RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/M/92 
12 December 2008 
 (08-6116) 
Council for Trade in Services  
  
 
REPORT OF THE MEETING HELD ON 5 DECEMBER 2008 
 
Note by the Secretariat
1 
  
1. On 5 December 2008, the Council for Trad e in Services held a meeting under the 
chairmanship of Ambassador Alex Van Meeuwen (B elgium).  The agenda wa s contained in document 
WTO/AIR/3290. 
2. The Chairperson
 indicated that he intended to make  a brief statement regarding the Air 
Transport Review.   
3. The representative of Australia  said that, under "Other Business", her delegation intended to 
raise the issue of the certification of the EC-25 schedule. 
4. The agenda was adopted , as modified. 
I. NOTIFICATIONS PURSUANT TO ARTICLES III:3 AND V:7 OF THE GATS 
5. The Chairperson  drew attention to notifications re ceived pursuant to GATS Article III:3 
(Transparency) from the Republic of Albania (S/C /N/452 to S/C/N/461);  the Republic of Armenia 
(S/C/N/464);  Switzerland (S/C/N/467);  and The Separate Customs Territo ry of Taiwan, Penghu, 
Kinmen and Matsu (S/C/N/468).   
6. The Council took note  of these notifications. 
7. The Chairperson  thanked those Members for submitting notifications and reminded Members 
that, according to GATS Article III:3, "each Member shall promptly and at least annually inform the 
Council for Trade in Services of the introduction of  any new, or any changes to existing, law, 
regulations or administrative guidelines which significantly affect trade in services covered by its specific commitments".  The number of Member s submitting notifications under Article III:3 had 
been disappointingly low and had a tendency to diminish over the years.  He encouraged Members to comply with their notification obligations as transp arency was one of the pillars of the system.  
Turning to the notifications made pursuant to GA TS Article V:7 (Economic Integration), he drew 
attention to communications from:   Japan and Indonesia (S/C/N/462);  China and Singapore on 
behalf of the ASEAN  Members (S/C/N/463);  Icel and (S/C/N/465);  Brunei and Japan (S/C/N/466);  
and, finally, the "CARIFORUM" States and the European Communities (S/C/N/469 + Rev.1).   
8. The representative of Japan
 said that the Japan-Indonesia and the Japan-Brunei Economic 
Partnership Agreements had entered into force, re spectively, on 1 July a nd 31 July 2008.  Both 
agreements covered a substantial range of trade in  goods and services.  Services specific commitments 
were scheduled in positiv e lists and went beyond commitments in  the GATS.  The agreement between 
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/C/M/92 
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  Japan and Indonesia had an independent chapter on the movement of natural persons, which contained 
substantial mode 4 commitments.  The text of the agreements and related doc uments were available 
on the website of the Ministry of Foreign Affairs of Japan. 
9. The Council took note
 of the notifications and the statement made, and referred  the 
agreements notified to the Committee on Regi onal Trade Agreements for examination. 
II. ANNUAL REPORTS OF THE SUBSIDIARY  BODIES TO THE COUNCIL FOR 
TRADE IN SERVICES 
10. The Chairperson  said that, in accordance with WTO reporting procedures, the Council for 
Trade in Services was to consider the annual reports of its subsidiary bodies. Accordingly, he drew 
attention to the following reports which had been adopted by the respective bodies:  (i) Annual Report 
of the Committee on Trade in Financial Services (S/F IN/20);  (ii) Annual Report of the Committee on 
Specific Commitments (S/CSC/14);  (iii) Annual Report of the Working Party on Domestic Regulation (S/WPDR/11);  and (iv) Annual Report of the Working Party on GATS Rules 
(S/WPGR/18).  These reports were factual and self-expl anatory.  He suggested that the Council take 
note of the four reports on the understanding that they  would be annexed to the annual report of this 
Council and form an integral part of it. 
11. The Council so agreed
. 
III. ANNUAL REPORT OF THE COUNCIL FOR TRADE IN SERVICES TO THE 
GENERAL COUNCIL 
12. The Chairperson  said that, in accordance with WTO reporting procedures, the Council for 
Trade in Services should report each year to the Ge neral Council on the activities in the Council, as 
well as in the subsidiary bodies.  The draft Annua l Report of the Council for Trade in Services on its 
activities in 2008 was contained in document S/C/W/292.  The Report was factual and self-explanatory.  As already indicated, the annual repor ts of the subsidiary b odies would be annexed to 
this Report for submission to the General Council. 
13. The Council adopted
 the 2008 Annual Report to the Ge neral Council, as contained in 
document S/C/W/292. 
IV. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA 
14. The Chairperson  recalled that, Section 18 of the Accession Protocol of the People's Republic 
of China provided for an annual review of the implementation by China of the WTO Agreement and 
of the related provisions of China's Accession Protocol .  As indicated in Section 18, the Committee on 
Trade in Financial Services (CTFS) and the Council for Trade in Services were two of the bodies in 
which this Review was to be conducted.  When it concluded its review, the CTFS was to submit a 
report to the Council, which would form part of  the Council's report to the General Council. The 
General Council would conduct its own review.  The Committee on Trade in Financial Services had 
conducted and concluded the trans itional review under Section 18 of China's Accession Protocol on 
Monday 1st December 2008.  A report had been submitted by this Committee (S/FIN/21).  The 
Chairperson proposed that the Council take note of the report by the Committee on Trade in Financial Services on the understanding that it would form part of this Council's report to the General Council.   
15. The Council so agreed
.  S/C/M/92 
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  16. The Chairperson  said that the Council would conduct the Seventh Transitional Review of 
China's specific commitments and drew Members'  attention to the communication from China in 
document S/C/W/296 which provided information required by Annex 1A of China's Accession 
Protocol.  He proposed that the Council follow the same procedure as in previous reviews.  First, 
China would be invited to respond to the comment s and questions which were contained in the 
communications from Japan (S/C/W/291), the Europ ean Communities (S/C/W/293), the United States 
(S/C/W/294) and Canada (S/C/W/295).  After Ch ina's statement, the floor would be open for 
delegations to make comments.   Then, China would be invited to respond. 
17. The representative of China  recalled that this was the Seventh Transitional Review by the 
Council of Trade in Services.  Prior to this mee ting, China had received questions from Japan, the 
European Communities, the United States and Cana da, and had studied them carefully.  Before 
coming to the specific questions, the delegation of China wished to make a general introduction on 
China’s services market and the fulfilment of its WTO commitments.  China had made extensive and 
deep commitments on about 100 sub-sectors out of the 160 contained in the services classification list.  In 54 of these sub-sectors, wholly foreign-owned companies were allowed.  Undertaking extensive 
GATS commitments was not easy for a developing c ountry with underdeveloped service sectors like 
China.  Moreover, China had liberalized a numbe r of sectors ahead of the scheduled commitments, 
including securities, insurance a nd tourism, despite the huge difficulties it had encountered over the 
years.  China’s liberalization had not only provid ed foreign investors with broad market access, but 
also had reflected China's positive attitude toward s an open domestic market and had pushed forward 
a more open and liberalized world trade.  By th e end of 2006, the trans itional period of China’s 
service trade had phased out and China was now one of the most liberal services markets among 
WTO Members.  Since the last Review, China had promulgated the Regulations on the 
Implementation of the Income Tax Law of the People’s Republic of China , Supplementary Provisions 
on Interim Measures for Administrative of Sino-Foreign Joint Ventures and Cooperative Medical 
Institutions , and Supplementary Provisions III on the Meas ures for the Administration on Foreign 
Investment in Commercial Fields , and amended the Catalogue for the Guidance of Foreign 
Investment Industries  and the Regulations on Administration of Foreign Invested Telecommunications 
Enterprises .  These promulgations and modifications mirrored China’s efforts to create a better 
environment for services markets and to promote th e healthy and continuous development of the 
services sector.  Foreign investments in the services sector had continued to increase in 2008.  From 
January to October, China had approved 11,396 foreign enterprises,  and the paid-in foreign capital 
had hit 2.136 billion USD.  China’s liberalizati on was especially remarkable in the construction 
sector, in which foreign paid-in capital reached 934 million USD, increasing by 184.95% compared with the same period last year.  The influence of th e on-going financial crisis had spread to the trade 
area, including trade in services.  It was of gr eat importance to the world trade and economic 
stabilization that all Members remain confident and keep the openness and development of services 
markets.  China had been committed to an open and liberal service market and would continue to do 
so.  China also wished to encourage other Member s, especially developed ones, to do the same.   
18. Postal and courier services.   The amendment of the Postal  Law was in accordance with the 
procedures stipulated by the Legislative Law of Ch ina.  Currently, the draft law and its explanatory 
notes were available on the website and open to  public comments.  The final adoption and 
implementation were subject to reviewing by the le gislative authority.  Her delegation was slightly 
confused concerning EC question 22 and US questi on 5, as both the United States and the European 
Communities seemed to mix the word "document" w ith "letter".  China had not made any specific 
commitment on the delivery of "letters" upon its accessi on and, hence, there was no discrimination.   
The Express Delivery Service Standards were recomme ndatory rather than compulsory, and would be 
helpful to encourage enterprises improving their ma nagement, as well as the quality of the service.  
She confirmed that the Measures for Administration of th e Market of Express Delivery Service , 
promulgated on 12 July 2008, did not require additi onal registration.  With respect to the universal 
postal service fund, it was well recognized that univer sal postal service was an important part of the S/C/M/92 
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  public service provided by the government.  Th e Chinese Government was committed to provide 
affordable and non-discriminatory/differential unive rsal postal service to its people.  In practice, 
universal postal service fund was also adopted by many other WTO Members.  The draft Postal Law 
did not require express delivery companies to pay an y additional taxes.  Nor was there any connection 
between the universal postal service fund and add itional taxes to express delivery companies.  
Besides, the draft law was not adopted yet, and it re mained to be decided how to collect and use the 
universal postal service fund.   
19. Distribution services.   Pursuant to the Measures for the Administra tion on Foreign Investment 
in Commercial Fields (Article 17) , wholesale of crude and refined oil had been opened to foreign 
companies since 11 February 2006, and the retail of refined oil since 11 December  2004.  Thus, 
China had fulfilled its WTO commitments.  The legi slative framework concerning the wholesale and 
retail of oil products included the Administration of the Market of Crude Oil , Article 17 of the 
Measures for Administration on Foreign Investment in Commercial Fields and the Catalogue for the 
Guidance of Foreign Investment Industries , 2007.  After the implementation of the  Measures for 
Administration of the Refined Oil Market  and the Measures for  Administration of the Crude Oil 
Market , qualified enterprises had been allowed to conduct the wholesale  of crude and refined oil 
products, and various forms of enterprises, includi ng large state-owned oil enterprises, multi-national 
oil enterprises and other forms of companies, had been allowed to compete on the Chinese oil market. 
Neither the  Measures for the Administra tion on the Refined Oil Market , nor other rules or regulations 
governing the distribution of refined oil contained any stipulations requiring to sell products to 
Sinopec or PetroChina.  Chapter 5 of the Measures  had some requirements concerning the purchaser 
of refined oil, for instance, Article 39 of the M easures stipulated that refined oil retailers should 
purchase products from enterprises with qualifications  for engaging in wholesale business of refined 
oil, no enterprises should sell refined oil on a comm ission basis for enterprises without qualification 
for engaging in the wholesale business of refine d oil, and no refined oil wholesaling enterprises 
should sell any refined oil for business purposes to enterprises without qualifications for engaging in 
the refined oil business.  These stipulations applied to  all wholesalers and retailers of refined oil.  
They reflected China’s prudential regulation aimi ng at ensuring public security, maintaining the 
market order and protecting the lawful rights of suppl iers and consumers of refined oil.  The Chinese 
Government respected enterprises' autonomy and fr eedom of operation, and enterprises had every 
right to operate on their own in compliance with  the law, choose their business partners and the 
counterparts of their contracts.  Their lawful ri ghts were also protected by the civil and commercial 
laws, such as the  Contract Law .  With regard to the retailing ser vices via Internet, China wished to 
point out that the ICP licensing requirement applie d equally to foreign and domestic suppliers.  The 
purpose was to ensure effective regulation and prot ect consumers' interest (for example, preventing 
commercial fraud).  This requireme nt did not affect China’s fulfilment of its commitments in the 
distribution sector.  She noted that GATS Article  XIV authorized Members to enforce measures 
"necessary to protect public morals or maintain public  order".  It was for that same reason that China 
imposed restrictions on the manufacture and sales of electronic game equipments.  These restrictions 
applied equally to domestic and foreign ente rprises, as stipulated in Article 6 of the Circular , and, 
thus, complied with the national treatment princi ple.  With regard to questions concerning the 
Regulation on the Administration of Commercial Cipher , she indicated that, as a prudential regulatory 
measure, China prohibited service suppliers to  import and distribute cipher products without 
authentication by the competent authority (the Stat e Cryptography Administration) in order to protect 
consumers' interest and ensure information security .  This measure applied equally to domestic and 
foreign suppliers.  China had appr oved several applications since May 2007, including Iphay Biology 
Technology Ltd., and Kelti (China) Commodity Ltd.   When examining applications from direct 
sellers, the Chinese Government always respected its WTO commitments, offering equal treatment to domestic and foreign companies, and followed the principle of prudential regulation, as well as 
progressive and manageable liberalization.  The Ch inese Government would grant a license for direct 
selling in accordance with Article 9 of the Regulations on Administration of Direct Sales  to qualified 
applicants.  Quite a few enterprises had been perm itted to conduct direct selling business in more than  S/C/M/92 
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  one province, autonomous region and municipality.  Her delegation asked the United States to clarify 
question 1c).  Article 7.2 of the Regulations  required foreign investors to have at least three years 
experience before applying for a direct selling licen se in China:  this was a prudential regulation on 
the qualifications of service providers.  Since direct selling had been prohibited in China  before the  
Regulations on Administration of Direct Sales  came to effect on 1 December 2005, it had not been 
possible for Chinese enterprises to ga in experience in direct selling prior to that time, which was why 
Chinese enterprises were not subject to this restri ction.  The 30 percent cap requirement was a 
necessary regulatory measure based on the current situa tion in China.  Direct sellers were somewhat 
like investment bankers in the sense that t oo much compensation might distort the incentive 
mechanism, and eventually affect  the interest of consumers and undermine the development of the 
whole sector.  China believed that the current cap was reasonable and proper.  The opening of new 
retail outlets was governed by the Measures for Administration on Foreign Investment in Commercial 
Fields , which was uniformly applicable throughout th e country.  After the approval authority was 
designated at provincial level, the MOFCOM would intensify training to provincial authorities and 
enhance the supervision mechanism in order to ensu re fair and efficient approvals.  Her delegation 
was not aware of "informal" minimum capital requi rements as well as of zoning requirements referred 
to by the United States.  Minimum capital requirements for foreign companies should meet the relevant requirements in the Companies Law  of China.  She confirmed that China had fulfilled its 
commitment and allowed foreign control in th e retailing of motor vehicles.  Concerning the 
distribution of pharmaceutical products, the appli cation process was the following:  after obtaining a 
pharmaceutical trading licence and other documents, th e applicants applied to commercial authorities 
for establishing foreign pharmaceutical wholesale and retail companies.  Upon approval, they should 
finish the registration in the administrative department for industry and commerce.  The 
Pharmaceutical Law  (Article 14) and its Implementation Rules  (Article 11 and 12) provided further 
details.  Other related laws and regulations included the  Companies Law , Law on Foreign Capital 
Enterprise , Law a on Sino-Foreign Contractual Joint Venture , Law on Chinese-Foreign Equity Joint 
Venture  and their Implementation Rules , and the Measures for Administration on Foreign Investment 
in Commercial Fields .  China asked the European Comm unities to clarify what it meant by 
"outsourcing" warehousing services and to give some examples. 
20. Construction services.   The delegation of China explained that the Construction Law  set 
minimum registered capital requirements, which appl ied to all construction enterprises established in 
China, both foreign and domestic ones.  Registered capital was an important guarantee against the risk 
of the projects.  There were currently legislativ e difficulties to replace registered capital requirements 
with other financial tools such as letters of cr edit, insurance bonds, or bank guarantees, because 
minimum capital requirements were stipulated in the law.  The fact that foreign construction 
companies were only allowed to conduct four type s of projects did not violate WTO rules because 
China had listed these reservations in its Schedule.  According to Circular No. 159 on the Issues of 
Qualification Administration of Foreign Construction Enterprises  issued by the former Ministry of 
Construction, the performance of foreign invest ors gained outside China would be taken into 
consideration when examining the qualification app lications.  She pointed out that when Chinese 
construction enterprises were undertaking projects in some Members, like in the United States, their 
overseas performances were not considered, which i ndicated that China truly and sincerely welcomed 
foreign investments in the construction sector.  The Rules Governing the Foreign Invested 
Engineering Design Enterprises  (Decree No. 114 from the Ministry of Construction) set requirements 
on the number of foreign professionals and their reside ncy in China to foreign enterprises;  this was a 
prudential regulation to ensure the quality of the projects.  As some foreign enterprises might face 
difficulties in meeting these requirements, China allowed, in Article 18 of the Implementing Rules , 
that these requirements be "temporarily not applicab le".  China urged foreign enterprises to make 
good use of this transitional period and to m eet the above-mentioned requirements as early as 
possible, so as to provide better services in the Chinese market.  According to China’s classification 
criterion regarding qualification of construction enterprises, the only specific requirement to conduct 
dredging business was that an enterprise should firs t obtain relevant qualifi cations, including porting S/C/M/92 
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  and sea-routing.  The Chinese Government had introdu ced the "constructor" system (jian zao shi) in 
order to ensure quality and safety in the construction sector.  Qualif ied foreigners were allowed to 
take the exams and could be registered to practi ce after passing the exam.  In 2003, China had began 
to gradually replace the project manager system with the constructor (jian zao shi) system.  All those 
qualified as a project manager and meeting other re levant criteria would be able to apply for a 
temporary constructor (jian zao shi) certificate.  Th erefore, there was no barrier for foreign applicants.  
She asked Japan to clarify which "local governments"  required minimum floor ar ea for offices.  China 
had not made commitments with respect to direct project contracts and, according to China’s Schedule, foreign enterprises wishing to contract  for project in China should establish commercial 
presence in the first place.  During the examinati on of qualifications, the Chinese authorities treated 
domestic and foreign enterprises fairly, and, t hus, fully complied with the national treatment 
commitment. 
21. Air transport services.   The regulation on Computer Reservation Systems (CRS) was still 
under discussion and her delegation was not in a positi on to give a specific timetable when it would 
be issued.  Foreign CRS had been open to Chinese airlines, and there was no examination or approval 
requirement.  Agents of foreign airline companies needed to acquire approval from the Civil Aviation 
Administration of China (CAAC) before connecting to , or using foreign CRS.  Pending the entry into 
force of any new regulation, foreign airline compan ies needed to file an application to the CAAC 
before connecting to, or using foreign CRS, according to the Provisional Administrative Measures on 
the Usage of Computer (Passenger) Reservation Syst em by Air Transport Enterprises and their Sales 
Agents within the Territory of China  (CAAC,1995,No. 51).  Foreign airlines could use CRS to sell or 
reserve tickets for customers after their appoint ed Chinese agents were approved by the CAAC.  
According to the CAAC, there was no information about approved agents failing to use foreign CRS 
services.   
22. Turning to telecommunication services , she said that "resale" services were not listed in 
China’s Schedule.  According to the Notes for Scheduling Basic Telecom Services Commitments , 
resale was a way to provide basic telecommunication service rather than a specific service, so the 
reference by Japan to the fact that "China did not prohibit the resale of those service areas" was improper.  Currently, China did not have a specific license for "resale" telecommunication service, so there was no need to design relevant market access re quirements.  As China had explained in previous 
transitional reviews, enterprises were allowed to c hoose the way they wished to provide services after 
gaining a basic telecommunication license, either by establishing their own facilities or by providing 
services on resale basis.  With regard to the minimum capital requirements for basic 
telecommunications, after careful study and review of the Chinese basic telecommunication market, the Government had modified the Regulations on Administration of Foreign Invested 
Telecommunications Enterprises , and had reduced the minimum capita l requirements by 50 percent.  
Her delegation wished to note that there was no unifi ed or identical international standard regarding 
the level of telecom capital requirements.  China was a vast country with an enormous population, 
which required heavier front-loaded investment in te lecom infrastructure than most other countries.  
Chinese telecommunication industry was still underdev eloped compared with developed countries.  
The digital divide remained a big challenge, especial ly in the middle and western parts of China, and 
many remote areas had no basic access to the telecommunication network at all.  At this stage China needed to first solve the problem of network c onstruction which required numerous infrastructural 
investments.  As her delegation had explained in  previous transitional reviews, minimum capital 
requirements should be determined according to the act ual situation of different countries.  The sector 
in China was currently under reform and major basic telecommunication operators were in the 
restructuring process.  MIIT would require dominant operators to establish rules for interconnection in 
accordance with the Regulation on Telecommunication  and Provisions on the Management of 
Interconnection between Public  Telecommunication Networks  after reconstruction.  The rules would 
be published through a proper channel after review and approval.  China had completed the draft of 
the Telecommunications Law , which was now under legislative re view.  The delegation of China  S/C/M/92 
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  asked Japan to clarify the concept of "indirect sh are holding" and confirmed that, by September 2008, 
there were forteen foreign value-added service en terprises operating in China.  The qualification 
requirements for basic telecommunication suppliers  were set out in Articles 4 to 10 of the Regulations 
on Administration of Foreign Invested Telecommunications Enterprises .  The Regulation was 
available on the website www.miit.gov.cn  and www.fdi.org.cn .  The Regulation on 
Telecommunication , Regulations on Administration of Foreign Invested Telecommunications 
Enterprises , Decrees No. 19 and No. 31 of the MII provi ded for qualifications and procedures in 
applying for telecommunication licenses (see www.miit.gov.cn  or www.fdi.org.cn  for detailed 
information).  All the application procedures were ope n and transparent.  In order to promote foreign 
investment in telecommunication, MIIT also provi ded relevant policy consulting services bilaterally, 
for example, with the European Communities.  A ccording to its Schedule, China had opened the 
following value-added services:  electronic mail,  voice mail, on-line information and database 
retrieval, electronic data interc hange, enhanced/value-added facsim ile services (including store and 
forward, store and retrieve), code and protocol  conversion and on-line in formation and/or data 
processing (including transaction processing).  China had noted that certain Members had concerns 
about the approval process for foreign applications , but wanted to assure that China honoured its 
WTO commitments, and examined app lications in accordance with the Regulations on Administration 
of Foreign Invested Telecommunications Enterprises , the Regulation on Telecommunication , 
Measures for the Administration of Permits for Operation of Telecommunication Business  and other 
relevant laws and regulations, wh ich improved transparency and streamlined approval procedures.  
China noted that some countries and regions had al ready implemented industr ial and commercial tests 
of WCDMA and CDMA2000, while TD-SCDMA, as one  of the three major 3G standards accepted 
by ITU, had not yet been tested in other countries and regions.  China allowed technological and commercial tests on TD-SCDMA in order to furthe r improve this standard and create a competitive 
environment for foreign and domestic enterpri ses.  MIIT had approved and issued the 
telecommunication industrial standards corresponding to the three technologies accepted by the ITU, 
namely TD-SCDMA, WCDMA and CDMA2000.  China understood that ITU was improving the 
802.16e standard, and would follow the developmen t of 802.16e technology closely.  China 
encouraged US enterprises to c ontinue their cooperation with Ch inese enterprises, and make joint 
efforts to contribute to the technology and industry development.  China’s de finition of value-added 
telecommunication service was in line with internati onal practice.  As the technology and the market 
developed, China would follow closely the definition adopted by other countries.   
23. Advertising services.   China recalled that it had comm itted to allow the establishment of 
wholly foreign-owned subsidiari es in advertising services within four years after accession.  
According to the 2004 Regulations on Foreign Investment in Advertising Firms , wholly foreign-
owned advertising firms had been allowed to se t up in China after 10 December 2005, thus fulfilling 
China's commitment.  Advertising could be double-edge d.  On one hand, it could play a key role in 
facilitating economic development, but, on the othe r hand, improper operati on might have adverse 
impacts on the interest of consumers and advertisin g operators, and even cause criminal cases in the 
worst scenarios.  Appropriate measures and regula tions of the advertising market were therefore 
necessary, including qualification approvals.  Ch ina welcomed foreign firms with advanced 
managerial and operational experiences which could contribute to pushing forward the healthy 
development of China's advertising industry.  Sh e indicated that China had approved forty-nine 
foreign advertising firms from Janua ry to October in 2008, of which thirty-nine were wholly foreign-
owned.  China had honoured its co mmitment and provided great market access to foreign investors. 
24. With respect to transparency , China recalled that, in Article 2 (c) of its Accession Protocol, it 
had committed to "establish or designa te an official journal dedicated  to the publication of all laws, 
regulations and other measures pert aining to or affecting trade".  The "laws, regulations and other 
trade-related measures" referred to  adopted ones.  As the draft Postal Law  was still in the legislative 
process, no final version had been published yet.  China had improved legislative procedures and 
enhanced legislative transparency.  Since Febr uary 2008, except for special exceptions, all the S/C/M/92 
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  administrative regulations promulgated at the legi slative level of the State Council were published on 
a single platform of the China Legislative In formation Network System (maintained by the 
Legislative Office of the State Council) for public comments before promulgation.  And, starting from 
July 2008, departmental rules by the central gove rnmental agencies were collected and published on 
the aforementioned website.  Since then, twenty-thr ee drafts of administrative regulations and three 
drafts of departmental rules had been p ublished on the website for public comments. 
25. Legal services.   The delegation of China indicated that it had noted the concerns expressed by 
the United States in relation to legal services.  This sector was highly specialized, especially for a 
developing country like China where economic devel opment was imbalanced across different regions.  
Supervision and regulation were needed to ensure  the quality of the services provided to protect 
public interest, and to meet the demand for legal ser vice in different regions.  For this reason, China 
encouraged foreign law firms to open representativ e offices in the regions suffering from a lack of 
legal services, as indicated in the Regulations on Administration of Foreign Law Firms’ 
Representative Offices in China .  As for the time period, practice in the past 10 more years had shown 
that it took three years on average for a represen tative office to be set up and operate normally in 
China.  Therefore, a three-year period was require d before foreign law firms could open an additional 
office in order to leave some transitional time to ensure that the quality of services provided would not 
be adversely affected by overexpansion of law firm s.  China had made great efforts in shortening the 
time span in the application process.  In practice, most applications had received replies within less 
than nine months. 
26. The representative of the United States
 said that his delegation believed that the TRM 
continued to be a useful mechanism which provided needed additional transpar ency for China's trade 
regime.  His delegation appreciated China's effort to respond to important questions.  Some of the 
answers to specific questions raised by the United St ates were encouraging.  With respect to express 
delivery, it was important to clarify that we were  talking about letters and not documents.  With 
respect to the draft postal law, his delegation wish ed to encourage that comments be taken into 
consideration when the law was in the drafting st age.  There had been positive responses on the 
distribution on crude and processed oil.  On direct selling, his delegation was still perplex by the three 
years direct selling experience requirement.  Alt hough the response indicated that this was due to 
prudential reasons, his delegation was not really sure what those prudential reasons would be.  In fact, 
the reference made by China to prudential reaso ns was undermined by the next comment which 
referred to the fact that Chinese companies did not have experience in direct selling;  hence, it was 
odd that foreign providers with experience would be  subject to more onerous  prudential measures.  
The answer to US question 3 regarding allowing fore ign-owned chains to sell motor vehicles had been 
positive.  His delegation also wanted to thank Ch ina for the information regarding transparency.  
Telecommunication services had been a long standing issue of concern.  While the United States had noted the reduction of the minimum capital require ment by fifty percent, the remaining amount 
remained very high and his delegation would contin ue to urge a further reduction, especially in the 
light of the comments that China was looking to expand its telecommunication infrastructure;  such 
high capital requirements did not encourage investments.  In the area of value-added services, his delegation was encouraged by China's willingness to engage and work with other trading partners. 
27. The representative of the European Communities
 thanked the delegation of China for its 
presentation made in response to the questions submitted by the European Communities and other 
delegations.  Her delegation att ached great importance to the TRM which provided an excellent 
opportunity to assess the progress made by China in complying with its WTO commitments under the GATS.  The EC wished to make some brief follow- up remarks in order to seek further clarification 
following China's presentation.  As regards postal and courier services, the EC welcomed the fact that 
a consultation process was opened on the 11
th draft Chinese Postal Law at the level of the National 
People's Congress. The EC had taken this opportuni ty to submit comments to China which it hoped 
would be taken into account.  The EC took note of  China's confirmation that the express deliver  S/C/M/92 
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  standards issued on 12 September 2007 were voluntary only and wished to further ask whether China 
could also confirm that the draft postal law, through its reference to the standards in Article 51 of the 
current draft, did not in fact make these standa rds mandatory.  Regarding the issue raised in EC 
question 22(a), the EC wanted to clarify that it  was concerned about commercial document delivery 
and not only private letters.  At the time of accession, the Chinese courier market was open to foreign 
companies for express delivery of commercial docum ents, parcels etc., covering domestic express, as 
China's limitation was restricted to the delivery of pr ivate letters only.  Hence, in the view of the EC, 
Article 50 paragraph 2 of the draft postal law prohibited foreign companies to operate domestic 
express delivery of all documents, which created di scrimination outside the reserved postal services 
area.  The EC asked China to clarify how it would ensure that the draft postal law would not contain 
this discriminatory element.  Regarding air trans port services, the EC understood that China was not 
fully able to clarify the exact timeframe of the entr y into force of the draft new regulation relating to 
Computer Reservation Systems. The EC would nevertheless be grateful if China could clarify whether the new law would allow direct access to and use of  foreign CRS by Chinese travel agents, including 
booking or reservation of tickets, but crucially also  issuing tickets through BSP.  The EC thanked 
China for its explanations regarding the qu estions submitted on the construction sector and 
highlighted the importance of this sector.  The EC acknowledged China's taking note of the difficulties faced by foreign companies to fulfil th e requirements stipulated by Decree 114.  However 
as stated by China, the current transitory ph ase of non-application to foreign companies was 
temporary. The EC asked China how this "temporar y" provision should be interpreted and when the 
regime would become permanent.  The EC noted that retailing services via the internet were of 
growing importance in the distribution services sect or.  The EC took note of China's statement but 
wished to raise a general concern regarding Chin a's requirement for a telecommunications license for 
value added services.  The EC believed that distri bution service suppliers should not be subject to 
telecommunications licences. 
28. The representative of Japan
 expressed her delegation's deep  appreciation for the detailed 
explanations given by China.  In Japan's view, the TRM mechanism was a very important element to 
try and secure the level of commitments undertaken  by China when it acceded  to the WTO.  Her 
delegation was very satisfied with the answers, wh ich would be conveyed to experts in Tokyo, and 
wished to make some follow-up questions.  With respect to advertising services she asked China to 
confirm her delegations' understanding  that the conditions contained in the regulations on foreign 
investment in advertising firms, which entered into force on 1st October, such as (i) mainly operating 
the advertising firms, and (ii) having three-year  experience after establishment, were regarded as 
prudential measures.  Second, in the construc tion and related engineering services sector, her 
delegation wished to clarify whether the minimal cap ital requirement was consistent with the national 
treatment, i.e. whether both foreign and domestic enterprises were subject to this requirement.  With respect to the distribution sector, she understood the explanation given by China as meaning that the 
authorization from the national commission for the distribution and import of household use game 
machine and software, as well as commercial secr et code product, was re quired from both national 
and foreign companies and, thus, was compatible w ith the national treatment obligation.  She stressed 
that her delegation highly appreciated China's useful  explanations and understood that preparing them 
had required great efforts from China.   
29. The representative of Canada
 said that the TRM has considerably facilitated the assessment of 
China's compliance with the terms of its accession.   Her delegation had submitted written questions 
concerning telecommunication services and regulatory tr ansparency.  She was pleased to take note of 
the clarifications provided by the delegation of China. 
30. The representative of China  said that she wanted to make some follow-up remarks.  China 
understood the US concern regarding direct selling.  However, as explained, China prohibited direct 
selling before the regulation had been adopted in 2005 , mainly for moral reasons, i.e. to protect public 
interest and prevent commercial fraud.  This pr ohibition meant that Chinese enterprises had no S/C/M/92 
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  experience in that area, which was why they were ex empted from the regulation.   This did not meant, 
however, that  foreign companies were discrimin ated.  The market was open to qualified foreign 
investors with good managerial and operational e xperience.  Direct selling was based on honesty and 
credibility, and China had had bad experiences w ith cases leading to criminal action.  Minimum 
capital requirements in the telecommunication sector  were applicable to both domestic and foreign 
companies.  China welcomed qualified foreign inv estors which were ready to contribute to the 
development of the Chinese market.  In its sche dule, China had committed to liberalize courier 
services, except for those reserved to Chinese postal au thorities by law.  According to the postal law, 
all letters – and not only private letters – were r eserved to China Post.  This had remained unchanged 
since China's accession to the WTO.  Her delegation w as ready to talk bilaterally with the European 
Communities about the definition of documents a nd letters.  Express Delivery Standards were 
recommendatory only.  With respect to air transport, the regulation on CRS was still under discussion;  her delegation was therefore not in a position to gi ve specific information in this regard, but would 
keep the European Communities in formed of the progress made.  In the construction sector, China 
would give a five year transitional period, star ting from February 2008, after which the project 
manager system would be replaced by the contractiv e system.  Foreign companies were encouraged to 
come and work in the Chinese mark et, to meet the requirements and also to consider hiring Chinese 
employees.  With respect to internet selling, Ch ina wished to note that the e-business developed 
rapidly, which represented a challenge for regul atory authorities.  The ICP licence requirement 
enabled suppliers and consumers to  have access to reliable information regarding on-line distribution 
and did not affect China's commitments in the distribution sector.  Her delegation also wanted to 
confirm that the three-year experience requirement for advertising firms was justified by prudential 
reasons.  Finally, the prohibition to sell household use game machine and software applied to both 
domestic and foreign companies. 
31. The Chairperson
 thanked China for its responses and pr oposed that the Council take note of 
the statements made and consider Chin a’s Transitional Review concluded.   
32. The Council so decided . 
33. Regarding the report to the General Council, the Chairperson  suggested that the Secretariat 
prepare this report, in accordance with previous practice.  It would be a factual report, stating basically the following:  (i) at its meeting on 1
st December 2008, the Council for Trade in Services 
conducted the Seventh Transitional Review of the Implementation by China of its WTO Agreement 
and of the related provisions of the Protocol, pursu ant to Section 18 of the Protocol of Accession of 
the People's Republic of China;  (ii) written comm unications were submitted before the meeting by 
the following Members:  Japan, the European Co mmunities, the United States and Canada;  (iii) a 
detailed account of the discussion during the meeting can be found in the meeting report, contained in 
document S/C/M/92. 
34. The Council so decided .  
V. NOTIFICATION PURSUANT TO GATS ARTICLE XXI 
35. Statements made under this agenda item are contained in an informal document 
(JOB(08)/131) and will be circulated as an addendum  to this report after the conclusion of the 
Article XXI negotiations and the certification of any changes to the relevant schedule of 
commitments.  S/C/M/92 
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  VI. FUTURE WORK OF THE COUNCIL FOR TRADE IN SERVICES (REGULAR 
SESSION) 
36. The Chairperson  said that this item had been placed on  the agenda as the result of discussions 
among delegations, and, in some instances, with the Secretariat.  The main question was how 
delegations envisaged the allocation of their time an d efforts in the coming months.  At this point, he 
wished to hear delegations' views and see wh ether there might be any specific suggestion. 
37. The representative of Hong Kong, China  said that the main preoccupation of her delegation 
was to conclude the DDA.  Nevertheless, it would be important to reflect on what the CTS should do 
in 2009.  It would be opportune for delegati ons to get together and discuss this issue. 
38. The representative of Chile  said that it was opportune to include this topic on the agenda.  The 
DDA was a priority.  Nevertheless, it was important not to underestimate the regulatory work of the 
CTS and of its subsidiary bodies.  It would be usef ul to consult on this issue at the beginning of 2009, 
as the regular agenda should not be hostage of a lack of progress in the DDA. 
39. The representative of the Philippines  said that these informal consultations should be open-
ended, at least in a first instance, without precludi ng the need to undergo some more bilateral or 
plurilateral consultations later on, if  differences needed to be bridged. 
40. The Chairperson  said that he would be conducting open -ended informal cons ultations on this 
issue at the beginning of next year. 
41. The Council took note  of the statements made. 
VII. OTHER BUSINESS 
42. The representative of Australia  wished to raise the issue of the certification of the EC-25 
schedule.  He said that his dele gation had taken the floor on this i ssue at previous meetings of the 
Council, including in June this year, and remained concerned that more than two years since the EC 
had notified certification of the EC-25 schedule of  commitments, referred to in document S/L/286, 
that schedule had still not entered into force.  Hi s delegation was one of the affected Members with 
whom a compensation arrangement had been agreed  and from Australia's perspective, a delay of 
unknown duration for entry into force was unaccep table on both systemic and commercial grounds.  
Australia had raised this matter b ilaterally with the EC and had not yet been advised as to when the 
schedule would be ratified by member states for its en try into force.  His delegation wished again to 
call on the EC to expedite the entry into force of the EC-25 schedule. 
43. The representative of Japan  said that the compensation should enter into force as soon as 
possible.  It was regrettable that no date was set two years after the certification of the schedule. 
44. The representative of India  said that his delegation wished to echo what previous speakers 
had said.  The EC-25 schedule had still to come in to force.  The compensation package had been 
agreed more than two years ago and there was still no clarity as to when it would come into force.  
This situation gave rise to various questions.  In effect, what was enforced at the moment?  Was the 
EC-12 schedule in force at the moment?  Was the EC offer based on the EC-12 or the EC-25 
schedule?  The implications for the next EC offer we re not clear.  India wished to encourage the EC to 
look closely at its internal processes, keeping in mind the objective of Article XXI and S/L/80. 
45. The representative of China  recalled that China was an affect ed Member in this proceeding.  
The delay in implementing the new schedule created le gal and commercial implications.  It was also a S/C/M/92 
Page 12  
 
  systemic precedent.  Her delegation wished to ur ge the EC to expedite its internal ratification 
procedure. 
46. The representative of Hong Kong, China
 said that her delegation was concerned about the 
systemic and commercial ramifications of this de lay.  Her delegation ha d conveyed its concerns 
bilaterally, including concerns regarding compliance w ith procedures set out in S/L/80 with the EC.  
She wished to thank the EC for its readiness to engage in these bilateral discussions.  Hong Kong, 
China hoped that the EC could take these concerns  into account seriously in order to reach a 
satisfactory solution.   
47. The representative of Brazil  said that his delegation was concerned with the legal status of the 
EC-25 package.  The new commitments were still not  in force, which created legal uncertainty and 
represented a grave precedent.  This situation was unacceptable both from a legal and commercial 
point of view. 
48. The representative of Canada  said that his delegation shared the views of previous speakers.  
The situation of the EC-25 schedule undermined th e certainty that Canada valued in the GATS 
system. 
49. The representative of the European Communities  recalled that, as had been indicated in the 
notification document as well as in the respective ag reements signed with the affected Members, the 
consolidated schedule should enter into force fo llowing the internal decision-making procedures of 
the European Communities and its Member States, wh ere appropriate.  Following the signature of the 
relevant agreements with the affected Memb ers and the completion of the WTO certification 
procedure in December 2006, the European Commiss ion had formally proposed the conclusion of the 
agreements to the EC Council, by means of a proposal for a Council decision.  Subsequently, by 
amending the original proposal of the Commission, the EC Council had decided to require the national ratification of the relevant  agreements by the EC Member States, and had also called for the 
consultation of the European Parliament.  The entry into force of the new schedule was dependent on 
the outcome of these proceedings.  For the time being, 10 Member States (Austria, Denmark, 
Germany, Lithuania, Malta, The Netherlands, Gr eece, Hungary, Spain and Sweden) had concluded 
their national procedures and ratified the relevant ag reements.  Once the internal procedures would be 
completed, the EC would notify to the WTO the entry into force of the new schedule. 
50. The Council took note
 of these statements. 
51. The Chairperson  recalled that, as indicated at the beginning of the meeting, he wished to 
make a brief statement regarding the Review of the Air Transport Annex.  He informed the CTS that 
it was his intention to hold informal consultations in order to reach an agreement on how to proceed 
further with the second Review.   
52. The Council took note  of this statement. 
53. The Council bid farewell to Mr. Roberto BO SCH from Argentina and to Mr. Minh DANG 
from Vietnam. 
__________