. /.   WORLD TRADE  
ORGANIZATION  G/SCM/Q2/CHN/26 
13 September 2007 
 (07-3824) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to the Questions Posed by JAPAN1  
regarding the New and Full Notification of CHINA2 
  
 The following communication, dated 7 September 2007, is being circulated at the request of 
the Delegation of China.    
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Question 1 
  In the Protocol on the Accession of the People's Republic of China (WT/L/432), China 
committed itself to the elimination of all s ubsidy programmes falling within the scope of 
Article 3 of the SCM Agreement.  Has China already eliminated all such subsidy programmes, including those listed in Annex 5B to the Protocol?  Please explain whether any of the subsidy programmes contained in the Notification are re levant to those which China committed itself to 
the elimination mentioned above?   
 
Reply
 
  Different views on whether China has fulfilled its obligation of elim inating all subsidies 
falling within the scope of Article 3 of the SCM Ag reement reflect the differe nt understandings of the 
definition of subsidy under Article 3 of the SCM Agre ement.  Currently it is being dealt with in the 
dispute settlement procedures of the WTO.  China has explained in various occasions the background 
of the policies which several Members believe to be inconsistent with China's WTO obligations.  
These are policies formulated at early stage of China's reform and opening-up process to attract 
foreign investment and later incorporated in the legi slation on tax in the 1994 reform in China of its 
tax regime.  With further reform of the tax re gime in China including the implementation on 
1 January 2008 of the new Income Tax Law of the People's Republic of China for Enterprises, these 
policies will be adjusted.    
Question 2 
 
 Recognizing that China's notification cov ers the period from 2001 to 2004, does China 
still currently maintain the subsidy programmes included in the Notification, including those 
subsidy programmes which appear to be contin gent upon export performance or the use of 
domestic over imported goods.  Can it be underst ood that all subsidy programmes contained in 
the Notification, for which, in the column "Durat ion of the subsidy and/or any other time-limits 
attached to it", an end-year is specified (eg. 2003-2005) and such end-year is a year earlier than 
                                                     
 
1 G/SCM/Q2/CHN/17.   
2 G/SCM/N/123/CHN.   G/SCM/Q2/CHN/26 
Page 2  
 
  2006, have already been abolished?  Please indica te any subsidy programmes in the Notification 
that have already been terminated. 
 
Reply
 
 
 China's notification covers the period from 2001 to 2004.  For those notified policies and 
measures where the duration is from a certain year to present, the legislation granting the policy or 
measure does not specify its end date, and the po licy or measure was still valid at the time of 
submission of the notification.  However, this do es not mean that the policies and measures will not 
be changed or terminated.  With the further refo rm of the tax regime in China, including the 
implementation of the new Income Tax Law of the People's Republic of China for Enterprises on 
1 January 2008, quite a number of existing preferen tial tax policies will be changed.  These changes 
will be reflected in China's future notification.     For those policies and measures where there is a specific end date in the notification, that is 
the end date provided in the legislation granting th e policy or measure.  In this case there would be 
two possibilities regarding the policy or measure after the specified end date.  One is that it comes to 
an end at the end date, like the LXXV in the notifi cation, that is, the refund of import VAT of raw 
copper materials.  Another possibility is that there would be a new legislation replacing the old one to 
extend the policy or measure either exactly as it w as or with some adjustment.  For this kind of 
extended policies and measures China will include  them in its future notification.   
 
Question 3 
  Please clarify whether, with regards to the subsidy programmes contained in the Notification for which enterprises with foreign in vestment (FIEs) are NOT explicitly specified as 
those eligible, there are any distinctions betwee n FIEs and other domestic enterprises in the 
eligibility for such subsidy programmes.   
 
Reply
 
  When these policies and measures are available to both FIEs and domestic enterprises, there 
is no distinction between them.   
 
Question 4 
  According to LXXV, the duration of "Refund of import VAT of raw copper materials" 
was from 2003 to 2005.  Since it appears th at this subsidy programme has already been 
terminated, can China confirm whether and when  this subsidy programme has actually been 
terminated?  Please indicate any relevant legislatio n or legal documents that gave effect to such 
termination.   
 
Reply
 
 
 As explained just now, LXXV in the notification, that is, the refund of import VAT of raw 
copper materials was terminated at the end of  2005 because there was no new legislation extending 
the policy at the time it expired at the end of 2005.   In the next new and full notification from China 
where 2005 will be coved, the policy will not appear.   
 
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