G/SCM/Q2/CHN/ 81 
20 November  2019 
(19-7935) Page: 1/20 
Committee on Subsidies and Countervailing Measures  Original:  English  
 
  
SUBSIDIES  
REPLIES TO  QUESTIONS F ROM THE UNITED STATE S1 REGARDING  
THE NEW AND FULL NOTIFIC ATION OF CHINA2 
The following communication, dated 19 November  2019, is being ci rculated at the request of the 
Delegation of China . 
 
_______________  
 
 
The United States appreciates China's efforts in compiling its most recent subsidy 
notification, which for the first time since China has become a Member, includes both 
central and sub -central subsidy programs in the same document. Unfortunately, as was 
true for China's previous notifications, China's most recent notification suffers from both 
severe under -reporting of important programs and significant over -reporting of irrelevant 
or minor programs.  
 
GENERAL  QUESTIONS  
Ques tion 1  
 
Are any of the notified programs in China's most recent notification related to the steel 
subsidy programs listed in the Article 25.8 submission of the United States and 
European  Union3, which has largely gone unanswered by China ? If so, please spe cify.  
Reply  
China has already made explanations and clarification s in previous regular meetings regarding  the 
issues. Please refer to the minutes of meetings.  
 
Question  2 
 
In China's most recent trade policy review, the Secretariat's report states that, during the 
review period, China continued to provide financial support to the fisheries sector and 
that outlays appear to be considerable. It cites an academic source estimat ing that China's 
annual expenditure for fisheries subsidies was RMB 40.4 billion in 2013. However, it notes 
that official expenditure figures for these subsidies programs were not made available to 
the Secretariat by the Chinese government. Despite multipl e international statements 
calling for increased transparency of fisheries subsidies, including most recently the 2017 
MC11 Ministerial Decision re -committing Members to implementation of existing 
notification obligations under Article 25.3 of the Agreemen t on Subsidies and 
Countervailing Measures, and repeated promises by China to provide relevant 
information, China had previously only notified three marginal fisheries subsidies 
programs in its 17 years of WTO  Membership.  
 
                                                
1 G/SCM/Q2/CHN/75.  
2 G/SCM/N/ 315/CHN . 
3 G/SCM/Q2/CHN/7 0. G/SCM/Q2/CHN/ 81 
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  In connection with the 2012 trade  policy review of China, the United States cited a 2003 
study with a similarly large estimate of the total value of support provided by China. China 
responded that it would provide a fisheries subsidies notification after agreement on 
strengthened notifica tion requirements in the context of the Doha Round (despite a 
current obligation under the Agreement on Subsidies and Countervailing Measures). In 
connection with the 2014 trade policy review of China, the Secretariat's report uncovered 
33 fisheries subsid ies measures. China responded that it needed more time to respond 
given the ambiguous descriptions of support projects for fisheries, various sources of 
information, and unidentified competent authorities, executors and scope of these 
support projects. In April 2016, the United States counter -notified 44 fisheries subsidies 
measures under Article 25.10 of the Agreement on Subsidies and Countervailing Measures 
and provided full translated copies of each measure .4 China responded that it had notified 
three of  these measures and continued to argue for more time. In July 2016, China 
submitted its first -ever sub -central government subsidy notification, yet no fisheries 
subsidies were included, even though the majority of the measures uncovered by the 
Secretariat and counter -notified by the United States were sub -central government 
measures. In connection with the 2016 trade pol icy review of China, the United  States 
again asked China when it would notify all of its fisheries subsidies. China responded that 
it is re viewing its fisheries subsidies and will deliberate on the notification issue based on 
the review results and the work in progress.  
 
In responding to this issue at China's trade policy review last year, China stated that:  
 
Information verified will be refl ected in the notification of subsidies to be 
submitted by China. China's notification will be updated to the years of 2015 -
2016. China will also continue its efforts in respect of the notification 
obligation under the SCM agreement.  
However, in China's mos t recent subsidy notification, there appear to be only six fisheries 
subsidies programs. China is the world's largest wild fish harvester, and primary source 
evidence continues to mount indicating that its fisheries subsidies programs are 
numerous and subs tantial. Given China's longstanding obligation to notify all of its 
fisheries subsidies under Article 25 of the Agreement on Subsidies and Countervailing 
Measures and Members' repeated requests over many years for information, when will 
China finally provi de a full accounting of all of its fisheries subsidies at all levels of 
government?  
Reply  
For the notified central and sub -central programs, please refer to the latest subsidy notification 
submitted by China on  30 June 2019.  
Question  3 
 
Is it China's posit ion that since becoming a WTO Member it has never provided subsidies 
for the construction, acquisition or renovation of fishing vessels (with th e possible 
exception of Program  1.63 Subsidy for scrapping and dismantling vessels and for ship 
type standardiza tion)? Please explain.  
Reply  
Since 2015, China has provided a subsidy for the scrapping, dismantling, renewal and renovation of 
fishing vessels, mainly for the scrapping, dismantling, renewal and renovation of fishing vessels that 
are not up to the inspection standards and have poor s afety and pollution prevention performance, 
as well as those that are more destructive to marine and fishery resources. The subsidy will expire 
at the end of 2019. For details of the subsidy for the scrapping, dismantling, renewal and renovation 
of fishing  vessels, please refer to the latest subsidy notification submitted by China on 30 June 2019.  
 
                                                
4 G/SCM/Q2/CHN/59.  G/SCM/Q2/CHN/ 81 
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  Question  4 
 
Is it China's position that it has never provided fuel subsidies to its fishing industry since 
becoming a WTO Member? We note the funding line in China's budget titled "Subsidies for 
Refined Oil Price Reform for Industries Such as Fisheries and Forestry" . 
Reply  
For the subsidies for refined oil price reform, please refer to the latest subsidy notification submitted 
by China on June 30, 2019.  
Questio n 5 
 
For Jiangsu, Jiangxi, Yunnan, and Zhejiang provinces, China notified only district -level 
and/or municipal -level programs. Please explain why no province -level programs were 
notified for these provinces. For a large number of other provinces (Fujian, G uangdong, 
Guizhou, Henan, Hubei, Heilongjiang, Qinghai, Sichuan, Shaanxi, and Tibet Autonomous 
Region), China notified only one province -level program. Please explain why only one 
province -level program was notified for these provinces. For two direct -admi nistered 
municipalities (Beijing and Chongqing), China notified only one municipal -level program. 
Please explain why only one municipal -level program was notified for these direct -
administered municipalities. In summary, it appears that China has not provi ded a 
complete notification for sub -central subsidy programs.  
Reply  
In recent years, China has made great efforts to strengthen the completeness of subsidy 
notifications, especially sub -central subsidy notifications. The second sub -central subsidy notifica tion 
submitted by China in July 2018 achieved the full coverage of provincial administrative regions for 
the first time. The third sub -central subsidy notification submitted by China on June 30, 2019 
involved a total of 420 sub -central subsidy policies.  
 
Question  6 
 
Have any of the legal measures referenced in the sub -central section of China's 
notification been published on the MOFCOM Gazette ? If so, please specify.  
Reply  
For details of China Foreign Trade and Economic Cooperation Gazettes of the MOFCOM, please visit 
the website of the MOFCOM at  http://english.mofcom.gov.cn/article/policyrelease/gazette/ . 
 
Question  7 
 
Please explain why China has not notified any so -called "government guidance funds," 
such as the National IC Investment Fund Co. Ltd (IC Fund) . 
Reply  
The National Integrated Circuit Industry Investment Fund is a corporate equity investment fund 
owned by  the National Integrated Circuit Industry Investment Fund Co., Ltd. (hereinafter referred 
to as "the Fund Company "). Incorporated on September 26, 2014, the Fund Company is a joint stock 
enterprise established in accordance with the Company Law which is not aff iliated with any 
government departments. The employees of the company are not government -administered public 
servants and have no administrative ranks. In the principle of separation between ownership and 
management, the fund entrusts a professional manage ment company to be responsible for the 
management and independently conduct investment business based on market -oriented principles. 
The fund’s investment management and decision -making are completely market -oriented, and 
governmental departments do not in tervene or participate in any investment decision -making 
programs of the fund. As the fund adopts the form of equity investment, its shareholders have clear 
demands on financial returns of the fund. Therefore, it is impossible for the fund to provide subsi dies G/SCM/Q2/CHN/ 81 
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  to the enterprises the Fund Company invested , and there is no subsidy in any form for the 
enterprises invested by it.  
Question  8 
 
How does China determine which industries should be supported by a government 
guidance fund ? How do individual companies qualify for equity investments by these 
funds ?  
Reply  
This question has exceeded the scope of the subsidy notification submitted by China, and does not 
belong to the information that China needs to submit according to the WTO Agreement on Subsidi es 
and Countervailing Measures.  
 
Question  9 
 
Do private investors in these government guidance equity investment funds invest on the 
exact same terms as the government investors (including state -owned and state -invested 
enterprises) or do the funds provide  for the possibility for the government (including 
state -owned and state -invested enterprises) to compensate private investors for losses 
incurred or allow the government to relinquish its share of profits to private investors?  
Reply  
This question has exce eded the scope of the subsidy notification submitted by China and does not 
belong to the information that China needs to submit according to the WTO Agreement on Subsidies 
and Countervailing Measures.  
 
Question  10 
 
Please provide a list of all government g uidance funds currently in operation by the central 
and sub -central governments, and the dates the funds were started.  
Reply  
This question has exceeded the scope of the subsidy notification submitted by China and does not 
belong to the information that Chi na needs to submit according to the WTO Agreement on Subsidies 
and Countervailing Measures.  
Question  11 
 
On what basis does China determine which legal measures to reference under the 
standard request to provide information on the "Legislation under which it [the subsidy] 
is granted" ? Can the legal basis of a subsidy program in China exclusively be a normative 
document ? (This seems to be the case for most of the subsidy programs in China's 
notification.)  
Reply  
The document on the format for subsidy no tifications issued by the WTO Committee on Subsidies 
and Countervailing Measures (G/SCM/6/Rev.1) requires that the subsidy notification submitted by a 
Member should include the legislation under which the subsidy is granted. However, there is no 
further re quirement for the legal status or nature of the legal basis. China believes that the Members 
may submit notifications based on their own understanding of the legal basis.  
Question  12 
 
In its 24 October 2017 replies to questions from the United States regar ding the sub -
central new and full notification of China (G/SCM/Q2/CHN/73), China stated that it 
"believes that there are two  types of sub -central subsidy programs: one of them is G/SCM/Q2/CHN/ 81 
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  formulated by sub -central governments on their own and are completely covered  by local 
finance alone; the other of them are jointly covered by central and local finance" . Of the 
108 sub -central subsidy programs in China's most recent notification, can China specify 
which programs are "formulated by sub -central governments on their own and are 
completely covered by local finance alone" and which are "jointly covered by central and 
local finance"?  
Reply  
When collecting information on subsidy notifications, we only required local governments to provide 
subsidy policies completely or partially covered by local finance, and we did not ask local 
governments to make a strict distinction or give a detailed description. Sub -central subsidies are not 
clearly defined by the WTO Agreement on Subsidies and Countervailing Measures,  and all Members 
submit their notifications based on their own understanding of sub -central subsidy notifications.  
Question  13 
 
China notified two sub -central programs related to "strategic emerging industries" : 
Program  2.17 – "Fund for development of emer ging industries in Nanjing City of Jiangsu 
Province" and Program 2.89 – "Fund for development of emerging industries in Shanghai 
Municipality (Hongkou District)" . China did not notify other sub -central programs related 
to "strategic emerging industries" . However, other sub -central "strategic emerging 
industries" programs appear to exist. One example is a municipal -level program from 
Guangxi province, apparently administered according to the Liuzhou Municipality 
Measures on the Administration of Strategic Em erging Industries Development Special -
Purpose Funding  (Liuzhou Municipal Industry and Information Technology Commission, 
Liu Gong Xin Tong [2015] No. 170, issued November 2, 2015). Please explain why such 
other programs related to "strategic emerging indus tries" were not notified.  
Reply  
For the subsidy policy on strategic emerging industries, please refer to the third sub -central subsidy 
notification submitted by China on June 30, 2019.  
 
Question  14 
 
China maintains a national budget for "Government -managed Funds" . According to 
Article  12 of the Provisional Measures for the Administration of Government -managed 
Funds (Cai Zong [2010] No.  80), each of the funds outlined in the "Government -managed 
Funds" budget are governed by, inter alia, an  Administration Measure. An example of such 
an Administration Measure are the Provisional Measures for the Administration of 
Renewable Energy Price Subsidy Funding (Cai Jian [2012] No. 102), which outlines 
subsidy eligibility criteria and other program det ails. Please explain whether China has 
notified subsidy programs funded under its national budget for "Government -managed 
Funds". If so, which programs?  
Reply  
The legal nature or status of the basis for granting subsidies is not clearly established by the WTO 
Agreement on Subsidies and Countervailing Measures, nor does it explicitly require Members to 
indicate whether a notified program is a government -managed fund.  
Question  15 
 
China's 2015 and/or 2016 budget (set out in Tax Rebates and Transfer Payments i n the 
General Public Budget from the Central Government to Local Governments ) lists at least 
18 other special -purpose funding line items that China did not notify and which appear to 
be potentially trade -impacting, including:  
a. Special -Purpose Funding for National Science and Technology Innovation Base 
(System) Capacity Building  G/SCM/Q2/CHN/ 81 
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  b. Central Fiscal Funding to Guide Development of Local Science and Technology  
c. Special -Purpose Funding  for Grassroots Popularization of Science Action Plan   
d. Special -Purpose Funding for Renewable Energy Development  
e. Target Price Subsidy  
f. Subsidies for Refined Oil Price Reform for Industries Such as Fisheries and Forestry  
g. Funding for Agricultural Support Protection Subsidies  
h. Funding for Forestry Subsidies  
i. Subsidy for Local Vehicle Purchase Tax Income  
j. Subsidies for Refined Oil Price Reform for Industries Such as Urban Public 
Transportation, Rural Highway Buses, and Taxis ( 2015 budget)  
k. Subsidies for Refined Oil Price Reform for Special Industries (2016 budget)  
l. Subsidized Interest Rates for National Economic and Technological Development 
Zones and Border Cooperation Zones in the Central and Western and Other Regions 
(2015 b udget)  
m. Subsidized Interest Rates for Ethnic Group Trade and Ethnic Group Special 
Merchandise Manufacturer Loans  
n. Mining Subsidy and Exploration Rights Use Fee Expenditure (2015 budget)  
o. Special -Purpose Funding for Public Interest Geological Work (2016 budget ) 
 
Please explain why China did not notify these special -purpose funding line items.  
Reply  
 
Considering that the WTO Agreement on Subsidies and Countervailing Measures authorizes Members 
to submit notifications based their own understanding of the Agreemen t, China believes that the 
questions regarding subsidy notifications should use the subsidy notifications submitted by Members 
as the fundamental basis. In addition, in order to improve work efficiency, China hopes that the 
United States may, before raisin g questions, carefully review the previous notifications submitted 
by China so as to avoid mistaking a subsidy program notified by China for one that has not been 
notified and thus repeatedly requests China’s explanation and clarification.  
Nevertheless, in  order to demonstrate China’s sincerity in responding to the concerns of the 
United  States, China is willing to make some explanations to the above questions raised by the 
United States within  our capacity: 1) Special -Purpose Funding for National Science a nd Technology 
Innovation Base (System) Capacity Building, Central Fiscal Funding to Guide Development of Local 
Science and Technology, Special -Purpose Funding for Grassroots Popularization of Science Action 
Plan and Subsidy for Vehicle Purchase Tax Income  are transfer payment funds allocated by the 
Central Government to local governments but not specific subsidies given to enterprises or 
industries, and are thus not within the scope of subsidy notification; 2) for Special -Purpose Funding 
for Renewable Energ y Development , relevant s ubsidy programs for refined oil price reform , 
Agricultural Support Protection Subsidies , Subsidy for Prevention from and Control of Pest and 
Disease in Forestry , and the new round of subsidy funds to turn more marginal farmland to forests 
and grasslands , please refer to the subsidy notifications already submitted by China; 3) relevant 
information on the target price reform has been notified by China to the WTO Committee on 
Agriculture, please refer to the notification submitted by C hina on domestic support for agriculture.  
Question  16 
 
Please explain why China did not notify the NDRC Special Projects Construction Fund 
program?  
Reply  
 
The Special Projects Construction Fund is operated by China Development Bank and Agricultural 
Development Bank of China in a market -oriented and professional manner, and is beyond the scope 
of subsidy policies that should be notified to the WTO.  
 G/SCM/Q2/CHN/ 81 
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  Question  17 
 
Article 3.4 of the Interpretation on 2015 Central State -owned Capital Management Budget 
states:  
 
State -owned capital injections [account for] 53.6 billio n yuan, including: 
26.5 billion  yuan expenditures for structural adjustment of the state -owned 
econ omy, [which is] used to sort out equity relations and support enterprise 
structural adjustment.  
Moreover, Article 3.5 describes an 8.8 billion yuan subsidy policy for state -owned 
enterprises.  
 
Please explain why these programs have not been notified. Wha t type of subsidy ( e.g., 
grant, equity infusion) was provided under the subsidy policy described in Article 3.5 in 
2015 -2016 ? What state -owned companies received capital injections and funds for 
restructuring in 20 15-2016?  
Reply  
 
Due to historical reasons, state -owned enterprises have undertaken the obligations to operate social 
programs. Therefore, the state has arranged some special funds to relieve state -owned enterprises 
of their obligations to operate social programs and address the historical debts of the government. 
The Chinese government is one of the shareholders of state -owned enterprises. Injecting capital into 
state-owned enterprises by the government through the system of budgeting for state capital 
operation is no less than  shareholders ' behaviour of increasing investment in enterprises funded by 
them to perform their rights and obligations.  This is exactly the same as other investors’ increasing 
investment in enterprises. Therefore, it is beyond the scope of subsidies defined  by the WTO.  
 
PROGRAM -SPECIFIC QUE STIONS  
Program 1.6 Preferential tax policies for the additional calculation and deduction of research and 
development expenses  
Question  18 
 
What are the eligibility criteria for this program ? What industries are eligible under the 
referenced legal measure?  
Reply  
 
Article 30 of the Enterprise Income Tax Law stipulates that weighted deduction may be computed in 
taxable income for the expenses of research and development  (R&D) fees incurred by enterprises in 
the deve lopment of new technology, new products and new skills . R&D expenses allowed to be 
deducted on a weighted basis include personnel labor charges, directly invested expenses, 
depreciation expenses, amortization of intangible assets, expenses for designs of n ew products, 
expenses for developing new technical procedures, clinical trial expenses for the research and 
manufacture of new drugs, expenses for on -the-spot experiments for exploration and development 
technologies, and other relevant expenses. Therefore,  except for several types of industries to which 
the policy of pre -tax deduction of R&D expenses is not applicable, all the enterprises that meet the 
requirements in the rest industries may be entitled  this preferential policy. According to current 
regulations, the industries to which pre -tax deduction of R&D expenses is not applicable are listed 
in a negative list in Caishui [2015] No. 119. These industries include tobacco manufacturing, 
accommodation and catering, wholesale and retail, real estate, leasing and business services, 
entertainment and other industries stipulated by the Ministry of Finance and the State Administration 
of Taxation. The above -mentioned industries are subject to the Industrial classification for national 
economic activities (GB/4754 - 2011) (GB/4754 - 2011) and will be updated accordingly.  G/SCM/Q2/CHN/ 81 
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  Program 1.8 Preferential tax policies for the incubators of science and technology enterprises  
Question 19 
 
What are the eligibility criteria  for this program ? What industries are eligible under the 
referenced legal measure?  
Reply  
The Notice of the Ministry of Finance and the State Administration of Taxation on the Tax Policies 
for Science and Technology Enterprise Incubators (Caishui [2016] No . 89) contains detailed 
provisions on the eligibility for tax policies for enterprise incubators, including the conditions on 
incubators, the conditions on incubating enterprises and the scope of incubating services. The above 
preferential policies are des igned to encourage entrepreneurship and innovation. Currently, these 
policies are applicable to state -level and provincial -level science and technology enterprise 
incubators, university science parks, and startup -company workshops  registered  by the state. They 
are not limited to specific industries.  
Program 1.10 Preferential tax policies for service enterprises with advanced technology  
Question 20 
 
This program is for service providers. Why is it included in the notification, given that the 
Agreement on Sub sidies and Countervailing Measures only covers goods?  
Reply  
During Trade Policy Review of China, the WTO Secretariat raised concerns about the fact that this 
policy was not notified. In order to enhance the transparency of trade policy, China has included this 
policy in the notification. In addition, China noted that the United States also included subsidies for 
film and television and other service industries in its subsidy notification. China hopes that the 
United  States may adopt a unified standard on th e scope of subsidy notifications.  
Program 1.12 Preferential tax treatment for projects for environmental protection, water and energy 
conservation  
Question 21 
 
Is imported equipment listed in the referenced catalogues ? Is imported equipment 
eligible for the preferential tax treatment?  
Reply  
 
Enterprises may enjoy relevant preferential tax  according to regulations when purchasing domestic 
and imported equipment conforming to policy requirements.  
 
Program 1.13 Preferential tax treatment for bui lding materials products produced with integrated 
utilization of resources  
Question 22 
 
What does it mean for a product to be produced "with integrated utilization of resources"?  
Reply  
Products produced with integrated utilization of resources refer to pro ducts of symbiotic and 
associated mineral resources such as kaolinite, bauxite and bentonite, and waste water (liquid), 
waste gas and waste residue products such as bricks (tiles), building blocks and wallboard products. 
For details, please refer to the No tice of the Ministry of Finance, the State Administration of Taxation 
and National Development and Reform Commission on the Publication of the Catalogue of Resources 
for Integrated Utilization Entitling . G/SCM/Q2/CHN/ 81 
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  Enterprises to Income Tax Preferences (2008 Version)  (Caishui [2008] No. 117).  
 
Question  23 
 
Is imported equipment listed in the referenced catalogue ? Is imported equipment eligible 
for the preferential tax treatment?  
Reply  
The Catalogue of Resources for Integrated Utilization Entitling Enterprises to Incom e Tax Preferences 
is applicable to the production of products listed in the Catalogue that meet relevant national or 
industry standards with the materials listed in the Catalogue as the main raw materials. Specific 
equipment is not included in the Catalogu e. 
Program 1.20 Preferential tax treatment for energy -saving and new energy vehicles and vessels  
Question 24 
 
Are imported vehicles and vessels eligible for the preferential tax treatment?  
Reply  
At present, both domestically produced and imported energy -saving and new energy vehicles and 
vessels may enjoy the preferential tax treatment  as long as they meet the prescribed conditions . 
 
Program 1.21 Preferential tax treatment for urban public transportation enterprises that purchase 
public buses and t rolleybuses  
Question 25 
 
Assuming the purchasers of buses and trolleys are government entities that provide 
transportation services, why is this program included in the notification?  
Reply  
 
In order to support the development of public transportation, from  January 1, 2016 to 
December  31, 2020, vehicle purchase tax can be exempted for the public buses and trolleybuses 
purchased by urban public transportation enterprises. Among them, urban public transportation 
enterprises refer to for -profit enterprises obta ining urban public transportation management 
qualifications according to law that provide public transportation services.  
 
Program 1.29 Preferential VAT policies for enterprises that employ disabled people  
Program 1.30 Preferential income tax policies for enterprises that employ disabled people  
Question 26 
 
On what basis are these two programs "specific" under Article 2 of the Agreement on 
Subsidies and Countervailing Measures and therefore, subject to the notification 
obligation?  
Reply  
The WTO Agreement on Subsidies and Countervailing Measures authorizes Members to submit 
notifications based on their own understanding, and each Member may have  different understanding 
of specificity. In addition, the United States emphasizes in the openin g section of its subsidy 
notification that it has notified some of the subsidies that are not specific. China hopes that the 
United States may adopt a unified standard on the scope of subsidy notifications.  G/SCM/Q2/CHN/ 81 
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  Program 1.31 Preferential tax treatment for impor ted products exclusively used by disabled people  
Program 1.32 Preferential tax treatment for products for the disabled people  
Question 27 
 
What commercial enterprises benefit from these programs such that the program is 
subject to the notification obligati on? 
Reply  
This policy is mainly aimed at facilitating the recovery of disabled people and the development of 
relevant domestic medical and health undertakings. All taxpayers engaging in the production, 
wholesale, retail and import of the above -mentioned products exclusively used by disabled people 
can enjoy the above preferential tax treatment. The WTO Agreement on Subsidies and 
Countervailing Measures authorizes Members to submit notifications based on their own 
understanding, and China h opes that the United States may adopt a unified standard on the scope 
of subsidy notifications, especially the issue of specificity.  
Program 1.34 Preferential tax treatment for anti -HIV-AIDS medicine  
Question 28 
 
What commercial enterprises benefit from th is program such that the program is subject 
to the notification obligation?  
Reply  
This policy is mainly aimed at promoting the development of HIV/AIDS prevention and treatment 
and other domestic medical and health undertakings. There are no specific restri ctions on the 
applicable subjects, and there is no distinction between Chinese -funded and foreign -invested 
enterprises. All eligible taxpayers can enjoy the preferential policy. The WTO Agreement on Subsidies 
and Countervailing Measures authorizes Members to submit notifications based on their own 
understanding, and China hopes that the United States may adopt a unified standard on the scope 
of subsidy notifications, especially the issue of specificity.  
Program 1.35 Preferential tax policies for enterprises  engaged in projects of preliminary processing 
of agricultural, forest, animal and fishery products  
Question 29 
 
What is the specific nature and extent of the preferential tax policy for fishermen and fish 
processors ? According to Public Notice by the Stat e Administration of Taxation No. 48, 
20115: 
 
Income from pelagic fishing conducted by a pelagic fishing enterprise that is 
in possession of a valid "Qualification Certificate for Pelagic Fishing" issued by 
the Ministry of Agriculture shall be exempt from corporate income tax. 
[emphasis added]  
Is this still the relevant provision ? If not, please cite to the relevant legal provision and 
specify the nature and extent of the preferential tax policy for all types of fishermen and 
fish processors.  
Reply  
 
The Announcement of the State Administration of Taxation on Issues concerning the Implementation 
of Preferential Enterprise Income Tax for Agricultural, Forestry, Animal Husbandry and Fishery 
Programs (Announcement No. 48 [2011] of the State Administration o f Taxation) offers exemption 
                                                
5 G/SCM/Q2/CHN/59.  G/SCM/Q2/CHN/ 81 
- 11 - 
  and reduction of enterprise income tax for the incomes of enterprises from agricultural, forestry, 
animal husbandry and fishery programs. Specific to fishery, the incomes of enterprises from offshore 
fishing programs may be exe mpted from enterprise income tax. According to the Enterprise Income 
Tax Law and its Implementing Regulations, the income of an enterprise engaged in an offshore or 
inland aquaculture program shall be taxed at the half rate with respect to the enterprise i ncome tax; 
the income of an enterprise engaged in preliminary processing of agricultural products or another 
agricultural, forestry, animal husbandry or fishery service program shall be exempted from 
enterprise income tax. Among them, the preliminary proce ssing of fishery products includes the 
preliminary processing of aquatic animals and aquatic plants. For details, please refer to the Notice 
of the Ministry of Finance and the State Administration of Taxation on Issuing the Scope of 
Preliminary Processing of Agricultural Products Enjoying Preferential Enterprise Income Tax Policy 
(Trial) (Cai Shui [2008] No. 149).  
 
Program 1.38 Preferential tax policies on imports of seeds (seedlings), breeding stock (fowl), fish 
fries (breeds) and wild animals and plants k ept as breeds during the period of the "Twelfth Five -Year 
Plan" and the "Thirteenth Five -Year Plan"  
Question 30 
 
Is the benefit for "fish fries" exclusively for aquaculture ? If not, please explain.  
Reply  
The benefit for "fish fries " is exclusively for aquaculture.  
Program 1.46 Tax preferences encouraging enterprises to increase employment  
Question 31 
 
Why is this program "specific" under Article 2 of the Agreement on Subsidies and 
Countervailing Measures, and therefore, subject to the notification obligation?  
Reply  
The WTO Agreement on Subsidies and Countervailing Measures authorizes Members to submit 
notifications based on their own understanding, and each Member has a different understanding of 
specificity. In addition,  the United States emphasizes in the opening section of its subsidy notification 
that it has notified some of the subsidies that are not specific. China hopes that the United States 
may adopt a unified standard on the scope of subsidy notifications.  
Progra m 1.48 Fund for poverty alleviation  
Question 32 
 
This fund appears to provide funds to individuals in poverty, why is it being notified?  
Reply  
The United States emphasizes in the opening section of its subsidy notification that it has notified 
some of the subsidies that are not specific. China hopes that the United States may adopt a unified 
standard on the scope of subsidy notifications.  
Program 1.59 Fund for agricultural resources and ecological protection  
Question 33 
 
How have fishermen qualified for sub sidies under this program ? Have any funds under 
this program been used for the construction, acquisition or renovation of fishing vessels ? 
How have funds been spent for fishermen at the sub -central levels of government under 
this program ?  G/SCM/Q2/CHN/ 81 
- 12 - 
  Reply  
The funds under this program have not been used for the construction, acquisition or renovation of 
fishing vessels. Please refer to the subsidy notification submitted by China for the conditions for 
obtaining the subsidy.  
Program 1 .60 Subsidy for prevention from and  control of pest and disease in forestry  
Question 34 
 
Why was this program notified if funds have only been provided to "grassroots forestry 
organizations"?  
Reply  
The WTO Agreement on Subsidies and Countervailing Measures authorizes Members to submit 
notifications based on their own understanding.  
Program 1 .62 Subsidy for standardization of inland water vessels  
Question 35 
 
Given that this program relates to transportation services, why was it notified?  
Reply  
 
The recipients of this subsidy program include eligible ship -owners of dismantled or renovated 
vessels and waterway transport operators of newly -built demonstration ships.  
 
Program 1.63 Subsidy for scrapping and dismantling vessels and for ship type standardization  
Question 36 
 
What is the law under which MOF Circular Cai Jian [2015] No.977 was issued ? Is MOF 
Circular Cai Jian [2015] No.977 a normative document?  
Reply  
The laws under which the Measures for the Administration of Subsidy for Scrapping and Dismantling 
Vessels and for Ship Ty pe Standardization (Cai Jian [2015] No. 977) include the Opinions of the 
State Council on Accelerating the Development Water Transport in the Yangtze River and Other 
Inland Rivers (Guo Fa [2011] No. 2), the Several Opinions of the State Council on Promotin g the 
Sustained and Healthy Development of Marine Fishery (Guo Fa [2013] No. 11) and the Notice of the 
State Council on Issuing the Implementation Plans on Accelerating Structural Adjustment, etc. 
Cai Jian [2015] No. 977 is administrative measures on Subsi dy for Scrapping and Dismantling 
Vessels and for Ship Type Standardization which is a regulatory  document.  
 
Question 37 
 
What is the meaning of "ship type standardization" ? Why is this an objective?  
Reply  
 
The main purpose of ship type standardization is to, through economic incentive policies and 
improving the technical standards of ships, accelerate the renewal and renovation of existing non -
standard ship types and used transport ships whose safety and env ironmental protection facilities 
are not up to norms and standards, strictly implement the ship renovation and scrapping system, 
and actively develop and promote the use of standard ship types, so as to achieve the optimal 
adjustment of the transport capac ity structures of ships, improve the lockage efficiency of ships, and 
promote energy conservation and emission reduction in water transport.  
 G/SCM/Q2/CHN/ 81 
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  Question 38 
 
What are the conditions a fisherman that is scrapping or dismantling a vessel must meet 
to qualify for a subsidy under this program ? Is the fisherman that receives a subsidy for 
scrapping or dismantling a vessel prevented from receiving a subsidy to buy a new fishing 
vessel or otherwise prevented from returning to fishing to earn a living?  
Reply  
The subsidy for scrapping and dismantling vessels is not a subsidy provided for fishermen, but a 
subsidy for eligible vessels that have been scrapped, dismantled, renewed or renovated.  
Question 39 
 
Although the word "renovation" is not in the title of th is program, it is referenced in the 
program description. Please confirm that this program also subsidizes the renovation of 
fishing vessels. What percentage of funds under this program in 2015 have gone towards 
scrapping or dismantling vessels and what per centage of funds in 2015 have gone towards 
renovating vessels?  
Reply  
For details, please refer to the subsidy notification submitted by China.  
Question 40 
 
According to some academic research, in the period leading up to 2015, China has 
decreased the numb er of its fishing vessels but has increased the total tonnage  and total 
engine  power of its fishing fleet.6 Does China agree with this conclusion?  
Reply  
In the period before 2015, China not only decreased the number of fishing vessels, but also 
maintained or even reduced the total engine power of fishing fleet. China has long implemented a 
"double control " system of the number and the total main engine power of fishing vessels, and the 
main engine power of renovated or newly -built fishing vessels must not exceed the main engine 
power of eliminated fishing vessels.  
Question 41 
 
What programs did the central government have in place prior to 2015 for the 
construction, acquisition or renovation of fishing vessels?  
Reply  
For details, please refer to the subsidy notification submitted by China.  
 
Program 1.64 Fisherman onshore resettlement subsidy  
Question 42 
 
How do fishermen become eligible for this program ? Is one of the conditions for receiving 
this subsidy that the fishermen not return to wild capture fishing ? Are the subsidies under 
this program provided exclusively to individual fishermen, rather than com panies 
engaged in fishing?  
                                                
6 Zhang Hongzhou, China’s Fishing Industry: Current Status, Government Policies, and Future 
Prospects , 2015, page 20; presented at the China as a "Maritime Power " conference, July 28 -29, 2015 . G/SCM/Q2/CHN/ 81 
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  Reply  
The recipients of fisherman onshore resettlement subsidy are determined according to the long -term 
places of operation. The program is aimed at improving the living conditions of fishermen, but not 
the redemption of their r ight of fishery. There is no stopping or restarting fishing. The subsidies 
under this program are provided exclusively to fishermen rather than companies.  
Question 43 
 
Why were no funds spent in 2016 under this program?  
Reply  
The program has been accomplis hed in 2015.  
Program 1 .66 Subsidy for scrapping old vehicles  
Question 44 
 
Are imported vehicles eligible under this program?  
Reply  
Imported vehicles are eligible under this program.  
Program 1 .68 Subsidy for urban public buses  
Question 45 
 
Assuming the purchasers of public buses are government entities that provide 
transportation services, why is this program included in the notification?  
Reply  
The program notified is the bus product oil price subsidy. For details, please refer to the subsidy 
notificatio n submitted by China.  
Program 1.69 Support for new energy vehicle promotion and utilization  
Question 46 
 
Are imported vehicles eligible under this program ? Have any purchasers of imported 
vehicles qualified and received a subsidy under this program?  
Reply  
Those who purchase models eligible for the program can receive subsidies.  
Program 1.76 Fund for construction of sponge cities  
Question 47 
 
This very clearly appears to be the government provision of infrastructure. Why is it being 
notified?  
Reply  
China has notified the program in the spirit of the principle of transparency. According to the WTO 
Agreement on Subsidies and Countervailing Measures, the notification itself does not prejudge the 
legal status of the measure or the nature of the me asure itself.  
 G/SCM/Q2/CHN/ 81 
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  Program 1.77 – Fund for Development of Strategic Emerging Industries  
Question 48 
China states that the legislation under which this program is granted is "MOF Circular Cai 
Jian No.1111 of 2012" and that the form of the subsidy is "financial appropriations" . How 
does China define "financial appropriations" in the context of Article 1 of the Agreement 
on Subsidies and Countervailing Measures ( eg., are they grants, equity infusions or can it 
include both)?  
Reply  
The aforementioned "financial appropriations " generally refer to grants.  
Question 49 
 
According to "MOF Circular Cai Jian No.1111 of 2012," funds for the development of 
strategic emerging industries are to be used for grants and equity investment in the 
Strategic Emerging Indus tries Venture Capital Investment Fund in accordance with M OF 
Circular Cai Jian No. 668 of  2011. The State Council approved the establishment of the 
National Strategic Emerging Industries Venture Capital Investment Guidance Fund in 
December 2015 (Guo Han [2 015] No.  131). Please explain the eligibility criteria for 
enterprises to receive investment from the Strategic Emerging Industries Venture Capital 
Investment Fund and the basis upon which the government decided to invest in the 
eligible industries.  
Reply  
The fund is an equity investment fund managed by a specialized organization and operated in a 
market -oriented manner. It indirectly supports the early, mid -term and start -up enterprises in 
emerging industries mainly by means of equity participation in vent ure capital funds. The decisions 
on all investment projects are made by the fund management organization on its own, and 
governmental departments do not intervene in the decision -making process.  
Program 1.80 – Industrial Transformation and Upgrading Fund  
Question 50 
 
China stated that the legislation under which this subsidy is granted is "MOF Circular 
Cai Jian No.567 of 2012" . However, "MOF Circular Cai Jian No.567 of 2012" was repealed 
and replaced by MOF Circular Cai Jian No. 320 of 2016 on June 6, 2016 . Subsequently, but 
still during the notification period, MOF Circular Cai Jian No. No. 320 was repealed and 
replac ed by MOF Circular Cai Jian No.  844 of 2016 on December, 1, 2016. Please explain 
why China did not notify the two measures that, during the n otification period ( i.e., 2015 -
2016), repealed and replaced the notified "MOF Circular Cai Jian No. 567 of 2012." Does 
this program implement any of the policies or support programs envisioned by Made in 
China 2025?  
Reply  
The Circular Cai Jian [2016] No. 320 was replaced and repealed by the Circular Cai Jian [2016] 
No. 844 of the Ministry of Finance on December 1, 2016. As the latter was substantially put into 
effect in 2017 it was therefore not covered in the notification period of 2015 -2016.  
 
Questio n 51 
 
Do any of the other subsidy programs in the notification implement the policies or support 
programs envisioned by Made in China 2025 ? Please explain how all of the subsidy policies 
set out in Made in China 2025 are being effectuated.  G/SCM/Q2/CHN/ 81 
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  Reply  
The Indust rial Transformation and Upgrading Fund mainly supports technological innovation, SME 
development, energy conservation and environmental protection, etc. Its utilization is subject to the 
non-discrimination principle of the WTO, with the domestic and foreig n-funded enterprises treated 
on an equal footing.  
 
Question  52 
 
For those programs relating to Made in China 2025, please explain the purpose of the 
various targets relating to domestic production, domestic market share for domestic 
production, internation al market share for domestic production, Chinese exports as a 
percentage of total domestic production, and other targets. Such targets are provided, for 
example, in the October 2015 Made in China 2025 Key Area Technology and Innovation 
Technology Roadmap, which was published by China's National Strategic Advisory 
Committee on Building a Strong Manufacturing Nation.  
Reply  
The formulation and implementation of Made in China 2025 has always been market -led. The 
indicators proposed in Made in China 2025 are either predictive or guiding in nature. As they are 
primarily used to provide information and guidance, the y are not mandatory policies. The Technology 
Roadmap is actually a green paper prepared by academics  to predict ing the pathway of future 
technologica l development. It is not issued by the Chinese Government. The market share and 
domestic production targets envisioned in that blueprint are not policy objectives set by the Chinese 
Government, nor are they linked to any government policies or funding.  
Question 53 
 
There appear to be several distinct subsidy programs that draw fu nding from the notified 
Program  1.80 "Industrial Transformation and Upgrading Fund," which are outlined in a 
variety of measures that are pursuant to the notified measure "MOF Circu lar Cai Jian 
No. 567 of 2012" . Please explain why the other subsidy programs that draw funding from 
the notified Program 1.80 were not notified. Examples of programs not notified are 
outlined in measures including:  
 
• MIIT Notice on Issuing the 2015 Industri al Transformation and Upgrading Key 
Project Guide  (Gong Xin Bu Gui [2015] No. 252), which lists 20 specific projects 
for subsidization in Attachment 1 and at Section 3(2)2 states that funding is to 
be managed in accordance with the notified measure "MOF Ci rcular Cai Jian 
No. 567 of 2012" . 
Reply  
The MIIT Notice on Issuing the 2015 Industrial Transformation and Upgrading Key Project Guide 
(Gong Xin Bu Gui  [2015] No. 252) is a document guiding the application for support from the 
Industrial Transformation and Upgrading Fund.  
• MIIT Notice on Issuing the 2016 Industrial Transformati on and Upgrading 
(Made in China  2025) Key Project Guide  (Gong Xin Bu Gui Han [2016] No. 433), 
which lists 18  specific projects for subsidization in Attachment 1 and at 
Section  3(2)3 states that funding is to be managed in accordance with 
Industrial Transformation and Upgrading (Made in China 2025) Fund Admin 
Measure  (Cai Jian [2016] No. 320), which replaced the notified measure "MOF 
Circular Cai Jian No. 567 of 2012" during the notification period.  
Reply  
The MIIT Notice on Issuing the 2016 Industrial Transformation and Upgrading (Made in China 2025) 
Key Project Guide (Gong Xin Bu Gui Han [2016] No. 433)  is a document guiding the application for 
support from the for Industrial Transformation and Upgrading Fund.  G/SCM/Q2/CHN/ 81 
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  • Notice on Organizing the Development of Green Manufacturing System 
Integration Work  (Cai Jian [2016] No. 797), which at Section  3(3) states that 
"industrial transformation and upgrading funds" are to be used to undertake 
green manufacturing system integration projects.  
Reply  
 
Relevant contents have been included in the programs notified by China.  
 
Question 54 
 
The measure notified by China under Program 1.80 – "Industrial transformation and 
upgrading fund" (MOF Circular Cai Jian No.567 of 2012) contains far less detail on the 
operation of this program than does the measure China notified for Program 1.63 – 
"Subsidy for scra pping and dismantling vessels and for ship type standardization" (MOF 
Circular Cai Jian [2015] No. 977). Please explain the difference in the level of detail of the 
measures notified under each program. Specifically, does this difference stem from the 
fact that Program 1.80 is a "fund" program and Program 1.63 is a "subsidy" program?  
Reply  
 
China’s notification is based on requirements of the WTO Agreement on Subsidies and Countervailing 
Measures and the specific contents of the subsidy programs. As far as we know, there are difference s 
in the level of detail of the specific subsidy programs notified by the United States.  
 
Program 1.81 Reward and support fund for restructuring of industrial enterprises  
Question 55 
 
What percentage of the funds under this pro gram goes towards resettling workers and 
what percentage is provided to industrial enterprises for other purposes ? For what type 
of purposes do industrial enterprises receive funds under the program beyond resettling 
workers ?  
Reply  
According to relevant f und management measures, all the funds of the program are used in the 
resettlement of workers.  
Program 1.82 Fund for promotion of energy -saving products  
Question 56 
 
Are imported products eligible under this program?  
Reply  
The energy -saving product promotion project uses financial subsidies to promote highly eff icient 
energy -saving products as an important measure aimed to  promote energy conservation and 
emissions reduction and the reduction of greenhouse gas emissions in particular . The  project ha s 
been terminated in February 2017.  
SUB-CENTRAL PROGRAMS  
Question 57 
 
To what extent do the notified sub -central programs pertaining to: (1) strategic emerging 
industries, (2) transforming and upgrading industries, (3) restructuring industrial 
enterprises to address overcapacity, (4) new and high technology, (5) research and  
development, (6) energy conservation, (7) water and air pollution programs, and (8) G/SCM/Q2/CHN/ 81 
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  energy -saving and recycling relate to, or implemented pursuant to, central government 
policies or legal measures?  
Reply  
Please refer to the subsidy notification at the ce ntral government level submitted by China.  
Program 2.13 Fund for research and development of applicative technologies  
Question 58 
 
What are the eligibility criteria for this program?  
Reply  
"Eligible projects " refer to projects that reflect major technologi cal needs of industries, enjoy clear 
market application prospects, carry out research, development and demonstrative applications of 
major common or key industrial technologies through the combination of production, teaching and 
research, or can significan tly improve the independent innovation capability of enterprises, and 
major public welfare scientific research projects related to the people 's livelihood.  
Programs 2.15, 2.80, 2.91, 2.100 and 2.108 for poverty alleviation  
Question 59 
 
These programs are n ot industrial subsidy programs. Why are these programs included in 
the notification?  
Reply  
The WTO Agreement on Subsidies and Countervailing Measures authorizes Members to submit 
notifications based on their own understanding, and each Member has a differe nt understanding of 
specificity. In addition, the United States emphasizes in the opening section of its subsidy notification 
that it has notified some of the subsidies that are not specific. China hopes that the United States 
may adopt a unified standard on the scope of subsidy notifications.  
Program 2.27 Fund for research and development of enterprises  
Question 60 
 
What are the eligibility criteria for this program?  
Reply  
For the specific conditions, please refer to the relevant policies and documents notified by China.  
Program 2.28 Fund for technical renovation of industrial enterprises  
Question 61 
 
What are the eligibility criteria to receive subsidies under this program ? Are only state -
owned enterprises eligible ? Is this program related to, or implemented pursuant to a 
central government policy or legal measure?  
Reply  
With respect to the fund for technical renovation of industrial enterprises of Tianjin, an enterprise 
that purchased equipment for production was eligible for the su bsidy in 2015, while an enterprise 
that purchased equipment through financing or leasing for production renovation was eligible for the 
subsidy in 2016.  G/SCM/Q2/CHN/ 81 
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  Program 2.38 Fund in support of leading fishery enterprises  
Question 62 
 
For what reasons were leading fishing enterprises rewarded subsidies ? Did any of the 
funds under this program go towards the construction, acquisition or renovation of fishing 
vessels ? If so, how much went for such purposes?  
Reply  
The fund in support of leading fishery enterprises is aimed at enhancing the capacity of Tianjin in 
driving agricultural industrialization, creating new models of working with and assisting farmers for 
leading enterprises, and increasing farmers ' incomes. No funds of the program are used for the 
construction,  acquisition or renovation of fishing vessels.  
Program 2.51 Fund for scientific research for social development  
Question 63 
 
This program appears unrelated to commercial production and trade. Why was it included 
in the notification?  
Reply  
China submits the  notification based on our own understanding of the Agreement on Subsidies and 
Countervailing Measures.  
Program 2.55 Fund for product quality improvement  
Question 64 
 
Is this program related to, or given pursuant to Made in China 2025?  
Reply  
This program is not related to Made in China 2025.  
Program 2.57 Fund for promotion of industrial restructuring  
Question 65 
 
What are the eligibility criteria to receive subsidies under this program ? Are only state -
owned enterprises eligible ? Is this progra m related to, or implemented pursuant to a 
central government policy or legal measure?  
Reply  
 
There are two types of enterprises that are eligible for the fund: 1 ) high-quality strategic emerging 
industrialized enterprises, and 2 ) transforming enterprises and enterprises that are changing 
products in strategic emerging industries. Eligible state -owned enterprises and any other types of 
enterprises can apply.  
 G/SCM/Q2/CHN/ 81 
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  Program 2.64 Fund for projects of new -type industrialization development  
Question 66 
 
What are the eligibility criteria for this program?  
Reply  
For detailed standards, please refer to the Application Instructions for the Fund of Ningxia Hui 
Autonomous Region for Projects of New -type Industrialization Development 2016.  
 
Program 2.83 Fund for industrial transformation and development  
Question 67 
 
Is this program related to, or implemented pursuant to Made in China 2025?  
Reply  
This program is not related to Made in China 2025.  
Program 2.86 Fund for scientific and technology innovation  
Question 68 
 
What are the specific eligibility criteria to receive a subsidy under this program ? What 
types of industries are eligible?  
Reply  
Please refer to the basis for subsidy policies submitted by China.  
Program 2.87 Fund in support of science and tec hnology intermediary services providers  
Question 69 
 
This is a program for service providers, which are not covered by the Agreement on 
Subsidies and Countervailing Measures. Why was this program included in the 
notification?  
Reply  
With a view to improve t he transparency of trade policy, China has included this policy in the 
notification. In addition, China noted that the United States has also included in its subsidy 
notifications subsidies for film and television services and other services. China hopes t hat the 
United  States may adopt a unified standard with respect to the scope of subsidy notification.  
Program 2.88 Fund for development through structural adjustment and change in growth pattern  
Question 70 
 
Is this program related to Made in China 2025 or  Program 2.83 referenced above?  
Reply  
This program is not related to Made in China 2025.  
 
__________