EN Official Journal of the European Union L 146/17

COMMISSION IMPLEMENTING REGULATION (EU) 2017/969

of 8 June 2017

imposing definitive countervailing duties on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2017/649 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel 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) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (‘the basic Regulation’) (1), and in particular Article 15 thereof,

Whereas:

1. PROCEDURE

1.1. Initiation

(1) On 13 May 2016, the European Commission (‘the Commission’) initiated an anti- subsidy investigation with regard to imports into the Union of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China (‘the PRC’ or ‘the country concerned’). The initiation was based on Article 10 of Council Regulation (EC) 597/2009 of 11 June 2009 on protection against subsidised imports from countries not members of the European Community (2). It published a Notice of Initiation in the Official Journal of the European Union (‘Notice of Initiation’) (3).

(2) The Commission initiated the investigation following a complaint lodged on 31 March 2016 by the European Steel Association (‘Eurofer’ or ‘the complainant’) on behalf of Union producers representing more than 90 % of the total Union production of certain hot-rolled flat products of iron, non-alloy or other alloy steel (‘HRF’). The complaint contained evidence of subsidisation and of a resulting threat of injury that was sufficient to justify the initiation of the investigation.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of China (‘GOC’) (4) that it had received a properly documented complaint, and invited the GOC for consultations in accordance with Article 10(7) of the basic Regulation. The GOC accepted the offer for consultations, which were held on 11 May 2016. During the consultations, due note was taken of the comments submitted by the GOC. However, no mutually agreed solution could be reached.

(4) A few months before the initiation of the present investigation, the Commission initiated, on 13 February 2016 (5), an anti-dumping investigation on imports of the same product originating in the PRC (‘the parallel anti-dumping investigation’).

(5) Shortly after the initiation of the present investigation, the Commission also initiated on 7 July 2016 (6), an anti-dumping investigation on imports of the same product originating in Brazil, Iran, Russia, Serbia and Ukraine.

(6) On 5 April 2017 the Commission imposed a definitive anti-dumping duty on imports of the same product originating in the PRC (7) (‘the anti-dumping Regulation’). The injury, causation and Union interest analyses performed in the present anti-subsidy and the parallel anti-dumping investigation are similar, since the definition of the Union industry, the representative Union producers and the investigation period are the same in both investigations. They have been up-dated and complemented in order to take account of all factual elements brought forward in the present investigation.

1.1.1. Comments following initiation

(7) The GOC argued that the filing of an anti-dumping complaint against the same product from five countries on the basis of the existence of material injury within less than two months of the filing of the present complaint based on a threat of injury raises serious questions as to whether the present anti-subsidy investigation should have been initiated.

(8) The Commission noted that the anti-subsidy case against the PRC and the anti-dumping case against the same product from five other countries are two separate investigations that must be assessed on their own merits. First, the two cases have different investigation periods, which only partially overlap (the second half of 2015). Second, the anti-subsidy complaint was based on a threat of injury to the Union industry whereas the subsequent anti-dumping complaint was based on the existence of injury to the Union industry. In this respect, the Commission recalled that the determination of dumping and injury is made on the basis of an investigation period defined in line with the relevant legal provisions and announced in the Notice of Initiation for each of the two cases. Moreover, without prejudice to the results of the ongoing anti-dumping investigation concerning the other five countries, recitals (549) to (551) show that the sufficient evidence available at the time of initiation has not been invalidated by the evidence found during the investigation.

(9) The Commission thus rejected this claim as unfounded.

(10) The GOC also claimed that the investigation should be terminated because the complaint did not satisfy the evidentiary requirements of Articles 11(2) and 11(3) of the WTO Agreement on Subsidies and Countervailing Measures and of Article 10(2) of the basic Regulation. According to the GOC, there was insufficient evidence of countervailable subsidies, injury and a causal link between the subsidised imports and the injury.

(11) The evidence submitted in the complaint constituted the information reasonably available to the complainant. It was also sufficient to show, at initiation stage, that the alleged subsidies were countervailable in terms of their existence, amount and nature. The complaint also contained sufficient evidence that there was a threat of injury to the Union industry, which was caused by the subsidised imports. The complaint consists of 166 pages, in which it describes the evidence contained in the 117 annexes. Insofar as the GOC pointed to any deficiencies with respect to the accuracy and adequacy of the complaint, the Commission examined these during the investigation, but found no reason to exclude any of the prima facie claims about the existence and extent of subsidisation when initiating the investigation.

(12) After disclosure, the GOC repeated its claim, but provided no additional grounds to substantiate it. Thus, the Commission maintained its position as described in the recital above.

1.2. Investigation period and period considered

(13) The investigation of subsidisation and injury covered the period from 1 January 2015 to 31 December 2015 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2012 to 31 December 2015 (‘the period considered’) as well as relevant post IP developments.

1.3. Interested parties

(14) 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, other known Union producers, the known exporting producers and the GOC, the known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(15) 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.

1.4. Sampling

(16) In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

1.4.1. Union producers

(17) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. In accordance with Article 27(1)(b) of the basic Regulation, the Commission selected a sample on the basis of the highest representative production and sales volumes, which could reasonably be investigated within the time available. The sample also represented a broad geographical spread. The Commission invited interested parties to comment on the provisional sample, but no comments were received.

(18) As a result, the final sample consisted of six Union producers located in five different Member States. It accounted for over 45 % of Union production.

1.4.2. Importers

(19) The Commission asked unrelated importers to provide the information specified in the Notice of Initiation in order to decide whether sampling was necessary and, if so, to select a sample.

(20) One unrelated importer came forward and an importer questionnaire was sent to this importer.

(21) However, even though the Commission contacted him in an effort to gather relevant information, the unrelated importer only provided an incomplete questionnaire reply.

1.4.3. Exporting producers

(22) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in the PRC to provide the information specified in the Notice of Initiation. In addition, the Commission requested the authorities of the PRC to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(23) Nine exporting producers / group(s) of exporting producers in the country concerned provided the requested information and agreed to be included in the sample. In accordance with Article 27(1)(b) of the basic Regulation, the Commission selected the following sample of four 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: — Benxi Iron & Steel Group, China — Hesteel Group, China — Jiangsu Shagang Group, China — Shougang Group, China.

(24) The sampled groups of exporting producers represented 68 % of the total imports of the product concerned to the Union.

(25) In accordance with Article 27(2) of the basic Regulation, all known exporting producers concerned, and the GOC, were consulted on the selection of the sample. Comments on the proposed sample were received from the complainant and two exporting producers, one included, one not included in the sample.

(26) The complainant argued that the proposed sample does not reflect the Chinese HRF industry to be investigated. More specifically, the complainant claimed that the Commission should base its sample not only on the volume of the exports, but also on the inclusion of the full range of subsidies set out in the complaint. In this respect, the complainant considered that two of the sampled companies were not representative recipients of countervailable subsidies.

(27) The Commission observed that the criterion it used for selecting the sample is Article 27(1)(b) of the basic Regulation. According to that provision, the Commission bases the selection on the largest representative volume exported to the Union. The fact that an individual company might not be eligible for a specific type of an alleged subsidy does not render the sample non-representative, as the purpose of the sample is to represent the overall HRF industry in the PRC with regard to eligibility for all types of alleged subsidies. The four sampled groups of exporting producers are representative, in terms of eligibility for the subsidies alleged in the complaint, as the Commission has analysed in a note to the file available in the non-confidential file. Hence, the Commission considered that the selected sample represented a proper basis to examine the existence and the extent of the alleged subsidisation, and complies with Article 27(1)(b) of the basic Regulation.

(28) After disclosure, the complainant insisted that the Commission should have used Article 27(1)(a) instead of Article 27(1)(b) of the basic Regulation for selecting the sample, as this would have allowed to better reflect the subsidy programmes in place. As explained in the previous recital, the Commission considered that the four sampled groups of exporting producers were representative not only in terms of volume, but also in terms of their eligibility for the subsidies alleged in the complaint as well as the subsidy practices investigated as per the Notice of Initiation. Therefore, this claim was rejected.

(29) The first exporting producer, which was sampled, enquired about the reasons for deviating from the sample proposed for the parallel anti-dumping investigation. The Commission recalled that the anti-dumping and the anti-subsidy investigations constitute two separate investigations having a different purpose. In the anti-dumping investigation, the Commission determines whether there is dumping or not (i.e. objective price discrimination), i.e. a binary question. The finding of dumping can be extrapolated from the sample to all other companies. In the anti-subsidy investigation, the Commission establishes the amount of the subsidisation per unit exported of the product concerned. Only those subsidies that are found in the sampled companies can be countervailed. Hence, in order to ensure the effectiveness of the investigation and the protection of the Union industry, the Commission considered that it was appropriate to cover a larger volume of exports in the anti-subsidy investigation than in the antidumping investigation, so as to ensure that the sample is representative of the eligibility for the subsidies alleged in the complaint as well as the subsidy practices mentioned in the Notice of Initiation. The extended sample for the anti-subsidy investigation covers a proper scope of eligibility for the subsidisation alleged in the complaint. Three of the four sampled companies were included in the sample of the parallel anti-dumping investigation. The inclusion of an additional company within the sample was based on the consideration that it was the next largest company in terms of volume, and that it ensured representativity of the sample in terms of eligibility for the subsidies alleged in the complaint.

(30) The second exporting producer, which was not sampled, requested to be added to the sample, or to receive an individual examination, arguing that the selected sample would not fairly represent its particularities. The arguments put forward referred to the production and export of high speed steel and tool steel, which according to it has different product characteristics and a different pricing. The criterion used for selecting the sample is the largest representative volume of exports of the product concerned. However, the exporting producer which requested to be included has significantly less export volumes of the product concerned than the proposed companies. It was therefore not possible to include it in the sample, which is why its claim to be included therein was rejected. In any event, the Commission decided subsequently to exclude high speed steel and tool steel from the scope of the product concerned, thus eliminating the company's entire production from the scope of the investigation. As a result, the company was not considered to be an exporting producer of the product concerned anymore and its request for individual examination became inadmissible, because it is no longer an interested party.

(31) The proposed sample hence complies with Article 27(1)(b) of the basic Regulation. The Commission therefore decided to retain the proposed sample as the final sample.

1.5. Questionnaire replies and verification visits

(32) A questionnaire was sent to the GOC. It included specific questionnaires for the China Development Bank, Agricultural Development Bank of China, Export Import Bank of China ‘EXIM’), Agricultural Bank of China (‘ABC’), Bank of China (‘BOC’), China Construction Bank (‘CCB’) and Industrial and Commercial Bank of China (‘ICBC’). Those banks had been specifically referred to in the complaint as public bodies or bodies directed and entrusted granting subsidies. In addition, the GOC was asked to forward that specific questionnaire for financial institutions to any other financial institution which is fully or partially owned by the GOC (‘state-owned banks’). Furthermore, the questionnaire for the GOC included specific questionnaires for those producers of iron ore, coke and coking coal which are partially or fully State-owned (‘SOEs’). Questionnaires were also sent to the four sampled groups of exporting producers, to the sampled Union producers, as well as to all related importers, the unrelated importer that had come forward, and two users that had come forward.

(33) The Commission received questionnaire replies from the GOC. Those comprised replies to the specific questionnaire from EXIM, ABC, BOC, CCB, and ICBC. The Commission also received questionnaire replies from the four sampled groups of exporting producers, from the sampled Union producers, from the unrelated importer, and from one user.

(34) The Commission sought and verified all information deemed necessary for the determination of subsidy, resulting threat of injury and Union interest. A verification visit took place at the premises the Chinese Ministry of Commerce, during which officials from other relevant ministries also participated. Moreover, representatives from the following financial institutions were present during this verification visit: — Export Import Bank of China, Beijing, China; — Industrial and Commercial Bank of China, Beijing, China; — China Construction Bank, Beijing, China; — Agricultural Bank Of China, Beijing, China; — Bank of China, Beijing, China.

(35) Moreover, verification visits pursuant to Article 26 of the basic Regulation were carried out at the premises of the following companies: (1) Sampled Union producers — ThyssenKrupp Steel Europe AG, Duisburg, Germany; — Tata Steel IJmuiden BV, Velsen-Noord, the Netherlands; — Tata Steel UK Limited, Port Talbot, South Wales, United Kingdom; — ArcelorMittal Mediterranee SAS, Fos-sur-Mer, France; — ArcelorMittal Atlantique Et Lorraine SAS, Dunkerque, France; — ArcelorMittal España SA, Gozón, Spain. (2) Sampled producers in the PRC (a) Benxi Iron & Steel Group: — Benxi Iron & Steel (Group) Co., Ltd, Benxi, PRC; — Bengang Steel Plates Co., Ltd, Benxi, PRC; — Benxi Beiying Iron & Steel (Group) Co., Ltd., Benxi, PRC; — Benxi Iron & Steel (Group) Mining Industry Co., Ltd., Benxi, PRC; — Benxi Iron & Steel (Group) International Trading Co., Ltd., Benxi, PRC; — Liaoning Henderson Assets Operating & Management Co., Ltd., Benxi, PRC. (b) Jiangsu Shagang Group: — Jiangsu Shagang Group Co., Ltd., Zhangjiagang City, PRC, — Zhangjiagang Hongchang Plate Co., Ltd., Zhangjiagang City, PRC — Zhangjiagang GTA Plate Co., Ltd., Zhangjiagang City, PRC — Zhangjiagang Yangtze River Cold rolled Sheet Co., Ltd, Zhangjiagang City, PRC — Zhangjiagang Hongchang Pellets Co., Ltd, Zhangjiagang City, PRC — Jiangsu Shagang International Trade Co., Ltd., Jinfeng Town, Zhangjiagang City, PRC. (c) Hesteel Group: — Hesteel Group Co., Ltd., Shijiazhuang and Beijing, PRC; — Hesteel Co., Ltd., Shijiazhuang, PRC; — Handan Iron & Steel Group Han-Bao Co., Ltd., Handan City, PRC; — Hesteel Co., Ltd. Tangshan Branch, Tangshan City, PRC; — Hesteel Co., Ltd. Chengde Branch, Chengde City, PRC; — Hebei Iron & Steel Group Mining Co., Ltd, Tangshan, PRC; — Hesteel Group International Trade Corporation, Beijing, PRC; — Sinobiz Holdings Limited (British Virgin Islands), Tangshan City, PRC. (d) Shougang Group: — Shougang Jingtang United Iron & Steel Co. Ltd., Caofeidian, PRC; — Tangshan Shougang Jingtang Xishan Coking Co. Ltd., Caofeidian, PRC; — Shougang Qian'an Iron and Steel, branch of Beijing Shougang Co. Ltd., Qian'an, PRC; — Qian'an Coal Chemical Company, Qian'an, PRC; — Shougang Mining Co. Ltd., branch of Shougang Corporation, Qian'an, PRC; — Beijing Shougang Co. Ltd., Beijing, PRC; — China Shougang International Trade & Engineering Corporation, Beijing, PRC; — Shougang Holding Trade Hong Kong Limited, Hong Kong; — Shougang Corporation, Beijing, PRC. (3) Users — Marcegaglia Carbon Steel Spa, Gazoldo degli Ippoliti, Italy.

1.6. Non-imposition of provisional measures

(36) On 13 February 2017, the Commission informed all interested parties that no provisional countervailing duties would be imposed on imports into the Union of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the PRC.

1.7. Subsequent procedure

(37) The Commission continued seeking and verifying all information it deemed necessary for its definitive findings, indicating the issues that needed to be further investigated.

(38) On 28 April 2017, the Commission disclosed to all parties the essential facts and considerations on the basis of which it intended to impose a definitive anti-subsidy duty on imports of the product concerned into the Union, and invited all parties to comment within 17 days. Through such disclosures, the Commission also informed interested parties of the results of its verification visits, including the instances where the Commission had to use best facts available. Moreover, on 18 May, the Commission sent an additional note to the file to all interested parties, explaining in more detail its reasoning on the calculation of benefit for preferential lending. Comments were received within the set deadline of 5 days and dealt with accordingly.

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Product concerned

(39) Hot-rolled flat steel products are produced through a metal forming process in which hot metal is passed through one or more pairs of hot rolls to reduce the thickness and to make the thickness uniform, whereby the temperature of the metal is above its recrystallization temperature. They can be delivered in various forms: in coils (oiled or not oiled, pickled or not pickled), in cut lengths (sheet) or narrow strips.

(40) There are two main uses of the hot-rolled flat steel products. First, they are the primary material for the production of various value added downstream steel products, starting with cold-rolled (8) flat and coated steel products. Second, they are used as an industrial input purchased by end users for a variety of applications, including in construction (production of steel tubes), shipbuilding, gas containers, cars, pressure vessels and energy pipelines.

(41) One exporting producer (Jiangsu Tiangong Tools Company Limited) requested on 26 June 2016 that certain types of hot-rolled flat steel products, known in the industry as tool steel and high-speed steel, should be excluded from the product scope. It claimed that tool steel and high-speed steel have significantly different properties, prices, different specifications and uses.

(42) In this respect, the Commission found during the parallel anti-dumping investigation that there are indeed major physical and chemical differences between other types of the product concerned than tool steel and high-speed steel on the one hand, and tool steel and high-speed steel on the other hand. There are several chemical elements inherently present in tool steel and high-speed steel, which are not found in the product concerned. Furthermore, there are differences in the production process, different uses and significant price differences between tool steel and high-speed steel on the one hand and other types of the product concerned.

(43) The Commission thus excluded tool steel and high-speed steel from the product scope of the parallel anti-dumping investigation.

(44) Based on the above considerations the Commission decided to exclude tool steel and high-speed steel also from the product scope of this investigation.

(45) The product concerned is thus defined as certain flat-rolled products of iron, non-alloy steel or other alloy steel, whether or not in coils (including ‘cut-to-length’ and ‘narrow strip’ products), not further worked than hot-rolled, not clad, plated or coated originating in the People's Republic of China. The product concerned does not include: — products of stainless steel and grain-oriented silicon electrical steel, — products of tool steel and high-speed steel, — products, not in coils, without patterns in relief, of a thickness exceeding 10 mm and of a width of 600 mm or more, and — products, not in coils, without patterns in relief, of a thickness of 4,75 mm or more but not exceeding 10 mm and of a width of 2 050 mm or more. The product concerned is currently falling within CN codes 7208 10 00, 7208 25 00, 7208 26 00, 7208 27 00, 7208 36 00, 7208 37 00, 7208 38 00, 7208 39 00, 7208 40 00, 7208 52 10, 7208 52 99, 7208 53 10, 7208 53 90, 7208 54 00, 7211 13 00, 7211 14 00, 7211 19 00, ex 7225 19 10, 7225 30 90, ex 7225 40 60, 7225 40 90, ex 7226 19 10, 7226 91 91 and 7226 91 99.

2.2. Like product

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

(47) Therefore, they are considered as alike within the meaning of Article 2(c) of the basic Regulation.

3. SUBSIDISATION

3.1. Introduction: Presentation of Government plans, projects and other documents

(48) Before analysing the alleged subsidisation in the form of specific subsidies or subsidy programmes (sections 3.4 and following below) the Commission assessed government plans, projects and other documents, which were relevant for more than one of the subsidies or subsidy programmes. It found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC's central planning for the following reasons.

(49) The 12th Five Year Plan for National Economic and Social Development of the PRC (‘the 12th Five Year Plan’) highlights the strategic vision of the GOC for improvement and promotion of key industries. In particular, chapter 9 of the 12th Five Year Plan, which concerns the transformation and upgrade of the manufacturing industry, calls for the transformation and upgrading of key existing industries to increase the competitiveness of China's industrial core. It indicates that the GOC will formulate policies to support the technical improvement of enterprises in order to improve market competitiveness. The steel industry figures prominently among these key industries.

(50) The 12th Five Year Plan also attaches great importance to resource conservation and environmental protection, as well as to the development of a circular economy and low carbon technologies targets. In this respect, chapter 9 of the 12th Five Year Plan states that the steel industry should make progress in integrated resources utilization, energy conservation and emission reduction, and that the GOC will support such environmentally friendly development efforts.

(51) The GOC has also issued a specific plan for the steel industry, i.e. the 12th Five Year Plan for the Steel Industry (‘the 12th Five Year Steel Plan’). That Plan highlights that the steel industry is an important basic industry of the national economy. The main priority for the GOC in the period 2011-2015 is the structural adjustment, transformation and upgrade of the steel industry. In addition, chapter 5 of the 12th Five Year Steel Plan emphasizes the importance of ‘strengthen[ing] the connection of fiscal, financial, trade, land, energy saving, environmental protection, safety and other policies with the steel industrial policy’.

(52) The GOC claimed that the Commission could not rely on the 12th Five Year Plan and the 12th Five Year Steel Plan for its investigation, as those plans expired on 31 December 2015. Hence, there would be no legal basis for continued subsidization. The Commission noted that the 12th Five Year Plan and the 12th Five Year Steel Plan covered the investigation period. In addition, in March 2016, the 13th Five Year Plan was released, which covers the period 2016-2020. As explained in the following recital, the 13th Five Year Plan builds on the objectives highlighted in the 12th Five Year Plan and develops them further. Hence, there is continuity in promoting the development of the steel industry.

(53) The 13th Five Year Plan further emphasizes the role of technological innovation in the economic development of the PRC, as well as the continued importance of ‘green’ development principles. According to its chapter 5, one of the main development lines is to promote the upgrading of the traditional industrial structure, as was already the case in the 12th Five Year Plan. This idea is further elaborated in chapter 22, which explains the strategy to modernize the traditional industry in the PRC by promoting its technological conversion. In this respect, the 13th Five Year Plan states that companies will be supported to ‘comprehensively improve in areas such as product technology, industrial equipment, environmental protection and energy efficiency’. Environmental protection is further elaborated in chapter 44. According to this chapter, a clean production ‘renovation’ will be implemented in key industries, and box 16 specifically refers to the steel industry in this respect.

(54) The ‘Steel Industry Adjustment and Upgrading plan for 2016-2020’ (the 13th Five Year Steel Plan) was released in November 2016. It is based on the 13th Five Year Plan. It states that the steel industry is ‘an important, fundamental sector of the Chinese economy, a national cornerstone’ (9). That plan further elaborates on the principles of technological innovation, structural adjustment and green development mentioned in the 13th Five Year Plan, links them to more specific priorities within the steel industry (see chapter IV — Main tasks), and makes the link with various fiscal and financial support measures (see chapter V — Safeguard measures).

(55) The GOC also claimed that these plans issue only policy guidance and, thus, they are not mandatory or binding. However, the introduction to the 12th Five Year Plan states: ‘This Plan, upon deliberation and approval by the National People's Congress, bears legal validity.’ Chapter 17 of the 13th Five Year Plan states: ‘The national development strategy and plan will come into play with a leading and constraining role.’ (10) Finally, the 13th Five Year Steel Plan states that ‘all local authorities in charge of the steel industry shall … implement the tasks and policy measures set out in the present plan’. At the level of individual companies, ‘relevant enterprises shall ensure convergence with the present plan's main objectives and priority tasks’ (11). Thus, rather than making only general statements of encouragement, these plans are binding. The GOC reiterated its position after disclosure, but did not provide any additional evidence to substantiate why the above-mentioned language would constitute only policy guidance, despite the clear wording indicating the opposite. Rather, the GOC cited specific language in these plans, which is more policy-oriented, but which does not contradict the findings on their legally binding nature. The Commission thus maintained its position that these plans are legally binding.

(56) The following documents also identify the steel industry as a strategic, prioritized and/or encouraged industry: (a) Decision No. 40 of the State Council on Promulgating and Implementing the ‘Temporary Provisions on Promoting the Industrial Structure Adjustment’(‘Decision No. 40’). This Decision states that the ‘Guidance Catalogue for the Industrial Structure Adjustment’, which is an implementing measure of Decision No. 40 is an important basis for guiding investment directions. It also guides the GOC to administer investment projects, and to formulate and enforce policies on public finance, taxation, credit, land, import and export (12). The steel industry is indicated as an encouraged industry in Chapter VIII of this Guidance Catalogue. As to its legal nature, the Commission noted that Decision No. 40 is an Order from the State Council, which is the highest administrative body in the PRC. In that regard, the decision is legally binding for other public bodies and the economic operators. (13) (b) According to its chapters III.5 and VIII, the National Outline for the Medium and Long-term Science and Technology Development (2006-2020) supports the development of key fields and priority themes, and encourages financial and fiscal support to these key fields and priorities. (c) Order No. 35 of the National Development and Reform Commission (‘NDRC’) (14)‘Policies for the development of the Iron and Steel Industry’ (2005) (‘Order No. 35’) mentions that the iron and steel industry is an important basic industry of the national economy. (d) The Blueprint for Steel Industry Adjustment and Revitalisation issued by the State Council in March 2009 (‘the Revitalisation Plan’) initiates several policies and support measures to guide the steel industry out of the international financial crisis, to maintain growth, and to guarantee the stable operation of the industry, because it is regarded as an important pillar industry of the national economy.

(57) After disclosure, the GOC quoted from Decision No. 40 that encouraged industries should receive credit support ‘according to the credit principles’. According to the GOC it cannot be inferred that such support should be given on a preferential basis. However, the investigation has shown that the vague term ‘credit principles’ does not mean market-based and commercial behaviour, but rather that those credit principles include important public policy considerations, which override credit risk assessment or lead to a complete absence of any risk assessment. Furthermore, the sampled companies benefited from preferential lending policies where a proper credit risk assessment is effectively absent, as explained in section 3.4 below. The Commission therefore rejected the GOC's assertion that lending to the steel industry was done on market based and commercial terms, and that the reference ‘according to the credit principles’ would constitute an obligation to follow those terms. The key point remains that according to Decision No 40, all financial institutions shall provide credit to encouraged industries, which includes the steel industry, and that that support is de facto provided on preferential terms disregarding the actual credit risk of the beneficiaries.

(58) The GOC further commented that the National Outline for the Medium and Long-term Science and Technology Development (2006-2020) does not establish eligibility of steel producers for the alleged subsidies. However, chapter III.5 of this document clearly mentions the steel industry in connection with priority theme No 29, called ‘Cyclic Iron and Steel Flow Process and Equipment’ and chapter VIII encourages financial and fiscal support to these priority themes. This claim was therefore rejected.

(59) Upon disclosure, the complainant asked the Commission to expand its analysis of the central plan to include the non-enforcement of bankruptcy law. It argued that figures between 2008 and 2015 show a ‘strikingly low’ number of bankruptcies in China and cited a bail-out agreement between several Chinese banks and the bankrupt steel trader Sinosteel from December 2016. Furthermore, it made reference to the findings of the IMF's report ‘Resolving China's Corporate Debt Problem’ (15), identifying a number of reasons for the low insolvency rate in China. The Commission accepted that the complainant had reported in its complaint a number of important individual cases, where bankruptcy proceedings had not been started for particular steel companies in distress. However, it found that the general figures on bankruptcies in China provided upon disclosure could not be broken down with sufficient certainty to the HRF sector. In order to ascertain whether the number of insolvencies is ‘normal’ or ‘low’ a proper benchmark would have to be established for the precise number of insolvencies during the IP. Such analytical work could not be conducted in the limited time available after disclosure. In any case, the comment did not call into the question the Commission's findings in this section, but rather confirmed them.

(60) In conclusion, the steel industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective.

3.2. Partial non-cooperation and use of best facts available

3.2.1. The application of the provisions of Article 28(1) of the basic Regulation in relation to the GOC's preferential lending

(61) The Commission requested the GOC to contact seven specific state-owned banks mentioned in the complaint, as well as any other state-owned bank, to fill in a specific questionnaire. However, the GOC only contacted five of the seven state-owned banks specifically mentioned by the complainant. According to the GOC, it had no authority to demand information from the other state-owned banks, as they operate independently of the GOC. In this regard, the Commission recalled that the GOC was not requested to provide any information, but only to forward the specific questionnaire to the state-owned banks.

(62) None of the five state-owned banks that responded to the specific questionnaire provided specific information concerning loans provided to the sampled companies, arguing that they were bound by statutory and regulatory requirements and contractual clauses with respect to the confidentiality of the information related to the sampled companies. In addition, thirty state-owned banks, which the GOC had refused to contact to fill in the specific questionnaire, did provide loans to the sampled groups of exporting producers. The Agricultural Development Bank of China did not provide loans to the sampled groups of exporting producers.

(63) Therefore, the Commission asked all the sampled groups of exporting producers to grant access to company-specific information held by all banks, state-owned and private, from which they received loans. However, all of the sampled companies declined to provide access to the data pertaining to them without providing any reasons.

(64) As three of the sampled groups of exporting producers are fully owned by the State, the Commission also requested the GOC, as the owner of these companies, to arrange for access to the requested information. However, the GOC rejected the request of the Commission, arguing that it had no authority to instruct these three groups of exporting producers to provide the requested access.

(65) The Commission received information on corporate structure and ownership only from the five state-owned banks mentioned in recital (34), but not from any of the other 40 financial institutions. Moreover, none of the 45 financial institutions provided any information specific to the risk assessment of the loans granted to the sampled groups of exporting producers.

(66) Therefore, the Commission informed the GOC that it might have to resort to the use of best facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

(67) The GOC objected to this use of best facts available, stating that it had no authority to demand information from the financial institutions and the three state-owned groups of exporting producers.

(68) That claim is unfounded. The Commission only requested the GOC to forward the specific questionnaire for the state-owned banks, because the GOC is best placed to have detailed information on the ownership structure of financial institutions in the PRC. The GOC could also have provided administrative support to collect the replies from the financial institutions.

(69) Furthermore, the Commission fails to see why the GOC could not support the Commission's request for access to specific information addressed to the three state-owned sampled groups of exporting producers, especially in view of the fact that the authorization for access would in all likelihood have needed an approval at the highest level, and thus needed the involvement of GOC officials.

(70) After disclosure, the GOC reiterated that it did not have the authority to demand the requested information from the state-owned banks and the three state-owned groups of exporting producers. The GOC also found that the request of the Commission posed an unreasonable burden on the GOC, as it was expected not only to forward the questionnaires, but also to provide administrative support to collect the replies. The Commission failed to see why sending out a questionnaire and collecting replies at a central level would have put an unreasonable burden on the GOC. As the GOC did not bring forward any other new elements, the Commission maintained its position as described in recital (68) above.

(71) Furthermore, the GOC claimed that the Commission did not indicate which information crucial to the investigation was missing and that it did not provide any explanations on why the requested information was necessary and why the information provided by the GOC was insufficient. In fact, the Commission had already alerted the GOC in its deficiency letter of 16 November 2016 that information was missing especially in relation to questions directed at state-owned banks, and that credit risk assessments should be made available during the verification. As the requested information was still not available after verification, the Commission informed the GOC in its letter of 16 March 2017 that it might have to resort to the use of best facts available under Article 28(1) of the basic Regulation because it still had no information in relation to most of the state-owned banks which provided loans to the sampled companies, and no company-specific information on the loans provided by the cooperating banks. Therefore, the GOC was adequately notified about the nature and the insufficiency of the information to be provided.

(72) Finally, the GOC stated that the Commission did not adequately explain why certain facts were deemed to be the best available information. The Commission disagreed with this statement. In section 3.4.1.2 below it is explained which facts available were used and why the Commission found that they were the best available information. This claim was thus rejected as unfounded.

(73) The private group of exporting producers Jiangsu Shagang Group also objected to the use of best facts available and considered that the request to provide an authorisation for the Commission to verify its financial data held by the financial institutions imposed an unreasonable burden on it. In particular, it claimed that the company representative was neither invited to be present at the verification on the financial institutions premises nor notified of the details of such verification.

(74) In reply to these claims, the Commission recalled that the company had only provided a short and unsubstantiated refusal to provide such an authorisation via a single-sentence e-mail dated 24 November 2016. At that time, the company neither asked about any further details of the verification at the financial institutions premises nor requested the presence of its representative at such verification. If the company had asked for it, the Commission could have provided further details and would have attempted to make arrangements for the company's representative to be present at the verification.

(75) Therefore, the Commission had to rely partially on best facts available when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

3.2.2. The application of the provisions of Article 28(1) of the basic Regulation to one exporting producer in relation to grants

(76) The Jiangsu Shagang Group failed to provide information on a random selection of grants for verification purposes. In addition, the Commission found evidence in the audited accounts of significant grants that were received prior to but conferring a benefit during the investigation period, and which had not been reported.

(77) Under these circumstances, the Commission considered that it had not received crucial information relevant to this aspect of the investigation. This caused serious difficulties to arrive at an accurate and substantiated conclusion for the subsidy findings related to grants with respect to this exporting producer.

(78) Therefore, the Commission notified the company that it would consider basing its findings partially on best facts available pursuant to Article 28(1) of the basic Regulation (i.e. as far as the information related to grants was concerned).

(79) In the reply to the Commission's letter, the company objected to the application of Article 28(1) of the basic Regulation regarding the grants. It argued that the grants found by the Commission during the verification visit were not reported because the questionnaire did not request to report those grants which were received prior to the IP and which were not recorded as a deferred asset. In addition, it claimed that it had provided a breakdown of these grants during the verification visit.

(80) The Commission found during the verification visit that most of the grants received prior to the IP were related to assets based on the names of the investigated subsidies. Thus, the exporting producer should have recognised these grants as deferred assets/income in accordance with the applicable accounting rules as outlined in the notes to its financial statements. Consequently the company should have reported the grants in the reply to the questionnaire, which asked to report all grants related to assets and booked as deferred income. The fact that the auditor did not qualify these grants as deferred assets does not mean that amounts received prior to the IP cannot confer a benefit during the IP, especially when no further details other than a breakdown per company was provided. Therefore, the Commission concluded that the company had neither provided the detailed information about the grants received in the IP and which were reported in the reply to the questionnaire, nor the details of the grants that were received prior to the IP, and which were found only during the verification visit to be relevant for the IP. In the absence of this detailed information the Commission could not use the information about the grants provided by the company.

(81) Therefore, the Commission had to rely on best facts available for its findings concerning grants for this company. When investigating the company on the spot, the Commission found that this company received substantial amounts from a variety of grant programmes, and therefore, the Commission used as best facts available the highest subsidy amount for these grants found during the IP.

3.3. Subsidies and subsidy programmes within the scope of the current investigation

(82) On the basis of the information contained in the complaint, the Notice of Initiation and the replies to the Commission's questionnaire, the alleged subsidisation through the following subsidies by the GOC were investigated: (i) Preferential policy loans, credit lines, other financing, and guarantees; (ii) De facto guarantee on the continuity of operations for companies in the HRF industry that face difficulties to repay loans; (iii) Grant Programmes — China World Top Brand Programme — Famous Brand Programme — Anti-dumping Respondent Assistance — The State Key Technology Project Fund Subsidies — Export Assistance Grants, such as e.g. rewards for advanced exporting enterprises or export performance, fair trade subsidies, grants for international economic cooperation — Innovative Experimental Enterprise Grant — Special support fund for non-state owned enterprises (non-SOEs) — Environmental Protection grants, such as e.g. incentives for Environmental Protection and Resource Conservation, Promotion of synergistic resource utilization, Incentive funds for energy conservation retrofit projects, Promotion of Energy Management Demonstration Centres — Grants related to technological upgrading or transformation, such as e.g. promotion of R&D tasks under Science and Technology Support Plans, Promotion of Key Industry Adjustment, Revitalisation and Technology Renovation, grants for the Commercial Application of R&D Results, Promotion of Quality Improvement, Promotion of Patent Registration, funds received under the ‘Three Categories’ Programme — Grants for elimination of outdated capacity — Liaoning Province Grants — Five Point One Line Programme — Tianjin Binhai New Area and the Tianjin Economic and Technological Development Area subsidies: Science and Technology Fund and Accelerated Depreciation Programme — Ad-hoc subsidies provided by the municipal/provincial authorities; (iv) Direct Tax Exemption and Reduction programmes — Enterprise Income Tax (EIT) privileges for Resource Products from Synergistic Utilisation — EIT credits for investment expenses on equipment related to environmental protection, energy and water conservation as well as production safety — EIT privileges for High and New Technology Enterprises — EIT privileges under the Great Western Development Program, — EIT privileges for revenues from Encouraged Products, — EIT Credit for the purchase of domestic equipment — Exemption or reduction of contributions related to water construction funds — The two free/three half programme for foreign invested enterprises (FIEs) — EIT offset for research and development — Income tax reductions for FIEs purchasing Chinese-made equipment — Preferential tax policies under the Northeast Revitalisation Programme — Western Region preferential tax policies — Coastal Economic Open Areas and Economic and Technological Development Zones preferential tax policies for FIEs — Special Economic Zones preferential tax policies for FIEs — Land Use Tax exemption or reduction — Local tax discounts — Dividend exemption between qualified resident enterprises; (v) Indirect Tax and Import Tariff Programmes — VAT exemptions and import tariff rebates for the use of imported equipment and technology — VAT rebates on FIE purchases of Chinese-made equipment — VAT exemption for products sold by FIEs — VAT reduction/exemption for products generated from synergistic Resource Utilisation — Tax concessions for Central and Western Regions; (vi) Government provision of goods and services for less than adequate remuneration (LTAR) — Government provision of iron ore for less than adequate remuneration — Government provision of coke extrusions for less than adequate remuneration — Government provision of coking coal for less than adequate remuneration — Government provision of power for less than adequate remuneration — Government provision of land and land-use rights for less than adequate remuneration; (vii) ‘Foreign Trade Transformation and Upgrading Demonstration Bases’ (‘Demonstration Bases’) and ‘Common Service Platforms’; (viii) Subsidisation of the provision of hot-rolled flat products to the EU during the investigation period.

3.4. Preferential lending

(83) According to the information provided by the four sampled groups of exporting producers, 45 financial institutions had provided loans to them. Of these 45 financial institutions, 35 were state-owned banks. The 10 remaining financial institutions were either privately owned, or the Commission could not find any conclusive information on their ownership. However, only five state-owned banks filled in the specific questionnaire, despite a request to the GOC that covered all 35 state-owned banks. Out of the 10 remaining financial institutions, only one replied, indicating that it could not reply without having consulted the regulatory authorities. After having consulted the CBRC, this financial institution informed the Commission that it was willing to cooperate, but that the CBRC suggested to it that such cooperation should be carried out through a regulatory cooperation mechanism (i.e. an exchange of information between Chinese and EU regulators respectively rather than directly between the Commission and the bank). The Commission welcomed this offer to cooperate, but noted that it was impossible to set up such an intermediate arrangement for the remainder of the investigation. In any case, the Commission did not receive any further letter or request from the CBRC itself. In addition, the financial institution did not provide any comments on substance within the set deadline. Therefore, the Commission had to base itself on best facts available.

3.4.1. State-owned banks acting as public bodies

(84) The Commission ascertained whether the state-owned banks were acting as public bodies within the meaning of Articles 3 and 2 (b) of the basic Regulation. In this respect, the applicable test to establish that a State-owned undertaking is a public body is as follows (16): ‘What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice. It follows, in our view, that evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. We stress, however, that, apart from an express delegation of authority in a legal instrument, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish the necessary possession of governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.’ In the present case, the conclusion that the state-owned banks are exercising governmental authority is based on formal indicia of government control and evidence that it has been exercised in a meaningful way.

(85) The Commission sought information about State ownership as well as formal indicia of government control in the state-owned banks. It also analyzed whether control had been exercised in a meaningful way. The investigation of that exercise was impeded by the refusal of the GOC and the state-owned banks to enable the Commission to analyse the decision-making process that had led to the preferential lending.

(86) In order to carry out this analysis, the Commission first examined information for the five state-owned banks that had filled in the specific questionnaire and allowed for verification.

3.4.1.1. Cooperating state-owned banks

(87) The following five state-owned banks provided a questionnaire reply, which was verified on site: EXIM, ICBC, CCB, ABC, and BOC. These five state-owned banks accounted for a substantial part of the loans granted to the four sampled groups of companies during the investigation period in terms of the amounts borrowed (ranging from 50 % to 60 % for both the Hesteel Group and the Jiangsu Shagang Group, and ranging from 80 % to 95 % for both the Benxi Group and the Shougang Group).

(a) Ownership and formal indicia of control by the GOC

(88) Based on the information received in the questionnaire reply and during the verification visit, the Commission established that the GOC held, either directly or indirectly, more than 50 % of the shares in each of these financial institutions.

(89) Concerning the formal indicia of government control of the five cooperating state-owned banks, the Commission qualified all of them as ‘key State-owned financial institutions’. In particular, the notice ‘Interim Regulations on the Board of Supervisors in Key State-owned Financial Institutions’ states that: ‘The key State-owned financial institutions mentioned in these Regulations refer to State-owned policy banks, commercial banks, financial assets management companies, securities companies, insurance companies, etc. (hereinafter referred to as State-owned financial institutions), to which the State Council dispatches boards of supervisors’ (17).

(90) The Board of Supervisors of the key State-owned financial institutions is appointed according to the ‘Interim Regulations of Board of Supervisors of State-owned Key Financial Institutions’. Based on Articles 3 and 5 of these Interim Regulations, the Commission established that Members of the Board of Supervisors are dispatched by and accountable to the State Council, thus illustrating the institutional control of the State on the cooperating state-owned banks' business activities. In addition to these generally applicable indicia, the Commission found the following with respect to the of the five state-owned banks:

EXIM:

(91) EXIM was formed and operates in accordance with ‘The Notice of Establishing Export-Import Bank of China’ issued by the State Council and the Articles of Association of EXIM. The State, as 100 % shareholder of EXIM, controls EXIM by nominating the Members of its Board of Supervisors. Those Members represent the interest of the State, including policy considerations in the meetings of EXIM. There is no Board of Directors. The State directly nominates the management of EXIM. According to its website, EXIM is dedicated to supporting China's foreign trade, investment and international economic cooperation. It is committed to reinforcing financial support to key sectors and weak links in the Chinese economy to ensure sustainable and healthy economic and social development.

ICBC:

(92) On the basis of chapters 8 to 10 of its Articles of Association, the GOC, through its shareholding of 69,6 %, has the power to appoint the most important positions within the management of the bank, such as the President and the Vice President, the Chairman and the Vice Chairman of the Board of Directors, the Executive Director, as well as the Chairman of the Board of Supervisors.

(93) Moreover, according to its Articles of Association, the Board of Directors convenes shareholder's meetings, decides on the business strategy and budget of the bank, takes investment (and merger) decisions, decides on the dismissals of senior management, formulates the risk management system, and decides on the establishment of departments and branches. This non-exhaustive list of responsibilities illustrates the institutional control of the State on ICBC's daily business.

CCB:

(94) According to chapter 11 and 12 of its Articles of Association, the GOC, in its capacity of main shareholder holding 57,31 %, has the power to appoint a majority of the members on the Board of Directors, which is the executive agency of the shareholders' General Meeting carrying out the management of CCB and shall be responsible to the shareholders' meeting. The same applies for the Board of Supervisors, i.e. the supervisory body of the Bank, as provided by chapter 16 of the Articles of Association.

(95) Moreover, according to CCB's Articles of Association, the Board of Directors decides on the budget of the bank, takes investment decisions, decides on the dismissals of the chief executive auditor and the secretary of the Board of the Directors. The 10 executive members (out of a total of 15 members) of the Board of Directors are the top management of CCB. This non-exhaustive list of responsibilities illustrates the institutional control of the State on CCB's daily business.

ABC:

(96) As mentioned in Article 134 of the Articles of Association, the GOC, in its capacity of main shareholder holding 79,62 %, has the power to appoint all of the Directors in the Board of Directors. The same applies to the Board of Supervisors according to Article 199 of the Articles of Association.

(97) Moreover, according to ABC's Articles of Association, the Board of Directors determines the strategy of the bank, decides on the budget of the bank, takes investment decisions, appoints the President and the Board Secretary of the bank, and establishes and monitors the risk management system of the bank. This non-exhaustive list of responsibilities illustrates the institutional control of the State on ABC's daily business.

BOC:

(98) As mentioned in Article 122 of the Articles of Association, the GOC, in its capacity of main shareholder holding 64,63 %, has the power to appoint both the executive and the non-executive Directors of the bank, which constitute the Board of Directors.

(99) Moreover, according to BOC's Articles of Association, the Board of Directors decides, inter alia, the financial institution's strategic principles, business plans and major investment plans, appoints or dismisses senior staff such as the President and Secretary of the Board, the Vice President, and other senior management personnel. The Board further decides on the implementation of resolutions at the shareholders' meeting, and approves corporate governance policies. This non-exhaustive list of responsibilities illustrates the institutional control of the State on BOC's daily business.

(b) Evidence showing that the Government exercised meaningful control over the conduct of those institutions

(100) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of the five cooperating state-owned banks with respect to their lending policies and assessment of risk, where they provided loans to the steel industry. The following regulatory documents have been taken into account in this respect: — Article 34 of the Law of the PRC on Commercial Banks (‘Bank law’); — Articles 7 and 15 of the General Rules on Loans (implemented by the People's Bank of China); — Chapter 5 of the 12th Five Year Steel Plan; — Chapter 5 of the 13th Five Year Steel Plan; — Decision No 40; — Guidelines of the People's Bank of China, China Banking Regulatory Commission (‘CBRC’), China Securities Regulatory Commission (‘CSRC’), and China Insurance Regulatory Commission (‘CIRC’) on supporting the steel and coal industries to resolve overcapacity and achieve turnaround in development (2016) ) (‘Guidelines of the People's Bank of China, CBRC, CSRC and CIRC’); — Notice ‘Several Opinions on Resolving Overcapacity’, issued by the NDRC, the Ministry of Industry and Information Technology (‘MIIT’) and CBRC (2016) (‘notice “Several Opinions on Resolving Overcapacity”’); — Green Credit Guidelines of the CBRC (read in combination with the Opinions on Strengthening Energy Saving and Emission Reduction and Accelerating Structural Adjustment in the Iron and Steel Sector, June 2010, State Council) (‘Green Credit Guidelines’).

(101) Reviewing these regulatory documents, the Commission found that financial institutions in the PRC are operating in a general legal environment that directs them to align themselves with the GOC's industrial policy objectives when taking financial decisions.

(102) At the general level, Article 34 of the Bank law, which applies to all financial institutions operating in China, provides that ‘Commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State’. With respect to EXIM, its public policy mandate is established in the notice of establishing the Import Export Bank of China as well as other public available information.

(103) Following disclosure, the GOC indicated that special loans referred to in Article 7 of the General Rules on Loans mentioned above were eliminated in 1999 based on a Circular on Improving the Administration of Special Loans (YINFA [1999] No. 228) and that Article 15 had become irrelevant as the PBOC no longer sets the upper and lower limits of loans.

(104) The GOC further alleged that the Commission had misinterpreted Article 34 of the Bank law. It also referred to Articles 4, 5, and 7 of the Bank law relating allegedly to the bank's autonomy, the lack of interference by entities or individuals, governments and the examination of the credibility of the borrowers. The GOC further commented that Article 34 should not be read in isolation.

(105) The Commission acknowledged that special loans were eliminated in 1999. This does not reverse, however, the conclusions drawn about the existence of preferential lending, which is also based on other facts available which, taken on their own, are sufficient.

(106) As for Article 15 of the General Rules on Loans, the Commission disagreed with the GOC's view. That Article provides: ‘In accordance with the State's policy, relevant departments may subsidize interests on loans, with a view to promoting the growth of certain industries and economic development in some areas.’ Thus, this provision remains relevant even after the end of floor and ceiling rates. In any event, Article 38 of the Bank law still refers to limits and may at any point in time be applied.

(107) As far as the Bank law is concerned, Articles 4, 5 and 7 belong to ‘Chapter I General provisions’ while Articles 34 and 35 belong to ‘Chapter IV Basic Rules for Loans and Other Business Operations’. Article 4 states that ‘The business operations of commercial banks shall be governed by the principles of safety, liquidity and efficiency. Commercial banks shall make their own decisions regarding their business operations, take responsibility for their own risks, assume sole responsibility for their profits and losses and exercise self-restriction. Commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual. Commercial banks shall independently assume civil liability with their entire legal person property’. Article 7 of the Bank law relates to the examination of the creditworthiness of the borrower.

(108) The investigation showed that Articles 4 and 7 of the Bank law are applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions. The findings of this investigation did not support the claim that banks do not take government policy and plans into account while making lending decisions. It rather confirmed the contrary, as has been clearly described in recitals (121) to (128) below. Therefore, the Commission found that Article 4 of the Bank law did not prevent commercial banks from taking government industrial policy and plans into account.

(109) The GOC also referred to Article 5 of the Bank law, deriving from it that there would be ‘no interference by local governments and government departments at various levels, public organizations or individuals in the business operations of the banks.’ However, the actual text of Article 5 of the Bank law reads as follows: ‘Commercial banks shall adhere to the principles of equality, voluntariness, fairness and good faith in business dealings with their clients’. For the Commission, this formulation does not shield banks from their duty to apply public policy considerations as set out in Article 34 of the Bank law. As set out in recitals (121) to (128) below, in view of the behaviour of the banks when providing loans to the sampled companies, this Article can therefore not be considered to contradict the interpretation of Article 34 established by the Commission.

(110) The industrial policy of the State is established through central planning, as explained in section 3.1 above. With regards to the steel industry, chapter 5 of the 12th Five Year Steel Plan specifically provides for strengthening the connection between financial policies and the steel industrial policy. Furthermore, Chapter 5 of the 13th Five Year Steel Plan issues ‘guidance to financial institutions and private capital to support the priority tasks of the Plan’, and provides that ‘As regards enterprises having a market and being profitable, banks shall keep the demand for credit reasonable’.

(111) Similarly, Decision No. 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. As already explained in section 3.1, projects of the steel industry belong to the ‘encouraged’ category.

(112) Following disclosure, the GOC indicated that the Commission did not explain how Decision No. 40 demonstrates that banks are required to undertake any preferential credit operations, and referred to Articles 17 and 18 of this Decision. The Commission noted that the Decision incorporates the GOC's will to actively support the development of the steel industry. The Decision also instructs all financial institutions to provide credit support only to encouraged projects (the category in which the steel projects belong) and promises the implementation of ‘other preferential policies on the encouraged projects’. On the basis of the above, banks are required to provide credit support to the steel industry under Decision No. 40. While Articles 17 and 18 of the same Decision also ask the bank to respect credit principles the Commission could not establish during the investigation that this was done in practice. Decision No. 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations.

(113) Furthermore, the Guidelines of the People's Bank of China, CBRC, CSRC, and CIRC, as well as the notice ‘Several Opinions on Resolving Overcapacity’, are specifically targeted at companies in the steel sector. They state that financial institutions must fully recognize the pillar role and strategic importance of steel and coal industries and continue to give credit support to the steel companies which comply with industrial policy and which adjust and regroup themselves without increasing their production capacity. This support shall extend to the setting of interest rates and the promotion of bonds and loans for mergers and acquisitions. Furthermore, debt restructuring and debt forgiveness is promoted.

(114) Following disclosure, the GOC stated that the Commission failed to mention any specific provisions in the above-mentioned documents which support its conclusions. The Commission highlighted that it had based its statements in the previous recital inter alia on the following passages of the notice ‘Several Opinions on Resolving Overcapacity’: (a) ‘Banking financial institutions shall raise their appreciation of the pillar and strategic role of the iron and steel industry and the coal industry in the national economy, and earnestly implement credit extension policies of differentiated treatment that are both accommodative and controlling.’ (b) ‘Financial support shall be stepped up for iron and steel enterprises and coal enterprises that engage in merger and reorganization.’ (c) ‘Banking financial institutions are encouraged to reorganize the loans disbursed to iron and steel enterprises and coal enterprises that are in difficult conditions but take the initiative to reduce capacity.’ (d) ‘As regards iron and steel enterprises and coal enterprises with marketable products or services and promising development potentials that are in line with national industrial policies and take the initiative to reduce capacity, adjust structures and transform development models, banking financial institutions shall set up creditor committees, adjust the maturity, interest rates and repayment methods of loans and take other measures.’

(115) As far as the Guidelines of the People's Bank of China, CBRC, CSRC, and CIRC are concerned, the following passages are inter alia relevant: (a) ‘Banking financial institutions should fully recognize the pillar role and strategic position of steel and coal industries, accurately grasp the law of their development, continue to give credit support, in accordance with the principles of risk controllability and business sustainability, to high-quality backbone enterprises, which have advanced technology and equipment, competitive products, markets, and may restore their competitiveness and get rid of temporary difficulties after deepening reform and strengthening internal management; actively offer comprehensive financial services to the enterprise which adjusts and regroups itself but doesn't increase its production capacity.’ (b) ‘Improve interest rate pricing management, and reduce enterprise's financing costs.’ (c) ‘Actively promote the innovation of green of bonds and high yield bonds. Expand the issuance of green financial bonds, green asset securitization and other innovative financial instruments to guide the green development of the steel and coal industries.’ (d) ‘Actively and steadily promote debt restructuring at the enterprise. For the enterprise which comply with national industrial policies, and actively take the initiative to reduce production capacity, adjust structure and transform for development, and has certain solvency, under the premise of loan quality monitoring and precise classification, help them weather the storm by adjusting the loan period, ways of repayment, and other debt restructuring measures.’ (e) ‘Improve the M & A loan business, and expand the scale of M & A loans, reasonably determine the loan term and interest rate, so as to support enterprises and regions with comparative advantage to integrate the industrial capacity’.

(116) The Green Credit Guidelines encourage financial institutions to use different credit extension and risk management policies in accordance with industry policies and depending on the environmental status of the borrower. The steel industry is seen as a primary target for the provision of loans related to environmental projects. The industry policy in this context is explained in the ‘Opinions on Strengthening Energy Saving and Emission Reduction and Accelerating Structural Adjustment in the Iron and Steel Sector’. These Opinions highlight that ‘the iron and steel industry, being the one with the biggest potential in energy conservation and emission reduction, occupies a vital position in the work of energy conservation and emission reduction. To strengthen energy conservation and emission reduction and structural adjustment is an important and major measure in transforming the development model of the iron and steel industry’. Projects related to new technologies and techniques of circular economy and energy conservation and emission reduction, such as coke dry quenching under high temperature and pressure, dry dust removal, recovery and utilization of residual heat and pressure of coal gas, and sintering flue gas desulfurization, and the ensuing ‘green’ financing are thus ‘vigorously promoted’.

(117) The GOC submitted in its disclosure comments that the Green Credit Guidelines and the ‘Opinions on Strengthening Energy Saving and Emission Reduction and Accelerating Structural Adjustment in the Iron and Steel Sector’ similarly fail to show the existence of a binding normative framework for lending practices. In particular, the GOC referred to Article 15 of the Green Credit Guidelines, which state that ‘banking institutions shall strengthen due diligence in credit granting’.

(118) The findings of this investigation did not support the claim that Article 15 of the Green Credit Guidelines precluded financial institutions from following government industrial policy and plans when granting loans. It rather confirmed the contrary, as has been clearly described in recitals (121) to (128) below. Therefore, this claim was rejected.

(119) The Bank law is legally binding. The mandatory nature of the Five Year Plans has been established above at recital (55). The mandatory nature of Decision No. 40 has been established above at recital (55). The mandatory nature of the other regulatory documents is demonstrated by the supervision and evaluation clauses which they contain. The notice ‘Several Opinions on Resolving Overcapacity’ states that ‘The CBRC, the National Development and Reform Commission and the Ministry of Industry and Information Technology shall organize inspection and supervision of the implementation hereof in due course.’ Article 28 of the Green Credit Guidelines states that ‘Regulatory authorities in the banking industry shall … evaluate the effect of green credit extended by financial institutions in the banking industry in a comprehensive manner based on the status of off-site regulation and on-site inspection. The evaluation results shall be used as the important bases for the regulatory ratings, institution access, business access and performance appraisals of the senior management staff of financial institutions in the banking industry in accordance with the relevant laws and regulations’. The Guidelines of the People's Bank of China, CBRC, CSRC, and CIRC on supporting the steel and coal industries to resolve overcapacity and achieve turnaround in development state that financial institutions should strengthen communication with local government departments.

(120) On that basis, the Commission concludes that the GOC has created a normative framework that had to be adhered to by the managers and supervisors appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the five cooperating state-owned banks whenever those were providing loans to the steel industry.

(121) The Commission also sought concrete proof of the exercise of control in a meaningful way on the basis of concrete loans. During the verification, the five cooperating state-owned banks pointed to Articles 4 and 5 of the Bank law, according to which they are required to make an independent assessment of a loan request. They maintained that in practice they had used sophisticated credit risk assessment policies and models when granting the loans at issue. However, no concrete examples were provided. The five cooperating state-owned banks refused to provide information, including their specific credit risk assessments, related to the sampled companies for regulatory and contractual reasons. With regard to the latter, they pointed out that without the consent of the borrower, they would breach contract by providing the information. All four groups of sampled exporting producers refused to sign a letter of consent allowing for an examination of their financial data at the bank's premises.

(122) In the absence of concrete evidence of creditworthiness assessments, the Commission therefore examined the overall legal environment as set out above in recitals (100) to (120), in combination with the behaviour of the five cooperating state-owned banks with regard to the loans provided to the sampled companies. This behaviour contrasted with their official stance, as they were not acting like financial institutions would normally do based on a thorough market-based risk assessment.

(123) The verification visits revealed that with the sole exception of certain loans in foreign currency and one single loan to one sampled exporting producer, loans were provided to the four groups of sampled exporting producers at interest rates close to the People's Bank of China (‘PBOC’) benchmark interest rates (18), regardless of the companies' financial and credit risk situation. Hence, the loans were provided below market rates when compared to the rate corresponding to the risk profile of the four sampled exporting producers. In addition, all of the sampled companies had received revolving loans, which allow them to immediately replace the capital repaid on loans at the maturity date by fresh capital from new loans.

(124) In the cases of the Shougang Group and the Benxi Group, payment schedules were restructured or debt was forgiven because of financial difficulties, and the Commission found one specific example of an intervention by the GOC which led to a debt restructuring against the financial institutions' better financial judgment (19).

(125) The Commission also found that loans which should have been reported by the banks as not normal loans had not been indicated as such in the national central credit register by the five cooperating state-owned banks. The obligation to report exists in particular when loans had been restructured, when the debtor defaulted on its payments, or when revolving loans had been issued. Such occurrences were found for all four groups of sampled exporting producers. According to the CBRC's ‘Guidelines on risk-based loan classification’, all of these instances should have been included in the central credit register. This lack of reporting by the financial institutions leads to a distorted picture of the company's credit situation in the central credit register, as the register does not show the real creditworthiness of the company. As a result, even if a financial institution were to apply a market-based risk assessment, it would have done so based on inaccurate information.

(126) Following disclosure, the GOC submitted that the lack of reporting of some loans in the central credit register demonstrated that the legislative framework for lending practices was not binding. However, a partial non-compliance with the obligation to report certain loans by some actors does not mean that the Guidelines as such had no legal force.

(127) Furthermore, the GOC noted that the annual reports of various Chinese banks contained extensive chapters on risk management and credit analysis, and clearly showed that loans to the steel industry had recently been restricted rather than promoted. The Commission considered that the information provided on credit risk assessment in the annual reports did not contain any new elements put forward by the GOC. In any event, those were abstract, and did not allow the assessment of individual cases, nor do they constitute proof that such assessment actually takes place. In addition, the examples provided by the GOC for EXIM and CCB merely related to a decrease in the percentage of loans provided to the steel industry. These statements did not provide any information about the conditions at which these loans were granted. In any event, in the absence of any information on the overall lending to the steel industry by all state-owned banks and private banks that are entrusted and directed, the fact that two of them have reduced their exposure is not meaningful. As for the annual report of China Merchants Bank, the statement of the GOC only referred to the fact that the bank adjusted its credit policies without any further details. Even if the China Merchants Bank ‘raised its entry standards’, the quoted reference also stated that the bank ‘supported its quality customers’.

(128) Therefore, the Commission did not see any reason to change its findings and concluded that the GOC has exercised meaningful control over the conduct of the five cooperating state-owned banks with respect to their lending policies and assessment of risk, where they provided loans to the steel industry.

(c) Conclusion on cooperating financial institutions

(129) The Commission found that the legal framework set out above is being implemented by the five co-operating State-owned financial institutions in the exercise of governmental functions with respect to the steel sector, thereby acting as public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(130) After disclosure, the GOC claimed that the Commission did not meet the evidentiary standards for determining that the state-owned banks were public bodies, as it allegedly relied exclusively on formal indicia of control such as the GOC's ownership or the power to appoint or nominate management officials to draw its conclusions. The Commission rejected this claim as unfounded, since it had also examined the exercise of this control in a meaningful manner in great detail in recitals (100) to (128) above.

3.4.1.2. Non-cooperating state-owned banks

(131) As set out in section 3.2 above, the GOC did not request any of the other state-owned banks which provided loans to the sampled companies to return the specific questionnaire. Therefore, in line with the conclusions reached in recitals (61) to (75) above, the Commission decided to use best facts available to determine whether those state-owned banks qualify as public bodies.

(132) Using publicly available information, such as the bank's website, annual reports, information available in bank directories or on the Internet, the Commission established that the following 30 banks that had provided loans to the four sampled groups of exporting producers were partially or fully owned by the State itself or by State-held legal persons: China Development Bank, Bank of Communications, China Everbright Bank, Postal Savings Bank, China Merchants Bank, Shanghai Pudong Development Bank, China Industrial Bank, Shenyang Rural Commercial Bank, Benxi City Commercial Bank, Benxi Commercial Bank, Kailuan Group Financial Co., Liaoning Hengyi Financing Lease Co., Ltd., Bank of Chengde, Bank of Hebei, Bank of Shanghai, Ningbo Bank, China CITIC Bank, China Guangfa Bank, China Bohai Bank, Huaxia Bank, China Resources Bank, China Zheshang Bank, China Credit Trust, Huarong International Trust Co. Ltd., Northern International Trust Co., Ltd., Zhangjiakou Bank, Hebei Iron and Steel Group Financial Co., Ltd, Shougang Group Finance, Finance Bureau of Benxi City, Zunhua Rural Credit Union. Information on the ownership structure of those banks can be found in the table below. Bank name Information on ownership structure China Development Bank 100 % State-owned policy bank Bank of Communications The Ministry of Finance and Central Huijin Investments hold 26,53 % of the bank's shares. China Everbright Bank The Ministry of Finance and Central Huijin Investments hold 41,24 % of the bank's shares. Postal Savings Bank Initially set up in 2007 by the State Post Bureau, a Department which is currently annexed to the Ministry of Transport. Currently 64 % of shares are held by the China Post Corp., which is wholly-owned by the State. China Merchants Bank This bank is part of the China Merchants Group, a state-owned enterprise (SOE). Shanghai Pudong Development Bank China Mobile Communication Group Guangdong Limited (SOE): 20 % Shanghai International Group Co., Ltd (state-owned financial holding group): 16,93 % Shanghai Sitico Assets Management Co., Ltd. (part of the Shanghai International Group): 5,23 % Central Huijin Asset Management Co., Ltd.: 1,49 % (…) China Industrial Bank Finance Bureau of Fujian 17,86 % (State authority) State-owned legal persons: PICC Property and Casualty Company Limited 4,98 % PICC Life Insurance Company Limited 4,21 % Buttonwood Investment Platform LLC. 3,52 % China National Tobacco Corporation 3,22 % China Securities Finance Corporation Limited 2,87 % PICC Life Insurance Company Limited-universal 2,49 % Fujian Tobacco Haisheng Investment Management Co., Ltd. 2,32 % China Huijin Investment LLC. 1,55 % Domestic non state-owned legal person: Tianan Property Insurance Co., Ltd 1,71 % (…) Shenyang Rural Commercial Bank Shareholding (as of end of 2014) State-owned legal persons: — Liaoning Energy Investment Group (10 %) — Yingkou Port Group (10 %) Domestic non state-owned legal person: — Shenyang Zhongyou Tianbao (Group) Materials and equipment (10 %) — Shenzhen Yunfan Technology (10 %) — Beijing Beili Bowen Technology (10 %) — Hangzhou Yongyuan Network Technology (10 %) — Dalian Yidu Group (10 %) (…) Benxi City Commercial Bank Shareholding as of End of 2015: — Local public finance: (1 shareholder) 12,08 % — State-Owned Enterprises (8 shareholders) 59,35 % — Private enterprises (6 shareholders) 23,17 % — Private individuals (789 shareholders) 5,42 % Main shareholders: Benxi City finance Office (local public finance) 12,08 % Shenjing Bank (SOE) 11,88 % Bengang Group (SOE): 9,99 % Liaoning Rongda Investment Enterprise (SOE): 9,99 % Dalian Port Group (SOE): 9,99 % Liaoning Liaoan Engineering and Machinery Group (private enterprise): 9,99 % Benxi Commercial Bank Idem Kailuan Group Financial Co. The Hebei Province State Asset Commission controls 100 % of the Kailuan Group, which in turn controls Kailuan Group Financial Co. Liaoning Hengyi Financing Lease Co., Ltd. Owned by the Benxi Group (SOE) Bank of Chengde Shareholding, as of end of 2015: — Chengde City Financial Office: 7,359 % — Chengde Zhongsheng Investment Group: 7,359 % — Hebei Beifang Road engineering construction group 7,359 % — Chengde City Jinhui Real Estate 6,211 % — Hebei Beichen Powergrid construction 4,842 % — Chengde city Shuangluan district Kangda industry and trade: 4,842 % (…) Bank of Hebei Shareholding, as of end of 2013: State-owned legal persons: — China Guodian Power Development: 18,98 % — Zhongcheng Construction & Investment Holding: 10,98 % — Hebei Port Group: 9,41 % Bank of Shanghai Major shareholders according to the annual report 2015: 206 Chinese state-owned enterprises owned 56 % stake of the share capital in total, as at 31 July 2015. Subsidiaries and wholly owned subsidiaries of Shanghai Municipal People's Government and district-level governments: — Shanghai Alliance Investment (15,08 %) — Shanghai International Port Group (7,20 %) — Shanghai Huixin (2,16 %) — Shanghai Huangpu District State-Owned Assets Corporation (2,20 %) Companies under the supervision of the State Council (SASAC and the Ministry of Finance): — China Jianyin Investment (5,48 %) — China Shipbuilding & Offshore International of China Shipbuilding Industry Corporation (4,63 %) — CITIC Guoan of CITIC Guoan Group (2,00 %) Ningbo Bank Largest shareholder with 21,38 % is the government of Ningbo, second largest with 20 % is the OCBC Bank of Singapore, and next (11,57 %) is a large Chinese textiles group. China CITIC Bank CITIC Group Corporation Ltd., formerly the China International Trust Investment Corporation, is a state-owned investment company of the People's Republic of China. It now owns 44 subsidiaries including China CITIC Bank, CITIC Holdings, CITIC Trust Co. and CITIC Merchant Co. China Guangfa Bank In 2015, 71,86 % of shares were held by state-held legal persons, 20 % were held by Citigroup China Bohai Bank SOEs: — TEDA Holding (25,00 %) — China COSCO Shipping (13,67 %) — Baosteel Group (11,67 %) State-held legal persons: — State Development & Investment Corporation, SDIC (11,67 %) — Tianjin Trust (10,00 %) — Tianjin Shanghui Investment (8,00 %) Foreign investor: — Standard Chartered HK (19,99 %) Huaxia Bank 20 % stake held by the Shougang Group (SOE), who is the largest shareholder. In addition, 18 % is held by the SOE China State Grid and 1,3 % by Central Huijin. China Resources Bank The controlling shareholder is the China Resources Group (large SOE) with a 75 % stake China Zheshang Bank Shareholding as of March 2015: State-held legal persons: — Zhejiang Finance Development Corporation (19,96 %) — Zhejiang Provincial Energy Group Company Ltd (5,50 %) Domestic non state-owned legal person — Travelers Automobile Group (8,99 %) — Hengdian Group Holdings Limited (8,30 %) — Zhejiang Hengyi Group (6,21 %) — Others (51,04 %) China Credit Trust This financial institution is related to one of the four state-owned asset management companies, whose main task is the acquisition, management and disposal of non-performing assets of state-owned banks. Huarong International Trust Co. Ltd. This financial institution is related to one of the four state-owned asset management companies, whose main task is the acquisition, management and disposal of non-performing assets of state-owned banks. Northern International Trust Co., Ltd. This financial institution is related to one of the four state-owned asset management companies, whose main task is the acquisition, management and disposal of non-performing assets of state-owned banks. Zhangjiakou Bank Handan Branch Owned by the local government. Hebei Iron and Steel Group Financial Co., Ltd Owned by the Hesteel Group (SOE) Shougang Group Finance Owned by the Shougang Group (SOE) Finance Bureau of Benxi City Local bureau of the Ministry of Finance, which provided a loan to one of the sampled companies Zunhua Rural Credit Union Owned by the local farmers' village

(133) The Commission further established, absent specific information from the financial institutions at issue indicating otherwise, GOC ownership and control based on formal indicia for the same reasons as set out above in section 3.4.1.1. In particular, based on best facts available, managers and supervisors in those 30 state-owned banks are assumed to be appointed by the GOC and accountable to the GOC in the same manner as in the five cooperating state-owned banks.

(134) With regard to the exercise of control in a meaningful manner, the Commission considered that the findings concerning the five cooperating financial institutions, which accounted for a substantial part of the loans to the four sampled groups of companies during the investigation period (ranging from over 50 % to almost 90 %, depending on the company) could be considered representative also for other non-cooperating state-owned financial institutions. The normative framework analysed in section 3.4.1.1(b) above applies to them in an identical manner. Absent any indication to the contrary, based on best facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner as for the five cooperating state-owned banks, so that the analysis on the concrete application of the normative framework in section 3.4.1.1(b) above applies to them in an identical manner.

(135) Moreover, the Commission observed that the majority of loan contracts which the Commission had obtained from the sampled companies had similar conditions and that the lending rates which had been agreed were similar and partly overlap with the rates provided by the five cooperating state-owned banks.

(136) The Commission considered therefore that the findings for the five cooperating state-owned banks constituted the best facts available for assessing the 30 other state-owned banks, due to those similarities in loan conditions and lending rates and the representativeness of the five financial institutions that were verified.

(137) On that basis, the Commission concluded that the other 30 state-owned banks which provide loans to the sampled companies are public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation.

(138) After disclosure, the GOC objected to the assessment of the formal indicia of control by the Commission, stating that the Commission had made a general country-wide assessment of all financial institutions without taking into account the core characteristics and functions of particular entities and their relationship with the government. More specifically, the GOC held that a difference should be made between financial institutions held by SOEs and those which are directly held by the GOC. As far as the country-wide assessment is concerned, the Commission noted that it had carried out a specific public-body-analysis for each of the financial institutions for which the GOC had submitted the relevant information requested. Unfortunately, the GOC did not submit information for all the other financial institutions that extended loans to the sampled cooperating exporting producers, as explained in section 3.2. The Commission was thus forced to make a public-body-analysis on the basis of best facts available.

3.4.1.3. Conclusion on state-owned financial institutions

(139) In light of the above considerations the Commission found that all 35 state-owned Chinese financial institutions that provided loans to the four sampled groups of cooperating exporting producers are public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation.

(140) In addition, even if the state-owned financial institutions were not to be considered as public bodies, the Commission found that they would also be considered entrusted and directed by the GOC to carry out functions normally vested in the government, within the meaning of Article 3(1)(a)(iv) of the basic Regulation for the same reasons, as set out in recitals (143) and (144) below. Thus, their conduct would be attributed to the GOC in any event.

3.4.2. Entrustment and direction of private financial institutions

(141) The Commission then turned to the ten remaining financial institutions. The following eight financial institutions were considered to be privately owned: HSBC, Standard Chartered Bank, Ping An Bank, Australia & New Zealand Banking Group (China) Limited, Shagang Group Finance, DBS Group (China) Limited, Bank of Beijing, Hang Seng Bank. In addition, Jinfeng Rural Commercial Bank and SPB Bank were considered to be private in the absence of any publicly available information on their ownership structure. The Commission analysed whether these financial institutions had been entrusted or directed by the Government of China to grant subsidies to the steel sector within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(142) According to the WTO Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body (20). In both cases, the government uses a private body as proxy to effectuate the financial contribution, and ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’ (21). At the same time, paragraph (iv) does not allow Members to impose countervailing measures to products ‘whenever the government is merely exercising its general regulatory powers’ (22) or where government intervention ‘may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market’ (23). Rather, entrustment and direction implies ‘a more active role of the government than mere acts of encouragement’ (22).

(143) The Commission noted that the normative framework concerning the steel industry mentioned above in recitals (100) to (120) applies to all financial institutions in the PRC, including privately owned financial institutions. To illustrate this, the notice ‘Several Opinions on Resolving Overcapacity’ is addressed to all policy banks, large banks, joint-stock banks, postal savings banks, foreign-invested banks, financial asset management companies, and other financial institutions under the management of the CBRC.

(144) Furthermore, the verification visits in the sampled companies revealed that the majority of loan contracts which the Commission had obtained from the sampled companies had similar conditions, a