WORLD  TRADE  
ORGANIZATION  WT/TPR/S/230/Rev.1 
5 July 2010  
 
(10-3641) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
CHINA 
 
Revision 
 
 
 
 
This report, prepared for the third Tr ade Policy Review of China, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from China on its trade policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Masahiro Hayafuji (tel.:  022 739 5873) and Mrs. Zheng Wang 
(tel.:  022 739 5288). 
 
Document WT/TPR/G/230 contains the policy statement submitted by China. 
 
 
 China WT/TPR/S/230/Rev.1 
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CONTENTS 
 
  Page 
SUMMARY   vii 
I. ECONOMIC ENVIRONMENT 1 
 (1) T RADE AND DEVELOPMENT POLICIES  1 
 (2) R ECENT ECONOMIC AND TRADE DEVELOPMENTS  5 
 (3) S TRUCTURAL POLICIES  7 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 11 
 (1) I NTRODUCTION  11 
 (2) I NSTITUTIONAL AND LEGAL FRAMEWORK  11 
 (i) Transparency 12 
 (ii) Central-Provincial relations in the pub lic sector and local barriers to internal 
trade 13 
 (3) F ORMULATION , ADMINISTRATION , AND IMPLEMENTATION OF TRADE POLICY  13 
 (i) Main trade laws 13 
 (ii) Agencies involved in trade policy implementation 14 
 (4) T RADE POLICY OBJECTIVES  14 
 (5) T RADE AGREEMENTS AND ARRANGEMENTS  15 
 (i) WTO 15  (ii) Regional arrangements 16 
 (iii) Bilateral arrangements 17 
 (iv) Unilateral preferences 20 
 (6) F
OREIGN INVESTMENT REGIME  21 
 (7) F OREIGN ASSISTANCE  22 
 (i) Assistance to China 22  (ii) China's assistance to foreign countries 23 
III. TRADE POLICIES AND PRACTICES BY MEASURE 24 
 (1) I
NTRODUCTION  24 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  25 
 (i) Customs procedures, valuation, and rules of origin 25  (ii) Tariffs 26 
 (iii) Indirect taxes affecting imports 33 
 (iv) Import prohibitions and licensing 33  (v) State trading 34 
 (vi) Contingency measures 35 
 (vii) Standards and other technical requirements 35  (viii) Government procurement 39 
 (ix) Import-related financing 42 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  42 
 (i) Procedures 42 
 (ii) Export subsidies 42 
 (iii) Export taxes 42  (iv) Tax rebates on exports 43 
 (v) Tax concessions under processing trade 44 WT/TPR/S/230/Rev.1 Trade Policy Review 
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  Page 
 
 (vi) Export prohibitions, restrictions, and licensing 45 
 (vii) Measures maintained by importing countries 46 
 (viii) State trading 46  (ix) Export facilitation and marketing assistance 47 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  47 
 (i) Taxation and tax incentives 47  (ii) Direct expenditures, industrial policies, and price "guidance" measures 52 
 (iii) State-owned enterprises, private enterprises, and corporate governance 54 
 (iv) Competition and consumer protection policy 58 
 (v) Intellectual property rights 61 
IV. TRADE POLICIES BY SECTOR 69 
 (1) I
NTRODUCTION  69 
 (2) A GRICULTURE  70 
 (i) Features and market developments 70  (ii) Policy objectives and administration 71 
 (iii) Policy instruments 72 
 (3) E
NERGY   76 
 (4) M ANUFACTURING  78 
 (5) S ERVICES  79 
 (i) Overview 79  (ii) Financial services 79 
 (iii) Telecommunications 88 
 (iv) Transport services 91  (v) Postal and courier services 96 
 (vi) Tourism 97 
 (vii) Other services 98 
REFERENCES   99 
APPENDIX TABLES  101 
 
 
 China WT/TPR/S/230/Rev.1 
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CHARTS 
 
    P a g e  
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
III.1 Average applied MFN and final bound tariff rates, by HS section, 2007, 2009, and 2010 28 
III.2 Distribution of MFN tariff rates, 2007 and 2009 30 III.3 Tariff escalation by 2-digit ISIC industry, 2009 30 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 I.1 Selected macroeconomi c indicators, 2005-09 2 
I.2 GDP by sector, 2005-09 9 
 III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
III.1 China's tariff structure, 2005, 2007, and 2009 27 
III.2 Summary analysis of Chin a's preferential tariff, 2009 31 
III.3 Products subject to export quotas and licensing, 2009 46 III.4 Tax revenue, 2005-09 48 
III.5 Selected governmen t transfers, 2007-08 52 
III.6 Y 4 trillion Stimulus Package, November 2008 53 III.7 Intellectual property enforcement, 2006-08 64 
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT  
 
AI.1 Trade and trade-related measures adopted by China, October 2008-February 2010 103 
AI.2 Merchandise exports by group of products, 2005-09 106 
AI.3 Merchandise imports by group of products, 2005-09 107 AI.4 Merchandise exports by destination, 2005-09 108 
AI.5 Merchandise imports by origin, 2005-09 109 
 II. TRADE
 POLICY  REGIME:   FRAMEWORK  AND  OBJECTIVES 
 
AII.1 China's major trade-related la ws and regulations, December 2009 110 
AII.2 Principal notifications unde r WTO Agreements, December 2009 116 
AII.3 Involvement in the WTO dispute settlement mechanism, December 2009 119  
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 AIII.1 China's preferential rules of origin, 2009 121 
AIII.2 Imports allocated to state-trading enterprises, 2007-09 123 
AIII.3 Import and export quantities for products subj ect to state-trading arrangements, 2006-08 124 
AIII.4 Export products subject to state-trading arrangements, 2009 126 
AIII.5 Excise (or consumption) tax, 2008-09 128 
AIII.6 International trade, processing trade, and shares of FIEs, 2007-09 130 
AIII.7 China's membership of international intellectual property rights conventions, 2009 131 
AIII.8 Patents applied for and granted, 2007-08 132 China WT/TPR/S/230/Rev.1 
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SUMMARY 
 
1. Since its previous Trade Policy 
Review in 2008, China has continued the 
gradual liberalization of its international trade 
and investment regime.  According to the Government, gradualism in economic reform 
is motivated by the need to maintain economic and social stability.   
2. China's dependence on export-led 
growth left it vulnerable to the effects of the global economic recession that began in late 2008.  In 2009, China's exports fell by 16%.  Imports fell by 11%, reflecting the high import-intensity of its manufactured exports.  
Real GDP growth declined from 9.6% in 2008 
to a year-on-year rate of 6.2% in the first quarter of 2009, the lowest rate in more than a decade.  However, growth rebounded in subsequent quarters so that in 2009 overall, 
China achieved real GDP growth of 8.7%.  In 
January 2010, China overtook Germany to become the world's largest exporter.  China remains the world's second largest importer, behind the United States. 
3. China's evident su ccess in competing 
for global markets and its continued heavy 
dependence on manufactured exports leaves it vulnerable to trade friction with its trading partners.  Membership in the WTO provides China with considerable legal security against 
a significant tightening of restrictions on its 
exports.  Like other WTO Members, China resisted a protectionist response to the effects of the global economic recession. 
4. The Chinese Government responded 
to the effects of the global economic recession 
by introducing expansionary fiscal and monetary policies to offset the sharp decline in external demand, putting more emphasis on domestic demand to drive GDP growth.  In particular, China announced a Y 4 trillion 
(13% of GDP in 2008) economic stimulus 
package in November 2008, covering a period of two years.  Partly reflecting the temporary increase in government expenditure, the surplus of domestic savings over domestic 
investment declined, and China's current account surplus, the international counterpart 
of China's domestic saving and investment balance in its balance of payments, narrowed from 9.4% in 2008 to 5.8% in 2009. 
5. The Government recognizes that 
temporary measures alone are not sufficient to correct imbalances in China's pattern of economic growth and development, which are macroeconomic and structural in nature.  
Achieving a better balance between external 
and domestic demand to drive its growth, and further liberalization of its import and export policies multilaterally will reinforce China's leadership role in helping, together with other WTO Members, to redress trade and economic 
imbalances of international importance in 
ways that minimize the risk to global growth and prosperity. 
6. The crisis has reinforced China's 
intention to undertake more longer-term 
structural reforms that are needed to 
strengthen its social safety net, reduce precautionary saving by households, diversify its economic structure, and to improve its underdeveloped capital market, which has contributed to high enterprise saving and thus 
impeded the Government's efforts to boost 
domestic demand.   
7. In order to rely less on manufacturing, 
the Government has relaxed FDI restrictions on some services sectors and is fostering the 
development of agriculture by providing 
production subsidies and phasing out agricultural taxes.  
8. China's heavy reliance on 
manufacturing has resulted in over-investment 
and hence excess capacity in certain industries, 
which became obvious when external demand declined.  Over-investment is partly the consequence of the absence of a sufficiently well-functioning capital market, monetary policy that is not entirely based on market 
instruments, and the Government's "guidance" 
in allocating resources to specific manufacturing activities.   WT/TPR/S/230/Rev.1 Trade Policy Review 
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9. China has continued its efforts to 
develop its capital market in order to facilitate the channelling of high domestic savings into the most profitable investments by, for 
example, strengthening corporate governance 
and the trading of shares on the stock market and thereby increasing the role of equity finance.  Furthermore, as the authorities recognize, China needs to  enhance the 
transparency of government policies and 
measures, increase dividend payments by state-owned enterprises to the Government, and strengthen the protection of intellectual property rights. 
10. On China's exchange rate, between 
July 2005 (when its exchange rate reform 
started) and September 2008, the renminbi (RMB) appreciated by 21.4% against the U.S. dollar, 13.6% against th e yen, and remained 
practically unchanged against the euro.  Since 
then, the RMB has remain ed stable against the 
U.S. dollar and depreciated against some major currencies (for example, the euro) in 2009.  At the time of its most recent examination of this issue, the IMF welcomed the important progress made in the past few 
years in increasing the market’s role in 
determining the exchange rate, as well as the consequent substantial real appreciation that has been achieved since the exchange rate reform in 2005.  Some IMF directors 
nevertheless supported the view that the RMB 
remains "substantially undervalued".  The Peoples Bank of China (PBC) maintains that under China's "managed floating" exchange rate regime, the RMB rate is based on supply 
and demand of the market and is adjusted with 
reference to a basket of currencies;  it wishes to maintain the exchange rate of the RMB basically stable at an adaptative and balanced level. 
11. While China has recently intensified 
its pursuit of bilateral/regional free-trade 
agreements, preferential margins provided by China are still small and trade with FTA partners still accounts for a minor share of its total trade.  During the review period, direct 
cross-strait links were established between China and Chinese Taipei in terms of air and 
maritime transport and postal services. 
12. China's average applied MFN tariff 
was 9.5% in 2009, slightly lower than in 2007 
(9.7%).  Bound rates are close to the applied 
rates, giving the tariff a high degree of predictability.  Nonetheless, the tariff could be complex, as, for example, the applied MFN tariff contains 60 different ad valorem  rates.   
13. China still uses various non-tariff 
border measures, such as import and export licensing or state trading to "guide" the allocation of resources.  China's trade remedy activity is assuming increasing importance, while China remains the most frequent target 
of anti-dumping measures. 
14. Around 15% of China's national 
standards are mandatory.  The rest are voluntary, although their implementation can be complex.  Some 46% of its national 
standards are equivalent to international 
standards.  Its SPS regime on the testing of dairy products for domestic consumption and for exports has been strengthened, and China has suspended its quality inspection exemption system.   
15. China's Government Procurement Law 
stipulates that the Government should procure domestic goods, projects, and services, although there are no provisions on local content or rules of origin to determine whether 
a product is produced domestically.  China 
applied to join the WTO GPA in December 2007.  Parties have expressed their willingness to work with China to facilitate its accession process, although some parties have 
expressed concerns in the WTO GPA 
Committee regarding, inter alia,  China's 
indigenous innovation initiative.  China's accession to the GPA should bring fundamental changes to its government 
procurement framework. 
16. China's export barriers have not been 
falling at the same pace as its import barriers. It still uses various export restrictions, including prohibitions, licensing, quotas, China WT/TPR/S/230/Rev.1 
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taxes, and less-than-full VAT rebates, to 
manage certain exports on grounds of natural 
resource and energy conservation.  However, export restraints tend to  reduce export volumes 
of the targeted products and divert supplies to 
the domestic market, leading to downward pressure on the domestic prices of these products, and thus may implicitly assist domestic downstream processing of the 
products concerned.  China is starting to 
consider more suitable internal (rather than trade) measures to conserve natural resources, save energy, and protect the environment.  For example, it is considering levying an environmental tax on the production/extraction 
of natural resources during the 12
th Five-Year 
plan period (2011-15).   
17. China has continued to review, revise, 
or amend its trade and related laws.  These include the Anti-Monopoly Law (effective 
1 August 2008), China's first comprehensive 
competition law and the Patent Law (effective 1 October 2009), which strengthened patent protection by, inter alia , increasing penalties 
against infringement.  Ch ina has also reformed 
its tax system to render it more neutral;  in 
particular, this involved the unification of 
enterprise income tax ra tes for all companies 
(domestic and foreign), and the  transformation of VAT from a production-based tax to a consumption-based one. 
18. China has continued to improve its 
legislative framework and intensify the enforcement of IPR protection, and has identified the promotion of innovation as a   national development strategy.  The country 
has become increasingly aware of the importance of IPR protection in facilitating domestic innovation.  Enforcing IPRs at the 
border is the responsibility of Customs, and 
China pays special attention to IPR protection in respect of exports.  Following a dispute at the WTO on the enforcement of IPRs, China notified that it is revising its Copyright Law 
based on recommendations and rulings of the 
DSB. 
19. Since its previous review, China has 
relaxed restrictions on FDI in services, notably in telecommunications and tourism, and the Central Government has been delegating to 
local governments licensing authority for the 
establishment and modification of operations of "encouraged" foreign-invested enterprises (FIEs) and certain selected sectors, as well as certain types of FIEs, such as foreign-invested 
joint-stock companies.  Nonetheless, there are 
still significant restrictions, such as foreign participation limits, on foreign investment in some sectors and private-sector activities. 
20. In banking, stringent qualification 
requirements remain, including high minimum 
asset requirements on sole or controlling 
shareholders and high minimum paid-up capital amounts, restrictions on the supply of credit-card services, and restrictions on the business scope of foreign banks branches.  The 
stock market in China has continued to 
develop during the period under review, and the process of converting shares of SOEs to be traded in the market has progressed.