WORLD TRADE  
ORGANIZATION  G/L/844 
7 December 2007 
 (07-5411) 
Council for Trade in Goods  
  
 
 
REPORT OF THE COUNCIL FOR TRADE IN GOODS 
ON CHINA'S TRANSITIONAL REVIEW  
 
 
1. The Council for Trade in Goods (CTG), at its  meeting on 23 November 2007, carried out the 
Transitional Review of China pursuant to paragr aph 18 of the Protocol on the Accession of the 
People's Republic of China (WT/L/432).  2. Japan and the United States submitted questi ons and comments in writing to China on the 
CTG-specific information requirements contained in A nnex 1A of the Protocol and on matters raised 
before subsidiary bodies.  These questions and co mments were circulated in documents G/C/W/586, 
and G/C/W/587, and G/C/W/589 respectively.  The Annex 1A  information provided by China to the 
Council for the review was circulated in document G/C/W/591.  3.  The CTG took note of the reviews that had b een carried out in the CTG subsidiary bodies.   
Furthermore, the Council reviewed the informati on provided by China concerning specific parts of 
Annex 1.A of the Protocol and the questions raised by certain Members.  The statements made at the 
meeting of 23 November 2007 are reflected in th e minutes of the meeting in document G/C/M/91.  
The relevant paragraphs which reflect the discussion under agenda item VII are annexed. 
 
 G/L/844 
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  ANNEX 
 
VII. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA  
A. 
REPORTS OF THE SUBSIDIARY BODIES OF THE COUNCIL FOR TRADE IN GOODS  
7.1 The Chairman  informed Members that, in accordance with paragraph 18 of the Protocol of the 
Accession of the People's Republic of China in docum ent WT/L/432, this Council was to report to the 
General Council on the Transitional Review.  He suggested proceeding in two stages.  The CTG 
subsidiary bodies had, as required, transmitted their re ports to the CTG.  As a first step, he would give 
Members the opportunity to make general comments on those reports and then he would propose that 
the Council take note of these Reviews.  Then, he  would move on to the CTG's own Transitional 
Review in which the CTG was required to review the information provided by China pursuant to 
designated parts of Annex 1.A of the Protocol.    7.2 He reminded Members that the following CT G subsidiary committees had carried out the 
Review:  Market Access - the report was contained in document G/MA/196 and Corr.1;  Agriculture - 
the report was contained in document G/AG/24;  Cu stoms Valuation - the report was contained in 
document G/VAL/61;  Sanitary and Phytosanitary Measures - the report was contained in document 
G/SPS/47;  Technical Barriers to Trade - the re port was contained in document G/TBT/22;  Import 
Licensing - the report was contained in document G/LIC/17;  Rules of Origin - the report was contained in document G/RO/64;  Anti-Dumping - the report was contained in document G/ADP/16;  
Subsidies and Countervailing Measures - the report was contained in document G/SCM/121;  
Safeguards - the report was contained in document G/SG/84;  and TRIMs - the report was contained 
in document G/L/835.  While not wishing to reopen any of these reviews, he asked if Members wished to take the floor on these reports.  
7.3 The representative of the United States
 recalled that this was the sixth Annual Transitional 
Review Mechanism for China.  As in the past, th e US approached the TRM with the understanding 
that it was designed to help Members understa nd and assess the progress that China had made in 
adopting and complying with WTO disciplines.  From that perspective, the US believed that the TRM 
continued to be a useful mechanism.  It helped to  provide needed additional transparency for China's 
trade regime, as it allowed Members to seek and obtai n clarifications regarding China's various trade 
policies and practices.  It also provided Member s with a multilateral forum for conveying their 
expectations of China and their concerns with Chin a's implementation and complia nce efforts.  In that 
regard, the TRM was a useful supplement to bilatera l discussions with China.  By now, after nearly 
six years of WTO membership, China should have im plemented almost all of the commitments that it 
made in its accession protocol.  As a result, it ma y be expected that the TRM would focus more on 
China's ongoing adherence to WTO rules than on Ch ina's implementation of specific commitments 
that it made in its Protocol of Accession.    7.4 In his delegation's written submission befo re this Committee (G/C/W/587 and G/C/W/589), 
the US focused on adherence to WTO rules.  The US  raised a number of questions.  Some questions 
were asked during transitional revi ews conducted by subsidiary bodies, but China did not respond to 
them, so they were asked again.  Other questions raised new questions.  He highlighted a few of the 
concerns that underlay the questions.    
 (i) Export Restrictions on Raw Materials:   
 7.5 His delegation had submitted questions about China's export restrictions on raw materials, a 
matter that raised serious WTO concerns, to th e Marked Access Committee.  China continued to  G/L/844 
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  maintain export quotas and sometimes export duties on at least a dozen raw materials that were 
particularly important to US industry, even though China was the world's leading producer of these raw materials.  WTO rules generally prohibited ex port quotas.  The same was true for the export 
duties that China sometimes used to further discour ages exports, as China had made a commitment in 
its WTO Protocol of Accession circumscribing their use.   It was long past time for China to get rid of 
its export restrictions on raw materials.  China s hould have eliminated them when it acceded to the 
WTO nearly six years ago.  His delegation wanted to see a level playing field, where competition was fair.  However, with China's export restrictions , the US and other WTO Members were significantly 
disadvantaged.  The export restrictions artificially  raised world raw material prices and lowered 
China's domestic prices.  That gave a substantia l artificial advantage to China's downstream producers 
over US and other foreign downstream producers.  China had suggested that its export quotas were 
justified because it was only trying to protect raw ma terials that were exhaustible natural resources.  
But, his delegation had not seen any facts to support that claim.  In order to protect its exhaustible 
natural resources, China would have to limit domestic sales just as it did exports.  But China did not appear to do that.  Take the example of coke, a ke y steel input.  China's production of coke had been 
rising every year, reaching the point last year wher e it produced nearly 300 million metric tons (MT).  
But almost all of that 300 million MT of produc tion was sold domestically;  China only allowed a 
small fraction of its domestic coke production to be exported.  The principal restriction China used 
was an export quota of 14 million MT.  China also rest ricted exports by adding on export duties, even 
though China committed in its WTO Protocol of Accession not to impose export duties on coke.  If a WTO Member was taking action to protect an exhaus tible natural resource, WTO rules required it to 
treat the domestic and export sides comparably.  China's system did not appear to do that. 
 
 (ii) VAT on Agricultural Goods:   
 
7.6 The United States raised straightforward questions about China's value-added tax (VAT) on 
agricultural goods in the Committee on Agriculture.  It  appeared that many agricultural products were 
exempted from China's 13 per cent VAT normally app licable to agricultural products when sold 
domestically.  For example, it appeared that dome stic sales of agricultural commodities produced and 
sold by farmers in China, such  as wheat, cotton and corn, were exempted from the VAT.  However, 
when imports of these same products  were sold in China, it appeared that they were assessed the VAT 
at the rate of 13 per cent.  His delegation had ask ed China to explain this apparent discrimination, 
which raised national treatment concerns.  Howe ver, China had so far offered no explanation. 
 
 (iii) Subsidies:   
 
7.7 As was evident from the US submission to this Council (G/C /W/587), China simply refused 
to respond to numerous questions that his delegati on raised about its subsidies practices.  These 
questions sought to address some critical issues, including potentially prohi bited subsidies provided 
by provincial governments in China.  The US requ ested that China answer those questions today. 
 
 (iv) Export duties on lead metal:   
 7.8 One of the new questions that his delegati on asked related to refined metal lead.  China 
recently imposed export duties on refined metal lead, which contributed to a steep decline in China's 
exports of refined metal lead and had contributed to a sharp rise in world prices.  Meanwhile, Chinese 
domestic prices had reportedly declined because of China's captive refined metal lead production, 
giving China's downstream producers a significant competitive advantage over foreign downstream 
producers.  However, in its Protocol of Acce ssion, China committed not to impose export duties on 
refined metal lead.  His delegation asked that China explain how it justified its use of export duties in 
this case.   G/L/844 
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 (v) Import restrictions on technologies:   
 
7.9 Another new question related to China's Catalogue of Technologies Whose Imports Are 
Banned or Restricted, issued by China's Ministry  of Commerce earlier this month.  This catalogue 
listed technologies whose imports were banned or rest ricted.  In his delegation's questions, it sought a 
number of clarifications from China, including how it  justified import bans and import restrictions on 
technology imports in light of its obligations under Article XIII of the General Agreement on Tariffs 
and Trade 1994.  He concluded by noting that China had made a submission in the last few days to the 
Council which related to this area.  To the extent  that the submission answered these questions, he 
apologised for taking the Council's time.  The US looked forward to China's responses to its 
questions.  7.10 The representative of the European Communities
 opened his statement by saying that it would 
cover both sections of this agenda item.  He  raised it now because it contained a number of 
conclusions which emerged from the discussions held in the subsidiary bodies on the TRM of China.  
His delegation remained seriously concerned over th e lack of co-operation shown by China in most 
aspects of the TRM discussions.  It was disappointed by the paucity and lack of Chinese replies in the 
majority of the subsidiary bodies and was troubled by the statement made by China in the Market 
Access Committee that "China is under no obligation to provide answers in this exercise".  It was 
hardly to be underlined that transparency was a vital element for the WTO and applied to all 
Members, even China.  He recalled that the speci al scrutiny provided for in the TRM was approved by 
China itself as part of its Protocol of Accession.   This lack of co-operation, transparency, 
unwillingness to respond to many questions and to ot her Members was a systemic concern.  Indeed, 
China itself, on discussions on the previous agenda ite m on textiles, stressed to Turkey the importance 
of transparency and getting clear answer to questi ons posed by China to Turk ey as well as the need to 
have written answers, not only oral statements.  He  invited China to apply the same requirements to 
itself in future discussions under the TRM.  His de legation remained optimistic and hoped that China 
would give detailed replies, in writing, to this C ouncil to all questions that  his delegation and other 
Members had posed in Committees.    7.11 He highlighted a number of specific areas of particular concern to the EC.  These were issues 
that had been outlined in his delegation's earlier communications and did not constitute an exhaustive 
list of concerns but a number of its more important concerns.  First, on the theme of transparency and 
predictability of trade relations,  China was committed in its accession protocol to provide a 
reasonable period for comments to the appropriate regulatory authorities before measures affecting 
trade in goods were implemented.  His delega tion looked to China to fully implement that 
commitment on advance notice and comment for trade regulations.  Secondly, on export restrictions,  
his delegation shared the concerns expressed by the US and questions raised by them and others that 
China should notify the quantities associ ated with the export restrictions that it applied;  that it should 
transmit to the WTO its justification for each specific export restriction;  and when there was no such justification, his delegation expected China to no tify to the WTO how and when it would bring those 
export restrictions for numerous raw materials into  line with WTO rules.  In its submission, dated 
19 November 2007, China had provided some informa tion on its export restrictions and its regime 
there.  But as far as his delegation could see, th e information was basic and did not indicate the 
quantities associated with the restrictions nor give any kind of detailed product-by-product, or sector-
by-sector, justification for the maintenance of these rest rictions.  It also did not explain, in the case of 
unjustified restrictions, how and when China would bring its regime into WTO rules and China's own 
accession commitments.  Further work would be n eeded from China to answer those outstanding 
questions.     G/L/844 
 Page 5 
 
 
  7.12 In the TBT area, his delegation had made the point in the past that, for a range of sectors, 
China's conformity assessment, the compulsory certifica tion system, appeared to be a technical barrier 
to trade and, as such, an unnecessary restriction on tr ade.  He reiterated his delegation's request that 
China seriously try to develop a system less heavy, less onerous, less burdensome and less a barrier to 
trade.  Similarly, he reiterated his delegation's c oncerns over China's automotive policy and wished to 
record in the minutes of this meting his delegati on's request that China allow foreign majority 
investment in the automotive sector and that it rem ove the so-called two-plus-two regulation affecting 
foreign participation in both passenger and commercial vehicle sectors.  He also wished to record its 
request that China accede to the UN-EEC 1958 Agreement on Automobile and Auto-parts 
Promulgation which would have the effect of removing this important obstacle to trade. 
 
7.13 He added that in the Market Access Committe e, his delegation had also raised a number of 
further concerns affecting sectors such as steel, sh ip-building, petro-chemicals, pharmaceuticals and 
cosmetics.  Concerns relating to Chinese regula tions and policies in these areas, varying from joint-
venture limitations, unjustified subsidies, local content requirements which appeared to be 
inconsistent with Article III of the GATT and the TRIMs and the Technical Barriers to Trade 
Agreements.  Again, his delegation remained unsatisfi ed with the answers given so far.  However, it 
remained optimistic that China would provide co mprehensive, written answers to the legitimate 
questions it and other delegations ha d raised.  He also asked if, at this time, China could provide 
information on its state of preparation for nego tiating its accession to the Government Procurement 
Agreement, which was an important step his delega tion was looking forward to and, again, constituted 
an important commitment in China's Accession Protocol. 
 7.14 The representative of Cuba
 reiterated her delegation's system ic concerns which it had voiced 
last year in this Council as well as this year in  the Market Access Committee.  Her delegation's on-
going concern was with regard to the discrimina tion in the Transitional Review Mechanism.  Her 
country was suffering because of export restrictions imposed by a WTO Member.  She had no 
intention of notifying goods and products and did not understand why a transitional process was being 
imposed on China.  All Members were subject to rules.   However, to her delegation, it appeared that 
some might be more subject to the rules than others .  She requested the US to be as forceful when it 
came to requesting elimination of restrictions which had been in place against her country for 
decades.  All Members must abide by the rules.  A Member could not ask another Member to do 
something when it was not doing what it was requ esting.  Members had to practice what they 
preached and people living in glass houses should not  throw stones.  She understood the concerns 
expressed by the US and the EC.  She believed there had to be further dialog ue but above all greater 
compliance with the rules of the WTO a nd she asked all Members to do so.   
 
7.15 The representative of China  voiced confusion as to where the Council was on its agenda with 
respect to this agenda item.  He understood that under the first sub-item, Members were supposed to 
make comments about the subsidiary body reviews.  Listening to some Members, it seemed that they 
had raised some substantial questi ons.  It appeared that some Members had difficulty in understanding 
what the Chairman was suggesting and in following th e WTO rules.  The EC delegate mentioned that 
his delegation was still requesting China to provide written answers but the rules in paragraph 18 of 
China's Accession Protocol did not require that.  Hi s delegation hoped that Members, before coming 
to this exercise, would study the rules carefully.  Otherwise it would be difficult to continue this 
exercise.  7.16 The Chairman
 proposed that the Council take note of the statements made and of the reports 
submitted by the subsidiary bodies. 
 7.17 The Council so agreed
. 
 G/L/844 
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  B. CTG-
SPECIFIC REVIEW  
7.18 The Chairman  recalled that China was required to provide information to the Council for 
Trade in Goods in accordance with paragraph 18.1  of the Protocol of Accession. The relevant 
information requirements were listed in Annex 1A.  China had submitted information as required 
under Annex 1A of the Protocol of Accession in document G/C/W/591.  He also drew Members' 
attention to the questions from Japan which were  circulated in document G/C/W/586;  and the 
questions from the United States circulated in documents G/C/W/587 and 589.  7.19 The representative of China
 said that his delegation's submis sion spoke for itself.  He added 
that some of the questions raised by the US and th e EC had already been addressed by his delegation's 
submission in G/C/W/591.  He noted that the US said that it had not had time to study this submission 
and apologised if the questions were answered in th e document.  However, the US asked the questions 
again.  China had provided responses but other Memb ers said they had not seen any response.  There 
was a question about communication.  China would like to show that it had effective communication 
with other Members but if Members were turning a blind eye to this fact by saying something or 
insisting on allegations that were untrue, then his delegation had to remind Members to study this 
document that China had provided for information.   If Members still had questions they would be 
welcome to raise them.  In this stage, his delega tion would listen to other Me mbers and if they still 
had questions, his delegation woul d try to respond to them.   
 7.20 The Chairman
 acknowledged that some Members might not have had the time to study the 
Chinese submission.  He asked Japan and the Un ited States if they wished to introduce their 
submissions.  7.21 The representative of Japan
 said that, having submitted its questions and comments on 
1 November 2007, it did not have a chance to ex amine the information submitted by China on 
19 November 2007.  After quickly glancing through China's submission, she considered that her 
delegation still needed more information from Chin a.  She highlighted the 5 issues her delegation 
raised before this Council.  Regarding the ex port prohibition of natural sand, her delegation 
understood that China maintained this prohibitio n for the purpose of environment protection and 
natural resource preservation.  She asked if China had any restrictions on domestic production or 
consumption of natural sand.  If so , her delegation wanted to know the details and, if not, it would like 
to hear China's justification for maintaini ng export prohibitions contrary to WTO rules. 
 7.22 Regarding the export restrictions on fluor ite, her delegation had raised this concern 
consecutively for the past few years.   It repeated the same questions  because it was not convinced that 
China's justification was sufficient.  Last year Japan  had asked China to give concrete data to show 
that China's domestic production controls were effectively conducted.  Her delegation had not 
received such data and could no t find any concrete data in th e report submitted by China on 
19 November.  This was why her delegation was not  convinced that this export restriction was 
inconsistent with the WTO Rules.  7.23 Third and fourth, her delegation also rai sed export restrictions on cokes and non-ferrous 
metals, issues already raised by the US, at the Market Access Committee this  year.  Her delegation 
had not received convincing justification from China fo r maintaining these restrictions neither.  As for 
cokes, her delegation wished to see the quantitati ve effects of China's measures for reducing the 
domestic production and consumption of cokes.  Her delegation also wished to know if there were any 
plans to reform the export licensing measures.  If so, she asked China to provide the details about it.  
As for non-ferrous metals, China had so far expl ained that resource protection and environmental 
conservation and a trade surplus reduction were the reasons for these quantitative trade restrictions.  
In terms of resource protection, she asked if Ch ina had restrictions on domestic production and 
consumption of these metals and, if that was the case, how effective were these domestic restrictions.   G/L/844 
 Page 7 
 
 
  In terms of a trade surplus reduction, she requested  clarification on the consistency of the quantitative 
trade restriction with the rules in GATT 1994 for that purpose.   7.24 Finally, she asked when China would star t its negotiation for its accession to the Government 
Procurement Agreement.  Her delega tion had raised the same issue l ast year at the Council for Trade 
in Goods, and China had responded that it wa s working on the initial offer for the accession 
negotiation.  Her delegation would be grateful if it could start the negotiations in the near future and 
would be happy to hear from China an update  on the current situation of this issue. 
 7.25 The representative of the United States
 did not believe that the matter could be dealt with by 
Members reviewing China's submission under An nex I.A and coming back with any additional 
questions.  The Annex I.A submission was not long and he glanced through it during the previous 
intervention.  With respect to his delegation's firs t area of concern, export restrictions, there was a 
section in China's submission that dealt with export restrictions but it was simply an assertion that its export restrictions were in conformity with Artic le XX.  His delegation had gone to the trouble to 
make a specific presentation, both written and or al.  Coke was the primary example where China's 
production continued to rise and exports were almost  entirely limited.  His delegation believed that it 
deserved an answer and not just an assertion that China's restrictions were in conformity with 
Article XX.  How could this be so given the histor y of this particular product?  His delegation cited 
other products as well, e.g., fluorspar, indium, ma gnesium carbonate.  There were lots of examples, 
and his delegation looked forward to having substantive answers from  China on how its policies were 
in conformity with its WTO obliga tions, given the points raised.   
 7.26 Other issues that his delegation raised we re not addressed in the Annex I.A submission, for 
example, the value-added tax on agricultural goods, specific questions on textiles, technology, and the 
banking and financial sectors.  His delegation ha d extensive questions on state trading entities and 
enterprises.  China gave a short response basically sa ying that there had been no change in this area 
since the last review, plus a couple of specific r esponses to other areas.  These responses were not 
nearly as responsive to the questions as his delega tion believed would be pro portionate to the points 
put forward.  His delegation also raised the No rth-East Revitalization Programme's sections on 
disclosure and transparency.  His delegation had made an extensive presentation in its written submission as well as in its oral  submission on export duties, on lead metal, on import restrictions, on  
technologies, on mergers and acquis ition regulations, and on medical de vice border examinations.  It, 
therefore, considered that, in conformity with how this process was supposed  to work, it expected a 
corresponding effort on China's side to demonstrate how the questions raised, with respect to their 
compliance with their WTO obligations, were or were not valid.  
7.27 The representative of China
 said that his delegation would respond to the questions one-by-
one.  His delegation had responded but he noted th at these responses were not satisfactory to some 
delegations.  Nevertheless , one could not say that his delegation had not responded.  He also thanked 
Cuba for the point it made that the WTO rules applie d to different Members in different ways and that 
there was some discrimination between some Me mbers.  Everybody knew that Paragraph 18 was  
discriminatory against China because no other Member  was required to go through this Review every 
year.  But, China had signed an agreement and, ther efore, was prepared to respect it, but strictly in 
accordance with paragraph 18.  He passed the floor to his colleague, the expert on CTG matters. 
 7.28 The representative of China voiced his disappoi ntment with some Members' statements which 
did not show any respect for China's efforts in the past six years under the transitional review 
mechanism.  He also believed that some Members ha d tried to misinterpret China's policies.  Having 
said that, he still wished to provide the inform ation in response to the questions and comments 
submitted to China prior to the meeting.  First of  all, he noted that, since its accession, China had 
ensured transparency in trade its policy regi me, including policies regarding export quantitative 
measures.  China reported to the Committee on Mark et Access a new and full notification on import G/L/844 
Page 8  
 
  and export quantitative measures every year.  Besid es, other export measures such as tariff and VAT 
rebates were included in the A nnex 1A information China had s ubmitted to this Council.  He 
considered that Members who raised questions rega rding this notification should have acquired the 
necessary information.  
7.29 In regard to the export control imposed on natural resource products, he clarified that both 
export controls and domes tic production and consumption controls  were in place, consistent with 
Article XX of GATT 1994.  Coke, for example, wa s an exhaustible resource, and the industry was 
highly polluting and energy consuming.  In order to  protect the environment and achieve sustainable 
development, China had implemented a series of m easures to exercise control over export and at the 
same time limit the domestic pr oduction and consumption of coke, including the following measures: 
 
(1) On 1 September 1999 and 1 January 2000, the former State Economic and 
Trade Commission (SETC) published the First Batch of Catalogue of Prohibitions of Repetitive Project Inv estment in Industrial and Commercial 
Area, and the Second Batch of Catal ogue of Outdated Production Capacity, 
Techniques and Products; 
 (2) On 27 May 2004, nine ministries jointly published the Circular on Streamlining 
Administration on Coke Industry, which stipulated that: 
 
(a) small coke factories must be s hut down and qualified manufacturers 
had to pay a heavy fee for causing serious pollution; 
(b) all coke projects since 2000 must be reviewed and those failed to meet 
the published standards have been terminated; 
(c) enforcement against illegal sales of export quota licence for coke 
should be made more effective. 
(3) On 16 December 2004, the NDRC published Announcement No. 76 of 2004, 
which set the standard for market access to coke industry.   
7.30 However, it may still take some time to see the result of China's efforts in terms of restricting 
the coke production of the domestic industry.  Besi des, the allocation of quotas, such as the applied 
quantity and historical performance, was consiste nt with the WTO requirements and China's accession 
commitment.  Commercial interest was the primary consideration of the Chinese coke exporting 
companies when choosing their trade partners and, th erefore, the price of coke was determined by the 
market and not by the export quota system.  China hoped that WTO Members duly recognized the sacrifices China had made, as well as the pressu re and dilemmas China was facing in environmental 
protection and natural resource conservation.  Its e fforts to achieve sustainable development should be 
understood and supported by Members. 
7.31 Regarding VAT exemption for some agricu ltural products, currently the major players in 
China's grain market included farmers, grain purch asing and trading entities at various levels, and end 
users.  The sale of agricultural products produced  by small farmers was exempted from VAT.  This 
was due to the fact that at the present stage in Ch ina, agricultural production was still characteristic of 
extremely small scale farming.  The current VAT system could not effectively cover the sales of grains 
produced by small farmers.  Howeve r, it should be noted that when farmers bought agricultural input, 
the price of which contained VAT, they had to unde rtake the VAT burden.  This part of VAT was not 
deducted when farmers sold their gr ains and thus generated a loss of their due income.  Therefore, 
when selling agricultural products, farmers were unde rtaking a de facto VAT burden, although they 
did not have to pay a de jure  VAT.  Moreover, transactions among grain trading or purchasing entities  G/L/844 
 Page 9 
 
 
  and sales by them to end users were subject to VAT.  Since imported grain was also purchased by the 
same grain trading or purchasing entities and since both domestic and import grain purchased by these entities or sold to end users by these entities were subject to VAT, China believed that such practice 
was in line with Article III of the GATT 1994 an d Article 3 of the Subsidies and Countervailing 
Measures Agreement. 
7.32 Regarding the consistency between the subsidy policy of local governments and the WTO 
rules, China had implemented a unified trade po licy framework across the entire country.  After 
China's entry into the WTO, the central government had sent clear in structions to local governments 
to abolish measures inconsistent with WTO rules at the earliest.  During recent years, local governments had begun to review lo cal subsidies to ensure their consistency with WTO rules.  
Regarding incentive policies in support of the deve lopment of the software industry, the policy 
objective of these incentives was to up grade the industry structure, wh ich would in turn enhance the 
development of the service industry, e.g., softwa re outsourcing.  These trade promotion measures and 
initiatives were permitted according to WTO rules.  Regarding integrated circuits, the incentives 
enjoyed by those 94 enterprises in the list releas ed by the NDRC, the Ministry of Information 
Industry, the General Customs Administration and the State Administration of Taxation, had been 
specified in the Notice of the State Council on Issuing Relevant Policies on Encouraging the 
Development of Software Industry and IT Industry  (GUO FA (2000) No. 18).  Related policies were 
not contingent upon export performance. 
7.33 Regarding the banking sector, state industrial policies indicated the direction and objective of 
industrial development, i.e. optimizing the indust ry structure, limiting the development of sunset 
industries and high energy-consuming industries in order to protect the environment and achieve 
sustainable development.  Therefore, taking into account the state industrial policies when issuing loans would help the commercial banks avoid risks a nd maximize their return.  He added that state-
owned enterprises in China had been responsible fo r their loss or profit, and for making independent 
commercial decisions since China's accession to the WTO.  How state-owned enterprises were 
managed or what privatization programmes woul d be implemented had nothing to do with the 
Subsidies and Countervailing Measures Agreement.  The Blueprint for the Northeast Revitalization 
Programme  encouraged the development of private sect ors, and provided state owned enterprises and 
other enterprises with equitable treatment in  the areas of market access, import and export 
administration, land use, credit loans and bond issuance. 
7.34 Regarding transparency, as it had committed in the Accession Protocol, China established a 
single journal to publicize all the trade-related la w regulation and rules.  Currently, all the major 
trade-related competent authorities sent copies of their newly published documents or draft to the 
MOFCOM Gazette.  Moreover, on 5 April 2007, the State Council published its Decree No. 492 of 
2007 the Regulation on Government Information Disclosure,  which would further enhance 
transparency of trade policies.  For the direc tive No. 95 of the ICAO, his government had responded 
to the questions under the Technical Barriers to  Trade Committee which was fully reflected in 
paragraph 24 of the WTO document G/TBT/22.  Members could revisit this document to asses 
China's response.  For the mergers and acquisition re gulation which concerned the US, as stated in the 
TRIMs Committee, China did not believe that this issue was, in any way, related to the TRIMs 
Agreement, or to the mandate of this Council. 
7.35 For technology import restrictions and prohi bitions, Members could have access to the two 
catalogues of technologies through Chin a's central government website at 
http://www.gov.cn/ziliao/flfg/2007-11/02/content_79 3830.htm.  The two catalogues mainly included 
out-dated technology used to produce high ener gy consumption or high pollution products, 
technology that might be used for illegal purposes, and technology that might harm national security.  
China believed its practice was in line with the WTO rules especially Article XXI, while not relevant 
to Article XI. G/L/844 
Page 10  
 
  7.36 The representative of Japan
 stressed that her delegation appreciated the efforts put forth by 
China in the TRM.  She found China's last interv ention very informative, adding that it would be 
helpful if China could circulate its oral interven tion in a non-paper.  She made this request on the 
understanding that this was not an obligation for China in relation to the TRM.   
7.37 The representative of China  thanked Japan for its appreciation.  With regard to the request for 
a copy of his delegation's oral statement, his de legation was willing to discuss an arrangement with 
the Japanese delegation after this meeting.  O fficially, it had stated that, under the TRM, his 
delegation had no obligation to provide a written stat ement.  However, it understood the need for the 
Japanese delegate to have such a copy and it was w illing to help.  He added, with respect to the 
Government Procurement Agreement, that China ha d been preparing its negotiations on the possible 
accession to Government Procurement Agreement, according to its accession commitment.  He 
assured Members that China had been taking me asures to fulfil its commitment to join the 
Government Procurement Agreement as soon as possibl e   He also drew attention to the oral 
statement by the European Communities and consid ered it odd that the EC was requesting a written 
statement from his delegation while it provided its statement in only an oral format.  He urged 
Members to study the rules of the WTO TRM so that all would have an understanding of how this 
exercise should be conducted and of the nature of  its limitations.  In this way, the co-operation 
between China and other Members under the TPR would be effective. 
7.38 The Chairman  proposed that the Council take note of the statements made.  He suggested that 
the Council proceed in the same manne r as last year with respect to the form of its report of the 
Review.  This would mean that a brief factual report would be prepared with references to the 
documents and attached to it the portion of the minutes of this meeting which related to the 
Transitional Review.  The report from the Council for Trade in Goods, as well as the reports of the subsidiary bodies, would then be transmitted to the General Council. 
 7.39 The Council so agreed
.   
 
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