COMMISSION IMPLEMENTING REGULATION (EU) 2021/2011

of 17 November 2021

imposing a definitive anti-dumping duty on imports of optical fibre cables originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (‘the basic Regulation’) (1), and in particular Article 9(4) thereof,

Whereas:

1. PROCEDURE

1.1. Initiation

(1) On 24 September 2020, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of optical fibre cables originating in the People’s Republic of China (‘China’, ‘PRC’ or ‘the country concerned’) on the basis of Article 5 of the basic Regulation. It published a Notice of initiation in the Official Journal of the European Union (2) (‘the Notice of initiation’).

(2) The Commission initiated the investigation following a complaint lodged by Europacable (‘the complainant’) on behalf of Union producers. The complainant represented more than 25 % of the total Union production of optical fibre cables. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3) On 21 December 2020, the Commission initiated an anti-subsidy investigation with regard to imports of optical fibre cables originating in the People’s Republic of China and commenced a separate investigation. It published a Notice of initiation in the Official Journal of the European Union (3).

1.2. Registration of imports

(4) Following a request from the complainant supported by the required evidence on 17 December 2020, the Commission made imports of the product concerned subject to registration under Article 14(5) of the basic Regulation by Commission Implementing Regulation (EU) 2021/548 of 29 March 2021 (‘the registration Regulation’) (4).

1.3. Interested parties

(5) In the Notice of initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, the known Union producers, the known Union associations, the known exporting producers, the authorities of China, the known importers, the known traders and users about the initiation of the investigation and invited them to participate.

(6) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. Hearings took place with the complainant and with one sampled importer (Cable 77 Danmark ApS (‘Cable 77’)).

1.4. Comments on initiation

(7) The Commission received comments on initiation from the Government of China (‘the GOC’), the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (‘CCCME’), the complainant, and one importer (Connect Com GmbH (‘Connect Com’)).

(8) Connect Com claimed that there was a need for more information and clarification regarding the complaint. In particular, it claimed that the deterioration of the market situation of the EU industry was not due to favourably priced imports from the People’s Republic of China but to relatively high internal transfer prices for intercompany transactions. Also, Connect Com claimed that the list of EU producers was incomplete in the complaint. As these comments concern the substance of the case rather than initiation, they are addressed below in recital (415) and in recitals (539) to (541).

(9) On the substantive requirements for the initiation of the investigation, the CCCME claimed that the complainant performed an incomplete injury assessment in the complaint, as the complainant did not provide figures on six of the fifteen injury indicators enumerated in Article 3.4 of the WTO Anti-Dumping Agreement (‘ADA’) (notably: productivity, return on investment, cash flow, wages, growth and the ability to raise capital or investments). Moreover, the CCCME argued that the complainant failed to provide any reliable/comparable data on sales prices.

(10) The Commission recalls, as the complainant already noted in its response to the comments of the GOC and the CCCME, that the applicable legal standard for the initiation of an anti-dumping investigation is Article 5.2 of the ADA, whereas Article 3.4 of the ADA constitutes the standard for the review by the investigating authority, in this case the Commission. Therefore, the complainant was bound to fulfil the requirements in Article 5.2 of the ADA, which is mirrored by Article 5(2) of the basic Regulation. Whereas, as the CCCME noted, Article 5.2. of the ADA makes reference to Article 3.4 of the ADA, and that Article 5(2) of the basic Regulation makes reference to Article 3(5) of the basic Regulation, such a reference is merely illustrative in both instances (‘such as [factors and indices] listed in paragraphs 2 and 4 of Article 3’ and ‘such as [factors and indices] listed in Article 3(3) and (5)’) (5). Article 5.2 of the ADA and Article 5(2) of the basic Regulation provide that a complaint should include evidence of: a) dumping; b) injury; and c) a causal link between the dumped imports and alleged injury. The EU case-law clarifies that ‘the quantity and quality of the information provided by the complainant do not need to be at the level required for a preliminary or final determination of the existence of dumping, injury or a causal link’ (6). As a consequence, ‘evidence which is insufficient in quantity or quality to justify a preliminary or final determination of dumping, injury or causation, may nevertheless be sufficient to justify the initiation of an investigation’ (7).

(11) In reply to the claim that the complainant failed to provide reliable/comparable data on sales prices, the Commission considered that the version open for inspection by interested parties of the complaint contained all the essential evidence and non-confidential summaries of data provided under confidential cover in order for interested parties to exercise their right of defence throughout the proceeding.

(12) Article 19 of the basic Regulation and Article 6(5) of the ADA allow for the safeguarding of confidential information in circumstances where disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom that person has acquired the information.

(13) The Commission assessed and accepted that data on sales prices fell under these categories. In any event, the complainants provided a meaningful summary of the information contained in the limited annexes of the complaint so that interested parties may have a ‘reasonable understanding of the substance of the information submitted in confidence’ as set forth by Article 19(2) of the basic Regulation. The complainants adequately summarised information on sales prices, without disclosing sensitive company-specific data in annexes 44b and 67 of the complaint amongst other.

(14) The CCCME also submitted that there was no injury shown in the complaint, since the Union industry increased its production and the slight decrease in production capacity deriving from the inability of the Union Industry of supplying all newly developed consumption in Europe is not in itself an indicator of material injury. Sales volumes increased as well, while the Union industry retains a market share of almost 80 % and the profitability trend is unclear and does not show injury. In this respect, the complainant replied that the increase in the Union consumption benefitted Chinese imports, that the remaining market share does not bear relevance for the assessment of the injury and that effects of tenders won by Chinese producers will materialise after a certain time lag. The CCCME responded that consumption, production and production capacity data show that the Union industry was able to supply most of the increase in EU consumption, while expanding its business.

(15) In addition, the CCCME claimed that the complaint contained no evidence of a causal link between dumped imports and injury. Firstly, the CCCME argued that there was no correlation between imports from China and the development of the Union industry. By way of example, the CCCME submitted that amidst the strongest increase in import volume from China in 2017-2018, the Union industry had the most significant increase in profitability. Secondly, third-country imports increased between 2018 and 2019, contrary to imports from China, and their effect cannot therefore be attributable to China, and, if there is injury, this is a self-inflicted injury due to the Union industry’s slow reaction to market movements. The complainant reacted to this CCCME’s claim, stating that a causal link can be established, since the injury happened at the same time as the increase in imports from China, and that third-country imports were not considered because they were either de minimis or showed no evidence of injurious dumping. The CCCME responded recalling that, amidst the strongest increase in import volume from China in 2017-2018, the Union industry had the most significant increase in profitability and that there was no correlation between the increase of imports from China and the decreasing sales volumes of the Union industry. Instead, as regards third-country imports, the CCCME noted that in total third-country imports increased, while imports from China decreased between 2018 and 2019. Finally, the CCCME observed that the complainant did not challenge the arguments that virtually all injury indicators in the complaint displayed positive trends and that the alleged injury was at least to a certain degree self-inflicted.

(16) Furthermore, the CCCME stated that import data presented by the complainant are overstated because they were based on a wrong assumption in terms of volume, which would have resulted in a distorted increase in imports. Notably, imports from China would have decreased in 2019 instead of increasing. In addition undercutting calculations in the complaint were flawed because they referred only to one exporter in one specific tender. In this respect, the complainant replied that a longer period should be considered to see the increase in volume of imports, not denied by the CCCME and confirmed by third-party data from market intelligence (CRU), and that calculations were not flawed because the complainant was bound to provide only reasonably available information, which included information from several producers in the Union and in China. The CCCME responded that it was the duty of the complainant to substantiate its claims and provide proof in respect of import data and that market intelligence (CRU) data referred to optical fibres and not to optical fibre cables. As regards undercutting and underselling calculations, the CCCME reiterated that they did not meet the standard to constitute sufficient evidence and that for significant calculations the complainant referred only to the prices of one Chinese producer (e.g., the free circulation export price used for the calculation of the injury margin for H1 2019 and the export price used for the costs of production for the underselling margin for H2 2019).

(17) The Commission considers that none of the CCCME allegations disproved the conclusion that there was sufficient evidence for the initiation of an anti-dumping proceeding. Indeed, the complaint contained sufficient evidence that dumped imports had a materially injurious impact on the state of the Union industry. The specific injury analysis of the complaint shows increased penetration of the EU market (both in absolute and relative terms) by imports from China made at prices which substantially undercut the Union industry’s own prices. This appears to have had a materially injurious impact upon the state of the Union industry, shown for example by decreases in sales and market share or by a deterioration of financial results.

(18) The Commission did not agree that the undercutting and underselling calculations in the complaint were incorrect. The methodology is explained in the complaint under section 8.1.2 and annexes cited therein, which contain separate undercutting and underselling calculations for each representative product type. At initiation stage, the Commission was satisfied with the evidence of the undercutting and underselling brought forward by the applicants and considered it sufficient evidence to initiate the investigation.

(19) In relation to sufficient evidence of a causal link, the following should be noted. Firstly, the situation of the Union industry deteriorated at the same time as the increase in dumped imports at prices which significantly undercut those of the Union industry. This strongly shows the existence of a causal link. Secondly, concerning other factors such as third-country imports, their impact is not as such as to cause deterioration of the Union industry, whereas, the analysis of the complaint did not reveal self-inflicted injury.

(20) During a hearing which took place following to the non-imposition of provisional measures, CCCME submitted a series of comments concerning the injury, causation and Union interest analysis contained in the complaint. The Commission considers that these comments concerning the complaint cannot be received as raised at this very late stage of the investigation beyond the deadline set at point 5.2 of the Notice of initiation. In any event, most of these comments are repetitions of arguments already raised and addressed in this section and do not show any lack of sufficient evidence when the Commission decided to initiate this investigation. As concerns the new elements submitted, in addition to the timeframe provided in point 5.2 of the Notice of initiation, the Commission recalls that this stage of the investigation is well beyond the deadlines for submission of new information as set out in point 7 of the Notice of initiation.

(21) In its comments on final disclosure, Connect Com claimed that the information in the complaint showed trends that do not justify the imposition of anti-dumping duties. Connect Com also requested the disclosure of the confidential information in paragraphs 105 and 109 of the complaint regarding the profit of certain Union producers and the tenders lost to the Chinese producers.

(22) In this respect the Commission recalled that pursuant to point 5.2 of the Notice of initiation, interested parties had a possibility to submit comments on the complaint and any aspects regarding the initiation of the investigation within 37 days of the date of publication of the Notice of initiation. Therefore, these comments cannot be considered after the definitive disclosure. In any event, the information requested by Connect Com is confidential by nature and cannot be disclosed to other interested parties.

(23) On the basis of the above, the Commission confirmed that the complainant provided sufficient evidence of dumping, injury and a causal link, thereby satisfying the requirements set out in Article 5.2 of the ADA and Article 5(2) of the basic Regulation. Therefore, the Commission complied with all the statutory requirements for initiation.

(24) The Commission considered and addressed all the other relevant comments in the sections below.

1.5. Sampling

(25) In the Notice of initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

1.5.1. Sampling of Union producers

(26) In its Notice of initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the volume of production and sales of the like product in the Union during the investigation period. This sample consisted of three Union producers. The sampled Union producers accounted for 52 % of Union production in the investigation period and was considered representative of the Union industry. The Commission invited interested parties to comment on the provisional sample. No comments were received and therefore the sample was confirmed.

1.5.2. Sampling of importers

(27) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of initiation.

(28) Five unrelated importers provided the requested information and agreed to be included in the sample. After analysing the sampling information supplied by the importers, the Commission decided that sampling was not necessary and asked all cooperating importers to submit their replies to the questionnaire.

1.5.3. Sampling of exporting producers in China

(29) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in China to provide the information specified in the Notice of initiation. In addition, the Commission asked the Mission of the People’s Republic of China to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(30) Thirty exporting producers in the country concerned provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of two groups of exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. The sampled groups of exporting producers represented more than 40 % of the exports reported by exporting producers of optical fibre cables from China to the Union during the investigation period.

(31) In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned, and the authorities of the country concerned, were consulted on the selection of the sample.

(32) Comments on the selection of the sample were received from one non-sampled exporting producer, Yangtze Optical Fibre and Cable Joint Stock Limited Company (‘YOFC’) and the Mission of the People’s Republic of China to the European Union.

(33) YOFC and the Mission of the People’s Republic of China to the European Union argued that considering the large number of cooperating exporting producers, the two sampled companies accounted for a low proportion of export volume to the Union that were not representative for the Chinese exporters. Furthermore, it was claimed that a sample of three companies could better avoid the situation that, due to changes to the sampled companies, the sample could be reduced to one company. The Mission of the People’s Republic of China to the European Union referred to the anti-dumping investigation of imports of steel road wheels from China (8) in this regard, in which it was alleged that the rights of the other cooperating exporters were impaired as the sample made of two exporting producers was reduced to one after one sampled exporting producer decided, at a later stage, not to cooperate in the investigation. It was further stated that the Commission’s practice in previous anti-dumping investigations was to sampled at least three companies. Finally, it was claimed that a sampled of three companies would be more appropriate in view of the fact that the exporters may have different sales channels, type of products and customers and different competition situation.

(34) Pursuant Article 17(1) of the basic Regulation the selection of the sample should be based on the largest representative volume of production, sales or exports which can reasonably be investigated within the time available. As stated in recital (30), the sampled groups of exporting producers accounted for more than 40 % of the reported exports from China to the Union during the investigation period, a representative level. The Commission considered that the sample as selected contained the largest quantity of imports that could be reasonably investigated within the time available. In this context, the two sampled exporting producer groups contain a large number of entities (five manufacturing entities and seven sales entities), and at least four exporting producers with a variety of sales channels and customers, and a large number of products. Furthermore, whether a sampled company will indeed cooperate or not after being sampled is a necessary but not sufficient condition for an exporting producer to be considered for the selection of a sample under Article 17(1) of the basic Regulation. Regarding the alleged practice of the Commission to select a sample of at least three companies, it is noted that, as explained above, the selection of the sample was based on the largest representative volume of production, sales or exports which could be reasonably be investigated within the time available in this case. The claim of differences in competitive situation was rejected as the parties did not explain in what way this would put the representativity of the sample in question and furthermore how a third sampled company would address the differences in competition if any.

(35) YOFC stated that including YOFC in the sample would not be burdensome for the Commission as, due to COVID-19 pandemic, the Commission does not conduct on-spot verification visits.

(36) While the Commission’s team has not conducted on-spot verifications visits in this case, it conducted remote cross-checking (‘RCCs’) of questionnaire replies. RCCs do not mean that the Commission saved time during the investigation. It is rather the opposite as more time is needed for the preparation of the verification of the information provided by companies when it is done remotely. Therefore, the claim was rejected.

(37) YOFC also claimed that it should be included in the sample as it is an experienced producer that exports high quality optical fibre cables to the Union, and its manufacturing process is different from other Chinese producers (it is vertically integrated, uses European technology to produce optical fibre cables, has advanced technologies, is the sole National Intelligent Manufacturing Demonstration Unit in China, and has achieved high automatization in the production of optical fibres). It further claimed that its export volume to the Union during the investigation period was relatively large. Moreover, YOFC submitted that one of the sampled Union producers indirectly holds shares of YOFC and two of the related companies concerned of YOFC and, therefore, including YOFC in the sample would enable the Commission to have a more comprehensive knowledge of the structure of the industry. It was also claimed that some of YOFC’s Union customers were also cooperating in the investigation as unrelated importers and therefore including YOFC in the sample might help the Commission verify a complete sales chain from China to the Union market.

(38) As explained above, the sample of exporting producers was selected on the basis of the largest percentage of the volume of exports from the country in question which could reasonably be investigated within the time available. YOFC was not among the two largest exporting producers which were selected and therefore was not sampled. At any rate, the two sampled groups of exporting producers are large experienced groups of companies as well that manufacture and sell high quality optical fibre cables to the Union, including also vertically integrated entities. Furthermore, there is no information in the file indicating that the technology used by the sampled exporting producers would be less advanced than other Chinese exporting producers. YOFC has not presented any evidence that would contradict this fact. Moreover, neither the fact that one sampled Union producer holds shares in an exporting producer or that exporting producers’ customers are cooperating in the investigation is relevant for the selection of the sample of the exporting producers. Therefore, these claims were rejected.

1.6. Individual examination

(39) Eight of the Chinese exporting producers that returned the sampling form informed the Commission of their intention to request individual examination under Article 17(3) of the basic Regulation. The Commission made the questionnaire available online on the day of initiation. Moreover, the Commission informed the non-sampled exporting producers that they were required to provide a questionnaire reply if they wished to be examined individually. Two companies provided a questionnaire reply.

(40) Due to the complexity of the investigation and the complex structure of the sampled exporting producers, the Commission decided not to grant individual examination as it would have been unduly burdensome and could have impeded the Commission to complete the investigation within the statutory deadlines.

1.7. Questionnaire replies and verification visits

(41) The Commission sent a questionnaire concerning the existence of significant distortions in China within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of the People’s Republic of China (‘GOC’). The questionnaires for the Union producers, importers, users, and exporting producers in the China were made available online (9) on the day of initiation.

(42) The Commission sought and verified all the information deemed necessary for the determination of dumping, resulting injury and Union interest. Due to the outbreak of the COVID-19 pandemic and the consequent measures taken to deal with the outbreak (‘the COVID-19 Notice’) (10), the Commission was unable to carry out verification visits at the premises of the sampled companies and cooperating users. Instead, the Commission performed RCCs of the information provided by the following companies via videoconference: Union producers: — Acome S. A. (France), — Corning Optical Communications Sp. z o.o., and its related companies (Poland, Denmark, France, Germany, Italy, Spain), — Prysmian S.p.A., and its related companies (Denmark, Finland, France, Germany, Italy, Netherlands, Romania, Slovakia, Spain, Sweden) Importers: — Cable 77 Danmark ApS (Denmark), — Connect Com GmbH (Germany), — Eku Kabel GmbH (Germany), — Har&Ca S.r.l. (Italy), — Infraconcepts B.V. (Netherlands) Users: — Deutsche Telekom GmbH (Germany) Exporting producers in China: FTT group: — FiberHome Telecommunication Technologies Co., Ltd, Wuhan (‘FTT’), — Nanjing Wasin Fujikura Optical Communication Ltd., Nanjing (‘NW’), ZTT group: — Jiangsu Zhongtian Technology Co., Ltd., Nantong (‘ZT’), — Zhongtian Power Optical Cable Co., Ltd., Nantong (‘ZP’) Related trader in China: — ZTT International Limited, Nantong, Related trader in Hong Kong: — Sumec Hong Kong Company Limited, Hong Kong, Related importers in the Union: — FiberHome International Poland Sp. z o.o, Warszawa, Poland, — FiberHome International Germany GmbH, Bonn, Germany, — ZTT Europe GmbH, Tauberbischofsheim, Germany.

1.8. Non-imposition of provisional measures and subsequent procedure

(43) Given the technical complexity of the case, the Commission decided not to impose provisional measures and to continue the investigation in order to collect further information.

(44) On 23 April 2021, in accordance with Article 19a(2) of the basic Regulation, the Commission informed Member States and all interested parties that no provisional duties would be imposed on imports of optical fibre cables originating in China and that the investigation would continue.

(45) Following the disclosure of the Commission’s intention not to impose provisional measures, comments and requests for clarification were received from Cable 77, Eku Kabel, Infraconcept and Comel.

(46) The parties who so requested were granted an opportunity to be heard. A hearing took place with Cable 77 and with CCCME.

(47) The Commission continued seeking and verifying all information it deemed necessary for its definitive findings. In this respect, the Commission sent an additional request for information to the cooperating non-sampled exporting producers, to the sampled exporting producers and to the sampled Union producers including but not limited to sales data on the basis of groups of product control numbers (‘PCNs’), investments and tenders. The replies were verified by the Commission in an additional round of RCCs.

(48) Official import statistics are reported in kilograms, and CN code 8544 70 00 contains products other than the product concerned. To obtain a more precise picture of imports of the product concerned, the Commission scrutinised detailed information from national customs authorities on the full set of single import transactions over the 2017-IP period, as reported by importers in their customs declarations and processed by the aforementioned authorities. The information pertained to imports into 9 Member States (Bulgaria, Denmark, France, Germany, Hungary, the Netherlands, Portugal, Romania and Spain) and was considered representative, as it covered 79 % of imports in the period considered. Granular analysis on this basis led to the conclusions presented below.

1.9. Disclosure

(49) On 30 June 2021, the Commission informed all interested parties of the essential facts and considerations on the basis of which it intended to impose a definitive anti-dumping duty on imports of OFC originating in China (‘final disclosure’). All parties were granted a period within which they could make comments on the final disclosure. The Commission received comments from the GOC, CCCME, the two sampled Chinese exporting producers, all cooperating unrelated importers and the complainant. On the basis of these comments, the Commission modified some of the considerations on the basis of which it intended to impose a definitive anti-dumping duty and informed all interested parties thereof (‘additional final disclosure’) on 2 September 2021.

(50) Following final disclosure and additional final disclosure, interested parties were granted an opportunity to be heard according to the provisions stipulated under point 5.7 of the Notice of initiation. Hearings took place with both sampled exporting producers, CCCME and one importer (Cable77).

1.10. Investigation period and period considered

(51) The investigation of dumping and injury covered the period from 1 July 2019 to 30 June 2020 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from I January 2017 to the end of the investigation period (‘the period considered’).

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Product concerned

(52) The product concerned is single mode optical fibre cables, made up of one or more individually sheathed fibres, with protective casing, whether or not containing electric conductors, originating in China, currently falling under CN code ex 8544 70 00 (TARIC code 8544700010) (‘the product concerned’).

(53) The following products are excluded: (i) cables in which all the optical fibres are individually fitted with operational connectors at one or both extremities; and (ii) cables for submarine use. Cables for submarine use are plastic insulated optical fibre cables, containing a copper or aluminium conductor, in which fibres are contained in metal module(s).

(54) The optical fibre cables (‘OFC’) are used as an optical transmission medium in telecommunication networks in long haul, metro and access networks.

2.2. Like product

(55) The investigation showed that the following products have the same basic physical, chemical and technical characteristics as well as the same basic uses: — the product concerned; — the product produced and sold on the domestic market of the country concerned; and — the product produced and sold in the Union by the Union industry.

(56) The Commission decided at this stage that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

2.3. Claims regarding product scope

(57) The ZTT group requested the exclusion from the investigation of optical ground wire (‘OPGW’) and optical phase conductor (‘OPPC’) cables. It argued that although these cables fell under the product definition, they had different physical characteristics and use (i.e. power transmission), were subject to different technical standards, were manufactured using different raw materials and according to different production processes, and were sold in separate markets. Furthermore, it was claimed that OPGW and OPPC cables represented only a small portion of sales to Union. The ZTT group also requested that in case the Commission considered that OPGW and OPPC cables fell within the product scope of the investigation, the specific features, end-use or market segment factors of these products be taken into account in the investigation.

(58) In its comments following final disclosure, the ZTT group reiterated its claims to exclude OPGW and OPPC cables from the investigation, arguing that the sampled Union producers did not sell the product types sold by ZTT group during the investigation period.

(59) OPGW and OPPC cables involve data transmission and share the basic characteristics of other OFC, including: (i) they include optical fibres; (ii) the coated optical fibre diameter is the same range; (iii) the number of fibres is also in the same range; (iv) the number of fibres per module is equally the same; and (v) the construction of the cable core is the same. The fact that OPGW and OPPC cables transmit power and have certain features (such as electrical features, no flame resistance requirement, high tensile strength requirement, etc.) does not detract from this fact.

(60) Furthermore, all cable types are subject to a certain extent to different technical specifications and standards. Regarding the raw materials, the fact that one material used for one component of the OFC may differ from one type of cable to another is irrelevant: all types of OFC are manufactured using optical fibres. Regarding the manufacturing processes, the investigation revealed that certain specially protected designs of standard optical cables had a layer of steel wire around their jacket, and these cables were made on the same machines as OPGW machines. Furthermore, the manufacturing of the armouring of OPGW and OPPC cables only applied to one stage of the construction of these cables, and this did not justify their exclusion from the product scope of the investigation. Furthermore, the fact that the sales of OPGW and OPPC cables represented a smaller portion of sales to the Union during the investigation period is irrelevant for the assessment of the claim. Finally, the fact that the specific PCNs sold by the ZTT group during the IP were not sold by the sampled Union producers does not detract from the fact that Union industry is producing OPGW and OPPC cables which compete with the Chinese exporters.

(61) Based on the foregoing, the Commission concluded that OPGW and OPPCare to be considered as a type of optical fibre cables that have the same basic physical, technical and chemical characteristics as the other OFC that are covered by the definition of the product concerned and therefore no separate analysis for these products was needed. In fact, OPGW and OPPC cables are optical fibre cables as they include optical fibres, the construction of the cable core is the same and they are designed to be used for data transmission. Moreover, the product control numbers used by the Commission for the calculation of dumping and injury margins properly identify OPGW and OPPC cables and adequately enable the Commission to conduct a fair price comparison between Union and Chinese producers. Therefore, the claim was rejected.

(62) ZTT group also suggested four methods to address and avoid any possible issues of circumvention in the event that OPGW and OPPC cables were excluded from the product scope of the investigation such as (i) visual inspection and documentary check by customs officials, (ii) system of certification, (iii) end-use control customs procedure and (iv) system of monitoring. As it was concluded that OPGW and OPPC are covered by the investigation, it was not needed to address the suggested methods for preventing circumvention.

3. DUMPING

3.1. Procedure for the determination of the normal value under Article 2(6a) of the basic Regulation

(63) In view of the sufficient evidence available at the initiation of the investigation pointing to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation with regard to China, the Commission considered it appropriate to initiate the investigation with regard to the exporting producers from this country having regard to Article 2(6a) of the basic Regulation.

(64) Consequently, in order to collect the necessary data for the eventual application of Article 2(6a) of the basic Regulation, in the Notice of initiation the Commission invited all Chinese exporting producers to provide information regarding the inputs used for producing OFC. Twenty-five Chinese exporting producers submitted the relevant information.

(65) In order to obtain the information it deemed necessary for its investigation with regard to the alleged significant distortions, the Commission sent a questionnaire to the GOC. In addition, in point 5.3.2 of the Notice of initiation, the Commission invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days. No reply to the requested information was provided by the GOC. Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in China.

(66) Submission on the application of Article 2(6a) of the basic Regulation was received within the deadline from the GOC and the CCCME.

(67) According to Article 2(1) of the basic Regulation, ‘the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’.

(68) However, according to Article 2(6a)(a) of the basic Regulation, ‘in case it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks’, and ‘shall include an undistorted and reasonable amount of administrative, selling and general costs and for profits’.

(69) As further explained below, the Commission concluded in the present investigation that, based on the evidence available, and in view of the lack of cooperation of the GOC as stated in recital (65), the application of Article 2(6a) of the basic Regulation was appropriate.

3.1.1. Existence of significant distortions

3.1.1.1. Introduction

(70) Article 2(6a)(b) of the basic Regulation defines ‘significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements: — the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country; — state presence in firms allowing the state to interfere with respect to prices or costs; — public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces; — the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws; — wage costs being distorted; — access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state’.

(71) According to Article 2(6a)(b) of the basic Regulation, the assessment of the existence of significant distortions within the meaning of Article 2(6a)(a) shall take into account, amongst others, the non-exhaustive list of elements in the former provision. Pursuant to Article 2(6a)(b) of the basic Regulation, in assessing the existence of significant distortions, regard shall be given to the potential impact of one or more of these elements on prices and costs in the exporting country of the product concerned. Indeed, as that list is non-cumulative, not all the elements need to be given regard to for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list. However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provides the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

(72) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector’.

(73) Pursuant to this provision, the Commission has issued a country report concerning the PRC (hereinafter ‘the Report’) (11), collecting information about the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as chemicals). The Report was placed in the investigation file at the initiation stage. Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation, of which the Report was an integral part.

(74) The complaint provided additional evidence on significant distortions in the OFC sector within the meaning of Article 2(6a)(b), complementing the Report. The complainant provided evidence that the production and sale of the product concerned is affected (at least potentially) by the distortions mentioned in the Report, in particular high levels of state interference in the OFC value chain, i.e. in the OFC sector and the sectors related to the production of OFC, in particular input sectors and the factors of production.

(75) The Commission examined whether it was appropriate or not to use domestic prices and costs in the PRC, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file, including the evidence contained in the Report, which relies on publicly available sources, notably on Chinese legislation, published official Chinese policy documents, reports published by international organisations and studies/articles by renowned academics, specifically identified in the Report. That analysis covered the examination of the substantial government interventions in its economy in general, but also the specific market situation in the relevant sector including the product concerned. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in the PRC, as also found by its previous investigations in this respect.

3.1.1.2. Significant distortions affecting the domestic prices and costs in the PRC

(76) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of the PRC. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’. The State-owned economy is the ‘leading force of the national economy’ and the State has the mandate ‘to ensure its consolidation and growth’ (12). Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation. The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the State with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the State ownership (13).

(77) In addition, under Chinese law, the socialist market economy is developed under the leadership of the Chinese Communist Party (‘CCP’). The structures of the Chinese State and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the State are indistinguishable. Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution. Following the already existing first sentence of the provision: ‘[t]he socialist system is the fundamental system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘[t]he most defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China’ (14). This illustrates the unquestioned and ever growing control of the CCP over the economic system of the PRC. This leadership and control is inherent to the Chinese system and goes well beyond the situation customary in other countries where the governments exercise general macroeconomic control within the boundaries of which free market forces are at play.

(78) The Chinese State engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market (15). The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as other means by which the State acts in and affects the market, such as through public investment and procurement.

(79) First, at the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans covers a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government. Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means in order to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans still contain explicit output targets which was also a regular feature in previous planning cycles. Under the plans, individual industrial sectors and/or projects are being singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.). The economic operators, private and State-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans (see also Section 3.1.1.5 below) (16).

(80) Second, concerning the allocation of financial resources, the financial system of the PRC is dominated by the State-owned commercial banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government’s industrial policy objectives rather than primarily assessing the economic merits of a given project (see also Section 3.1.1.8 below) (17). The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Also these parts of the financial sector other than the banking sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the State and the CCP (18).

(81) Third, concerning the use of different State and regulatory instruments, the interventions by the State into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted in order to facilitate the achievement of goals designed by State policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies (19). Similarly, in the area of investment, the GOC maintains significant control and influence over the destination and magnitude of both State and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining State control over key sectors or bolstering domestic industry (20).

(82) In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with the free play of market forces, resulting in a distortion of the effective allocation of resources in line with market principles (21).

3.1.1.3. Significant distortions according to Article 2(6a)(b), first indent of the basic Regulation: the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country

(83) In the PRC, enterprises operating under the ownership, control and/or policy supervision or guidance by the State represent an essential part of the economy.

(84) The GOC and the CCP maintain structures that ensure their continued influence over enterprises, and in particular State-owned enterprises (SOEs). The State (and in many aspects also the CCP) not only actively formulates and oversees the implementation of general economic policies by individual SOEs, but it also claims its rights to participate in operational decision making in SOEs. This is typically done through the rotation of cadres between government authorities and SOEs, through the presence of party members on SOEs executive bodies and of party cells in companies (see also section 3.1.1.4), as well as through the shaping of the corporate structure of the SOE sector (22). In exchange, SOEs enjoy a particular status within the Chinese economy, which entails a number of economic benefits, in particular shielding from competition and preferential access to relevant inputs, including finance (23). The elements that point to the existence of government control or influence over enterprises in the OFC sector is further developed in sections 3.1.1.4 and 3.1.1.5 below.

(85) Specifically in the OFC value chain, the GOC owns stakes in many companies, a number of which it also controls.

(86) The Commission found that at least one major OFC producer - FiberHome Telecommunication Technologies Co., Ltd (FTT) (24) - acknowledges to be fully controlled by the State-owned Assets Supervision and Administration Commission (SASAC) (25), therefore by a State entity. FTT, while controlled by the State, exercises also majority ownership over other OFC producers, such as Changchun Fiberhome Technologies, Chengdu Datang Cable, Fiberhome Marine Network Equipment, Xinjiang Fiberhome Optical Communications. Another OFC producer - Nanjing Wasin Fujikura Optical Communication - was also found to be controlled by FTT, hence also to be controlled by the State.

(87) Apart from directly controlled companies, the GOC is also influencing the privately owned companies in the PRC. As confirmed by one of the sampled exporting producers in the course of the investigation, it was also established that the State, directly or indirectly (e.g. though various State-related entities, such as: the Bank of China, the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Development Bank, Changshu City Development Investment Co., or the Shanghai Financial Development Investment Fund) holds stakes in numerous OFC producing companies. It is worth noting that, among the latter, Yangtze Optical Fiber and Cable (YOFC) stands out, as State-controlled investors own 39 % of the company (26). This company is a large domestic producer and also a large exporter to the EU of the product concerned.

(88) With regard to privately owned OFC producers, the Commission also established that in the case of at least two of them – Jiangsu Zhongtian Technology (ZTT) (27) and Hengtong Group – the controlling (private) shareholders were CCP-affiliated and held Party positions (see recital (104)).

(89) With respect to the providers of inputs for the production of OFC, one of the raw materials for manufacturing OFC is aramid yarn. Regarding the latter, the Commission also found significant State interference in the aramid sector. The company Yantai Tayho Advanced Materials (YTAM) is one of the key producers of aramid fibres in the PRC (28). YTAM’s controlling shareholder is the Yantai Guofeng Investment Holdings Group (29), while the latter is fully owned by the Yantai SASAC (30), resulting in the full control of YTAM by State authorities. Other notable producers of aramid fibres in the PRC are Sinopec Yizheng Chemical Fibre Company (31) (subsidiary of State-owned Sinopec Group (32)) or the State-owned enterprise Sinochem (33).

(90) The production of OFC involves also the use of chemical inputs such as: low, medium or high density polyethylene, or polybutylene terephthalate. These substances are chemical compounds obtained in chemical processes. Various chemical compounds are also used to produce the preform at the origin of the optical fibre. Therefore, producers of these inputs can also be considered as participants of the Chinese chemical sector. With regard to that sector, the Commission found that that, according to national statistics, State-owned enterprises (SOEs) represented 52 % of the total assets of chemical companies in 2015 (34). SOEs, in particular large central ones, have traditionally played a dominant role in the PRC’s chemical industry due to their oligopoly position in upstream/feedstock, easy access to government-allocated resources (funds, loans, land etc.) and strong influence in government decision-making. In this respect, the Commission found specifically that certain key producers of high density polyethylene in the PRC, such as PetroChina, Sinopec Maoming Petrochemical Corporation, China National Offshore Oil Corporation (35), are State-owned enterprises.

(91) Furthermore, certain raw materials of steel are used in OFC manufacturing, such as certain types of steel wire or strip. In that respect, in the steel sector, a substantial degree of ownership by the GOC persists. While the nominal split between the number of SOEs and privately owned companies is estimated to be almost even, from the five Chinese steel producers ranked in the top 10 of the world’s largest steel producers four are SOEs (36). At the same time, while the top ten producers only took up some 36 % of total industry output in 2016, the GOC set the target in the same year to consolidate 60 % to 70 % of iron and steel production to around ten large-scale enterprises by 2025 (37). This intention has been repeated by the GOC in April 2019, announcing a release of guidelines on steel industry consolidation (38). Such consolidation may entail forced mergers of profitable private companies with underperforming SOEs (39). An example of a recent merger are the steel producers Baosteel Group Corp. and Wuhan Iron & Steel Group Corp. in 2016, creating the world’s second largest steel producer (40). The major stainless steel producers are state-owned, for example Tisco, Baosteel, Ansteel Lianzhong, Jiujuan Iron and Steel and Tangshan.

(92) With the significant level of government intervention in inputs sectors of the OFC market (e.g. in the steel sector, in the chemical value chains, or through State control of certain leading aramid producing enterprises), coupled with the fact that - as found by the Commission - certain OFC producers are controlled or owned directly or indirectly by the State, or are subject to the influence of the State (e.g. through the corporate presence of the CCP), rely on its support and, in certain cases, implement the CCP’s ideology, State-owned or State-controlled producers as well as privately-owned OFC producers are prevented from operating under market conditions. Both public and privately-owned enterprises active in the production of OFC and of the inputs used in the manufacturing of the latter, are also subject, directly or indirectly, to policy supervision and guidance as set out in Section 3.1.1.5 below.

3.1.1.4. Significant distortions according to Article 2(6a)(b), second indent of the basic Regulation: State presence in firms allowing the state to interfere with respect to prices or costs

(93) Apart from exercising control over the economy by means of ownership of SOEs and other tools, the GOC is in a position to interfere with prices and costs through State presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant State authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights (41), CCP cells in enterprises, state owned and private alike, represent another important channel through which the State can interfere with business decisions. According to the PRC’s company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution (42)) and the company shall provide the necessary conditions for the activities of the party organisation. In the past, this requirement appears not to have always been followed or strictly enforced. However, since at least 2016 the CCP has reinforced its claims to control business decisions in SOEs as a matter of political principle. The CCP is also reported to exercise pressure on private companies to put ‘patriotism’ first and to follow party discipline (43). In 2017, it was reported that party cells existed in 70 % of some 1,86 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies (44). These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of OFC and the suppliers of their inputs.

(94) In addition, on 15 September 2020 a document titled ‘General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era’ (45) was released, which further expanded the role of the party committees in private enterprises. Section II.4 of the Guidelines state: ‘[w]e must raise the Party’s overall capacity to lead private-sector United Front work and effectively step up the work in this area’; and section III.6 states: ‘[w]e must further step up Party building in private enterprises and enable the Party cells to play their role effectively as a fortress and enable Party members to play their parts as vanguards and pioneers.’ The Guidelines thus emphasise and seeks to increase the role of the CCP in companies and other private sector entities (46).

(95) The following examples illustrate the above trend of an increasing level of intervention by the GOC in the OFC sector.

(96) As already pointed out, a certain number of OFC producers are owned or controlled by the State, which allows the latter to freely interfere with prices and costs. This interference is also exacerbated by the strong CCP’s presence and influence in these companies.

(97) The Commission found, for example, that the China Information and Communication Technology Group, to which the exporting producer FTT belongs – states on its website that: ‘Sticking to the Party's leadership and strengthening the Party building are the “root” and “soul” of State-owned enterprises. Since the establishment of China Information and Communication Technology Group Co., Ltd. (China Information and Communication Technology Group Co., Ltd.), the Party Committee of the Group has fully implemented the spirit of the 18th National Congress, of the 19th National Congress, of the previous plenary sessions of the Party and as well as the spirit of the National Conference on Party Building of State-owned enterprises, and has ensure that the Party building as well and all aspects of the enterprise’s work follow Xi Jinping's theory of the new era of socialism with Chinese characteristics. Establish the “four consciousnesses”, strengthen the “four confidences”, resolutely achieve the “two safeguards”, deeply implement the general requirements of Party building in the new era, pay close attention to the Party governance’s main responsibilities, and fully involve to the Group’s Party Committee in corporate governance to exert leadership and “give direction, ensure the overall management, and ensure implementation” and continuously promote the “double integration and double promotion” of Party building with production and business work.’ (47)

(98) The Commission established also that Party building activities are extended to entire industrial zones, as reported by the website of the Wuhan Eastlake High-Tech Development zone: ‘Conveying the whole city's state-owned enterprise Party building work conference and the district party (work) committee secretary’s grass-roots Party building work and reporting on the general conference’s spirit: On May 7, 2019, the local promotion conference for party building work in state-owned enterprises of Donghu High-tech Zone was held in Fiberhome Communications Group. Nearly 30 people attended the meeting, among which the Deputy director of the Party Working Committee Organization Department of Donghu High-tech Zone, Wan Ling and related comrades, as well as people in charge of managing and leading Party building work in SOEs centrally managed by the district and under direct management of the district.’ (48) The Donghu High-tech Zone (or Wuhan East Lake High-Tech Development Zone) is often referred to as the ‘Optics Valley’ (49) due to the focus on optoelectronics production, including OFC.

(99) It is to be noted that the activities cited in the previous recital involve Fiberhome Group, the parent company of FTT. The company’s website mentions ‘support to the Government’s policies’ as one of the key elements in its relationship with the GOC (50). Moreover, in relation to company party-building activities Fiberhome is portrayed as a model for other enterprises: ‘On May 17, Optics Valley Construction Company organized a study visit for cadres and employees at Fiberhome Technology Group, to visit the exhibition of scientific and technological achievements, listen to expert lectures, and follow the inspection tour of General Secretary Xi Jinping, review the spirit of the important speech of General Secretary Xi Jinping during his inspection of Hubei […] Comrade Hua Xiaodong, Director of the Office of the President of Fiberhome Communications, focused on the Fiberhome Technology Group’s grassroots Party building, innovative Party building measures and online Party building results, […] The general manager of the company, Comrade Zhou Aiqiang, emphasized that the company’s cadres and employees must combine studying and implementing the spirit of General Secretary Xi Jinping’s important speeches with the spirit of the high-tech zone promoting the implementation of the Optics Valley’s high-quality development.’ (51) As evidenced in the latter excerpt, party building activities are intended to be closely related to the business development of the Optics Valley.

(100) As pointed in recital (94), the GOC is also further expanding the role of the CCP in the private sector, thereby further increasing its capacity to control and interfere with private companies’ decisions and operations. The Commission found ample evidence of the latter interference in the case of privately-owned OFC producers.

(101) The company ZTT praises itself of the interest in the enterprise of the CCP and the authorities: ‘ZTT has attracted the attention of the Communist Party and state leaders for its cross-domain development. The central, provincial and municipal leaders have inspected and given affirmation and encouragement to ZTT.’ (52) Additionally, the company’s website gives accounts of its party-building activities and achievements, as well as the interactions with the CCP and authorities in that respect. For example, the company describes an inspection of the company’s party-building work by provincial and municipal party and government leaders: ‘Xue Jiping [Secretary of the Party Committee and Chairman of ZTT], said that Zhongtian Technology is a key manufacturing enterprise in Nantong, and that today's development is inseparable from the care and support of Party committees and government leaders at all levels, as well as that the Party committee of Zhongtian Technology Group, under the guidance of the superior Party organization, carefully set up the stage to foster mutual promotion, common progress and win-win of Party building together with enterprise development. He highlighted the two specific practices that Zhongtian Technology summarized and formed under the leadership of the Party flag. The first is the working system of the advanced spiritual homeland engineers. […]; The second is the advanced intellectual property bank enhancing the enterprise’s core competitiveness by involving the backbone of party members’ initiatives, truly transforming the advantages of Party building into development advantages, and transforming the wisdom of the Party and the masses into development efficiency.’ (53) The company also stresses the prominence of its party-related activities and the importance of their integration in the company’s operations: ‘The Party Committee of Jiangsu Zhongtian Technology Co., Ltd. was awarded the honorary title of “Advanced Grassroot Party Organization of Jiangsu Province” and became the only enterprise in Nantong area to receive this honor. In recent years, under the leadership of Xue Jiping, a national model worker, party secretary, and chairman of the board of directors, the Zhongtian Technology Party Committee has always adhered to the guiding ideology of “focusing on Party building around development and promoting development through Party building”, and actively explored standardized and integrated party building models, focussing on the integration of Party building work with enterprise production and business, detailed management, and culture development.’ (54)

(102) The Commission also made findings on the influence of the CCP on another OFC producer with substantial domestic production and exports of the product concerned to the EU, that is Hengtong Group. The company, while being privately owned, has been publishing accounts on the role and influence of the CCP, CCP membership and Party committees within the company, as well as on how the company adheres to State strategies in its activities: ‘Without the reform and opening policy, there would be no Hengtong today; as regards the future development of Hengtong, the banner of the Party must be flying high in the enterprise. Cui Genliang, Secretary of the Party committee and Chairman of the Board of directors of Hengtong Group, said that the Party committee of Hengtong Group has never forgotten its original intention, has always remembered its mission and will continue to forge the “red engine” of party building, cast the surging power of a new round of the enterprise’s development, and strive to answer the questionnaire of the era of high-quality development. […] Through the “one person for two positions” system allowing the same person to be Party secretary and company leader, the current 32 party branch secretaries of Hengtong Group are all held by the general managers of each company, and the effectiveness of Party building work is included in the overall assessment of subsidiaries. […] The [Hengtong] Group’s Party committee holds a Party building seminar every two years to formulate the group’s Party building work plan as a “prescribed action” for the annual work of each Party branch while each Party branch chooses an innovative “optional action”, to promote the corporate branch to grasp the fortress-type goal and to create a Group’s Party building “combat team”, to make sure that staff Party members focus on banner-type honours, to create group’s Party building “special forces”, and form a Group Party building paradigm of “strategic Party committees, Party fortress branches and banner Party members […] The enterprise’s development is inseparable from the Party’s correct leadership. We must always be grateful and take responsibility while remaining based on the society.” The Hengtong Group’s Party Committee has established a great responsibility to closely follow the national development strategy, and considers Party building work as way to achieve the close integration of corporate development with the national strategy and to seize major opportunities to grow bigger and stronger.’ (55)

(103) Furthermore, the Commission established that the privately-owned company YOFC is also subject to the influence of the State, notably through the role of the CCP in the company’s operations. The company’s website gives accounts of such interaction when describing an event aimed at celebrating the 97th anniversary of the founding of the CCP: ‘At the meeting, Comrade Ma Jie, Secretary of the Party Committee and Chairman of YOFC, delivered an important report. Secretary Ma Jie comprehensively summarized the company's party building work and operating conditions over the past year, and put forward work requirements for the future. He pointed out: In the past year, under the correct leadership of the higher-level organizations, in accordance with the overall deployment and requirements of the Donghu High-tech Zone Party Working Committee, the company’s Party committee has carefully studied and implemented the spirit of the 19th National Congress of the Communist Party of China and focused on the overall development of YOFC. […] In the report, Secretary Ma Jie also analysed the challenges faced by YOFC in 2018 and required all Party members to effectively implement the company's five strategic measures to accelerate the company's transformation and development. […] He requested: “[…] Guided by the spirit of the report of the 19th National Congress of the Communist Party of China, and taking the 30th anniversary of YOFC as an opportunity, we will make new contributions to the company's brand-new future, recreate new glories”’ (56). One year later, at the occasion of the 98th CCP anniversary, YOFC also reported that in 2019 ‘the party committee of YOFC was awarded the honourable title of “Advanced Party Organization” of the Donghu High-tech Zone’. During the event, Chairman and Secretary Ma Jie ‘called on all Party members to hold high the great banner of socialism with Chinese characteristics and firmly establish the “four consciousnesses”, to strengthen the “four self-confidences”, practice the “two maintenances”, learn from the example, take the advanced ones as the benchmark, perform their duties with diligence, inherit and carry forward the older generation’s pioneering and innovative spirit of revolutionaries and advanced model figures, fully involve grassroots Party branches as battle fortresses as well as pioneering and exemplary Party members, strive for the full completion of YOFC's business objectives in 2019, and present the outstanding achievements as a gift for the 98th anniversary of the founding of the Communist Party of China, and for the 70th anniversary of the founding of the People's Republic of China!’ (57)

(104) CCP structures also personally overlap with the corporate management bodies in the case of a number of leading OFC producers. The Commission found that the Chairman and controlling shareholder of ZTT, Xue Jiping, is a CCP member and Party Committee Secretary (58). In the case of FTT, another major OFC producer, the chairman of the Board of Directors, Lu Guoqing, is a CCP member (59), while two other top managers hold also the positions of Secretary and Deputy-Secretary of the Party Committee (60). As also previously evidenced in recital (102), the controlling shareholder of the privately-owned OFC producer Hengtong Group – Cui Genliang – is not only the Chairman of the Board of Directors but also Secretary of the Party Committee. He also used to sit as Representative in the 12th and 13th National People's Congress (61). Furthermore, as established in recital (103), the Chairman of the Board of Directors of YOFC – Ma Jie – holds the position of the Secretary of the Party Committee and is a Member of the CCP (62).

(105) The State’s presence and intervention in the financial markets (see also Section 3.1.1.8 below), as well as in the provision of raw materials and inputs further have an additional distorting effect on the market (63). Thus, the State presence in firms, including SOEs, in the OFC sector and other related sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

3.1.1.5. Significant distortions according to Article 2(6a)(b), third indent of the basic Regulation: public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces

(106) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on. Relevant plans exist on all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government. Overall, the system of planning in the PRC results in resources being allocated to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces (64).

(107) The OFC equipment is regarded as a key product by the GOC, as found in public policy documents and lists (65). Such categorisation is of significant importance as it qualifies given sectors for coverage by a variety of specific policies and support measures designed to spur development in each sector (66). OFC being a key component of internet networks infrastructure, it plays a paramount role in the roll-out of optical fibre networks and broadband internet. The development of the latter in the PRC is guided and managed by numerous plans, directives and other documents, which are issued at national, regional and municipal, and are mutually interlinked. Examples of such key policy documents include, at central level: the 13th Five Year Plan (FYP) for Economic and Social Development of the People’s Republic of China (2016-2020) (67), and the accompanying 13th FYP for Strategic Emerging Industries (SEI) (68), the ‘Made in China 2025’ Plan (69), the ‘Internet Plus’ Plan (70), the ‘Broadband China’ strategy (71), the Guiding Opinions of the General Office of the State Council on Accelerating the Building of a High-speed Broadband Network and Pushing forward Lower Tariffs for Faster Internet Connection (72), or the Three-year Action Plan for the Construction of Major Information Infrastructure Projects (73). These central policy provisions find also their reflection and follow-up at sub-central level, as for example in Guangdong Province’s Action Plan on ‘Internet Plus’ (2015-2020) (74). In relation to this, planning documents pertaining to other sectors issued at sub-central level can make a link to the development of internet in terms of policy guidance, and notably the implementation of the ‘Internet Plus’ Plan - such as in the case of the Hebei province Petrochemical 13th FYP (75).

(108) The above policies have been at the origin of the State’s focus on the development of optical fibre networks and infrastructure, and by the same of the OFC market and the related State backing. Furthermore, the implementation of the above policies has been also closely related to and furthered by the implementation of superior policies, such as the development of the information industry (relevant document: ‘Guide for the Development of the Information Industry’ of the Ministry of Industry and Information Technology (MIIT) and the NDRC), of the big data industry (relevant document: ‘Big Data Industry Development Plan (2016-2020) of the MIIT’), of cloud computing (relevant document ‘Three-year Action Plan for Cloud Computing Development (2017-2019) of the MIIT’), or of ‘the Internet of Things’ (relevant document: the Notice of the General Office of the MIIT on Comprehensively Promoting the Construction and Development of the Mobile Internet of Things) (76). In other words, OFC stands out as a product of paramount importance for the GOC in the building of networks and infrastructure serving entire strata of key connectivity and digital policy areas developed and overseen by the State. On the basis on policy documents cited in recital (107) and (108), the GOC intervenes to implement the related policies and interferes with the free play of market forces in the OFC sector, notably by promoting and supporting the latter sector through various means.

(109) The GOC steers the development of the OFC sector in accordance with a broad range of tools. The Commission found evidence of specific projects, and establishment of governmental guidance funds and industrial zones, which reflected the range of public authorities’ support for the OFC producers and their value chain.

(110) A case of local guidance fund and authorities’ actions supporting the OFC sector through a capacity building project in Shandong Province was evidenced as follows by a participating company: ‘The phase I of the project has a total investment of RMB 1,8 billion and consists in the construction of 6 optical fibre drawing towers and 12 optical fibre production lines, achieving a breakthrough in the optical fibre industry in Shandong Province. […] The entry of government equity investment funds has enabled companies to reduce financing costs, enhance their financial solidity and security ratio, has guided the transformation of business concepts and has ensured upgrades’ (77). Another source confirms that the project’s aim is to implement overarching State policies, such as those enumerated in recitals (106) to (108), which in turn rely on optical fibre: ‘The development of the Internet is inseparable from high-speed transmission tools, and high-speed transmission tools are derived from good optical fibre. Shandong Zhiguang Communication Technology Co., Ltd. is a high-tech company built to implement the ‘Made in China 2025’ strategic action, the national strategy for the information-based economic development, as well as to meet the needs of national key projects such as “Big Data”, “Internet Plus” and “Digital China”. Optical fibre, a material with the natural “gene” of science and technology, has now taken root and blossomed in Zaozhuang City.’ (78)

(111) The Commission found also a case of establishment of municipality-backed fund in Suzhou City for an amount of up to RMB 1 billion, which was made available in order to ease financial pressure stemming out from business difficulties of one of the OFC producers - Tongding Interconnection Information. The fund’s vocation is also to ease the path of companies to achieve stock exchange listing (79).

(112) Additionally, as mentioned in recital (98), the Commission found that among GOC-backed special industry development zones, one in Wuhan - the East Lake New Technology Industry Development Zone - served as a major production base for OFC. As one of the State Council-approved ‘National High-tech Industry Development Zones’ and a ‘National Indigenous Innovation Demonstration Zone’, it became the PRC’s first optoelectronics industry base (also called ‘China Optics Valley’ – see recital (98)). OFC producers active in the zone have been benefitting from various forms of incentives and State support (80).

(113) Furthermore, among the instruments through which the GOC steers the development of the OFC sector, there are also direct State subsidies. The 2019 Annual report of the exporting producer FTT confirms that the company had RMB 393,8 million of deferred income in governmental subsidies and RMB 45,8 million of governmental subsidies as ‘other income’ at the end of 2019 (81). The 2019 annual report of exporting producer ZTT confirms that the company had RMB 150,3 million of deferred income in governmental subsidies and had received RMB 361,1 million of governmental subsidies related to daily company activities as of the end of 2019 (82). Furthermore, the 2019 annual report of OFC producer Hengtong Group substantiates that the company’s deferred income consisting in governmental subsidies amounted to RMB 81,8 million and subsidies specified as being related to daily company activities amounted to RMB 268,3 million in 2019 (83).

(114) With regard to inputs used in the production of OFC, the Commission found that aramid, a chemically obtained synthetic fibre and input in the production of OFC, is – similarly to optical fibres (see recital (107)) – categorised as a key product by the GOC in the Guiding Catalogue of key products and services in strategic emerging industries (84). This qualification has put the latter raw material in focus of various GOC policies. As a consequence, aramid has been covered in the PRC by planning documents, such as the Implementation Plan for the Transformation and Upgrading of Chemical Fibre Manufacturing Industry (2017 – 2020) (the Implementation Plan), where it features as a key focus item in terms of development acceleration (85). It was established that aramid was also covered by at least one additional planning document - the Hebei 2016 New Material Industry Development Promotion Plan, which instructed relevant stakeholders to notably speed up the development of aramid fibres, through the Handan national Torch Programme (86).

(115) More broadly, chemical fibres are subject to State regulation and market-management policies not only centrally (for example via the Implementation Plan) but also under sub-central planning documents, such as the Zhejiang Province’s Action Plan for Comprehensive Transformation and Upgrade of Traditional Manufacturing industries - where chemical fibres feature as one of the 10 key industries subject to specific policy management (87), or the 13th FYP for the Development of the Chemical Industry in Jiangsu Province (2016 – 2020). In the latter’s provisions concerning new chemical materials, the focus is placed notably on supporting the development and industrialisation of high-value added downstream applications such as ‘high performance fibres’, which can encompass fibres used in the production of OFC. In that regard, the latter Plan also instructs industry to reduce production costs and ‘break the supply bottlenecks as regards upstream key support materials’ (88).

(116) With regard to another basic input – polyethylene – there is evidence of production management by the State: the National Development and Reform Commission (NDRC) has included certain polyethylene production processes in its Catalogue for Guiding Industrial Restructuring, where one sub-section of the ‘restricted list’ covers petrochemicals, and notably includes ‘polyethylene or polyvinyl chloride by acetylene process with an annual output of less than 200 000 tonnes’ (89).

(117) In general terms, the chemical industry, from which producers of OFC source a number of their inputs (see recitals (90) and (114)), is regarded as an important sector by the GOC. This is reflected in the many plans, directives and other documents pertaining to the chemical sector, which are issued at national, regional and municipal level. These documents aim at managing numerous aspects of the functioning of the chemical sector at large, thereby affecting, for example, the subsectors producing the various upstream chemical compounds used to manufacture the chemical raw materials used in OFC production (e.g. those enumerated in recitals (90) and (114)), notably in terms of value chain development, supply patterns, technology choice, production localisation, or policy support (90).

(118) Specifically also in the case of glass fibres, which constitute one of the inputs, the Commission confirmed that the State intervened into the geographical distribution of glass fibre production, through the provisions of the 13th FYP for the Construction Material Industry (2016-2020) (91), notably instructing production to be developed specifically in Jiangxi Province, thereby interfering in the free decision-making of the relevant economic operators.

(119) As also mentioned in the Report, the prices of electricity, which is one of the factors of OFC production, are not market-based in the PRC and are also affected by significant distortions (through central price-setting, price differentiation and in direct power purchase practices) (92).

(120) This involvement of the government and local authorities across the entire OFC value chain has, at least potentially, a distortive effect on prices. Through the means described above, the OFC sector and sectors producing raw materials used to manufacture OFC are subject to governmental intervention, with the GOC directing and controlling virtually every aspect in the development and functioning of the OFC value chain.

(121) In sum, the GOC has measures in place to induce operators to comply with public policy objectives, including the producers of OFC and of the inputs used in the manufacturing of OFC. Such measures impede market forces from operating freely.

3.1.1.6. Significant distortions according to Article 2(6a)(b), fourth indent of the basic Regulation: the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws

(122) According to the information on file, the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than the PRC, the Chinese system is characterised by systematic under-enforcement. The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the State in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings (93).

(123) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in the PRC (94). All land is owned by the Chinese State (collectively owned rural land and State-owned urban land). Its allocation remains solely dependent on the State. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates (95). Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land (96).

(124) Much like other sectors in the Chinese economy, the producers of OFC are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies are also subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. The present investigation revealed nothing that would call those findings into question. As such, the Commission preliminarily concluded that the Chinese bankruptcy and property laws do not work properly, thus generating distortions when maintaining insolvent firms afloat and when allocating land use rights in the PRC. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the OFC sector and the sectors manufacturing the raw materials used to produce the product concerned.

(125) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the OFC sector and the sectors manufacturing the raw materials used to produce the product concerned.

3.1.1.7. Significant distortions according to Article 2(6a)(b), fifth indent of the basic Regulation: wage costs being distorted

(126) A system of market-based wages cannot fully develop in the PRC as workers and employers are impeded in their rights to collective organisation. The PRC has not ratified a number of essential conventions of the International Labour Organisation (‘ILO’), in particular those on freedom of association and on collective bargaining (97). Under national law, only one trade union organisation is active. However, this organisation lacks independence from the State authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary (98). Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area. This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration (99). Those findings lead to the distortion of wage costs in the PRC.

(127) There was no evidence to the effect that companies producing OFC or related inputs would not be subject to the Chinese labour law system described. The OFC sector is thus affected by the distortions of wage costs both directly (when the product concerned is manufactured) as well as indirectly (when OFC producers have access to capital or inputs from companies subject to the same labour system in the PRC).

3.1.1.8. Significant distortions according to Article 2(6a)(b), sixth indent of the basic Regulation: access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the State

(128) Access to capital for corporate actors in the PRC is subject to various distortions.

(129) Firstly, the Chinese financial system is characterised by the strong position of State-owned banks (100), which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similarly to non-financial SOEs, the banks remain connected to the State not only through ownership but also via personal relations (the top executives of large State-owned financial institutions are ultimately appointed by the CCP) (101) and, again just like non-financial SOEs, the banks regularly implement public policies designed by the government. In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State (102). This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (103).

(130) While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

(131) For example, the GOC has very recently clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. One of the State’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues in companies (104). Also, the performance evaluation criteria of commercial banks have now to, notably, take into account how entities ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’. (105)

(132) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm's strategic importance to the GOC and the strength of any implicit guarantee by the government. Estimates strongly suggest that Chinese credit ratings systematically correspond to lower international ratings (106).

(133) These issues are compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important (107). This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

(134) Secondly, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the growth in corporate leverage in the State sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

(135) Thirdly, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces, but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 (108). Official media in the PRC have recently reported that the CCP called for ‘guiding the loan market interest rate downwards.’ (109) Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

(136) Overall credit growth in the PRC indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly in recent years. Faced with a situation of increasing debt-at-risk, the GOC has opted to avoid defaults. Consequently, bad debt issues have been handled by rolling over debt, thus creating so called ‘zombie’ companies, or by transferring the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

(137) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in the PRC is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets.

(138) No evidence was submitted to the effect that the OFC sector would be exempted from the above-described government intervention in the financial system. The Commission has also established that leading producers of OFC benefited from government subsidies (see recital (113)). Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

3.1.1.9. Systemic nature of the distortions described

(139) The Commission noted that the distortions described in the Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above in Sections 3.1.1.2 to 3.1.1.5 as well as in Part A of the Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above in Sections 3.1.1.6 to 3.1.1.8 above and in Part B of the Report.

(140) The Commission recalls that in order to produce OFC a range of inputs is needed. In that respect, according to evidence on the file, the sampled exporting producers sourced most of their inputs in the PRC. When the producers of OFC purchase/contract these inputs in the PRC, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors.

(141) As a consequence, not only the domestic sales prices of OFC are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation,