WORLD TRADE
ORGANIZATIONG/L/648
21 October 2003
(03-5540)
Committee on Trade-Related Investment Measures
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 OF THE
PROTOCOL OF ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA TO THE
WORLD TRADE ORGANIZATION
REPORT OF THE CHAIRMAN
1. Pursuant to Paragraph 18 of the Protocol of Ac cession of the People's Republic of China, the
Committee held the second annual review under China's Transitional Review Mechanism (TRM) atits meeting on 3 October 2003.
3. Written comments and questions in connection with China's TRM were submitted in advance
of the review by the European Communities and the United States. These submissions were
distributed in documents G/TRIMS/W/ 31 and G/TRIMS/W/32, respectively.
4. In a communication dated 1 October 2003, China submitted information on Annex 1A of its
Protocol of Accession in the context of the TRM.   This submission was circulated as document
G/TRIMS/W/34, dated 2 October 2003.
5. Reproduced as Annex 1 to this document are the relevant sections of the Minutes of the
TRIMs Committee meeting held on 3 October 2003 in which the substantive discussions on China's
TRM are reflected.
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Annex 1
Relevant Sections of the Minutes
of the Meeting held on 3 October 2003
(G/TRIMS/M/18)
B. TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE 'S REPUBLIC OF CHINA TO THE WORLD TRADE ORGANIZATION
4. The Chairman recalled that under Paragraph 18 of China's Protocol of Accession, the TRIMs
Committee was required to review annually, over a period of eight years after China's accession, the
implementation by China of the WTO Agreement and the related provisions of the Protocol and to
report to the Council for Trade in Goods (CTG) on the results of its review.  The first review had
taken place in October 2002 and the corresponding report had been forwarded to the Council for
Trade in Goods as document G/L/586.  He said that  with respect to the review for 2003, in order to
fulfill its task in a timely manner, it would be necessary for the TRIMs Committee to undertake the
review and submit its report in advance of the meeting of the CTG scheduled for 24 November.  The
Council for Trade in Goods would, in  turn, report to the General Council by the end of the year.  He
then said that the information submitted by China on Annex 1A of its Protocol of Accession had been
circulated in document G/TRIMS/W/34, dated 2 Oct ober 2003.  In addition, questions in connection
with China's Transitional Review Mechanism ha d been submitted by the European Communities
(G/TRIMS/W/31) and by the United States (G/TRIMS/W/32). He then announced his intention to
conduct the review as follows: the floor would be given to the delegation of China to introduce its
submission;  delegations that had addressed questions to China – in this instance, the European
Communities and the United States – would then be invited to take the floor;  other Members wouldthen be given the opportunity to speak;  and finally, the delegation of China would be invited to make
any additional comments.  As regards the Committee' s reporting obligation to the Council for Trade in
Goods, he referred to the 2002 review for which the Committee had agreed that the Chairman should
submit to the CTG a short, factual report referring to all relevant documentation submitted for that
review.  In addition, the minutes of the meeting reflecting the substantial discussions held by the
Committee on this issue were attached to the report.  It was his understanding that Members would
wish the Committee to follow the same course of action as last year's review.  In other words, hewould put up a draft factual report which would include references to all the submissions made on this
issue and to which the relevant parts of the Minutes of this meeting would be attached.  The report
would be circulated to all Members before it was submitted to the Council for Trade in Goods.
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5. In reply to a question by Brazil regarding the Committee's approval of the final report to the
Council for Trade in Goods, the Secretariat said that the Chairman's proposal concerned procedure
and not the adoption of the report itself.  The report that should be made to the CTG would be a report
on the responsibility of the Chairman and the pertinent sections of  the Minutes and all other relevant
documentation would be attached to the report.
6. The Committee agreed on the procedure proposed by the Chairman.
7. The Chairman then invited the representative of China to introduce its submission.
8. The representative of China introduced it s submission in G/TRIM S/W/34, which elaborated
on China's efforts and achievements in implementing its relevant obligations during the second year
                                                     
1 A draft Report of the Chairman was distributed to the Members at the meeting for their consideration.G/L/648
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since its accession, and also replied to written questions that had been submitted by Members
(statement reproduced in Annex 1).
9. The representative of the European Commun ities thanked China for its written submission
and for its oral presentation which completed the information given therein.  He said that since his
delegation would need to digest and analyse all the information, he was not in a position to provideany definitive reactions at the present meeting.  His delegation therefore reserved the right to come
back to those questions with possible follow-up comments and questions.
10. The representative of the United States thanked China for its written submission and said that,
together with the oral presentation made at the pr esent meeting, it was clear that China was trying to
be responsive to the questions that had been put.  He would forward the information to his authorities
and if the United States had any further follow-up comments to make then this would be made known.
11. The representative of Japan thanked the Chinese delegation for its submission and
explanation regarding its efforts and achievements in preparing for the second TRM review, and also
thanked the European Communities and the United States for their submissions.  As his delegation
had already explained at the Committee's last TRM review, Japan registered its strong interest in the
Chinese new automobile industry policy as well as its measures related to the TRIMs Agreement and
China's commitments.  It was Japan's understanding that such a new automobile industry policywould be implemented in consistency with the TRIMs Agreement and the current commitments of
China.  Japan hoped that the new policy would soon be published and its details made known.
12. The representative of China thanked the Europ ean Communities, the United States and Japan
for their comments and questions and reiterated that China was prepared to work very closely with its
trading partners and WTO members to fulfil its commitments under the TRIMs Agreement and underthe terms of its Protocol of Accession. China's goal was to see that all its policies as far as they related
to TRIMs were consistent with its requirements a nd commitments.  China wanted to continue to make
its investment climate attractive to foreign investment and believed that this would be very helpful to
China's economic development.  For that purpose, he said that China would be very cooperative with
the WTO Members and with all foreign investors.
13. The Chairman commended the delegation of China for its efforts in preparing for the review
and in replying to the questions that had been submitted.  He also thanked all other delegations for
their active participation in the exercise.
14. The Committee took note of the statements, approved  ad referendum  the Report of the
Chairman to the Council for Trade in Goods, and agre ed that the Report, to which would be attached
as an annex the relevant sections of the Minutes of the present meeting, be submitted to the Council
for Trade in Goods.G/L/648
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Annex 1
Statement by the Representative of China
1. Thank you for giving me this opportunity to introduce China’s implementation of Agreement
on Trade-Related Investment Measures (TRIMS Agreement) and its relevant commitments upon
accession.
2. In advance of this meeting, China has submitte d the information required by Annex 1A to the
Protocol of Accession to the TRIMS Committee, which elaborates on China’s efforts and
achievements in implementing its relevant obligations during the second year since its accession. As
the document containing the information has been circulated by the committee, I will not repeat thecontent in my presentation for the sake of brevity.
3. Mr. Chairman, before review, we have received some questions raised by some members
concerning China’s implementation of TRIMs Agreement. In response, I would like to make some
necessary explanation and clarification on these issues. 
1.      On the revision of the Guiding Industrial Catalogue for Foreign Investment.
 
On February 11, 2002, State Council of China promulgated newly-amended the Regulation on
Guiding the Foreign Investments. Afterwards, strictly according to WTO rules and commitments
upon accession to WTO, China amended the original Guiding Industrial Catalogue for Foreign
Investment in a comprehensive manner. It was made effective as of April 1, 2002. The Catalogue lists371 industries and divides them into three categories including “encouraged”, “restricted” and
”prohibited” for foreign investment, of which 262 are encouraged, 75 restricted and 34 prohibited. All
the industries not listed in the Catalogue are considered as permitted. The contents in relation to
liberalization committed by China upon accession are listed in the Attachment to the Catalogue. In
addition, requirement for technology transfer has been eliminated in approving the foreigninvestment.
2.      On the enforcement of the contracts wh ich contain conflicting terms with provisions in
TRIMs agreement.
 
China has revised the Law of the People's Republic of China on Chinese-Foreign Equity Joint
Venture; Law on Chinese-Foreign Contractual Joint Venture;  and Law on Wholly Foreign Owned
Enterprises  and their respective implementing regulations. The revision includes the elimination and
cessation of enforcement of requirements on trade and foreign exchange balancing, local content,
export performance, compulsory technology transfer, and etc. This revision has got extensive media
coverage. Chinese government respects freedom of contract. If the articles of association or contract
of enterprises with foreign investment approved before amendment of the relevant laws contain theterms on foreign exchange balance, local contents, and export performance, and the investors on both
sides can reach an agreement, they may file the appl ication to relevant authorities to alter or nullify
those terms. The application will be processed timely and in a manner consistent with TRIMs
agreement.
3. Questions concerning the new Policy on  the Development of Auto Industry
Upon join the WTO, China has eliminated or ceased to implement the provisions like foreign
currency balancing requirement, local content and etc., which were contained in the 1994 Automobile
Industrial Policy.G/L/648
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The newly drafted Policy on the Development of Auto Industry is now with the State Council for
approval. During the process of enactment, we published the draft of new policy on the website for
the opinions from all walks of the society. General Motors, Association of Automobile Industry in
Japan and some companies in EU are among those who submitted comments. Afterwards, we have
sent the draft directly to the companies in the indu stry, the research institute and scholars alike for
their inputs, and explicitly require the Chinese parties of joint ventures to solicit the opinions of their
foreign partners. Beside that, extensive and in-depth exchanges of ideas, discussions and consensus
building have been conducted with many foreign auto makers on a number of specific issues.
4. I hope the information provided by China and my statement could help members to
understand China’s fulfilment of TRIMS Agreement and its commitments. My colleague and I would
like to have further exchange of views with memb ers if they may have follow up questions on the
issues mentioned above.
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