CHINA – MEASURES AFFECTING FINANCIAL INFORMATION SERVICES AND FOREIGN FINANCIAL INFORMATION SUPPLIERS
Document: Request for Consultations by the European Communities
Date: 5 March 2008
Document codes: WT/DS372/1; S/L/319; IP/D/27
Complainant: EU
Respondent: China
Dispute stage: Consultation
Agreements cited: Art. XVI:2(a), XVI:2(e), XVII, XVIII  Services (GATS)Art. 39.2  Intellectual Property (TRIPS)

CHINA – MEASURES AFFECTING FINANCIAL INFORMATION SERVICES AND
FOREIGN FINANCIAL INFORMATION SUPPLIERS

Request for Consultations by the European Communities

 The following communication, dated 3 March 2008, from the delegation of the European
Communities to the delegation of China and to th e Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

 The European Communities hereby requests c onsultations with the People's Republic of
China ("China") pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Trade in Services
("GATS") and Article 64.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights
("TRIPS Agreement"), in respect of the provisions of Article XXII of the General Agreement on
Tariffs and Trade 1994 ("GATT"), with respect to measures affecting financial information services
and foreign financial information services suppliers in China.
1. Measures at issue
 The measures at issue include, but are not limited to:
− The Notice Authorizing Xinhua News Agency to Implement Centralized
Administration over the Release of Economic Information in the People's Republic of
China by Foreign News Agencies and their Subsidiary Information Institutions, issued
by the State Council on 31 December 1995 as Circular No. 1 of 1996 ("the Circular");

− the Decision on Establishing Administrative Permission for the Administrative
Examination and Approval of Items that Must Be Retained , issued by State Council
Order No. 412 on 29 June 2004;

− the Measures for Administering the Release of News and Information in China by
Foreign News Agencies ("the 2006 Measure"), issued by Xinhua News Agency on
10 September 2006;

− the Catalogue of Industries for Guidi ng Foreign Investment (Revised 2007) issued by
the State Council in October 2007 and prom ulgated by Order No. 57 of National
Development and Reform Commission a nd the Ministry of Commerce ("the
Catalogue");

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− the Decisions of the State Council regarding Entrance of Non-Public Capital into
Cultural Industries, promulgated by the State Council on 13 April 2005;

− the Several Opinions on Introducing Foreign Investment into the Cultural Sector ,
issued by the Ministry of Culture on 6 July 2005;

− the Opinion on Foreign Investment in Cultural Industries , promulgated by the
Ministry of Culture on 5 August 2005;

− the Detailed Rules on the Approval and Control of Resident Representative Offices of
Foreign Enterprises, issued by MOFTEC on 13 February 1995;

− the Procedures of the State Administration for Industry and Commerce of China for
the Registration and Administration of Resident Representative Offices of Foreign
Enterprises, of 5 March 1983;

− the Rules for Internet Information services;

− the Administrative Rules for Internet News Information Services promulgated by State
Council Information Office and Ministry of Information Industry on
25 September 2005.

 Foreign financial information suppliers are cons idered and treated as news agencies in China.
Thus, financial information services fall within th e category of services sectors in which foreign
investment is prohibited, and due to this fact, fore ign financial information suppliers are therefore not
permitted to set up a commercial presence in a form other than that of a representative office.
 The "Xinhua News Agency" is the State news agency in China, but it also acts as the
regulatory authority for foreign news agencies and for foreign financial information providers. Xinhua
is therefore responsible for the examination and ap proval procedure in respect of foreign financial
information providers. As a result, financial info rmation providers are subject to the 2006 Measure
and need the approval of Xinhua to operate. Th ey can only operate through an agent designated by
Xinhua and are not allowed to directly solicit subs criptions for their services. Moreover, potential
users wishing to subscribe to their services are only allowed to do so through a designated entity only.
 As part of the measures at issue, Xinhua News Agency has only designated the China
Economic Information Service (CEIS), a bran ch of Xinhua, as agent under the September 2006
Measure. From 2007 onwards, it has made the renewa l of foreign financial information suppliers
licences conditional upon the signature of agent agreements with CEIS.
(1) Foreign financial information suppliers are subject to further operational
requirements, including the approval by Xinhua of any change in their scope of
business, transmitting means, etc, and are al so subject to the obligation of annual
reporting on their activities to Xinhua. As part of the annual review process, foreign
financial information providers are re quired to provide to Xinhua's Foreign
Information Administration Center (FIAC) valuable and confidential commercial
information on both their services and their customers. Similarly, their clients are
required to submit all contractual informa tion to FIAC upon signing the contracts for
the supply of financial information services.

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(2) The 2006 Measure replaced the "Methods for the Exercise of Administration over
Publication in China of Economic Information by Foreign News Agencies and their
Information Subsidiaries", promulgated by Xinhua on 15 April 1996 on the basis of
the Circular. The Circular had been cl arified, as far as European Communities'
providers of financial information services ar e concerned, by an Exchange of Letters
of 10 November 1997 between Xinhua and the EC. On this basis, Xinhua's FIAC
would not intervene in the transactions between European Communities' financial
information providers and their customers, would guarantee the confidentiality of any
information submitted to it, would not require details of the financial transactions
between financial information providers and customers, and would approve licence
applications within 20 working days after submission of a limited number of
documents describing their functioning and operations in China. Foreign financial
information suppliers have operated and developed th eir activities in China in
accordance with the relevant licences granted on the basis of these rules, which were
renewed annually until 2006.
 As part of the measures at issue, on 20 J une 2007, Xinhua launched "X inhua 08", a financial
information provider which supplies services on a commercial basis and in competition with other
service suppliers. Neither Xinhua 08, nor other domes tic financial informati on suppliers, are subject
to the requirement to supply their services through an ag ent or intermediary or to any other equivalent
requirement.
 In respect of the measures referred to in this section, this request also covers any amendments,
replacements, extensions, implementing measures or any other related measure.
2. China's commitments
 China's GATS schedule of commitments includes in the horizontal section a standstill
provision ("the standstill provision") with regard to mode 3 with the following wording: " The
conditions of ownership, operation and scope of activiti es, as set out in the respective contractual or
shareholder agreement or in a licence establishing or authorizing the operation or supply of services
by an existing foreign service supplier, will not be m ade more restrictive than they exist as of the date
of China's accession to the WTO. " Moreover, the horizontal section does not include any general
restriction applying to the establishment of foreign invested enterprises. However, it does indicate that
the establishment of branches by foreign enterp rises is unbound, unless otherwise indicated in the
specific sub-sectors.
 Also, China's GATS schedule of commitments in sector 7 "Financial Services", sub-sector B
"Banking and other financial services", subsection (k), shows no limitations with respect to the
provision of financial information services through suppl y modes 1, 2 and 3. With regard to mode 3,
the schedule indicates that criteria for authorization ar e solely prudential, and also that "branches of
foreign institutions are permitted".
 In consequence, China has full GATS commitments with regard to the provision and transfer
of financial information for modes 1, 2 and 3, coupled with a standstill commitment in respect of
mode 3 with regard to the conditions of ownership, operation and scope of activities of foreign service
suppliers that applied at the time of China's WTO accession.
Moreover, paragraph 309 of China's Accession Wo rking Party Report (WT/ACC/CHN/49) states
that " China confirmed that for the services included in China's Schedule of Specific Commitments,
relevant regulatory authorities would be separate from, and not accountable to, any service suppliers

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they regulated, except for courier and railway tran sportation services. For these excepted sectors,
China would comply with other relevant provisi ons of the WTO Agreement and the Draft Protocol.
The Working Party took note of these commitments." This paragraph is referred to in paragraph 342 of
the Working Party Report. As a result, the Chinese commitment contained therein is included in the
Protocol of Accession (WT/L/432), and forms theref ore integral part of the Marrakesh Agreement
Establishing the WTO.
3. Legal basis
 The European Communities considers that the me asures at issue appear to be inconsistent
with China's obligations under the GATS, the TRI PS Agreement and China's Protocol of Accession.
In particular, and as a result of the measures above, Ch ina appears to be acting inconsistently with the
following provisions:
− Article XVI:2(a) GATS, by limiting the number of service suppliers in the form of
numerical quotas, monopolies, exclusive servi ce suppliers or the requirements of an
economic needs test.
− Article XVI:2(e) GATS, by not allowing fore ign financial information suppliers to
establish in a legal form other than representative office.
− Article XVII GATS, by imposing discriminatory requirements that result in less
favourable treatment of foreign services a nd foreign financial information suppliers,
in particular by requiring them to supply their services through a designated agent,
whereas domestic suppliers are not subject to any equivalent requirement; and by
refusing to renew the necessary licence to fo reign suppliers of financial information
services in 2007, thus modifying the conditi ons of competition in favour of domestic
services and service suppliers.
− The standstill provision in China's GATS schedule of commitments, by substantially
worsening the conditions of operation and scope of activities as set out in the relevant
licences authorizing the operation of supply of services by existing foreign service
suppliers.
− In the alternative, Article XVIII GATS in respect of the standstill provision in China's
GATS schedule of commitments.
− The commitment undertaken by China in paragraph 309 of its Accession Working
Party Report, according to which relevant regulatory authorities would be separate
from, and not accountable to, any service supp liers they regulated, which is included
in China's Protocol of Accession (WT/L/432) and forms therefore integral part of the
Marrakesh Agreement establishing the World Trade Organization.
− Article 39.2 of the TRIPS Agreement, by not ensuring the possibility for financial
information services suppliers of preventing secret and commercially valuable
information lawfully within their control wh ich they have tried to protect from being
disclosed to, acquired by, or used by others without their consent in a manner contrary
to honest commercial practices.
 The measures cited in this request for consu ltations also appear to nullify or impair the
benefits accruing to the European Communities directly or indirectly under the cited agreements.

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 The European Communities reserves the right to address additional issues regarding the
above matters in the course of the consultations.
 The European Communities looks forward to receiving China's reply to this request for
consultations and to fixing a mutually convenient date for consultations in Geneva.