo wed to engage in the business of personal 
insurance and property insurance at the same time.
145  Foreign holdings of equities in a Sino-foreign 
joint-venture insurance company engaged in  life insurance business may not exceed 50%.146  Foreign-
funded insurance companies that engage in life insurance business must not be dissolved.147  
162. The Measures for Administration of Capital De posit by Insurance Companies entered into 
force on 7 July 2011.  Under the measures, 20% of  the registered capital of an insurance company 
                                                      
143 Exemptions are given to insurance companies engaged in co-insurance business, large-scale 
commercial insurance or master policy, and cross-provinc ial-border business underwritten through internet or 
telephone marketing activities. Article 42 of the Rules on Administration of Insurance Companies. 
144 Except for investors that purchase stocks of liste d insurance companies on the stock exchanges.  See 
Article 12 of the Measures for Administration of Equities of Insurance Companies. 
145 Article 16 of the Regulations on Administration of Foreign-funded Insurance Company. 
146 Article 3 of the Detailed Rules for Implementation of Regulations on Administration of Foreign-
funded Insurance Company.  Wholly foreign-owned insurance companies and branches of foreign insurance companies are not allowed to enga ge in life insurance in China. 
147 Except splits or mergers.  Article 26 of the Re gulations on Administration of Foreign-funded 
Insurance Company. China WT/TPR/S/264 
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  must be saved in capital deposit accounts within 30 days of permissions granted to operate or to 
increase registered capital.148  The capital deposit is to be used only for debt settlement if the 
insurance company is liquidated.  The Regulati ons on Administration of Reprehensive Office of 
Foreign Insurance Organizations in China is currently under public consultation. 
(d) Financial information 
163. Financial information services offered by foreign providers are regulated by the 
Administration of Provision of Fi nancial Information Services in Ch ina by Foreign Institutions, which 
entered into force in June 2009.  Financial inform ation services are defined as services provided to 
users engaging in financial analysis, financial transactions, financial decision-making or other 
financial activities in respect of the provision of info rmation and/or financial st atistics that may affect 
financial markets. 
164. The State Council's Information Office is the regulatory body for financial information 
services in China. Service providers must seek  approval from the Information Office prior to 
operating in China.149  Approved service providers must file with the regulator each service contract 
with domestic clients within 30 days of signing,  termination, or alteration of the contract.150  Service 
providers approved by the Information Office al so require permission from MOFCOM, and must 
register with the SAIC within 30 days of this since permission being granted. 
(iii) Telecommunications 
(a) Market structure 
165. According to ITU data, China had 64.4 mobile cellular subscriptions per 100 inhabitants in 
2010, i.e. about 859 million subscriptions, up from 393 m illion subscriptions in 2005.  This more than 
doubling in five years corresponds to a compound annual growth rate of 16.7%.  Correlatively, the 
number of fixed lines decreased from 350 million to 294 million between 2005 and 2010, i.e. from 
26.80 lines per 100 inhabitants to 21.95.  Overall, penetration of telephones in China is still on the 
rise, from 79.9% in 2009 to 84.6% in 2010.  
166. After the allocation of the third 3G licence to China Telecom in January 2009, there are now 
three main operators both for the fixed-line market and the mobile telephone market.  These operators 
also provide data services, IP telephony services, and satellite services.  CITIC networks provides 
only satellite services (Tables IV.11, IV.12 and IV.13). 
167. While majority state owned, the three compan ies are listed on the st ock market and hence 
open to private investors, including foreign, through the acquisition of shares.  Foreign investment is 
of 25.80% in China Mobile, 28.99% in China Unicom, and 17.15% in China Telecom.  
With regard to telephone tariffs, in 2009, averag e charges for traditional fixed-line and mobile 
domestic direct dials were ¥0.27/minute and ¥0.33/ minute (with an access charge of ¥0.1/minute).  
Average charges for traditional fixed-line and mobile international direct dials were ¥3.40/minute and 
                                                      
148 Insurance capital deposit is required by Article 97 of the Insurance Law. 
149 The decision whether to grant business approval is made within  20 working days of receipt of 
application.  Each approval is valid for two years. 
150 Information to be filed includes information pro ducts, methods of delivery, identities of clients, and 
validity period of the contract. Article 12 of the Provisio ns states that all filed information is protected, and will 
be used for regulatory purpose only. WT/TPR/S/264 Trade Policy Review 
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  ¥3.01/minute.  In 2010, the averages were ¥0. 26/minute and ¥0.23/minute for traditional fixed-line 
and mobile domestic direct dials;  and ¥2.85/mi nute and ¥2.14/minute for traditional fixed-line and 
mobile international direct dials. 
Table IV.11 
Basic telecommunications service providers, 2011 
Services Providers 
Fixed-line services China Teleco m, China Mobile, China Unicom 
Mobile telephone services China Tel ecom, China Mobile, China Unicom 
Data services China Telecom,  China Mobile, China Unicom 
IP telephony services China Teleco m, China Mobile, China Unicom 
Satellite services China Telecom, China Mobile, China Unicom, CITIC Networks 
Source: Information provided by the Chinese authorities. 
Table IV.12 
Market shares for fixed lines, 2011 
Operator Market share of users (%) Market share of revenue (%) 
China Telecom 61.4 62.5 
China Unicom  32.6 32.9 
China Mobile 6 4.6 
Source:  Information provided by the Chinese authorities. 
Table IV.13 
Market shares for mobile telephones, 2011 
Operators Market share of users (%) Market share of revenue (%) 
China Telecom 12.4 9.7 
China Unicom  20.3 14.3 
China Mobile 67.3 76 
Source:  Information provided by the Chinese authorities. 
168. With regard to tariff structure,  in recent years, the Government  has maintained the principles 
of breaking the monopoly and introducing competition in telecommunications.  The Ministry of 
Industry and Information Technology (MIIT) has been promoting reforms on telecom tariff 
management, improving gradually the formation me chanism of market-oriented telecommunications 
tariffs.  Against this background, tel ecoms tariffs have declined signifi cantly, overall.  With regard to 
the tariff structure for mobile telephony, MIIT issued  a "Notice on Simplification of Charge of 
Long-distance Call via Mobile phone" in 2009, wh ich simplified the tari ff structure for local 
long-distance calls via mobile phones and combined local and long-distance call charges.  In 
fixed-line telephony, maximum standard charges for dialling services among business areas have been 
gradually declining all over China, under MIIT and NDRC guidance.  As of end-June 2011, the 
maximum interval fee standard was lowered to ¥0.2/min in 29 provinces, and interval fees were cancelled in Beijing, Shanghai, Tianjin, and Heilongjiang. 
169. In order to encourage market competition and promote the lowering of communication costs, 
the upper-limits method (price caps) has been used instead of pricing by the Government, since 
18 November 2009, to manage basic monthly fees for fixed local telephone services and fees for local 
calls with the business area, as well as basic monthly fees for local network wireless access, fees for local Netcom calls, and fees for l ong-term lease of leased circuit. China WT/TPR/S/264 
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  170. As of end 2011, the number of Chinese Intern et users reached 513 million (an average of 
38.3 per 100 persons), fixed broadband access s ubscribers reached 156 million (an average of 
11.69 per 100).  
(b) Regulatory regime 
171. MIIT is the main regulator of the telecom industry.  It deals with, inter alia , licencing, 
interconnection rates, technical standard settings , radio frequency allocations, spectrum monitoring 
and enforcement, numbering, type approval, services  quality monitoring, universal service, quality of 
service standards, enforcement of the quality of  service obligations, and information technology.  
MIIT shares its regulatory competence with the National Development and Reform Commission for 
price regulation;  with the State Administration of Radio, Film and Television for broadcasting;  and 
with the State Council Information Office, the Minist ry of Public Security, the State Administration 
for Radio Film and Television, and the General Ad ministration of Press and Publication for internet 
content.151 
172. China's GATS and FTA commitments on teleco mmunications comprise four main blocks, 
except in the Closer Economic Partnership agreements with the Hong Kong SAR and the 
Macao SAR, which define a sui generis  regime, and in the FTA with ASEAN, which does not include 
any telecommunication commitment.       
173. The first block covers all value-added teleco mmunications services "including" items (h) to 
(n) of the MTN.GNS/W/120 nomenclature, i.e. electr onic mail (h);  voicemail (i);  electronic data 
interchange (k);  enhanced/value-added facsimile services (including store and forward, store and 
retrieve) (l);  code and protoc ol conversion (m);  and online in formation and/or data processing 
(including transaction processing).  For those services, entry for mode 1 refers to mode 3 ("see mode 3"), there are no restrictions for mode 2, and commercial presence is allowed in the form of joint venture, with foreign investment limited to  50%.  The additional commitments column indicates 
that the reference paper obligati ons apply to those services.  The commitments contained in the FTA 
with Pakistan, New Zealand, Singapore, and Chile ( by cross-reference for the latter) are identical to 
GATS commitments;  however the reference paper obligations are not included for value-added 
telecommunication services in the agreements with New Zealand, Singapore, and Peru. 
174. The second block of commitments comprises one basic telecommunication service, paging, 
for which the conditions are identical to that of valu e-added services (mode 1:  "see mode 3", mode 2:  
none;  and mode 3:  only in the form of joint ve nture, with foreign ownership limited to 50%;  
obligations of the reference paper) under GA TS as well as under the FTAs with Pakistan, 
New Zealand, Singapore, and Chile (by cross-reference for the latter).   
175. The third block, mobile voice and data services,  covers both analogue/digital/cellular services 
and personal communication services.  Under GATS co mmitments, mode 1 refers to mode 3, no 
restrictions are inscribed for mode 2, and commercia l presence is allowed in the form of joint venture, 
with foreign ownership limited to 49%;  and the obl igations of the reference paper are inscribed.  The 
commitments are identical in the FTAs with Pa kistan, New Zealand, Singapore, and Chile (by 
cross-reference for the latter).   
176. The fourth block covers fixe d domestic and international basic telecommunications services 
i.e. voice services, packet-switched data transmission services, facsimile services, domestic 
                                                      
151 International Telecommunication Union, "ICT EYE" data base.  Viewed at:  http://www.itu.int/ITU-
D/icteye/.   WT/TPR/S/264 Trade Policy Review 
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  private-leased circuit, and international closed u ser group voice and data services.  In the latter case 
the commitment indicates that the use of private leased circuit services is permitted.  The regime is the same as for mobile services (mode 1:  see mode 3, mode  2:  none, mode 3:  joint venture, with foreign 
ownership limited to 49%, and sub scription to the reference pape r obligations) both under the GATS 
and under the FTAs with Pakistan, New Zealand, Si ngapore, and Chile (by cross-reference for the 
latter).  
177. The Closer Economic Partnership agreements with the Hong Kong SAR and the Macao SAR 
contain extensive commitment formulated with sui generis  classification and definitions that are 
drawn from the "Mainland telecommunication business classification" and not from the 
MTN.GNS/W/120 and the "Chairman's note" (S/GBT/W /2/Rev1) categories referred to in China's 
GATS commitments.  Hong Kong/Macao SARs services suppliers are allowed "to set up joint venture 
enterprises to provide the following five types of value-added telecom services: (1) internet data 
centre services, (2) store and forward services, (3) call centre services, (4) internet access services, 
(5) content services", with shareholding limited to 50%.  In addition, Hong Kong/Macao SARs 
services suppliers are allowed to set up joint ventur es, with maximum participation of 50% to provide 
IP virtual private network services.  Hong Kong SAR suppliers are allowed to distribute fixed/mobile 
telephone services cards in Guangdong province, wh ich may only be used in Hong Kong/Macao (to 
the exclusion of mobile satellite phone services card s);  this does not apply to Macao suppliers.  
178. There have been no major changes to the institu tional structure or the existing regime since 
2009.  A draft telecommunication law, whose first dr aft dates back July 2004, is still in preparation 
through a process of further investigation, verifi cation, opinion soliciting, a nd modification, presided 
over by the Legislative Affairs Office of the State Council.  There are no plans to lift or ease the provisions on minimum registered capital. 
179. Department rules enacted or amended since 2009 by the Ministry of Industry and Information 
Technology include:  Measures for the Administ ration of Seismic Performance Testing of 
Telecommunications Equipment (MIIT Order No . 3, 1 March 2009, effective 10 April 2009);   
Decision on Abolishing the 8 Rules like Provisions of the Ministry of Posts and Telecommunications 
on Compensation for Damages to Telecommunication Lines, etc. (MIIT Order No. 4, 1 March 2009, effective 10 April 2009);  Administrative Measures for the Licensing of  Telecommunication Business 
Operations (MIIT Order No. 5, 5 March 2009, effective 10 April 2009);  and Measures for the 
Administration of Communication Network Secur ity Protection (MIIT Order No. 11, 21 January 
2010, effective 1 March 2010).  
180. These are essentially technical regulations with no effect on market access for foreign 
investment.  However, the Administrative M easures for the Licencing of Telecommunication 
Business Operations amend the existing rules by further detailing and specifying the material to be provided by an applicant for a licence, as well as the procedures for the approval of licences and the 
specific requirements for applicants' behaviour (com pliance with laws and regulations, prohibition of 
deceptive and fraudulent practices to the detriment of consumers, prohibition of anti-competitive 
practices, etc.).  The rules are applied on a non-discr iminatory basis to national and foreign applicants, 
provided that the latter comply with conditions set up by the Provisions on the Administration of 
Foreign-funded Telecommunications Enterprises  (Decree No. 534 of the State Council of the People's 
Republic of China). 
181. MIIT Order No. 11 on  Measures for the Administration of Communication Network Security 
Protection, issued in January 2010, imposes techni cal requirements on business operators to guarantee 
the security of the network against viruses and malici ous attacks so as to mainta in the integrity of the China WT/TPR/S/264 
 Page 141 
 
 
  network and the economic and social benefits attached  to it.  The standardized technical requirements 
include a security-risk-analysis report and regular reviews of the security measures by the Regulatory 
Agency.  Order No. 11 applies to providers of  both basic telecommunications and value-added 
services, including internet.  This complements the new CCC (China Compulsory Certification) 
requirement for IT security products issued in  2009 by the Ministry of Public Security. 
182. In the "restricted" category of the 2011 Catalogue for the Guidan ce of Foreign Investment 
Industries  telecommunications companies are classified as:  "value-added telecommunications 
services (the foreign capital must be less than 50%), basic telecommunications services (the foreign capital must be less than 49%)".  The same catalog ue places in the "prohibited" category:  "News 
websites, internet audiovisual programme services,  operating sites offering internet-surfing services, 
as well as culture-related businesses on the internet (music excluded)". 
183. Article II Clause 9 of the document Several Op inions of the State Council on Encouraging 
and Guiding the Healthy Development of Private I nvestment stipulates that Chinese authorities should 
"encourage the private capital entering the basic te lecommunications market by means of sharing, 
support the private development of the value-added telecom service and reinforce the supervision of 
monopolization telecom field and unfair competition be haviours, to promote a fair competition and 
the resource sharing". 
184. According to existing rules, basic telecommunica tion has to be at least 50% state owned, but 
in application of that policy, six basic telecomm unication subsectors have been opened to private 
investment up to 100% for Chinese nationals.  These are:  analogue trunking telecom service;  radio 
paging service;  domestic very small aperture term inal (VSAT) earth station communication service;  
the "second category" of data communication ser vices (including fixed-network domestic data 
transmission service and wireless data transfer service);  customer premises network (CPN) service;  and web-hosting service.  As a result,  the six basic telecommunications services are now aligned with 
value-added services, which, except for domestic multi-party telecommunica tions, have long been 
opened fully to private investment.  According to  the Chinese authorities, only two of these services, 
radio paging services and the second category of data  communication services, are covered by China's 
WTO commitments, via the paging services and "packet switched data transmission" entries, and therefore open to foreign investment. 
185. Regarding interconnection, China has issued two new regulations  to strengthen supervision 
and administration of telecom network operations  and ensure steady and reliable operations of 
telecom networks.  Firstly, Chapter III, Article 25 of the Measures on Supervision and Administration 
of Telecommunications Network Oper ations (No. 187, 2009 of the MIIT) stipulates that basic telecom 
services operators shall apply protective measures of network architecture on the interconnection 
between networks.  Secondly, to reinforce the supervision and administration of interconnection 
quality between internet backbone networks, regulate the processing of interconnection, and guarantee 
smooth interconnection between internet backbo ne networks, the MIIT issued Measures on 
Supervision and Administration of the Interconnec tion Quality between Internet Backbone Networks 
(No. 48, 2011, 10 May 2011).  Other rules on interco nnection have not changed since the last TPR of 
China
152, except that China's regulations now define the term leading telecommunications business 
operators as "operators that control vital telecommu nications infrastructure, have a relatively large 
                                                      
152 See WTO document WT/TPR/S/230/Rev.1, paragraph 94, pp. 89-90. WT/TPR/S/264 Trade Policy Review 
Page 142 
  
  share of the telecommunications market and can  materially influence the entry of other 
telecommunications business operators into  the telecommunications business market".153 
186. China has issued a large number of regulations  regarding internet services (Table IV.14). 
Table IV.14 
Regulations on Internet Services 
Title Issued by Date issued Date effective  
Regulation on Telecommunications of 
the People's Republic of China Decree No. 291 of the State Council of the 
People's Republic of China 25 September 2000 25 September 2000 
Measures for Administration of 
Information Service via Internet Decree No. 292 of the State Council of the 
People's Republic of China 25 September 2000 25 September 2000 
Provisions on the Administration of 
Foreign-Funded Telecommunications 
Enterprises Decree No. 534 of the State Council of the 
People's Republic of China 10 September 2008 10 September 2008 
Administrative Measures for the 
Licensing of Telecommunication 
Business Operations Order No. 5 of the Ministry of Industry 
and Information Technology of the 
People's Republic of China 5 march  2009 10 April 2009 
Administration of Internet Electronic 
Messaging Services Provisions Order No. 3 of the Former Ministry of 
Information Industry 6 November 2000 6 November 2000 
Interim Provisions on the 
Administration of Internet Publication Decree No. 17 of the General 
Administration of Press and Publication 
and former Ministry of Information 
Industry 27 June 2002 1 August 2002 
Measures for the Administration of 
Internet Domain Names of China Order No. 30 of the Former Ministry of 
Information Industry 5 November 2004 20 December 2004 
Measures for the Archival 
Administration of Non-operational 
Internet Information Services Order No. 33 of the Former Ministry of 
Information Industry 8 February 2005 of 20 March 2005 
Measures for the Administration of IP 
Address Archiving Order No. 34 of the Former Ministry 
Information Industry 8 February 2005 20 March 2005 
Measures on the Administration of 
Internet Information Services Order No. 37 of the State Council 
Information Office and the Former 
Ministry of Information Industry 25 September 2005 25 September 2005 
Measures for the Administration of 
Internet E-mail Services Order No. 38 of the Former Ministry 
Information Industry 25 September 2005 25 September 2005 
Regulation on the Administration of 
Visual and Audio Program on Internet Order No. 56 of the State Administration 
of Radio, Film and Television and the 
Former Ministry of Information Industry 20 December 2007 31 January 2008 
Catalogue of Telecommunications 
Services Order No. 73 of the Ministry of 
Information Industry 21 February 2003 1 April 2003 
Source: Information provided by the Chinese authorities. 
187. The Catalogue of Telecommunication Services  places internet services providers (ISPs i.e. 
providers of access) and internet content provi ders (ICPs) into the cat egory of value-added 
telecommunication services.  Pursuant to Article  7 of the Regulations on Telecommunications 
(Order No. 291 of the State Council), internet acce ss service providers must obtain a business licence 
from the telecom administration authority, classi fying them either as internet data centre 
(category one of value-added telecommunication services) or as internet access service (category two of value-added tel ecommunication business).  
                                                      
153 Article 17 of the Regulations on Telecommunications (Decree No. 291 of the State Council, 
25 September 2000, effective the same date) and Article 5 of the Provisions on Administration of the 
Interconnection of Public Telecommunications Networks (Order No. 9 of the Former Ministry of Information 
Industry, 10 May 2001, effective the same date). China WT/TPR/S/264 
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  188. The catalogue further divides internet content providers into "operational ICP" (pursuant to 
Article 3 of the Measures for Administration of Information Service via Internet, a supplier of "services and activities such as providing paid informa tion or web design to Internet users via the 
Internet") and "non-operational ICP" (a supplier of  "services and activities of providing Internet users 
with free public and commonly shared inform ation without charges via the Internet"). 
189. Internet providers are subject to several layers of regulation.  If foreign funded they first have 
to comply with Provisions on the Administration of Foreign-funded Telecommunications Enterprises 
(Decree No. 534 of the State Council).  The last revision of these provisions, in 2008, simplified the requirements and procedures of examination and approval, notably by suppressing the requirement of 
a feasibility study report, and lowered the mini mum registered capital of telecommunications 
enterprises (for basic telecommunications ser vices nationwide or beyond a single province, 
autonomous region or municipality directly u nder the central government from ¥2 billion to 
¥1 billion, and within a province,  autonomous region or municipality directly under the central 
government from ¥200 milli on to ¥100 million).   
190. Internet access services and information servi ces business (including Internet information 
services) belong to the second category of value-added telecom business in China's Classification of 
Telecommunications Business.  Information services belongs to "online info rmation and database 
retrieval business", which are covered by China' s WTO commitments.  Therefore, foreign-funded 
enterprises may apply for business in accordance with the requirements of, inter alia,  the Provisions 
on Administration of Foreign-Funded Teleco mmunications Enterprises, the Measures for 
Administration of Telecommunications Business Li cence, and the Measures for Administration of 
Internet Information Services. 
191. Certain forms of internet activities (news websit es, internet audiovisual programme services, 
operating sites offering "internet-surfing services" , as well as "culture-related businesses" on the 
internet (music excluded)) are classified in the "prohibited" category by the 2011 Catalogue on the 
Guidance of Foreign Investment Industries . 
192. Internet providers need to a pply for a licence.  Licensing of ISPs and operational ICPs is 
covered by the Administrative Measures for the Licensing of Telecommunication Business Operations and for non-operational ICPs by the Measures for the Archival Administration of Non-operational Internet Information Services (Order  No. 33 of the Former Ministry of Information 
Industry).  Regarding licensing procedures, the Re gulations on Telecommunications, implements a 
system of permits for the operation of telecomm unications business.  Operation of value-added 
telecommunications services covering an area across two or more provinces, autonomous regions and/or municipalities directly under the central gove rnment requires examination and approval by the 
State Council's department in charge of the info rmation industry and a "Cross-regional Value-added 
Telecommunications Service Operating Permit".  Operation of value-added telecommunications 
services covering an area within one province, auto nomous region or municipality directly under the 
central government requires examination and appr oval by the telecommunications administration 
authority of the province, autonomous region or municipality directly under the central government and a "Value-added Telecommunicati ons Service Operating Permit". 
193. Internet content providers are subject to th e Measures for Administration of Information 
Service via Internet and to the Regulations  on Telecommunications, and their implementing 
regulations, the  Measures for the Archival Administration of Non-operational Internet Information 
Services, and the Administrative Measures for the Licensing of Telecommunication Business 
Operations for operational internet info rmation providers only for the latter. WT/TPR/S/264 Trade Policy Review 
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  194. In addition, pursuant to releva nt provisions of the Measures for Administration of Information 
Service via Internet, engagement in internet info rmation services in relation to news, publication, 
education, medical care, drugs, medical instruments,  etc. is subject to review and approval by the 
relevant competent authority, pursuant to laws, admi nistrative regulations, and relevant provisions of 
the State, and to legal review and approval by the relevant competent authority before application is 
made for a business licence or record-filing formalities are undertaken. 
195. The activities of internet content providers are regulated by different regulations issued by 
specialized authorities depending on the nature of the services provided. 
196. For news information services, the Provisions on the Administration of Internet News 
Information Services (Order No. 37 of the Stat e Council Information Office and the Ministry of 
Information Industry) define the conditions of est ablishment of internet news information service 
providers, the application materials to be submitte d, the examination and approval procedures, the 
codes of conduct applicable, the government supervis ion and administration measures, and the related 
legal responsibilities.  In addition, the Measures for Administration of Information Services via 
Internet regulate the information service activities of fered to internet users, distinguishes commercial 
and non-commercial internet information servi ces, and stipulate provisions on the related 
market-access criteria, the procedures of administra tive licence, the rights and obligations of service 
providers and the legal liabilities of illegal acts. 
197. The Measures for the Administration of Internet E-mail Services (Order No. 38 of the 
Ministry of Information Industry) apply to the provision of internet e-mail as well as access services 
to internet e-mail services and the transmission of in ternet e-mails.  They require the provider of such 
services to hold a permit for the operation of valu e-added telecommunication services or to perform 
the procedures for archival filing of non-operational internet information services.  In addition, these 
Measures stipulate the codes of conduct, the relate d prohibited acts, the report handling mechanism 
and the legal responsibilities of internet e-ma il service providers and telecommunication service 
providers that offer access services to internet e-mail services. 
198. The Management Provisions on Electronic Bulletin Services in Internet (Order No. 3 of the 
Ministry of Information Industry) regulate the publication by online subscribers of information on the internet in an interactive form , such as bulletin boards, whiteboard s, discussion forums, chat rooms, 
and message boards.  They stipulate that anyone engaged in the provision of internet information 
services that wishes to launch electronic messaging ser vices must submit a dedicated application, and 
stipulate conditions and procedures of examination and approval as well as rules of behaviour to be 
observed by the providers of electronic messag ing services.  For internet electronic messaging 
services the dedicated application procedure was ca ncelled and changed into the licensing system of 
internet information services by the promulgation of Decision of the State Council on Issuing the Fifth Batch of Administrative Examination and Approval  Items Which are Cancelled and Those Which are 
Decentralized to the Lower Level (Guo Fa [2010] No . 21) issued on 4 July 2010.  Engagement in 
internet information services and intended electroni c bulletin services is subject to review and 
approval by the special administrative authority (i .e. the National Internet Information Office) for 
electronic bulletin service contents. 
199. The Interim Provisions on the Administration of Internet Publication (Order No. 17 of the 
General Administration of Press and Publication and th e Ministry of Information Industry) define the 
notion of internet publication and stipulate th e examination and approval conditions as well as 
materials to be submitted so as to engage in intern et publication business, the rights and obligations of 
internet publishers, and the legal liabiliti es of related illegal acts.      China WT/TPR/S/264 
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  200. The Administrative Provisions on Internet Audio- Visual Program Services (Order No. 56 of 
the State Administration of Radio, Film, and Tele vision and the Ministry of Information Industry) 
define internet audio-visual programme services, th e regulators of internet audio-visual programme 
services and their responsibilities, the application c onditions and materials to be submitted to be 
engaged in internet audio-visual programme service s, the subject and procedures of examination and 
approval, the service regulations, the rules on the pr otection of users' rights and interests, and the 
related legal responsibilities, etc.  
201. The Ministry of Industry and Informa tion (MII) promulgated on 29 December 2011 the 
Several Provisions on Regulating the Market Order of  Internet Information Services, which entered 
into effect on 15 March 2012.  These provisions deal with competition (prohibiti on of unfair practices 
among website operators, rules on the bundling/unbundi ng of software), and consumer protection 
(users' rights, consent required from consumer s before downloading software, rules on pop-up 
window advertisement, protection of users' pers onal data, information security, and complaint 
process).  
202. Foreign presence in the telecommunications services sector remains extremely marginal:  up 
to April 2011, 25 licences for value-added telecomm unication services had been granted to foreigners 
(60 applications were received a nd 42 completed the first stage of the licensing process:  "Validation 
Opinions on Foreign Investment in Telecommunica tions Business") compared with 23,259 licences 
delivered to Chinese citizens or companies (90% of them privately owned).  Foreign-funded 
enterprises are virtually all (23 of the 25) con centrated in the sub-market of cross-regional 
value-added telecommunications services where they represent 1.1% of the total of the 
2,087 companies licenced, compared with 106 stat e-owned enterprises (85.08% of the total) and 
1,958 private Chinese-owned companies (93.82% of the total).  
203. For basic telecommunications services, no appli cation for licence has been received by the 
Chinese authorities from foreign operators.  
204. The planned universal services fund has not yet been established. 
(iv) Transport 
(a) Maritime transport services 
Market structure 
205. In 2010, around 90% in volume of China' s international cargo was carried by sea.  This 
represented a freight volume of 581 million tonnes or 4,599.9 billio n tonne-kilometres, up from 
517 million tonnes or 3,952.4 billion tonne-kilometr es in 2009.  Maritime exports and imports 
amounted respectively to 69% and 61.8% of the total value of exports and imports 
(US$1,088.6 billion and US$861.1 billion), up fr om 67.9% and 61.7% in 2009 representing 
US$815.7 billion and US$620.7 billion.  The differe nce between volume and value can be explained 
by the intermodal share of air cargo transport, which carries low volume high value goods, and the 
differences between intermodal maritime export and im port shares by the fact that China imports a lot 
of raw materials in bulk and exports a lot of medium  to high-value manufactured goods in containers. 
206. Domestic maritime trade (cabotage), a segment  reserved to 100% Chinese-owned companies 
flying the Chinese flag, represented 1,323 million tonn es or 1,689.3 billion tonne-kilometres in 2010 
compared with 1,104 million tonnes and 1, 339.9 billion tonne-kilo metres in 2009.  WT/TPR/S/264 Trade Policy Review 
Page 146 
  
  207. As of 1 January 2011, China had 2,044 vessel s over 1,000 gross tonnes registered under its 
national flag, (representing 46,207,468 dead wei ght tons, DWT) of which 1,136 vessels were 
deployed internationally (21,280,000 DWT), co mpared with 2,024 vessels (41,026,075 DWT) and 
1,069 vessels (18,100,000 DWT), respectively, as of 1 January 2010.  
208. China is about to renew its Ad hoc tax-Free Registration Policy for the Chinese 
flag-of-convenience ship Program for the 12th Five-year Plan period (2011-2015), in a bid to attract 
Chinese flag-of-convenience ships to register in Ch ina.  According to UNC TAD statistics, as of 
1 January 2010, there were 1,609 vessels of this kind representing a tonnage of 63,326,314 DWT.  
The two fleets taken together make China the wo rld's third maritime nation by tonnage, after Greece 
and Japan, a rank it already had in 2010. 
209. Throughput in all of China's top ten ports grew between 2009 and 2010 (Table IV.15).  
Table IV.15  
China's top ten above-scale goods seaports in terms of throughput, 2010 
(10,000 tonnes and %) 
Rank Port 2009 2010 Year on year growth 
(%) Share of throughput 
(%) 
1. Ningbo-Zhoushan  57,684 63,300 +9.7 7.8 
Ningbo  38,385 41,217 +7.4 5.1 
Zhoushan  19,300 22,084 +14.4 2.7 
2. Shanghai  49,467 56,320 +13.9 7.0 
3. Tianjin  38,111 41,325 +8.4 5.1 
4. Guangzhou  36,395 41,095 +12.9 5.1 
5. Qingdao  31,546 35,012 +11.0 4.3 
6. Dalian  27,203 31,399 +15.4 3.9 
7. Qinhuangdao  24,942 26,297 +5.4 3.2 
8. Tangshan  17,559 24,609 +40.2 3.0 
9. Rizhao  18,131 22,597 +24.6 2.8 
10. Yingkou  17,603 22,579 +28.3 2.8 
 Total 697,159 810,180 +16.2  
Source:  Information provided by the Chinese authorities.  
210. The ranking provided by the Chinese authorities covers all type of merchandise handled, 
including bulk shipment of oil, grains, and coal.  The ranking for container shipment is slightly 
different (Table IV.16).  In 2010, Shanghai port became the world's leading container port by 
throughput, before Singapore.  The ports of Shen zhen (No. 4), Ningbo (No. 6), Guangzhou (No. 7), 
Qingdao (No. 10), Tianjin (No. 14), Xiamen (No.  19), Lianyungang (No. 29), and Yingkou (No. 35) 
also appear in the list of world top 50 container ports by throughput in 2010, established in September 
2011 by the magazine Containerization International .  In spite of the economic crisis, the growth of 
throughput remained at two digits. 
Trade regime 
211. The Ministry of Transport (MOT) is responsib le for drafting and formulating shipping and 
port policies.  The overall objective of the polices is to open up the market gradually in conformity with WTO commitments, promote full competition in international shipping markets, and constantly 
improve China's competitiveness in the sector.  China has four levels of trade regulation of maritime 
transport (GATS commitments, free-trade agreements, other preferential regimes, applied regime 
erga omnes ). China WT/TPR/S/264 
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  Table IV.16 
China's top ten above-scale container seaports in terms of throughput, 2010 
(10,000 TEU and %) 
Rank Port 2009 2010 Year on year growth 
(%) Share of throughput 
(%) 
1. Shanghai  2,500 2,907 +16.3 20.0 
2. Shenzhen  1,825 2,251 +23.3 15.4 
3. Ningbo-Zhoushan  1,050 1,315 +25.2 9.0 
Ningbo  1,042 1,300 +24.8 8.9 
Zhoushan  8 14 +78.8 0.1 
4. Guangzhou  1,120 1,255 +12.0 8.6 
5. Qingdao  1,026 1,201 +17.0 8.2 
6. Tianjin  870 1,009 +15.9 6.9 
7. Xiamen  468 582 +24.4 4.0 
8. Dalian  458 526 +15.0 3.6 
9. Lianyungang  303 387 +27.7 2.7 
10. Suzhou  254 334 +31.6 2.3 
 Total 12,208 14,571 +19.4  
Source:  Information provided by the Chinese authorities. 
212. Regarding cabotage traffic, at present, China im poses strict restrictions on, and prohibits, in 
principle, foreign-funded companies and foreign ships from engaging in domestic cabotage traffic 
(including the onward forwarding of internationa l cargo (international relay).  However after 
undergoing registration formalities, foreign shipping companies may transport self-owned or leased 
empty containers between coastal ports in China.   While the legislation foresees the possibility of 
granting waivers, none has granted. 
213. China's GATS commitments regarding internati onal passenger and freight transport contain 
no restrictions for mode 1 and 2154, and conditions the establishment of a company to fly the Chinese 
flag on the establishment of a joint venture with foreign participation limited to 49%, and on the 
appointment of the chairman of the board of directors and of the general manager by the Chinese side.  China has no commitments regard ing other forms of commercial presence i.e. on the onshore 
establishment of maritime transport operators.  However, pursuant to China's Article II MFN 
exemptions, parties concerned may, through bilate ral arrangements, establish wholly foreign-funded 
companies to provide daily agent services for ships owned or operated by the investors, in accordance 
with Chinese laws and regulations regarding wholly  foreign-funded compani es.  In addition, the 
Notice on Strengthening the Administration Work on the Examination and Approval of Wholly 
Foreign Owned Shipping Companies (Jiao Shui Fa  [2011] No. 40), issued on 15 August 2011 allowed 
the establishment of wholly foreign-owned shipping  companies in open port cities where they have 
stable sources of cargo and passengers.  After a full y ear in operation and having paid up its registered 
capital, a foreign shipping company may establish branches in open port cities where it has stable 
sources of cargo and passengers.  According to th e Chinese authorities, the absence of commitments 
for "other form of commercial pres ence" is because China wants to re tain the possibility to reciprocate 
or retaliate in cases where its own maritime transport operators face discrimination or are denied access for their commercial presence abroad.  
214. By end 2010, nearly 150 Chinese and foreign in ternational shipping companies had obtained 
operations qualifications for inte rnational liner shipping, in accord ance with the Regulations of the 
                                                      
154 Since 2008, China and Chinese Ta ipei have agreed to open some of their ports to allow direct 
maritime traffic between them.  This traffic remains closed to third parties. WT/TPR/S/264 Trade Policy Review 
Page 148 
  
  People's Republic of China on Inte rnational Ocean Shipping, and were  carrying out international liner 
shipping business in China.  Among them, 105 are in ternational shipping companies with overseas 
registration.  In addition, 41 international shippi ng companies with overseas registration set up as 
wholly foreign-funded shipping companies in China.  
215. China's free-trade agreements with New Zealand, Singapore, Pakistan, Peru, and Chile 
contain commitments identical to the GATS (by cr oss-reference for the latter).  The FTA with 
ASEAN does not contain any maritime transport commitments.  The Closer Economic Partnership 
arrangements with the Hong Kong and Macao SARs  allow shipping service providers from the 
Hong Kong and Macao SARs to establish wholly ow ned shipping companies in mainland China for 
other form of commercial presence.  In addition,  shipping service providers from the Hong Kong and 
Macao SARs are allowed to use liner vessels to freel y move empty containers that they own or rent 
between ports in mainland China, so lo ng as customs formalities are completed. 
216. Regarding non-FTA preferential regimes, Chin a has filed two MFN exemptions regarding 
international freight and passenger tr ansport.  The first covers bilate ral agreements through which "the 
parties concerned may establish entities to engage in  usual business in China either as joint ventures 
or wholly owned subsidiaries subject to the Ch inese laws on joint ventures and on foreign capital 
enterprises for ships owned or operated by carriers of the parties concerned".  At present, China 
allows shipping companies registered in countries or regions that have bilateral maritime freight 
agreements with China to establish wholly owned subsidiaries in China to provide daily agent 
activities for vessels owned or operated by their i nvestors.  China has signed bilateral maritime 
shipping agreements with more than 60 count ries/regions, including the United States, the 
European Union , and other major maritime transport c ountries/regions.  The second MFN exemption 
covers cargo-sharing agreements with Algeria,  Argentina, Bangladesh, Brazil, Thailand, the 
United States, and Democratic Republic of Congo (Z aïre).  However the maritime agreement with the 
United States no long includes cargo reservations (since 2003).  
217. In terms of the applied regime, the bilateral car go reservations have never been implemented, 
nor has the cargo reservation foreseen by the UN Liner Code of Conduct for Liner Conferences, to 
which China is party.  There are also no unilatera l cargo reservations, including on food aid and on 
EXIM bank financed cargo.  China applies natio nal treatment regarding subsidies and leaseback 
shipping fund schemes.  The legislation for estab lishing a shipping company to fly the Chinese flag 
reflects the GATS commitments, undertaken on a status quo basis. 
218. Regarding competition policy for liner service s, liner conference agreements, operation 
agreements, and freight-rate agreements involvin g Chinese ports that are signed among international 
shipping operators engaged in intern ational liner transportation, must be submitted to the Ministry of 
Transport for the record.155  The liner-freight rates must be submitted (and reported) in the required 
format.  The Shanghai Shipping Exchange is the or gan designated by the Ministry of Transport for 
freight-rate filing and registration.  International shipping operators must follow the valid, registered 
freight rates.  Liner trade conference and freight-ra te agreement organizations  are required to appoint 
liaison organs and representatives within China to establish a valid consultation mechanism with the 
shippers or shipper orga nizations within China.156  In 2008, China formulated the Anti-monopoly Law 
to ban monopoly agreements in principle;  it exclud es other circumstances specified by laws and the 
                                                      
155 According to the  International Maritime Tran sport Regulations of the People's Republic of China 
promulgated in 2002, and the Announcement on the Implementing Rules of the International Container Liner Freight Filing, promulgated by the Ministry of Transport in 2009. 
156 According to the Announcement on Strengthening the Supervision and Control of Liner Trade 
Unions and Freight Rate Agreements issued by the Ministry of Transport in 2007. China WT/TPR/S/264 
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  State Council, including provisions on liner conference stipulated in the  International Maritime 
Transport Regulations. 
219. China has neither GATS nor FTA commitments on rental of vessels with crew;  maintenance 
and repair of vessels;  and supporting services fo r maritime transport, but currently applies no 
restrictions on these subsectors.  China has no commitments on pushing and towing services, which 
are reserved, as part of cabotage, to 100% Chin ese-owned companies flying the Chinese flag.  At 
present, China has strict restrictions, and a prohibition in principle, on foreign-funded companies and foreign vessels engaging in pushing and towing ser vices.  However, some individual ports have 
foreign shareholders, which implies the existence of  some foreign investment in the area of pushing 
and towing services.  
220. For maritime cargo handling China's GATS commitm ents consist of a "none" for mode 2 and 
a limitation to joint venture with foreign majority  allowed for mode 3.  The FTAs with New Zealand 
and Singapore, Pakistan, Peru, and Chile are identical to the GATS (by cross-reference for the latter).  
The FTA with ASEAN does not contain any commitmen ts regarding this type of service, while the 
Closer Economic Partnership agreements with H ong Kong, China and Macao, China allow wholly 
owned enterprises.  In terms of applied regime Artic le 5 of the Port Law of the Republic of China of 
28 June 2003 encourages economic or ganizations and individuals "at home and abroad" to invest in 
construction and operations  of ports, and the 2011 Catalogue for the Guidan ce of Foreign Investment 
Industries classify construction and management of pub lic port dock facilities in the "encouraged" 
category, without mentioning ownership conditions .  In practice wholly owned subsidiaries are 
allowed and numerous;  most container terminal co mpanies operating in China have foreign investors 
among their shareholders.  Investors in large facilities include:  Hong Kong, China's Hutchison 
Whampoa Holding;  Denmark's AP Moller Terminals;  Singapore's PSA;  United Arab Emirates' Dubai port world;  Switzerland's Mediterranean Sh ipping Company;  Japan's NYK in;  Spain's 
Dragados;  and there are numerous other fo reign investors in smaller facilities.  
221. For customs clearance services and for cont ainer depots and stations China's GATS 
commitments as well as China's FTA commitments with  New Zealand, Singapore, Pakistan, Peru, and 
Chile (by cross-reference for the latter) allow joint venture with foreign majority.  The CEPAs with 
the Hong Kong and Macao SARs allow the establish ment of wholly foreign-owned enterprises to 
operate international shipping cont ainer depots and stations, or to provide shipping agency services 
for vessels that are owned or operated by their parent companies, including customs clearance and 
inspection declaration.  
222. China's GATS and FTA commitments with New Zealand, Singapore, Pakistan, Peru, and 
Chile (by cross-reference for the latter) for mariti me agency services consist in a "none" for modes 1 
and 2 and in a limitation to joint venture with fo reign ownership limited to 49% for mode 3.  The 
CEPA with the Hong Kong and Macao SARs allow wholly foreign-owned shipping companies to 
provide daily agency services for shipping transport between Hong Kong and Class II ports in 
Guangdong Province operated by Chinese mainland vessels that are leased by their parent companies.  
For enterprises providing third-party public ship  agency services, the Ch inese mainland/Chinese side 
is still required to hold the majority share.  In terms of the applied regime, maritime agencies are 
classified in the 2011 Catalogue for the Guidance of Foreign Investment  Industries in the "restricted" 
category, with the indication that the Chinese side should hold the majority of the shares.  
223. China has undertaken additional commitmen ts under the GATS on access to/use of, on 
reasonable and non-discriminatory terms and conditions , for all the nine ports services listed in the WT/TPR/S/264 Trade Policy Review 
Page 150 
  
  maritime model schedule.157  Commitments in the FTA with New Zealand, Singapore, Pakistan, Peru, 
and Chile (by cross-reference for the latter) are sim ilar.  The Closer Economic Partnership agreements 
with Hong Kong, China and Macao, China, and the FTA with ASEAN do not contain commitments in that regard.  In terms of the applied regime, for considerations of national security, navigation safety, 
and environmental protection, China applies compulso ry pilotage for foreign vessels and grants equal 
treatment on pilotage fees.  Since 2009, the activitie s of pilotage have been separated from the port 
enterprises to which they belonged, and have be come public institutions with the function of 
providing public services for ships.  
224. Port charges are decided by the MOC and th e NDRC, taking into consideration cost and 
market competition;  the charges are applied unifo rmly across the country.  Port operators may set 
some fees, such as for warehousing and container yard services.  
225. There are no GATS or FTA additional commitments on access to use of multimodal transport 
services but in terms of applied regime there are no r estrictions "on the ability to rent, hire or charter 
trucks, railway carriages, ships or barges and relate d equipment, for the purpose of onward forwarding 
of international cargoes carried by sea, or have ac cess to and use of these forms of transport services 
for the purpose of providing multimodal transport services" to quote the formulation used by the 
maritime model schedule. 
226. In the Closer Economic Partnership agreemen ts with Hong Kong and Macao SARs, China 
has undertaken commitments on a series of maritime transport services that do not appear in the two classic GATS classifications of maritime transport services (MTN.GNS/W120 and the maritime 
model schedule), i.e. ship chandling, container leasi ng, tugging, ship surveys, ship management, and 
chartering (only between the Hong Kong or Macao SARs and Guangdong province for the latter).  
Wholly foreign-owned enterprises from Hong Kong, China and Macao, China are allowed to offer 
routine agent services for vessels owned or operated by the investor, and are allowed to engage in 
international vessel management business. 
227. In terms of the applied regime for these se rvices, wholly foreign-owned enterprise are 
allowed to offer routine services for vessels owned or  operated by the investor while international ship 
management services are allowed in the form of equity  joint venture or contractual joint venture, with 
foreign ownership limited to 49%. 
228. Table AIV.1 includes a summary of the trade regime for maritime transport services.  
(b) Inland waterways transport 
Market structure  
229. Due to the progressive industrialization of west ern China, inland waterways transportation is 
an increasingly important mode of transport for Chin a's development.  Land tr ansport (rail, road, and 
inland waterways) costs and bottlenecks can offs et the competitive advantage of the western 
provinces' cheaper labour costs, which is why the Chinese authorities have made the development of 
this sector a national priority.  
                                                      
157 (1) pilotage, (2) towing and the tug assistance, (3) provisioning, fuelling and watering, (4) garbage 
collecting and ballast waste disposal, (5) port captain's services, (6) navigation aids, (7) shore-based operational 
services essential to ship operations including communications, water and electrical supplies, (8) emergency 
repair facilities, and (9) anchorag e, berth and berthing services. China WT/TPR/S/264 
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  230. The sector has experienced growth rates well a bove 20% during the last decade.  The Yangtze 
river alone, is carrying the world highest rive r cargo volume, with 1.66 billion tonnes in 2011158, and 
6.48 million TEUs (twenty-foot equivalent units) of container traffic in 2009, compared, for instance, 
with the 25 million TEUs throughput at the port of Shanghai the same year.159  The fleet serving this 
traffic comprises 145,000 vessels with an average si ze of 250 DWT per vessel.  There are plans to 
standardize the average size of th e vessels to 2,000 DWT by 2020 to cater for the expansion of the 
traffic.160  The Yangtze river has 246 ports, 42 of which are on the main lines of the river;  22 of these 
ports are open to international traffic.   
Trade regime 
231. China has partial GATS commitments regardi ng inland waterways freight transportation 
(11.B.b, CPC 7222):  for mode 1, " only international shippi ng in ports open to foreign vessels shall be 
permitted";  a "none" for mode 2;  mode 3 remain s unbound;  and mode 4 subject to the horizontal 
commitments.  The mode 1 entry corresponds to the applied regime erga omnes  as described below.  
The China-Singapore, China-Pakistan, China-Peru and China-New Zealand agreements replicate the 
GATS commitments, while China's other FTAs (with A SEAN;  Hong Kong, China;  Macao, China;  
and Chile) do not mention this sector.  Commitments  undertaken by China on services auxiliary to all 
modes of transport in the GATS or FTA context ( see Table AIV.6) do apply to services auxiliary to 
internal waterways transport. 
232. The Ministry of Transport (M.o.T) is the ad ministrative authority in charge of inland 
waterways transport services.  "Construction and ma nagement of public dock facilities of ports" and 
"construction and management of storage facilities rela ting to transportation services" are classified in 
the 2011 Catalogue for the Guidance of Foreign Investment Industries  in the "encouraged" category.  
Repair, design and manufacture of vessels (includi ng subsection), 'water transport companies', and 
'ship agency and ocean shipping tally' are all in the 'restricted' category. 
233. International, including foreign, shipping lines may serve directly harbours upriver, notably in 
Nanjing, and offer direct international service s there (e.g. the CVX intra-Asian loop of the 
Hong Kong based company Gold Star Lines in 2 006).  In principle, inland waterways traffic 
(i.e. cabotage traffic between two Chinese river ports or between a Chinese river port and a Chinese sea port) is reserved (both for freight and passe ngers), to 100% Chinese-owned companies flying the 
Chinese flag.  However, foreign freight forwarders  (e.g. TNT, APL logistics, OOCL logistics) and 
foreign shippers may, and do, freely charter local feeder services.  A Switzerland based, 
Norwegian-U.S. owned company, Viking River Cr uises, in association with a local partner, 
New Century Cruises, has run cruises on the Yangze ri ver since 2003;  it provides the ship, manages 
them through a catering contract, and markets them worldwide.
161 
234. A summary of the trade regime of the inland wa terways transport sector in China is found in 
Table AIV.2. 
                                                      
158 Fairplay magazine , 19 February 2009. 
159 Containerization International , May 2010. 
160 Fairplay magazine , 26 May 2007. 
161 Fairplay Magazine , 6 May 2004 and 10 June 2004;  Containerization International , 
21 August 2003;  and online information.  Viewed at:  http://www.vikingrivercruises.com/.     WT/TPR/S/264 Trade Policy Review 
Page 152 
  
  (c) Air transport  
Market structure  
235. China's air transport market has grown stead ily over the last 25 years with a compound 
average growth rate of 23% between 1900 and 2 000 and of 91% between 2000 and 2010.   In 2010, 
China's total turnover of passenger traffic, cargo, and mail ranked second in the world. 
236. In terms of international traffic, in the summer and autumn of 2011 (IATA summer season 
2011), 99 foreign airlines opera ted 1,960 scheduled passenger and cargo flights per week from 
107 foreign cities to 32 Chinese cities (1,579 flights for passengers and 381 for cargo).  In addition, 
20 national airlines operate 2,236 in ternational scheduled passenger and cargo flights per week from 
39 Chinese cities to 124 cities in 55 foreign countries (1,933 flights for passengers and 303 for cargo).  
237. In terms of domestic traffic, during the same period, 32 domestic airlines (including air cargo 
companies) arranged 45,484 domestic flights/week  on 1,469 air routes (44,660 passenger flights and 
824 cargo);  cabotage, like virtually everywhere in the world, is reserved in China to domestic airlines.  Air services currently serve 173 cities and 175 airports.  
238. The size of the air transport industry in Ch ina is further described in Table IV.17. 
Table IV.17 
China's air transport industry main indicators, 2009-10a 
Indicator Unit 2009 2010 
Total transport turnover volume 10,000 tonne-km  4,270,726 5,384,490 
Passenger capacity 10,000 persons 23,052 26,769 
Total turnover of passenger traffi c 10,000 person-km 33,752,354 40,389,960 
Cargo capacity 10,000 tonnes 446 563 
Cargo and mail turnover 10,000 tonne-km 1,262,307 1,788,982 
a These figures reflect only the activities of Chinese airlines. 
Source:  Information provided by the Chinese authorities. 
239. Forty-seven airlines are established in China;  38 are state owned and 16 have foreign equity 
participation (Table IV.18);  5 are listed as stoc k companies.  Since 2009, CAAC has approved four 
private or private-holding airlines:  ShunFeng Airlines;  Yunnan Ying'an Airlines;  Uni-top Airlines;  and Changlong International Cargo Airlines.  Chan glong International Cargo Airlines is not yet in 
operation. 
240. China is making considerable investments in its airport network.  Between 2006 and 2010, 
33 new airports were built, 33 retrofitted and exte nded and 4 re-located.  There are 11 airports 
currently under construction and the five-year pl an 2011-2015 foresees an additional 70 new airports 
(there are currently 175).  In 2010, Beijing Cap ital international airport became the second busiest 
airport in the world after Atlanta, and Shanghai P udong International Airport ranked third worldwide 
in terms of cargo;  21 Chinese airports have a turnover of over 10 million passengers per year.
162  
However, many of the newly built airports in smaller cities are struggling financially (with 
                                                      
162 Engineering and Technology Magazine , "Most Chinese airports 'are losing money'".  Viewed at:  
http://eandt.theiet.org/news/2012/jan/china-airports.cfm. China WT/TPR/S/264 
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  130 airports totalling a cumulative loss of ¥1,68 billion in 2010163) as the airport system is starting to 
feel competitive pressure from the high speed railway network.   
Table IV.18 
Foreign equity participation in Chinese airlines, 2011 
Company name Foreign shareholders Shares (%) 
Air China Limited HKSCC Nominees Limited    
Cathay Pacific Airways Limited   Public shares, H share and A share  17.00 
18.10 12.04 
China Eastern Airlines Corporation Limited Ov erseas listed foreign share H share   32.20 
China Southern Airlines Company Limited H share public shareholders  17.89 
China Cargo Airlines Ltd. Concord Pacific Limited   
Singapore Airlines Cargo Pte Ltd    16 
16 
Shandong Airlines Co., Ltd. Domestic listed foreign share   35.87 
Yangtze River Express Airlines Co., Ltd. China Airlines Ltd.  
Yangming Line (Singapore) PTE. Ltd.   
Wan Hai Lines (HK) Ltd.    
China Container Express Lin, Inc  25 
12 
12 
6 
Hainan Airlines Co., Ltd. American Aviation  3.06 
Air China Cargo Co., Ltd. Cathay Pacific Airways Limited      
Brighten Star Technology Co., Ltd.   25 
24 
Great Wall Airlines Co., Ltd. Singapore Airlines Cargo Pte Ltd    
Dahlia Investments Pte Ltd     25 
24 
Jade Cargo International Compa ny Limited Lufthansa Cargo    
DRG German Investment and Development Co., Ltd.   25 
24 
Shanghai Airlines Cargo International Co., Ltd.  Concord Pacific Limited  
Juniper Estate B.V.  25 
20 
Donghai Airlines Co., Ltd.  Hong Kong Ea st Pacific (Holdings) Limited  25 
China Express Airlines Company Limite d  High Hero International Limited  
Tampines International Limited  25 
24 
Grand China Air Co., Ltd.  Starstep Limited 
Pan American Aviation Holding  
Union Trans-Atlantic Limited  
Perfect Star Investment Limited   9.571 
3.998 
0.666 
0.400 
Henan Airlines Co., Ltd.  Pingshan Co., Ltd. 
Mountains Trust  25 
24 
Grandstar Cargo International Airlines Co., Ltd.  Korea Air Lines (foreign-funded)  
Asiana Airlines (foreign-funded)   
Shinhan Corporation  25 
13 
11 
Source:  Information provided by the Chinese authorities. 
Trade regime 
241. The Civil Aviation Administration of China (CAAC, formerly the General Administration of 
the Civil Aviation of China) is the main regulator of  the air transport sector.  Its status was changed in 
March 2008 from an organization directly under the St ate Council to a State Bureau Administered by 
ministries or commissions.  In March 2009, the 33 Offices of the Civil Aviation Operation Safety 
Supervision were renamed Administrations of Civil Aviation Operation Safety Supervision.  In 2011, 
the number of Administrations was increased to 39.  Between 2009 and 2011, China completed the 
final steps of the reform, launched in 2007, aiming at  separating the operation of the air traffic control 
system from its regulation. 
                                                      
163 Head of CAAC quoted in Airport International News , March 2011. WT/TPR/S/264 Trade Policy Review 
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  242. Since 2009, 1 administrative regulation and 13 de partment rules have been issued by the 
CAAC, and 9 department rules have been cancelled.  All are of a technical nature except for two that 
have a trade relevance:  the Supplementary Pr ovisions on Foreign Investment in Civil Aviation 
No. IV, allows Hong Kong, China and Macao, Chin a services providers to engage in aircraft 
maintenance and repair business in  Mainland China, in the form of sole investment or controlling 
interest;  and No. V allows Chinese Taipei services providers to invest in Mainland China aircraft 
repair and maintenance field in the form of a sole investment or joint venture, on the condition that the 
provider takes the form of a corporate body or in case of a joint investment by several providers that 
the main investor is a corporate body. 
243. China's GATS commitments on aircraft repair and maintenance include a "none" for mode 2 
(an important mode for this type of service), and allows commercial presence in the form of joint venture with Chinese controlling shares, and subject  to an economic needs test.  Two of the FTAs 
signed by China (China-Pakistan and China-Peru) contain commitments identical to those under the 
GATS.  In four FTAs (with ASEAN, Chile, New Z ealand, and Singapore), the requirement for an 
economic needs test is suppressed.  Maintenance and repair of aircraft is in the "permitted" category 
in the 2011 Catalogue for the Guidance of Foreign Investment Industries .  The applied regime, which 
is defined by paragraph 4, Article 6 of the Forei gn Investment in Civil Aviation Regulations of 2002, 
is identical to GATS commitments, which are based on a status quo binding.  
244. The trade regime for computer reservation ser vices is somewhat complex.  China's GATS 
commitments in this sector for mode 1 comprise three sections.  The first section stipulates that 
foreign computer reservation systems (CRSs) that have agreements with Chinese aviation enterprises 
and a Chinese CRS, may provide services to Chinese aviation enterprises and Chinese aviation agents 
by connecting with the Chinese CRS.  The second section states that a foreign CRS may provide 
services to representative offices and sa les offices established in the destination cities in China by 
foreign aviation enterprises that have the right  to engage in business under bilateral aviation 
agreements.  The third section stipulates that dir ect access to and use of a foreign CRS by Chinese 
aviation enterprises and agents of foreign aviation enterprises is subject to approval by the CAAC.  
There are no restrictions for mode 2 while mode 3 remains unbound. 
245. All FTAs have commitments identical to those in the GATS on mode 1, except the 
China-Chile agreement, under which mode 1 does not require Chilean computer reservation service 
providers to conclude an agreement with Chinese av iation enterprises in order to provide services to 
these enterprises and to aviation agents by c onnecting through a Chinese CRS.  For mode 3, 
four FTAs (with ASEAN, Chile, New Zealand, and Singapore) allow the creation of joint ventures 
with foreign ownership limited to 49%, and an  economic needs test, while mode 3 remains unbound 
in the FTAs with Pakistan and Peru. 
246. In terms of the applied regime, computer reser vation is in the "permitted" category in the 
2011 Catalogue for the Guidance of Foreign Investment Industries .  The applied regime reflects the 
GATS commitments under mode 1, i.e. as foreign co mputer reservation services may provide services 
to representatives offices and sales offices established in the destina tion cities in China by foreign 
aviation enterprises that have the right to engage in business under bilateral aviation agreements.  No 
applications have been received so far by C AAC for access and use of a foreign CRS by Chinese 
aviation enterprises and agents of foreign avia tion enterprises committed under 1(c) of the GATS 
commitments.  The possibility of CRS joint ventur es under four of the FTAs signed by China has not 
been used.  A new draft regulation is being prepar ed with the aim of clarifying the conditions of 
authorization by the CAAC for direct access to  and use of foreign CRSs by Chinese aviation China WT/TPR/S/264 
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  enterprises and agents of foreign av iation enterprises.  This draft legi slation is undergoing a process of 
consultation with interested parties. 
247. China has no GATS commitments on selling and marketing of air transport services.  The 
situation is similar for the FTAs with ASEAN, Ne w Zealand, Singapore, Pakistan, and Peru.  The 
China-Chile FTA contains commit ments whereby there are no restrictions under modes 1 and 2, and 
for mode 3, foreign enterprises designated to operate  by the relevant bilateral air services agreement 
may establish offices in Chin a.  The applied regime  erga omnes allows commercial presence only in 
the form of representatives offices.  
248. Providers from Hong Kong, China and Macao Chin a benefit from preferential provisions:  the 
right to set up wholly owned air transport sales ag encies with national treatment for the registered 
capital and for banking guarantees;  no preliminary vetting by local representative offices of the China 
Air Transport Association;  and the right to sell tickets on domestic routes.     
249. China has no GATS commitments on air trans port services not explicitly mentioned in the 
GATS air transport annex, but has several FTA commitments.  The China-Chile FTA contains a commitment on airport operations services with a "none" for modes 1 and 2 and "unbound" for 
mode 3.  The CEPAs with Hong Kong, China a nd Macao, China contain extensive commitments 
regarding airport operation services:  services supp liers from Hong Kong, China or Macao, China are 
allowed to provide contract management services fo r small and medium airports, with a contract 
limited to 20 years, in the form of cross-border supply, contractual joint ventures, equity joint 
ventures or wholly owned operations.  They are also allowed to provide, through the same legal 
forms, airport management training and consultation services.      
250. In terms of the applied regime since 2009, no changes have been made to the structure 
regulating auxiliary services.  The Regulation on the Administration of Civil Airports, issued on 1 July 2009, defined the respective obligations of th e airport management body, the airlines, and other 
airport-stationed units;  the Code of Conduct for operating businesses like retail, catering, and aviation 
ground services etc.;  as well as the qualificati ons and the Code of Conduct for fuelling services 
companies.  
251. The construction and management of civil airpor ts are classified in the "encouraged" category 
of the 2011 investment catalogue, with the condition that the Chinese partner shall hold the majority 
of the shares.  There are several joint ventures with substantial foreign shares involved in the 
management of Chinese airports, for example:  Frankfurt Airport (Fraport) had a 24.5% share in Xian 
airport;  the joint venture between Shanghai Airpor t Authority (SAA) and the Airport Authority of 
Hong Kong (AAHK), and there are numerous consu ltancy projects, for instance those of Changi 
airport with Chongqing, Qingdao, and Chengdu airports. 
252. For ground-handling services, the China-Chile free-trade agreement contains commitments 
with "none" for modes 1 and 2, and commercial presen ce allowed in the form of joint ventures with 
foreign ownership limited to 49%.  Some bilatera l air services agreements also have preferential 
clauses on ground handling, e.g. the China-Un ited States bilateral air services agreement.
164  A new 
draft regulation aimed at further liberalizing ground-handling services is being prepared.  No 
information is available on its timetable or content.  
253. Regarding specialty air services, the China-Chile  FTA contains commitments with "none" for 
modes 1 and 2 and "unbound" for mode 3.  In term s of the applied regime, general aviation companies 
                                                      
164 ICAO WASA database (WASA). WT/TPR/S/264 Trade Policy Review 
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  for agriculture, forestry, and fishery are classi fied in the "encouraged" category of the 2011 
investment catalogue but limited to equity or contractual joint ventures, while general aviation 
companies engaging in photographing , prospecting, and industry are classified in the "restricted" 
category, with the condition that the Chinese partner must hold over 50% of the shares.   
254. Establishment of airlines transportation companies is still classified by the 2011 Catalogue 
for the Guidance of Foreign Investment Industries  in the "encouraged" category, with the condition 
that the Chinese partner must hold the majority of the shares.  Since 2002, foreign investors in all-
cargo, all-passenger, or combined airlines in Chin a have been allowed to hold 49% of the capital, 
while the individual shareholding of a foreign i nvestor and its affiliates must not exceed 25%.165  
Foreign investors have established some  joint ventures under these provisions.166  In addition, some 
passenger airline transportation companies, like Air China Limited, have issued H shares in Hong 
Kong, China. 
255. Allocation of routes for domestic air transpor t services is regulated by:  the Provisions on 
Domestic Route Operating Permit of Civil Aviati on of China (CAAC Order No. 160), the Procedures 
for Domestic Route Operating Permit of Civil Avia tion of China, Notice on Further Regulation of the 
Cabotage Flight Slot (CAAC Notice No. 102 [2009]), the Notice on Further Regulation of the 
Supervision of Interim Operating Flight Slot of Overtime Charters of Domestic Routes (CAAC Notice 
No. 1 [2010]), the Notice on the Further Reform of  the Supervision Measures of Domestic Operating 
Permits and Flights (CAAC Notice No. 16 [2010]) and the provisions on the Administration of Civil Air Transport of Dangerous Goods  (CCAR-276).  These rules institute a two-tier system.    
256. The air route operation licences and scheduled flights among the four airports of Beijing, 
Shanghai, and Guangzhou are subject to a pproval and management by the Civil Aviation 
Administration of China.  Air routes and scheduled  flights among other domesti c airports are subject 
to registration management, where application, preliminary review, acceptance and publication is 
managed via internet via the Flight Informati on Management (Monitoring) System of the Civil 
Aviation of China at the level of the respective CAAC  regional administrations concerned.  An airline 
benefiting from a new route is protected by an exclusivity of two years including on the individual 
legs constituting the route.     
257. A major reform has taken place with regard to price setting for domestic airlines.  Under a 
decision of the CAAC and the National Developm ent and Reform Commission, as of 1 June 2010, 
prices of first class and the business class tickets on the domestic civil aviation routes are fully 
liberalized.  Specific prices are now determined by the airlines.  For international traffic, the 
Supervisory Regulations on Interna tional Air Fares apply by default if the pricing clause of the 
relevant bilateral air services agreement (BASA) does not stipulate otherwise, e.g. by a free-pricing 
clause.  Under these regulations, carriers must declare their prices 60 days in advance of 
implementation;  the CAAC decides whether to  approve the proposed price based on prevailing 
international prices, market conditions, relevant exchanges rates, and related state policies.  
                                                      
165 WTO document S/C/M/89, 19 November 2007.  According to Article 6 of Order 110, "where 
foreign investors invest in civil airports, the Chinese party shall take the relatively holding position.  Where 
foreign investors invest in public air transport enterprise s, the Chinese party shall take the holding position, and 
the proportion of investment made by one foreign investor (including its associate enterprises) may not exceed 
25%.  Where foreign investors invest in the general aviation enterprises engaging in business flight, air 
sight-seeing or that serving the industry, the Chinese party shall take the holding position;  where they invest in the general aviation enterprises engaging in agriculture, forestry or fishery operations, the proportion of foreign 
investment shall be determined by both the Chinese and foreign parties through negotiation". 
166 For more information see WTO document S/C/W/270/Add.2, 28 September 2007, p. 314. China WT/TPR/S/264 
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  258. According to the Chinese authorities, there is no specific support or subsidy policy for 
domestic airlines except for support to national airlin es opening feeder routes to connect remote areas 
or areas with backward economic development, so  as to ensure universal service.  The Chinese 
government also provides third-party war-risk liability insurance to all Chinese airlines.  The coverage 
is for liability in excess of US$250 million up to US$1  billion per occurrence.  The policy has to be 
renewed every year.  
259. International scheduled passenger and freight tr ansportation are regulated by bilateral air 
services agreements.  Detailed data on China's ae ropolicy until 2005 are contained in the "QUASAR 
profile" of China.167  China's weighted air liberalization index was 5.5, and the high and low indexes 
of the agreements covered by the study were 0 and 14, respectively.  Since that document was issued, 
China has amended or concluded 18 new agreements (Table IV.19). 
Table IV.19 
Liberalization of air transport services under China's bilateral air service agreements, 2011 
Partner Date 5th 7th Cabotage Coop Designation Withholding Pricing Capacity Stat ALI 
Afghanistan  2006 Y N N N Multi SOE DA PD Y 10 
Algeria 2006 Y N N Y Multi SOE DA PD Y 13 
Myanmar 2006 Y N N Y Multi SOE DA FD Y 21 
Saudi Arabia 2007 Y N N Y Multi SOE DA PD Y 13 
Tajikistan 2007 N N N N Multi SOE DA PD Y 4 
Zambia 2007 Y N N Y Multi SOE DA PD Y 13 
United Statesa 2007 Y Y N Y Multi SOE DD PD Y 25 
Angola 2008 Y N N Y Multi SOE DA PD N 13 
Tanzania 2008 Y N N Y Multi SOE DA PD Y 13 
PDR Korea 2008 N N N N Single SOE DA PD Y 0 
Sudan  2009 Y N N Y Multi SOE DA PD Y 13 
Chile  2009 Y N N Y Multi SOE CoO FD Y 24 
Croatia  2009 Y N N Y Multi SOE DA PD Y 13 
Russia 2010 Y N N Y Multi SOE DA PD Y 13 
ASEAN 2010 Y N N Y Multi SOEb CoO FD Y 24/26 
Switzerland 2010 Y N N N Multi SOE/PPoBc CoO PD Y 17 
Cameroon 2010 N N N Y Multi SOE CoO PD Y 10 
Georgia 2011 N N N Y Multi SOE CoO PD Y 10 
a Amending protocol. 
b With optionally CoI (Community of In terest clause) for the ASEAN parties. 
c SOE for China, PPoB for Switzerland. 
Note: "5th" stands for fifth freedom rights;  "7th" for seventh freedom rights;  "Coop" for coop eration clauses;  "Stat" for statistics;  
"ALI" for Air Liberalization Index;  "Y" for yes;  "N" for no;   "Multi" for multi-designation;  "Single" for single designation ;  
"SOE" for substantial ownership and effective control;  "PPo B" for principal place of busine ss;  "DA" for double approval;  
"DD" for dual disapproval;  "CoO" for country of origin;  "PD" for pre-determination;  and "F D" for free deternination.  
Source:  ICAO WASA data base;  Science Po RITS database;  a nd information provided by th e Chinese authorities (ALI 
computed by the Secretariat). 
260. China's recent bilateral agreements are notably  more liberal than those in its 2005 QUASAR 
profile.  Aside from the agreement with Korea PDR, th ey all have an ALI equal to or above 10, close 
to the high score recorded in th e QUASAR profile (14), and largely above it for four agreements 
(Myanmar (21), United States (25), Chile (24), ASE AN (24/26)).  Essentially, liberalization has been 
                                                      
167 WTO document S/C/W/270/Add.2, "QUASAR profile" of China, pp. I.329 to I.336.  On a scale 
ranging from 0 (classical "Bermuda II" agreements) to 50 (full common aviation market) for more details on the 
QUASAR methodology see document S/C/W/270/Add.1, pp. I.9 to I.21. WT/TPR/S/264 Trade Policy Review 
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  in clauses on fifth freedom rights (present in all new agreements except four);  multi-designation 
(present in all new agreements except one);  a nd cooperation on code-share , which is typical of 
"modern" agreements (present in all new agreements except four).  In additio n, there has been some 
(semi-)liberalization in "country of origin" pricing (i n five cases) and in the rare but very liberal free 
determination of capacity (in three cases).  
261. Domestic and overseas airlines are required to  apply for slots to the slot-management 
departments of regional administration bureaux unde r the CAAC.  The slot-management departments 
of regional administration bureaux then allocate slots in accordance with the Measures for the Administration of Civil Aviation Flight Schedul e (Min Hang Fa No. 51 of 2010), and report the 
results to the CAAC Air Traffic Management Bureau .  In accordance with relevant provisions of the 
Measures for the Administration of Civil Aviation Flight Schedule, the coordination and allocation of slots follows the principles of:  openness, impartiality  and fairness;  historical slots priority, and 
priority of the continuation of previous season's schedules;  benefiting the promotion of large portal 
aviation pivot construction, the pr inciple of benefiting the promotion of the coordinated development 
of trunk line and branch line aviation;  benefiting th e promotion of the normal order of flight;  good 
faith first;  and coordination of  main and auxiliary airports. 
262. The rules also contain a "use or lose" rule if th e slot is not used within a week, and prohibit 
exchanges of slots among airlines, in principle.  A pplications for airport slots by national and foreign 
airlines are processed according to the four principles of "impartiality, publicity, justice, and transparency". 
263. A summary of the trade regime of air transport services is found in Table AIV.3.  
(d) Rail transport services  
Market structure 
264. With its relatively lower environmental imp act, minimal land take, and ability to serve 
densely populated areas, rail transport is particul arly well suited to the needs of China's economic 
development.  This explains why China is one of the rare countries in the world where classic mixed 
passenger-freight normal-speed inter-urban railways lines are still being built alongside dedicated 
freight lines and high-speed dedicated passenger lin es.  China has the world's longest and fastest 
high-speed railway network. 
265. In 2010, the Chinese railway network comprised 91,178.5 km (corresponding to a railway 
network density of 95.0 km/10,000 square kilo metres), of which 41.1% (37,487 km) double-track 
lines, and 46.6% (42,464 km) electrified lines.  By contrast, in 2008, the total mileage of China's 
railway was 79,687.3 km, of which 36.2% were doubl e track.  The medium long-term plan for the 
development of the network decided by China's State Council in 2004 and reviewed and accelerated 
in 2008 foresees a 120,000 km network by 2020, of which 50% would be double track and 60% 
electrified.  The objective is to serve all cities with a population over 200,000 inhabitants. 
266. The first high-speed services on a dedicated passenger line, Beijing-Tianjin was opened in 
August 2008.  A network of special railway lines for passenger traffic with a total mileage of over 
16,000 km is to be built by 2020 in China.  Th e new railway construction programme includes many 
inter-regional trunk lines, with p assengers and cargo on the same line, so as to promote regional 
development and alleviate bottlenecks on rail transport.   In particular, 12,000 km of lines will be built 
in western China, and the total railway ne twork in these areas will exceed 50,000 km. China WT/TPR/S/264 
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  267. The existing network is also to be upgraded :  25,000 kilometres will be electrified, 
19,000 kilometres double tracked, 1,066 stations rec onstructed or built, and the rolling stock renewed 
and expanded.  Dedicated freight lines, in particular  lines dedicated to the transport of coal are also 
being upgraded.  The Daqing railway line, built in 1985-92 for trains of 5,000 tonnes and an annual 
capacity of 100 million tonnes of coal, has been re novated to handle 20,000- tonnes trains and annual 
capacity of 400 million tonnes.  
268. The volume of railway freight (inc luding luggage) reached 3.5 billion  tonnes in 2010 
corresponding to 2,764.4 billion tonne-kilometres.  Railway passenger traffic reached 1.7 billion 
persons corresponding to 876.2 billio n person-kilometres, respectively. 
269. China is also one of the world's largest urban ra il transit markets (including metro, light rail, 
and trolley), as numerous cities are constructing or expanding their urban railway networks.  At end 
2011, 13 cities had an urban rail transit system with  a total length of about 1,600 km.  Meanwhile, 
1,400 km are under construction.  The total length of urban rail transit in China is expected to surpass 
3,000 km in 2015. 
Trade regime  
270. The Ministry of Railways is the regulatory author ity for inter-urban railway transport, and the 
Ministry of Housing and Urban-Rural Development is  the competent department for urban rail transit 
planning and construction.  The Ministry of Railway s is both the regulator and the operator of the 
national railway network and carries out its operations  through its railway enterprises and particularly 
its regional railways bureaux.  However, the system is  to be reformed with a view to separating the 
regulatory functions from the operational functions.  The rail price-setting mechanism will be further 
reformed as will the mechanisms for investment in and financing of rail construction and for the 
subsidization of public rail transport services.  In  terms of investment and financing of railways, 
market access will be further opened to encourage private capital investment in the construction and 
operation of railways.      
271. China has no GATS or FTA commitments on railway passenger transport, except in one FTA.  
The Closer Economic Partnership agreement with Hong Kong, China allows Hong Kong SAR 
services supplier to operate and manage the Shen zhen metro line 4 in the form of wholly 
foreign-owned operations. 
272. Construction and management of metro and city light rail are classified in the 2011  Catalogue 
for the Guidance of Foreign Investment Industries in the "encouraged" category, with the condition 
that the Chinese partner must hold the majority of the shares.  A new draft regulation on urban and 
suburban light rail is being prepared so as to enc ourage marketization and attract private and foreign 
investment in a sector largely regulated as a pub lic government-owned and managed public utility.  
No information is available yet on its content or timetable. 
273. Railway passenger transportation companies are s till classified in the "restricted" category in 
the 2011 investment catalogue, with  the condition that the Chinese partner must hold the majority of 
the share.  
274. For freight transportation, China's GATS commit ments consist of a "none" for modes 1 and 2, 
and allow commercial presence in the form of who lly foreign-owned subsidiaries.  The FTAs signed 
by China with ASEAN, Singapore, New Zealand, Pa kistan, Peru, and Chile (by cross-reference for 
the latter) echo the GATS commitments, while the Cl oser Economic Partnership agreements with 
Hong Kong, China and Macao, China do not co ntain any reference to the subsector.  WT/TPR/S/264 Trade Policy Review 
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  275. Railways freight transport companies are still classified in the catalogue as "restricted" 
without limitation on foreign ownership.  
276. Construction of railways, although part of c onstruction services and not of railway transport 
services, has to be tackled together with railway transport, since, in practice the involvement of 
private and foreign investors is realized through co mpanies in charge of both the construction and the 
management of the lines. 
277. China's GATS commitments for railway constr uction are the same as for construction in 
general:  wholly foreign enterprises are permitted but may only undertake four types of projects (wholly foreign-financed construction projects;  construction projects f unded by international 
financial institutions;  Chinese fore ign/jointly-constructed projects w ith foreign investment equal to 
more than 50% or projects with less than 50% but that are technically difficult for Chinese 
construction enterprises to implement alone;  and te chnically difficult projects subject to the approval 
of provincial authorities).  
278. The FTAs with ASEAN, Chile, New Zealand, Singapore, Pakistan, and Peru echo the GATS 
commitments.  The closer Economic Partners hip agreements with Hong Kong, China and 
Macao, China contain a complex set of preferential commitments essentially regarding qualifications 
requirements (see Table AIV.4). 
279. The 2011 Catalogue for the Guidance of Foreign Investment Industries  classifies the 
construction of railways, the construction of "grid of national trunk railways"  and "feeder railways, 
local railways and related bridges, tunnels and ferri es facilities", the "construction and management of 
metro city light rail" and the "comprehensive main tenance of infrastructure of high speed railways, 
special railway line and intercity lin e" in the "encouraged" category.  In all cases the condition is that 
the Chinese partner must hold the majority of the shares, except for the "construction of feeder 
railways, local railways and related bridges, tunnels  and ferries facilities" where equity joint-ventures 
and contractual joint-ventures are allowed w ithout a ceiling on foreign participation. 
280. China encourages private, including foreign, investment in the construction and operation of 
railways. In 2010, the State Council issued Severa l Opinions of the State Council on Encouraging and 
Guiding the Healthy Development of Private Invest ment (No.13 [2010] of the State Council).  This 
text prescribes the following policy orientations:  to push forward the study of the reform plan of the 
railways regime, to introduce market competition;  to promote the diversity of investors;  to encourage 
private investment participation in the construc tion of main lines, secondary lines, rail ferries, and 
station facilities;  to explore the possibility of se tting up investment funds fo r railways, to actively 
support operators to become corpora tized and listed, and to broaden the scope of private capital access 
to railways construction.  To operationalize this pol icy guidance, the Ministry of Railways is in the 
process of finalizing the Regulations on Railway Construction and the Regulations on Railway 
Transport,  with a view  to building an open, fair, and impartial market-access system and 
administration policies for broadening private i nvestment, notably through the participation of 
insurance and social security funds, other instituti onal investors, and enterprises in joint-venture 
railway construction and operation. 
281. By end 2010, 180 joint-venture railway companies had been set up throughout China.  They 
procure freely through biddings.  They do not r eceive subsidies and do not have the financial 
guarantee of the Chinese State or of the Ministry  of Railways.  These joint ventures account for 
around 10% of traffic, the bureaux of the Ministry of Railways account for the rest. China WT/TPR/S/264 
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  282. The 180 established joint-venture railway comp anies include the Suohuang railway- a joint 
venture of the Ministry of Railways and Shenhua Group, but exclude Baoshen railways, Shensuo railways and Dazhun railways, wholly funded by Shenhua Group.  Three of these joint ventures 
involve foreign interests:  the Jing-Hu High-Speed Railway Company, with the Bank of China Group 
Investment Limited (Hong Kong) holding 4.537%  shares;  the Jin-Yu-Lu Railway Transport 
Corporation, with Bank of China Group Invest ment Limited (Hong Kong) holding 14.45% shares, 
and the Guang-Shen Railway Company Limited wh ich made a public offering of H shares in 
Hong Kong, China in April 1996, and whose Americ an Depository Share was listed on the New York 
Stock Exchange in May 1996.  At present, forei gn shares in this company account for 20.2% of the 
total shares.  There are three state-owned but publicly listed railways companies:  Daqin railways, 
Guang-Shen railways, and Tielong Logistics. 
(e) Road transport services  
Market structure 
283. The size of China's road freight transport ma rket is commensurate with size of the country 
and its economic dynamism.  In 2010, 11.33 mi llion commercial road vehicles (among which 
10.5 million goods vehicles – trucks and vans) carri ed domestic traffic of 30.53 billion passengers 
(corresponding to 1,502.08 billion passenger-kilome tres), and 24.48 billion tonnes of merchandise 
(4,338.97 billion tonne-kilometres).  All excep t passenger-kilometres traffic and passenger vehicles 
experienced two-digit growth year-on-year.
168 
284. As might be expected, the international road  transport market appears relatively small 
compared with the domestic market:  7.8 milli on passengers (350 million passenger-kilometres) and 
29.6 million tonnes (1.6 billion tonne-kilometres) fo r freight transport in 2010.  Both tonnage 
(+90.4%) and tonne-kilometres (+65.8%) progressed strongly compared with 2009.  International 
freight transport employs only 20,000 drivers, co mpared with a total of  17.4 million commercial 
drivers.   
285. In terms of intermodal shares, 93% of p assenger transportation and 76% of freight 
transportation was by road.  In 2010, 24.55 million pe rsons were employed in the road transport sector 
(excluding urban passenger traffic).  Road freight transport businesses showed constant growth over 
the decade to 2008, when they numbered 6.1 million, while the number of passenger services enterprises diminished by half due to concentration a nd integration.  The freight transport sector is not 
highly concentrated as over 85% comprise individual operators owning just one truck, without 
company status.  Companies that own more than 100 trucks account for 4% to 8.5% of the total, 
depending of the sub-segment considered (special fr eight transport, container transport, heavy duty 
transport, dangerous goods transport).  The passenge r transport sector is somewhat more concentrated 
as most passenger transport companies own a fleet  of between 10 and 49 passenger vehicles.  
However, concentration varies depending on the subsector (bus lines, taxi, coaches).
169  
Trade regime 
286. China has made extensive GATS commitments on fr eight transportation by road in trucks or 
cars (CPC 7123/w120 11.E.b).  There are no restric tions in modes 1 and 2, for market access or 
national treatment, and wholly owned subsidiari es are permitted under mode 3.  There are no 
                                                      
168 Number of passengers:  +9.8%;  passenger-kilometres traffic:  +11,2%;  tonnage of freight:  +15%;  
tonne-kilometres:  +16.7%;  goods vehicles fleet:  +1 5.8%;  passenger vehicles fleet:  +5.9%.      
169 International Road Transport Union (2009). WT/TPR/S/264 Trade Policy Review 
Page 162 
  
  restrictions in mode 3 for national treatment, and mode 4 is unbound as indicated in the horizontal 
commitments for both market access and national treatment.  There are no GATS commitments for road passenger transport nor for any of the othe r road-transport services (rental of commercial 
vehicles with operators, maintenance and repair of  road transport equipment and supporting services 
for road transport services).  
287. All the free-trade agreements signed by Chin a replicate the GATS commitments for freight 
transport.  The CEPAs with Hong Kong, China an d Macao, China contain further commitments on 
road freight transport, namely the right for provi ders originating from those two Members to provide 
non-stop road freight transport services between Hong  Kong or Macao and the Mainland and the right 
for Hong Kong or Macao-invested production enterpri ses to provide road freight transport services in 
Guangdong, subject to authorization by the provincial authorities. 
288. In addition, some of these FTA contain commitments on other road transport services, such as 
part passenger transport, and service or main tenance and repair of vehicles.      
289. This is the case in the FTAs with ASEAN, Singapore, and Pakistan, in which China has 
committed part of road passenger transportation CPC 71213, i.e. inter-urban regular transportation
170 
(for market access:  modes 1 and 2:  unbound;  mode 3:  only in the form of joint ventures with 
foreign investment limited to 49% and economic ne eds test required;  mode 4:  unbound except as 
indicated in the horizontal commitments;  for nati onal treatment:  modes 1 and 2 unbound;  mode 3:  
none) as well as on part of maintena nce and repair services (CPC 61120)171, with a liberal regime 
(mode 1 and 2:  none;  m ode 3:  wholly owned fore ign subsidiaries permitted).  
290. The China-Peru FTA contains an identically drafted commitment on passenger transport but 
not on maintenance and repair of vehicles, while the China-New Zealand FTA has the same commitment in maintenance and repair as the th ree previously mentioned agreements but not on 
passenger transport.  China-Chile does not contai n any references to road transport services but 
China's GATS commitments on road transport are inco rporated by reference in this agreement.   
291. The CEPAs with Macao, China and Hong Kong contain extensive commitments regarding 
road passenger transport and services auxiliary to ro ad transport, and the right for providers from 
Hong Kong, China and Macao, China to provide road transport passenger through wholly owned 
subsidiaries in the western areas of Mainland Chin a;  to set up joint ventures on the Mainland to 
provide inter-urban regular passe nger transportation;  to provide direct passenger bus services 
between Hong Kong or Macao and nine provinces;  to set up wholly owned enterprises in Mainland 
cities to provide passenger public transport and hire -car services in those cities;  and to establish 
passenger terminals and repair stations  in Guangdong province subject to the approval of the 
provincial authorities.  The CEPAs also contain commi tments on "road freight transport station" but 
these services are not classified as support services for road transport (but as services auxiliary to all 
modes of transport);  the same goes for "driver training" commitments (education services). 
292. Commitments undertaken by China on services auxiliary to all modes of transport in a GATS 
or an FTA context (see Table AIV.6) apply to road transport. 
                                                      
170 Defined as "interurban regularly scheduled highway passenger transportation by motor-bus, 
including passenger accompanying baggage transportation".    
171 Excluding CPC 8867 repair services not elsewher e classified of motor vehicles, trailers, and 
semi-trailers on a fee or contract basis. China WT/TPR/S/264 
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  293. The Ministry of Transport is the administrative authority in charge of road freight transport 
services.  Road freight transport companies are classified in the 2011 Catalogue for the Guidance of 
Foreign Investment Industries  in the "encouraged" category.  "Cross border automobiles vehicles 
transportation companies" are classi fied in the "restricted" category. 
294. China's internal applied regime for road frei ght transport appears liberal.  There are no 
restrictions in the GATS sense nor any quantitativ e regulations on capacity or on prices (these still 
exist in many OECD countries).172  The 20 November 2001 Provision on the Administration of 
Foreign Investment in Road Transport173 stipulates that foreign investors may establish wholly owned 
subsidiaries or joint ventures in the sectors of road  goods transport, road goods portage and loading 
and unloading, road goods storag e and other supplementary services and vehicle maintenance relating 
to road transport.  
295. Foreign investors also have the right to estab lish joint ventures in road passenger transport on 
the following conditions:  at least one of the investor s must have more than five years of experience in 
the road passenger transport business within China;  the share of foreign investment must be limited 
to 49%;  and 50% of the registered capital must be  used in the construction or reconstruction of 
passenger terminals.  The vehicles used must be of  middle or upper level.  For both freight and 
passenger transport the duration of the joint venture may not exceed 12 years but may be prolonged to 20 if more than 50% of the registered capital has been used in the construction of passenger and goods 
terminals.  These conditions also apply to operato rs originating from ASEAN, Singapore, Pakistan, 
Hong Kong, China, Macao, China, and Peru.  By  end 2010, there were 3,852 road transport 
enterprises with foreign investment, a year-on-year increase of 34.5%;  passenger transport enterprises 
had increased by 7.3% and freight transport enterprises by 39.8%. 
296. International road transport is regulated by 11  bilateral agreements, with transport quotas 
determined annually and shared on a 50/50 basis.
174  These agreements also cover passenger transport.   
The characteristics of these agreements are broadl y similar to those of the ECMT model agreement 
that prevails in Europe175, except for prescribed routes, due to in frastructural constraints.  China is 
also a member of three plurilateral agreements:  the road transport between China, Kyrgyz Republic, 
and Uzbekistan (not yet implemented);  the agreement between China, Kazakhstan, Pakistan, and the Kyrgyz Republic;  and the Cross-Border Tran sport Agreement of the Greater Mekong Sub-Region 
(CBTA-GMS) between Laos, Viet Nam, Thailand,  China, Cambodia, and Myanmar.  The latter 
contains a multilateral quota that is not yet fully im plemented.  Similarly, while transit traffic is 
legally possible in the bilateral and the plurilate ral frameworks, it remains largely non-existent.  
297. The trade regime for China's road transp ort sector is summarized in Table AIV.5. 
(v) Tourism  
(a) Market structure 
298. In 2010, China was the world's third tourism d estination, after France and the United States, 
in terms of tourist arrivals, which rose to 55.7 milli on, up 9.4% over 2009.  It  ranked fourth after the 
                                                      
172 For details on internal road transport regimes see WTO document S/C/W/324, pp. 17-21 and 57-64.    
173 Viewed at:  http://www.asianlii.or g/cn/legis/cen/laws/potaortswfi886/, see notably articles 2, 3, 6, 
and 16. 
174 These agreements have been concluded:  Kazakhstan, Kyrgyz Republic, Russia, Mongolia, 
Uzbekistan, Tajikistan, Democratic People's Republic of Korea, Pakistan, Nepal, Laos, and Viet Nam. 
175 For details on the ECMT model agreement see WTO document S/C/W/324, pp. 22-26. WT/TPR/S/264 Trade Policy Review 
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  United States, Spain, and France in terms of recei pts, with US$45.8 billion, up from US$39.7 billion 
in 2009 (+15.5%).  The World Tourism Organizati on expects China to become the world's first 
tourism destination by 2020. 
299. For outbound tourism, China ranked third in 2010, after Germany and the United States in 
terms of international tourism expe nditure, with US$54.9 billion.  Th is expenditure rose fourfold in 
just ten years, and grew by 26% compared with 2009, making China the world's fastest growing outbound tourism market.  Overall, the Chinese outbound market represents 6% of the global 
outbound market. 
300. China's lodging industry has developed considerably in the last 20 years, from a largely 
state-owned sector to a booming industry, fostered by economic growth and real estate development, 
and with private and foreign interests involved.  It  still has great potential compared with penetration 
rates in developed countries.  It is dominated by middle/low-end accommodation, including stand alone, non-rated, non-chain hotels and guest houses, wh ich have a combined market share of 95% (in 
terms of room numbers).  Stars hotel account for 4. 5% of total market supply (3.8% for 1 to 3 stars 
hotels, 0.7% for the 4 and 5 stars hotels) (Table IV.20).  
Table IV.20 
Structure and development of the tourism sector, 2000 and 2008     
Hotel categories 2000 2008 Compound annual 
growth 2000-08 
(%) Number % of total Number % of total 
4 and 5 stars hotels  469 0.2 2,253 0.7 +22 
1 to 3 stars hotels 5,560 2.3 11,846 3.8 +10 
Branded economy hotels 23 0.0 2,805 0.9 +82 
Non-chain hotels, guest housesa 231,748 97.5 298,989 95.5 +3 
Total 237,800 100 315,893 100 +4 
a No statistics are available from the National T ourism Administration of China for this category. 
Source:  National Tourism Administration of  China, Euromonitor, Inntie. 
301. Forecasters expect the largest growth to take place in the budget/economy chain hotel 
segment, which accounts for only 15% of the overall hotel  sector in China, compared with 70% in the 
United States.  China is said to have the second-la rgest hotel development pipeline in the world, 
second only to the United States.  However, in cer tain areas, such as Beijing, Shanghai, and the 
coastal regions, there is some localized over capacity, and in some cases occupancy rates are 
decreasing.  
(b) Trade regime 
302. The regulatory authority for tourism services is the National Tourism Administration.     
303. China's GATS commitments for hotels and r estaurants services consist in a "none" for 
modes 1 and 2, and allow commercial presence in the form of wholly foreign-owned subsidiaries.  
They also contain a mode 4 sector-specific entry wh ereby "foreign managers and specialists including 
chefs and foreign executives who have signed contract  with joint venture hotels shall be permitted to 
provide services in China".  
304. The CEPAs with Hong Kong, China and Macao , China and the FTAs with New Zealand, 
Singapore, Pakistan, Peru, and Chile (by cro ss-reference for the latter) replicate the GATS China WT/TPR/S/264 
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  commitments.  The FTA with ASEAN does not contain any reference to hotels and restaurants nor to 
any tourism services.  The GATS and FTA commitme nts reflect the applied regime and are based on 
status quo bindings.  
305. The market share of foreign hotel chains is substantial in the luxury segment, at 60% for 
five-star hotels, but is much lower for the other segments, at 25% for four-star hotels and 14% for 
economy and budget chain hotels.176  Foreign interests are virtually absent from the segment of 
individually owned hotels.  Fore ign presence does not necessarily take the form of wholly owned 
foreign subsidiaries, management agreements, franc hise agreements, lease-operate agreements as well 
as joint ventures are also frequent. 
306. China's commitments on travel agencies and tours operators services, comprise a "none" for 
modes 1 and 2, and allow wholly foreign-owned s ubsidiaries with no restriction on branching, and 
national treatment for registered capital.  The comm itments also include a mode 3 national-treatment 
restriction, whereby joint-venture and wholly foreig n-owned travel agencies are allowed to engage in 
outbound tourism activities i.e. to organize tours or to book trips for Chinese citizens travelling 
abroad.   
307. China's FTA commitments on travel agencies and tour operator services are somewhat 
heterogeneous.  The agreement with ASEAN does not  contain any reference to travel agencies and 
tour operators;  the agreement with Chile repr oduces only part of China's GATS commitments;  the 
agreements with New Zealand a nd Singapore have commitments iden tical to the GATS;  while the 
agreements with Peru and Pakistan include a full "none" for mode 3 in the market-access column.  
The Closer Economic Partnership agreements with  Hong Kong China and Macao, China contains a 
series of preferential concessions for Hong Kong and Macao travel agencies and tour operators:  
travel agents from Hong Kong or Macao established in nine provinces and the municipalities of Beijing and Shanghai may organize group tours to Hong Kong and Macao, respectively, and their 
minimum entry requirements were lower than those generally applied at the time of signature.  
However, since 2007, these entry requirements have  been the same for a ll WTO Members and based 
on the national-treatment principle.  This was been confirmed in the Travel Agency Regulations 
promulgated in May 2009.   
308. In terms of the applied regime, under the January  2009 regulations on travel agencies, China 
initiated the Interim Measures for the Supervision a nd Administration of the Pilot Operation of the 
Outbound Tourism Business by Sino-foreign Joint Venture Travel Agencies (No. 33 Order of the 
National Tourism Administration and the Ministry of Commerce), in August 2010, which authorized, 
on a pilot basis, the gradual opening to foreign-f unded travel agencies of the business of outbound 
tourism for residents of China's mainland.  In  May 2011, the National Tourism Administration 
determined a first list of three Sino-foreign Jo int Venture Travel Agencies for Chinese Citizens' 
outbound tour business:  TUI China Travel Co. Ltd.;  CITS American Express Business Travel;  and 
JTB New Century International Tours.  The results of  this pilot programme will be evaluated, and if 
deemed successful, it will be extended to othe r foreign travel agencies through a licensing 
mechanism. 
309. So far, 58 travel agencies have b een licenced to operate in China.
177    
310. The Approved Destination Status (ADS) is a pr ogramme designed to facilitate group travel of 
Chinese tourists through the conclusion of consular  and of other facilitating measures with partner 
                                                      
176 CB Richard Ellis Res earch Asia (2009).  
177 WTO document S/C/W/344, 28 October 2011. WT/TPR/S/264 Trade Policy Review 
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  country or regions.  Without this status, a country or  region may not receive visits of such groups.  
However, according to the authorities, this status  is granted on request and does not constitute a 
restriction but a facilitation measure.  By May 2011,  140 countries or territories had been granted 
ADB, including 11 new destinations since China's pr evious TPR in 2009 (Papua New Guinea, Ghana, 
Micronesia, Cape Verde, Montenegro, Mali, Cana da, United Arab Emirates , Ecuador, Guyana, and 
Dominica). 
311. China has neither GATS nor FTA commitments on tour guides services except with 
Hong Kong and Macao SARs whose permanent resident s with Chinese citizenship are allowed to take 
the relevant examination and to ob tain tour group escort licences for outbound group tours and to be 
employed by travel agencies from Mainland China,  Hong Kong, China and Macao, China that are 
allowed to provide outbound group services.  This generic absence of commitments may be because 
this activity is reserved, in terms of the applie d regime, to Chinese citizens who have obtained the 
relevant degree.  
312. The trade regime for tourism services is summarized in Table AIV.7.  
(vi) Environmental services 
(a) Market structure 
313. The importance of the Chinese market for envi ronmental services is commensurate with the 
large population of the country and its rapid deve lopment.  For instance, the number of urban 
waste-water-treatment plants gr ew almost six-fold between 1995 and 2005 (from around 100 plants to 
764) and from 2005 to 2010 the market incre ased from ¥44.29 billion to ¥107.38 billon, 
corresponding to an annual compound growth rate of 19.5%.178  By 2010, total industrial solid waste 
produced in all regions had reached 2.4 billion tonn es.  The solid waste disposal market, including 
hazardous material disposal, is said to repr esent 11% of the world market, and amounts to 
US$10,061,040 million.179 
314. Growth of this market is expected to exceed  30% in the coming years, as the Government 
invests massively (¥170 billion planned from 2011 to 2015, i.e. more than the double of the amount 
invested from 2005 to 2010)180, and implements (for environmenta l services in general) a policy 
designed to attract private and foreign investors so  as to diversify the type of operator, advance 
marketization, and import state-of-the art tec hnologies.  This policy is still being designed as 
environmental facilities were originally regulated like public utilities, largely municipality owned.  
For instance, the Beijing Urban Infrastructure Franchise Regulations,  promulgated by the Beijing 
People's Congress Standing Committee in December 2005, allow for the franchise of sewage and 
solid waste disposal projects in such modes as build-operate-transfer (BOT).  The Measures for 
Administration of Tianjin Municipal Utilities Franchise, promulgated in July 2005 by the Tianjin Municipal Government, allow foreign capital partic ipation in franchising activities of municipal 
utilities, such as sewage treatment and waste dispo sal, in the mode of sole proprietorship, joint 
venture, or cooperation.  
                                                      
178 Innovation Center Denmark (2009). 
179 Icon Group International (2004). 
180 China Daily /Xinhua, 29 April 2011. China WT/TPR/S/264 
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  (b) Trade regime 
315. China's environmental services commitments under the GATS include sewage services, 
refuse disposal services, cleaning services of exha ust gases, noise abatement services, sanitation 
services, nature and landscape protection services,  and other environmental protection services under 
the W/120 classification. 
316. However, they exclude, horizontally, envir onmental quality monitoring and pollution source 
inspection.  The regime is common to all these services:  "unbound" for mode 1 except for 
consultation services;  "none" for mode 2;  commerc ial presence allowed only in the form of joint 
venture with foreign majority ownership. 
317. FTA commitments are more liberal in the case of the agreements with ASEAN, Chile, 
New Zealand, Singapore, and Pakistan, which allo w wholly owned-foreign enterprises under mode 3 
(for only four services in the case of Pakistan:  sewag e, refuse disposal, cleaning of exhaust gas, and 
noise abatement).  In the China-Peru FTA, the le vel of China's environmental services commitments 
is the same as in the WTO.  In 2008, the Chin ese Mainland signed Supplement V to the CEPAs with 
the Hong Kong and Macao SARs, stipulating th at the Guangdong Province may approve the 
qualifications of Hong Kong or Macao service provide rs to establish environmental pollution control 
facility operation enterprises in Guangdong.  
318. In terms of the applied regime, the 2011 Catalogue for the Guidance of Foreign Investment 
Industries classifies "construction and management of treatment plants for sewage, garbage, the 
dangerous wastes (incineration and landfill) and the facilities of environment pollution treatment" in 
the "encouraged" category.  By contrast, construc tion and operation of gas, heat supply, and water 
drainage network in cities with a population of more than 500,000 people are classified in the 
"restricted" category, and requires the Chinese side to control shares.  The Measures for 
Administration of Environmental Pollution Cont rol Facilities Operation Qualification Licence, 
announced in November 2004 by the former Stat e Environmental Protection Administration (SEPA 
Decree No. 23), contain no limit on foreign-funde d enterprises engaging in the operation of 
professional categories of environmental pollution  control facilities, such as domestic sewage, 
industrial waste water, dust removal, and desulfuriza tion of industrial waste gas, industrial solid waste 
(except hazardous waste) and garbage. 
319. According to China's WTO commitments, unde r mode 3 (commercial presence), foreign 
services providers are allowed to engage in environm ental services only in the form of joint ventures, 
but the foreign investment may hold the majority  of ownership.  In practice, foreign-owned 
enterprises are already invo lved in environmental impact assessment services. 
320. Table AIV.8 summarizes the trade regime for China's environmental services.  
(vii) Postal and courier services  
321. The amended Postal Law, which entered into force on 1 October 2009, established the rules 
on the universal postal service and the supervisio n and administration system for China's postal 
market.  It provides that post administrations are responsible for the supervis ion and administration of 
postal enterprises and express delivery companies.  At  present, postal administrations consist of the 
Post Administration of the State Council and unde r its leadership, postal agencies of provinces, 
autonomous regions, and municipalities.  WT/TPR/S/264 Trade Policy Review 
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  322. The newly formed China Post Group Corpora tion, a wholly state-owned enterprise, is 
committed to ensuring universal postal services, wh ile also engaging in commercial operation of a 
competitive business.  According to the Postal Law, correspondence (including letters and postal 
cards) delivery services within the scope prescribed by the State Council must be provided 
exclusively by postal enterprises.  At present, the scope of postal enterprises' exclusive rights is being 
specified by relevant authorities.  The state s ubsidizes the postal enterprises for the provision of 
universal postal services, which are defined as th e delivery of correspondence, printed matters not 
heavier than 5 kg, and parcels not heavier than 10 kg each, and postal remittanc e.  A universal postal 
service fund will be set up to support the provision of universal postal services.  According to the 12th 
Five-Year Plan for Postal Services, the Admi nistrative Measures on the Contribution, Use and 
Supervision of the Universal Postal Service Fund, as well as the Provisions on the Exclusive Operation Scope of the Postal Enterprises will be i ssued to complement the regulatory regime of the 
postal sector. 
323. Development of express delivery services has been sustained and rapid;  in the past five years, 
the average growth rate of income from express delivery business has been 19%.  In 2010, express 
delivery services accounted for 45% of the total revenue of China's postal industry.   According to the 
new Postal Law, foreign investors are not allowed to engage in domestic express delivery service for 
correspondence;  this service is in the "prohibited" category in the 2011 Catalogue for the Guidance 
of Foreign Investment Industries .  However, foreign-invested e xpress delivery enterprises represented 
by the four "international integrators" (FedEx , DHL, UPS, and TNT) dominate the international 
express delivery business in China.   
324. The postal authority has also strengthened its administration on express delivery services.  
Under the Postal Law an express delivery licence mu st be obtained from the postal authority for the 
provision of express delivery services.  Further, express delivery enterprises that were established in accordance with relevant regulations but did not meet the requirements in the Law, needed to meet the 
licensing requirements for express delivery before 30 September 2010.  In addition to relevant 
provisions in the Postal Law, the Administrativ e Measures on Operation Licence of Express Delivery 
Services also entered into force on 1 October 2009.  According the 12
th Five-Year Plan for Postal 
Services, the 2008 Measures of Administration on Express Delivery Market are to be amended.  Up to July 2011, the postal authority had issu ed 6,891 express delivery licences and approved 
foreign-invested enterprises to engage in express delivery services.  
325. In order to further expand express delivery servi ces, in 2010, China Post set up China Courier 
and Logistics Co. Ltd, which is preparing for its initial public offering.  If successful, it will become 
the first express delivery enterprise listed in China.  The 12
th Five-Year Plan for Postal Services states 
that China will deepen reform and strengthen postal  enterprises.  The objective is for them to be 
ranked in the Global 500, and especially to creat e large express-delivery enterprises.    
(viii) Distribution services   
(a) Overview 
326. China's distribution sector continues to develo p rapidly.  Total wholesale and retail trade 
increased from about ¥9.3 trillion in 2005 to more th an ¥27.66 trillion in 2010.  At end 2010, there 
were 111,770 enterprises engaging in wholesale and/or retail services in China, with 8.52 million 
employees.  The value-added of wholesale and re tail trades amounted to ¥3.57 trillion in 2010, 
accounting for 8.9% of GDP and 20.7% of the total value-added of the tertiary industry.  Foreign 
investment also continued to grow in this sector.  At end 2010, there were  4,266 foreign-invested China WT/TPR/S/264 
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  wholesale and/or retail enterprises (juridi cal persons) above designated size, employing 
967,141 people;  71.1% were wholly foreign-owne d enterprises  Total foreign investment in 
wholesale and retail reached US$103.2 billion.181  From January 2009 till June 2011, China approved 
the establishment of 748 foreign-invested retail en terprises, which utilized foreign investment of 
US$2.98 billion.  According to a communication submitted by China to the WTO in October 2011, 
foreign-invested enterprises in the whole distri bution sector (including commission agent services, 
wholesale, and retail) totalled 5,983.182   
327. Large supermarkets and high-class department stores are relatively new to China's retail 
sector, and constitute the main businesses operated by  foreign-invested retailors.  In this area, 
foreign-invested retailers preva il over domestic retailers.  In Janua ry 2010, there were 604 foreign-
invested comprehensive retail enterprises, acc ounting for US$2.26 billion of utilized foreign 
investment;  mainly in the form of department st ores (360 units) and large supermarkets (160 units), 
they used foreign investment of US$1.78 billio n and US$440 million.  These department stores and 
supermarkets were located mainly in the eastern coastal region.  
328. There have been no major changes in the laws , regulations and rules governing distribution 
services.  Since 2008, the Ministry of Commerce has delegated its authority of examining and 
approving foreign-invested enterprises in some se rvices sectors, including retail, to the competent 
local administrations.   In order to prevent large retailers from abusing their advantageous position in 
the market, in addition to ensuring the implementation of the Administrative Measures for Fair Transactions between Retailers and Suppliers, the Ministry plans to improve relevant rules and 
regulations.  The Ministry is also promoting the formulation of the Administrative Measures on Urban 
Commercial Outlets to regulate the construc tion of large-scale commercial outlets.   
(b) Online retail 
329. As e-commerce has developed rapidly, online retail in China has experienced explosive 
growth in the past few years.  According to the statistics of the China Internet Network Information 
Centre, online shopping consumers in China comp rised 194 million people, and 37.8% of total 
netizens at end 2011.  Online retail sales grew by  44.6 % over the year 2010, to ¥756.6 billion, which 
represents 4.2% of the total retail sales of consumer goods in China.  Online retail in China is in 
various forms, including:  sales by internet compan ies whose main business is online retail, some of 
which are online department stores, others are sp ecialized, such as in books, audiovisual products;  
sales by traditional retailers;  sales on electronic transaction platforms;  and online sales by 
manufactures.   
330. The leading online retail platform is Taobao.co m with which 50,000 traders are registered.  
According to Analysys International, an internet  research firm, Taobao.com accounted for nearly a 
third of China's online retail business-to-customer (B 2C) market share in the second quarter of 2011, 
followed by 360buy.com (12.4%) and amazon.cn (2.3 %).  Clothing, footwear, consumer electronics, 
and media products constitute the main commodities of  online sales.  The rapid development of online 
group purchase drives the online sale of local servi ces, such as catering, th e beauty industry, and 
entertainment. 
331. Enhanced telecommunication infrastructure, including broadband access, and improved 
electronic payment facilities contributed to the e xpansion of e-commerce in China, including online 
retail.  In response to the booming online retail business, the Chinese Government is working on the 
                                                      
181 National Bureau of Statistics of China (2011). 
182 WTO document S/C/W/344, 28 October 2011. WT/TPR/S/264 Trade Policy Review 
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  establishment of regulatory framework.  According the authorities, the Administrative Regulation on 
Online Retail, which is being drafted, will, inter alia , regulate the market access of online retail 
platforms and provide for rules on online consumers pr otection.  Online retail is apparently subject to 
laws, regulations, and rules that govern e-commerce and internet in general.  The Law on Electronic 
Signature was promulgated in 2004and in 2005, the State Council issued a Circular on the 
Acceleration of E-Commerce with a view to facilita ting transactions over the internet.  The Central 
Bank issued the Administrative Measures on Payment Services Provided by Non-Financial Institutions in 2010, which provides rules governing online payment.  E-commerce is also subject to 
internet-related regulations.  An internet compa ny directly engaging in online retail services or 
providing online retail platforms must obtain an IC P (internet content provider) licence.  ICP-related 
licensing requirements and procedures are set out mainly in the Regulations on Telecommunications, the Administrative Measures on Information Servi ces via Internet, and the Administrative Measures 
for the Licensing of Telecommunication Business Opera tions, etc.  Online retail is maintained in the 
"restricted" category of the 2011 Catalogue for the Guidance of Foreign Investment Industries .  
(c) Franchising 
332. The regulatory framework on franchising in China was established with the entry into force of 
the Administrative Regulation on Commercial Fran chising in May 2007.  To implement this 
regulation, two department rules entered into force at the same time:  the Administrative Measures on Filing for the Operation of Commercial Franchi ses and the Administrative Measures on Information 
Disclosure of Commercial Franchises.  At end 2011, over 1,700 franchise enterprises, including 
39 foreign franchisors, had been filed with the Co mmerce Franchise Information System.  According 
to the latest annual survey by China Chain Store a nd Franchise Association, at the end of 2010, there 
were more than 4,500 franchise units operating ove r 400,000 franchise stores covering more than 70 
industries, which created over 5 million jobs.  In 2011, the Ministry of Commerce revised two ministerial measures governing franchise.  The revi sion of the Administrative Measures on Filing for 
the Operation of Commercial Franchises was completed and set to enter into effect in February 2012.  
There is now no limitation on foreign-investment in  franchising.  China removed franchising from the 
"restricted" category in the 2011 Catalogue for the Guidance of Foreign Investment Industries .  
Foreign franchisors must file with the Ministry of Commerce while domestic franchisors are required 
to file with the commercial competent authority at the provincial level.   
(ix) Logistics services 
(a) Market overview 
333. China's logistics industry has grown rapidly since accession to the WTO.
183  According to 
China Federation of Logistics and Purchasing, the total external logistics value was ¥125.4 trillion in 2010, 6.3 times higher than that in 2000.  It was ma inly boosted by the logistics values of industrial 
products, imports, and exports.  The total logisti cs value of industrial products was ¥113.1 trillion in 
2010, representing 90.2 % of the total external logi stics value.  From 2000 to 2010, the average annual 
growth rate of external logistics was 22%.  The va lue added of logistics has also grown annually, at 
14% since 2000;  it reached ¥2.7 trillion in 2010, accoun ting for about 16% of the total value added of 
                                                      
183 The Restructuring and Revitalization Plan for the Logistics Industry issued by the State Council in 
2009 defined the industry for the first time.  According to this document, the logistics industry refers to a 
compound service industry integrating transport, warehousing, freight forwarding, and information technology.  According to the Chinese authorities, while in practice an y enterprise engaging in transport or warehousing or 
freight forwarding is now considered as a logistics enterprise, the Government is encouraging logistics 
enterprises to integrate these activities by introducing relevant policies. China WT/TPR/S/264 
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  China's tertiary industry and 6.9% of GDP.  At th e same time, China's logi stics spending decreased, 
from 19.4% of GDP in 2000 to 17.8% in 2010.  Nevert heless, this remains much higher than that in 
developed countries, where logistics spending nor mally accounts for 10% of GDP.  Transport and 
warehousing spending, respectively, accounted for 54% and 33.9% of China's total logistics spending 
in 2010.  According to the World Bank Logis tics Performance Index, China ranked the 27th of 
130 economies in 2010 up from 30th in 2007.184  According to the World Bank, China's logistics 
performance is far higher than would be expect ed based solely on its income level.   
(b) Logistics infrastructure and freight transport 
334. In line with the rapid increase in fixed asset i nvestment in the last two or three decades, 
China's logistics infrastructure h as been remarkably improved.  Improved infrastructure and increased 
demand from manufacturing and merchandise trade cont ributed to the rapid growth of logistics 
industry.  According to China Federation of Logist ics and Purchasing, China's fixed asset investment 
in the logistics industry was ¥3.07 trillion in 2010, of which 75.7% (¥2.3 trillion) was in transport and 
7.2% (¥223.8 billion) in the warehousing and posta l industries.  From 2000 to 2010, fixed asset 
investment in logistics increased 24.1% annually.   
335. Freight traffic appears to have increased in each  transport mode in the last few years.  In 
2010, 24.5 billion tonnes of freight were transporte d by road and turnover was 4.34 trillion tonne/km, 
up more than four-fold over 2006 (Table IV.21).  The volume of road container transport was 
52.82 million TEUs and 595.9 million tonnes in  2009, up 50.1% and 62.2% over 2006.  
Table IV.21 
Basic conditions of freight transport, 2006-10 
Item 2006 2007 2008 2009 2010 
Length of transport routes  (10,000 km)      
      Railways in operation 7.71 7.80 7.97 8.55 9.12 
      Highwaysa 345.70 358.37 373.02 386.08 400.82 
          Expressway 4.53 5.39 6.03 6.51 7.41 
      Navigable inland waterways 12.34 12.35 12.28 12.37 12.42 
      Total civil aviation routes 211.35 234.30 246.18 234.51 276.51 
      Petroleum and gas pipelines 4.81 5.45 5.83 6.91 7.85 
Total freight traffic (10,000 tonnes) 2,037,060 2,275,822 2,585,937 2,825,222 3,241,807 
      Railways 288,224 314,237 330,354 333,348 364,271 
      Highways 1,466,347 1,639,432 1,916,759 2,127,834 2,448,052 
      Waterways 248,703 281,199 294,510 318,996 378,949 
      Civil aviation 349.4 401.8 407.6 445.5 563.0 
      Petroleum and gas pipelines 33,436 40,552 43,906 44,598 49,972 
Total freight tonne/km (100 million tonne /km) 88,840 101,419 110,300 122,133 141,837 
      Railways 21,954 23,797 25,106 25,239 27,644 
      Highways 9,754 11,355 32,868 37,189 43,390 
      Waterways 55,486 64,285 50,263 57,557 68,428 
      Civil aviation 94.3 116.4 119.6 126.2 178.9 
      Petroleum and gas pipelines 1,551 1,866 1,944 2,022 2,197 
Table IV.21 (cont'd) 
                                                      
184 In the 2010 Logistics Performance Index Report, those 26 countries or regions ranked ahead of 
China were all developed economies except four: Singapore, Hong Kong China, South Korea and United Arab 
Emirates.   WT/TPR/S/264 Trade Policy Review 
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  Item 2006 2007 2008 2009 2010 
Possession of civil motor vehicles (10,000 uni ts) 3,697.35 4,358.36 5,099.61 6,280.61 7,801.83 
      Private vehicles 2,333.32 2,876.22 3,501.39 4,574.91 5,938.71 
Possession of other motor vehicles (10,000 units) 8,797.67 9,434.03 9,756.92 10,489.01 11,305.55 
Possession of civil transport vessels (unit) 194,360 191,771 184,190 176,932 178,407 
      Motor vessels 157,805 157,544 152,247 149,367 155,624 
      Barges 36,555 34,227 31,943 27,565 22,783 
Volume of freight handled in coastal ports above 
designated size (10,000 tonnes)b 342,191 388,200 429,599 475,481 548,358 
a Length of highways includes village roads since 2005.  
b Since 2009, statistical coverage above de signated size refers to coastal seaport with capacity over 10 million tonnes yearly and 
inland port over 2 million tonnes yearly. 
Source:  China Statisti cal Yearbook 2011. 
336. While the volume of freight transport by rail is less than that by road, more than half of rail 
transport revenue is from freight transport (¥1 39.3 billion in 2006).  The major types of goods 
transported by rail are coal, petroleum, smelting materials (coke, ore, steel, etc.), building materials, grain, fertilizer, and containers.  Coal constitutes near ly half of the goods trans ported by rail.  In 2010, 
fixed asset investment in the rail sector reached ¥842.7 billion, with annual growth of nearly 20%. 
337. In 2010, freight throughput of 'above-scaled' coastal ports was 5.5 billion tonnes and total 
freight traffic by waterways about 3.8 billion to nnes.  Coal, minerals, construction materials, 
petroleum, steel, and machinery and electrics were the main types of goods transported.  Coal 
constitutes nearly one fifth of the total amount of freight traffic by waterways. 
338. Air freight, which accounted for less than 2% of  total freight traffic in China, amounted to 
5.63 million tonnes in 2010, of which 1.93 million t onnes were transported on international routes and 
3.70 million tonnes on domestic routes.  Freight thr oughput of the airports was 8.6 million tonnes in 
2009, up 14.3% over 2006.  The top 10 freight airports  by turnover in 2007 are:  Shanghai Pudong;  
Beijing Capital;  Guanzhou Baiyun;  Shenzhen Ba oan;  Shanghai Hongqiao;  Chengdu Shuangliu;  
Kunming Wujiaba;  Hangzhou Xiaoshan;  Xiamen Ga oqi;  Nanjing Lukou.  Shanghai Pudong Airport 
had the highest freight turnover in China, Nanjing Lukou had the highest growth rate. 
(c) Storage and warehousing 
339. According to China's second economic census,  there were 17,415 storage and warehousing 
enterprises in 2008, which had ¥569.45 billion of asset s, employed 5,110,000 people, and generated 
revenue of ¥89.7 billion.  In 2007, the reve nue of storage and warehousing services was 
¥302.1 billion.  They comprised a relatively sm aller subsector of China's logistics industry, 
accounting for 7.6% of the total assets or 9.6% of th e total revenue of the industry.  However, this 
subsector has grown rapidly (the annual growth rate of general re venue was 35% from 2004 to 2008).  
In 2010, fixed asset investment in storage a nd warehousing was ¥181.2 billion, representing only 
6.5% of the total fixed asset investment in transport, storage, and post.
185  
340. China's existing storage and warehouse facilities bare ly meet its fast increasing market needs.  
According to a survey conducted by China Materi als Storage and Transportation Association, the 
warehouse vacancy rate in China was 3% in 2008, mu ch lower than the rate deemed normal in the 
industry, of 20%.  In this context, logistics operators in China including not only storage and 
                                                      
185 National Bureau of Statistics of China (2011). China WT/TPR/S/264 
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  warehousing enterprises, but also freight forwar ders and 3PL providers, have increased their 
investment in building and upgrading storage and warehouse facilities, including specialized 
warehouses (e.g. warehouses for hazardous goods, cold storage).  
341. Domestic enterprises mainly engaging in storage and warehousing services are generally very 
small.  In 2008, the average number of employees per enterprise was only 29.  Recent mergers and 
acquisitions in the logistics industry mostly  involved storage and warehousing enterprises.186  With 
¥12.5 billion of assets, 8.31 million square meters of land, 6,700 employees, and 6.2 billion tonnes of 
annual throughput, China Material Storage and Transportation Corp (CMST), a state-owned 
enterprise, is the sector leader.   
342. Foreign logistics enterprises also provide st orage and warehousing services in China.  The 
world's leading warehouse developer and operator, Prol ogis, formed its first joint venture in Suzhou in 
2004.  Prologis is now present in 20 coastal and inland Chinese cities with 8.1 million square meters 
in operation.  
(d) Freight forwarding 
343. Until 1 July 2004, engaging in international fre ight forwarding services in China was subject 
to administrative approval by the competent aut hority responsible for foreign trade.  As of 
1 July 2004, 5,012 enterprises had obtained such ap proval, of which 2,555 were juridical persons, 
2,457 branches.  Enterprises engaging or wishing to engage in international freight forwarding 
services are required currently only to file with the local authority responsible for commerce.  As of 
May 2010, there were 25,606 'filed' international fre ight forwarders, of which 20% were state-owned 
or state-controlled, 20% with foreign investment, and 60% private domestic enterprises.  State-owned 
or controlled freight forwarders prevail in terms of market share and overall turnover.  A study 
undertaken in 2010 shows that state-owned or st ate-controlled enterprises operate about 40% of 
freight forwarding businesses in China, forei gn-invested enterprises 30% and private domestic 
enterprises 30%.187  According to China International Frei ght Forwarding Association, China National 
Foreign Trade Transportation Corp (Sinotrans), a state-owned enterprise, is the biggest freight 
forwarder in China with a turnover of ¥74.3 billion in 2009;  while the total turnover of the top 10 
private freight forwarders was around ¥30 billion.  Big Chinese freight forwarders are transforming or 
have transformed into third-part y logistics providers;  their businesses now cover a wide range of 
activities along the logistics chain.   
(e) Third-party logistics (3PL) 
344. The concept of third-party logistics (3PL) remains relatively new to China and the 3PL 
market is in its early stages, as most domestic enterp rises continue to operate their own logistics as an 
in-house business.  According to a 2008 study by KPMG, while the majority of multinational corporations use 3PL in China, only 15% of domest ic companies use outside logistics firms;  3PL's 
share of China's logistics market is estimated to  be around 20%, which is considered low compared 
with the EU (35%), the US (57%), and Japan (80%).
188  According to another study, the total cost of 
the 3PL in China was ¥230 billion in 2006, accounting fo r less than 6.1% of the nation's total logistics 
cost (¥3.8 trillion).189  
                                                      
186 China Association of Warehousing and Storage online information.  Viewed at:  www.caws.org.cn. 
187 Mei Zanbin & Liu Jianxin (2010). 
188 KPMG (2008). 
189 China Knowledge Online.  Viewed at:  www.chinaknowledge.com. WT/TPR/S/264 Trade Policy Review 
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  345. China's domestic logistics enterprises may be  state-owned/controlled or private.  Most 
state-owned/controlled logistics ope rators have developed from trad itional state-owned transport or 
warehousing enterprises.  Some are subsidiaries of state-owned enterprises in other industries (e.g. 
chemical, electronics, mineral industries), which engage  in the logistics industry in order to diversify 
their business.  State-owned/controlled operators hold 50% of China's logistics market.  Most 
domestic private logistics enterprises are small and only operate local businesses.  More than 700,000 
logistics enterprises are registered in China, but less  than 1% of them are truly integrated logistics 
enterprises;  most provide a single logistics service, such as freight forwarding or warehouse managing.  Even the largest enterprise in this in dustry has a market shar e of less than 2%.   
346. According to China Federation of Logistics and Purchasing, the combined revenue of the top 
50 biggest logistics enterprises in China (i.e. annua l revenue of over ¥1 billion), was ¥450.6 billion in 
2009.  Among the top 50, 18 were SO Es, and 6 were foreign-invested;  30 were logistics enterprises 
whose main business was transport;  8 mainly oper ated warehousing and storage services;  and only 
12 were integrated logistics enterprises;  80% were located in the east of China. 
347. China Ocean Shipping Group Corp (COSCO), th e largest domestic logistics enterprise, had 
revenue of ¥155.0 billion in  2006.  Other top domestic logistics enterprises include:  China Shipping 
Corp;  China National Foreign Trade Transportation Corp (Sinotrans);  China Material Storage and 
Transportation Corp (CMST);  China Railway Expr ess Corp (CRE);  China Post.  The CRE has the 
largest service network throughout China, while the COSCO's network mainly covers the coastal 
areas.   
348. According to statistics by MOFCOM, from 1998 to end 2011, there were 
6,415 foreign-invested enterprises established in  transport, storage and warehousing, and postal 
services, the total actually utilized foreign capital being US$24.79 billion, re presenting 2.6% of the 
total inflow of foreign investment in the same pe riod.  One study indicated that services provided by 
foreign-invested logistics enterprises repr esent about 22% of China's logistics market.
190  
Foreign-invested logistics operators have preva iled China's domestic enterprises in international 
express delivery, sea-freight forwarding, and speciali zed logistics services.  For example, Schenker's 
subsidiary in China was selected to operate as the official freight forwarding & customs clearance 
supplier for the 2008 Beijing Olympic Games.  Schenker has operations in over 50 key cities 
throughout China with more than 4,700 employees. 
349. Other world leading logistics operators (e.g. Ag ility, YRC Worldwide, EAS, BAX, Panalpina, 
Kuehne+Nagel, FedEx, TNT, UPS, TNT, Maersk Logistics, APLL, ZIM Logisitics, NYK Logisitics, 
etc.) all have a presence in China, through either joint-ventures in the early years or 100% owned 
subsidiaries since 2005.  They have accelerated their expansion in China in recent years, particularly 
through acquisition of domestic logistics ente rprises.  For example, in 2007 Agility acquired 
Guangzhou Runtong International Tr ansportation Co Ltd, an ocean freight forwarder based in 
Guangdong, and Cosa Freight, a Shenzhen-based ocean freight forwarder known for its expertise in 
multi-country consolidation and value-added services, such as transloading direct-to-store programmes.  In 2008, Agility also acquired Bais ui United Logistics (Shanghai) Co., Ltd.  With 
services covering 150 Chinese cities, Agility now h as more than 40 offices, 1,500 staff, over 
200,000 sq.m. of warehousing storage capacity and its own fleet, trucks, and contracted vehicles in 
China.  Similarly, YRC Worldwide acquired JHJ International, a trucking carrier, in 2005 and 
Shanghai Jiayu Logistics Co., Ltd. (Jiayu), in 200 7, one of China's largest national providers of 
truckload and less-than-truckload services. 
                                                      
190 Mei Zanbin & Liu Jianxin (2010). China WT/TPR/S/264 
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  350. The "big four" integrated operators play an impor tant role in China's logistics market.  TNT in 
China has 34 branches and 5 international gatewa ys for international express delivery business, as 
well as 57 operation hubs and 1,600 depots for dom estic road distribution.  TNT employs 
21,000 professional employees with services covering over 600 cities in China, making China its 
second largest market, after Europe.  TNT has dedi cated Boeing 747 freighters operating seven flights 
per week between Shanghai and Europe and five flights per week between Hong Kong and Europe.  
FedEx set up its Asia-Pacific Hub in Guangzhou and operates 30 weekly U.S.-China frequencies, 
including weekly flights serving Shanghai, Beijin g, and Shenzhen.  FedEx employs more than 
6,000 people in China and its service network now covers over 300 Chinese cities.  DHL has more 
than 200 agencies providing services to more than 400 cities in China.  UPS serves 330 Chinese cities 
and operates 200 weekly flights connecting China to markets around the world.  Its flights now 
operate in six Chinese cities.  
(f) Logistics parks (including bonded logistics parks) and logistics hubs  
351. According to a survey carried out by China Federation of Logistics and Purchasing, there 
were 475 logistics parks in China in 2008, of wh ich 122 were in operation an d the others were under 
construction or planni ng.  More than 54% of these logistics park s were located in the coastal regions.  
In terms of size and functions, the parks are very diverse, ranging from small areas with a few warehouses or distribution centres, to comprehens ive industrial zones grou ping various logistics 
enterprises.  Some logistics parks were built an d operated by local governments as supporting services 
provided to business.  There are also logistics parks operated by private or foreign capital.  
352. Bonded logistics parks, which are established in  bonded zones or special ports adjacent to 
bonded zones operate under Custom s supervision to facilitate im ports and exports, especially 
processing trade and transit trade. 
353. Shanghai has the country's largest seaport and th e second-largest airport in terms of air-freight 
throughput.  With the advantages of deep-water ports , airports, land transport, and full port facilities, 
Shanghai is developing four major logistics pa rks, located at WaiGaoQiao, Pudong Airport, 
Northwest, and the Yangshan deep-water port.  Suzhou is the secondary logistics hub in Yangtze 
River Delta, due to the significant presence of fore ign manufacturers.  In the same region, Ningbo 
port's freight throughput ranked third in China in 2010. 
354. In the Pearl River Delta where industries focus on processing and export, Shenzhen has 
become the most important logistics hub in south China owing to its location adjacent to Hong Kong, 
and its own port.  In recent years, the municipa l government of Guangzhou has been promoting the 
region as a logistics hub, leveraging on its status as a centre for manufacturing, its well-established 
transportation network, and rapidly de veloping logistics infrastructure. 
355. The Bohai Bay Region has high logistics demand and freight traffic;  Shandong Province has 
the highest freight traffic volume in China.  Logistics activities in Tianjin, the economic centre of 
North China, are currently centred around Tianjin Ai rport and the Binhai New Area, which consists of 
the Tianjin Port and the Tianjin Economic Technol ogical Development Area (TEDA).  The central 
government has identified logistics as a key gr owth area for the city, and strongly supported 
municipal plans to develop the Binhai New Area and enhance the city's logistics infrastructure.  
Dalian is the gateway for goods from th e north-east entering the Bohai Sea. 
356. While the coastal areas remain the overwhelmi ng focus of logistics activities, new logistics 
hubs are emerging in inland China. Chengdu, Hangzhou, and Shenyang have strong consumer WT/TPR/S/264 Trade Policy Review 
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  markets while Chongqing, Wuhan, Nanjing, Harb in, Changchun, Xian and Zhengzhou represent the 
major industrial hubs for the rapidly expanding domes tic markets.  Unlike the coastal logistics hubs, 
where imports and exports are major factors for logi stics development, the logistics markets in inland 
cities are driven mainly by the growth of the domestic economy.  They also have the advantage of 
lower costs for land and labour. 
(g) Regulatory framework 
357. While there is no single competent authority overseeing the logistics industry in China, more 
than a dozen of government departments are responsib le for logistics-related regulations.  In order to 
facilitate internal coordination, the National Inter-M inisterial Joint Meeting on Modern Logistics was 
set up in 2005.  This institution, with the Na tional Development and Reform Commission taking the 
lead, involves 15 ministries and agencies  that meet one or twice per year.191  The State Council issued 
the Restructuring and Revitalization Plan for Logi stics Industry in March 2009;  and in August 2011, 
the General Office of the State Council issued the Opinions on the Policies and Measures for 
Promoting the Sound Development of Logistics Industry, which anticipate, inter alia , tax reductions 
and further favourable land policies for logistics en terprises, eliminating or reducing road tolls, and 
more investment in logistics infrastructure.  Th e Opinions encourage big logistics enterprises to 
consolidate the fragmented industry through mergers and acquisitions, and set farm produce logistics 
as priority. Also in June 2010, the National De velopment and Reform Commission issued the 
Development Programme for Farm Produce Cold Chain Logistics.  In the newly amended Catalogue 
for the Guidance of Foreign Investment Industries , modern logistics and related technical services, 
logistics information consulting services are classified as "encouraged". 
358. Logistics-related laws, regulations or rules ar e scattered in various sectors.  For example, 
numerous regulations governing transport, especially fre ight transport, are also relevant for logistics 
services, such as:  the provisions governing ma ritime transport in the Maritime Law (1992);  
Regulation on International Maritime Transport (20 02) and its Implementation Rules (2003);  Interim 
Measures for the Examination and Approval of Wh olly Foreign-funded Shipping Companies (2000); 
Administrative Measures on Foreig n Investment in Internationa l Maritime Transport (2004);  
Administrative Measures on Port Management (200 4);  the Regulation on Road Transport (2004);  
Administrative Measures on International Road Tr ansport (2005);  the Administrative Measures on 
Foreign Investment in Road Transport and its supplementary provisions (2001, 2003, 2004);  Administrative Measures on Road Transport of th e Radioactive Substances (2011);  Administrative 
Measures on Road Transport of Hazardous Goods (2011);  Administrative Measures on Road Freight 
Transport and Depots (2009);  Interim Measures on  Examination, Approval and Administration of 
Foreign Investment in Railway Freight Transport (2000);  Administrative Regulation on Waterways 
Transport (2009) and its Implementation Rules (200 9);  Measures on Foreign Investment in Civil Air 
Transport and its supplementary provisions (2001, 20 04, 2007, 2008, 2010)  .  The Postal Law (2009) 
and the Administrative Measures on Operation Licence of Express Delivery Services (2009) provide 
for rules on express delivery (see above).   
359. The Ministry of Commerce is the competent au thority in China with respect to freight 
forwarding.  Main regulations and rules include : the Administrative Regulation on International 
                                                      
191 The 15 departments and agencies are:  the Minist ry of Commerce;  the Ministry of Railways;  the 
Ministry of Transport;  the Ministry of Industry and Information Technology;  the Civil Aviation 
Administration;  the Ministry of Finance;  the Ministry of Public Security;  the General Administration of Customs;  the State Administration of Taxation;  the State Administration for Industry and Commerce;  the 
General Administration of Quality Supervision;  Inspection and Quarantine;  the State Standardization 
Commission;  China Federation of Logistics and Purchasing;  and China Transport Association. China WT/TPR/S/264 
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  Forwarding Agency Services and its Implementati on Rules (2004);  the Administrative Measures on 
International Forwarding Agency Enterprises with  Foreign Investment (2005);  and the Interim 
Measures for the Filing of International Freight Forw arders (2005).  Foreign investors are allowed to 
establish wholly foreign-owned freight forwarding agencies in China and are subject to the same 
registered capital requirement as domestic freight forwarders (no less than US$100 million).  Foreign-
invested freight forwarders are allowed to engage  in a wide range of businesses, including:  ship 
booking, customs clearance, storage and warehousing, freight forwarding agent, international express 
delivery, international multimodal transport, containe r transport, consultancy.  An application for the 
establishment of a foreign-invested freight forw arder is submitted to the commercial competent 
authority at the provincial level and a decision on th e application must be taken within 30 days.  All 
international freight forwarders are registered with the Ministry of Commerce.  As freight forwarders 
and logistics operators also provide customs brokera ge services, they are also subject to regulations 
and rules in this regard, such as the Admini strative Measures on Customs Declaration Unit 
Registration (2005), and Administrative Measures on Customs Inspection and Quarantine Agencies 
(2002). 
360. The Government is promoting the application of  uniform logistics-related technical standards 
across the country, as part of its efforts to integr ate the logistics industry.  A sub-commission on 
logistics technical standardization was establis hed under the State Standardization Commission in 
2003.  The latter, together with other ministries a nd agencies, issued the National Specific Programme 
for Logistics Standardization in 2010, which identif ied standardization tasks related to logistics in 
13 areas, including transport, storage and warehousing, freight forwarding, some special 
product-related logistics (grains, cold chain, pharm aceutics, car parts, etc.), and postal and express 
delivery.  At end 2010, 22 national logistics standa rds and more than 20 logistics industrial standards 
had been issued.   
361. China has made commitments on logistics-rela ted services under the GATS.  Apart from its 
commitments regarding transport services, China h as also made phase-in commitments on storage and 
warehousing services (CPC 742), and freight fo rwarding agency services (CPC 748 and 749 
excluding freight inspection).  According to these co mmitments, wholly foreign-owned subsidiaries in 
these two sectors are permitted, respectively, since 2004 and 2005.  In general,  there are no limitations 
on national treatment except in freight forwarding agency services.  A foreign freight forwarding 
agency must have at least three consecutive years of experience before establishing in China;  a 
second joint venture may be set up only after its first jo int venture has been in operation for two years;  
the operating term of a joint-venture freight forw arding agency may not exceed 20 years;  and a 
joint-venture freight forwarding agency may set up branches after one year of operating in China.  
China's PTAs confirm its GATS commitments in these sectors. 
 China WT/TPR/S/264 
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