RESTRICTED WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/ACC/SPEC/CHN/1/Rev.2
21 July 2000
(00-3023)
Working Party on the
Accession of ChinaOriginal:  English/
anglais/
inglés
DRAFT REPORT OF THE WORKING PARTY
ON THE ACCESSION OF CHINA TO THE WTO1
Revision
The following is a further revision of the Draft Report of the Working Party on the Accession
of China to the WTO reflecting the submissions by members and China since the beginning of the
Tenth Meeting of the Working Party.
Groupe de travail de
l'accession de la Chine
PROJET DE RAPPORT DU GROUPE DE TRAVAIL DE
L'ACCESSION DE LA CHINE À L'OMC1
Révision
Le texte ci-après est une nouvelle révision du projet de rapport du Groupe de travail de
l'accession de la Chine à l'OMC;  il tient compte des communications adressées par les membres et la
Chine depuis le début de la dixième réunion du Groupe de travail.
Grupo de Trabajo sobre laAdhesión de China
PROYECTO DE INFORME DEL GRUPO DE TRABAJO
SOBRE LA ADHESIÓN DE CHINA A LA OMC
1
Revisión
La siguiente es una nueva revisión del proyecto de informe del Grupo de Trabajo sobre la
Adhesión de China a la OMC, en la que se tienen en cuenta las comunicaciones formuladas por los
miembros y China desde el comienzo de la décima reunión del Grupo de Trabajo.
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/ACC/SPEC/CHN/1/Rev.2
Page 2
I. INTRODUCTION
1. At its meeting on 4 March 1987, the Council established a Working Party to examine the
request of the Government of the People's Republic of China (hereinafter referred to as "China")
(L/6017, submitted on 10 July 1986) for resumption of its status as a GATT contracting party, and to
submit to the Council recommendations which may include a draft Protocol on the Status of China.In a communication dated 7 December 1995, the Government of China applied for accession to theAgreement Establishing the World Trade Organization (hereinafter referred to as the "WTOAgreement") pursuant to Article XII of the WTO Agreement.  Following China's application andpursuant to the decision of the General Council on 31 January 1995, the existing Working Party onChina's Status as a GATT 1947 Contracting Party was transformed into a WTO Accession WorkingParty, effective from 7 December 1995.  The terms of reference and the membership of the WorkingParty are reproduced in do cument WT/ACC/CHN/2/Rev.6.
2. The Working Party on China's Status as a Contracting Party met on 20 occasions between
1987 and 1995 under the Chairmanship of H.E. Mr. Pierre-Louis Girard (Switzerland).  The WorkingParty on China's accession to the WTO Agreement met on _________________ and_________________ under the same Chairman.
DOCUMENTATION PROVIDED
3. The Working Party had before it, to serve as a basis for its discussion, a Memorandum on
China's Foreign Trade Regime (L/6125) and questions posed by members of the Working Party on theforeign trade regime of China, together with replies of the Chinese authorities thereto.  In addition, the
Government of China made available to the Working Party a substantial amount of documentation.,
which is listed in document WT/ACC/CHN/23.
INTRODUCTORY STATEMENTS
4. In statements to the [GATT 1947 Working Party and subsequently to the] Working Party [on
China's accession to the WTO], the representative of China emphasized that [the resumption ofChina's status as a contracting party and] accession to the WTO were priorities for the governmentand critically important elements in the process of economic reform towards a more market-orientedeconomy and opening to the outside world.  He noted in this connection that China had been a fullparticipant in the Uruguay Round and had signed the Final Act accepting the results of these
negotiations.WT/ACC/SPEC/CHN/1/Rev.2
Page 3
5. The representative of China noted that China had a territory of 9.6 million square kilometres
and, at the end of 1998 a population of 1.25 billion.  Since 1979, China had been progressivelyreforming its economic system, with the objective of  establishing and improving the socialist market
economy.  The reform package introduced in 1994 covering the banking, finance, taxation,
investment, foreign exchange and foreign trade sectors, had brought about major breakthroughs in
China's socialist market economy.  State-owned enterprises had been reformed by a clear definition ofproperty rights and responsibilities, a separation of government from enterprise, and scientificmanagement.  A modern enterprise system had been created for the state-owned sector, and the latterwas gradually getting on the track of growth through independent operation, responsible for its ownprofits and losses.  A nation-wide unified and open  market system had been developed.  An improved
macroeconomic regulatory system used indirect means and market forces to play a central role ineconomic management and the allocation of resources.  A new tax and financial system wasfunctioning effectively.  Financial policy had been separated from commercial operations of the
central bank, which now focussed on financial regulation and supervision.   The exchange rate of the
Chinese currency Renminbi had been unified and remained stable.  The Renminbi had been madeconvertible on current account.  Further liberalization of pricing policy had resulted in the majority ofconsumer and producer products being subject to ma rket prices.  The market now played a much more
significant role in boosting supply and meeting demand.
6. He further noted that as a result, in 1999, the Gross Domestic Product (GDP) of China totaled
RMB 8.2054 trillion yuan (approximately US$990 billion).  In 1998, the net per capita income forrural residents was RMB 2,160 yuan (approximately US$260), and the per capita dispensable income
for urban dwellers was RMB 5,425 yuan (approximately US$655).  In recent years, foreign trade had
grown substantially.  In 1999, total imports and exports of goods reached US$360.65 billion, of whichexports stood at US$ 194.93 billion, and imports, $165.72 billion. Exports from China in 1998accounted for 3.4% of the world's total.
7. The representative of China noted that the Government of China had always considered that
rejoining the multilateral trading system would [offer great benefits, placing] [place] China's trade andeconomic relations on a stable and predictable footing, [subject to multilaterally agreed rules anddisciplines, as well as improving] [and improve] market access for China and its trading partners.  Ithad always been the policy of China's Government  that reform and market-opening should proceed
simultaneously with the development of the legal system.  High priority had been given to economic
legislation to guide and safeguard the development of the socialist market economy.WT/ACC/SPEC/CHN/1/Rev.2
Page 4
8. [The representative of China [solemnly] stated [that although China's was clearly a special
case, China expected to avail itself of the derogations and special provisions made available todeveloping country members of the WTO] [China should enjoy all rights and the special anddifferential treatment accorded to developing country members].  In response, some members of the
Working Party indicated that because of the significant size, rapid growth and transitional nature of
the Chinese economy, China should not automatically receive all the benefits accorded to originaldeveloping country Members of the WTO.  In particular, some members of the Working Partyconsidered that certain transitional arrangements available to developing country WTO Membersshould not be granted to China.  Some members of the Working Party considered that notwithstandingthe fact that many of the features of China's economy were at present those of a developing countryeconomy, China should, as a minimum, undertake to bring certain measures into conformity on amore expedited basis than would otherwise be required of an original developing country Member ofthe WTO. ][Some members of the Working Party  indicated that because of the significant size, rapid
growth and transitional nature of the Chinese economy, a pragmatic approach should be taken in
determining China's need for recourse to transitional periods and other special provisions in the WTOAgreements available to developing country WTO Members.  Each Agreement and China's situationshould be carefully considered and specifically addressed.]
9. Many members of the Working Party expressed their interest in carrying out bilateral market
access negotiations with China with respect to industrial and agricultural products, and initialcommitments in services.  The representative of China stated that China was keen to undertake suchnegotiations with interested Working Party members.
10. Some members of the Working Party stated that in addition to undertaking market access
negotiations in goods and services, close attention should also be paid to China's multilateralcommitments, in particular China's future obligations under the Multilateral Agreements in Trade inGoods and the General Agreement on Trade in Services (GATS).  This was of vital importance toensure that China was able to take [full] [relevant] benefit of the WTO Membership as quickly aspossible, as well as to ensure that the value of any market access conditions undertaken was notadversely affected by inconsistent measures such as some types of non-tariff measures.  [Only afterenjoying normal rights of the WTO will China be able to effectively fulfill its obligatins.]
11. Some members of the Working Party expressed concern over discrepancies in statistical
information supplied by the government of China on trade volume/value.  Members and China
pursued this issue separately in an Informal Group of Experts on Export Statistics.  The Group ofExperts submitted its report to the Chairman of the Working Party on 30 June 1994 (document …).WT/ACC/SPEC/CHN/1/Rev.2
Page 5
12. The Working Party reviewed the foreign trade regime of China.  The discussions and
commitments resulting therefrom are contained in paragraphs … below and in the draft Protocol ofAccession [and China's Schedules annexed to the Protocol].
II. ECONOMIC POLICIES
1. Non-discrimination (including national treatment)
13. Some members expressed concern regarding the application of the principle of non-
discrimination in relation to foreign individuals and enterprises (whether wholly or partly foreignfunded).  Those members stated that China should enter a commitment to accord non-discriminatorytreatment to all foreign individuals and enterprises and foreign-funded enterprises in respect of theprocurement of inputs and goods and services necessary for production of goods and the conditionsunder which their goods were produced, marketed or sold, in the domestic market and for export.  Inaddition, China should also enter a commitment to guarantee non-discriminatory treatment in respect
of the prices and availability of goods and services supplied by national and sub-national authorities
and public or state enterprises, in areas includ ing transportation, energy, basic telecommunications,
other utilities and factors of production.
14. Some members of the Working Party also raised concerns over China's practice of
conditioning or imposing restrictions upon participation in the Chinese economy based upon thenationality of the entity concerned.  Those members in particular raised concerns over such practicesin relation to the pricing and procurement of goods and services, and the distribution of import andexport licences.  Members of the Working Party requested that China enter into a commitment not tocondition such practices on the nationality of the entity concerned.
[15. In response, the representative of China emphasized the importance of the commitments
that the government was undertaking on non-discrimination. The representative of China
noted, however, that any commitment to provide non-discriminatory treatment to Chinese
enterprises and foreign [and foreign funded]  enterprises and individuals in China would be
subject to other provisions of the Protocol and,  in particular, would not prejudice China's rights
under the General Agreement on Trade in Services (GATS), China's GATS schedule orcommitments undertaken in relation to trade-related investment measures.  The Working Partytook note of this statement.
16.  The representative of China further confirmed that China would provide the same
treatment to Chinese enterprises and foreign [and foreign funded]  enterprises and individuals inWT/ACC/SPEC/CHN/1/Rev.2
Page 6
China.  China would eliminate dual pricing prac tices as well as differences in treatment
accorded to goods which are produced for sale in China and those produced for export.  The
Working Party  took note of these commitments. ]
[xx. China emphasized the importance of the commitments that the government was undertaking
on non-discrimination. China confirmed that it would be providing the same treatment to Chinese
enterprises and the enterprises and individuals of other WTO members in China in respect of therequirements of this section of the Protocol. This would involve the elimination of dual pricingpractices as well as differences in treatment accorded to goods which are produced for sale in Chinaand those produced for export. China noted, however, that these requirements are subject to otherprovisions of the Protocol and, in particular, would not prejudice China’s rights under the GeneralAgreement on Trade in Services (GATS), China’s GATS schedule or commitments undertaken inrelation to trade-related investment measures. The Working Party took note of this statement.]
[xx. The representative of China confirmed that consistent with China’s rights and obligations
under the WTO Agreement and this Protocol, Chin a would provide non-discriminatory treatment to
other WTO Members, in particular with respect to any  benefit accorded to Members of the WTO
that are separate customs territories.  The Working Party took note of this commitment.
[xx. The representative of China confirmed that all fiscal, financial and budgetary activities
performed by sub-central governments would be  in compliance with Article III of the GATT 1994.
The representative of China  confirmed that sub-central entities had no autonomous authority overissues of subsidies, taxation, trade policy or any other measures covered by WTO  provisions. He alsoconfirmed that the provisions of the WTO Agreement, including China's Protocol, shall be applied
uniformly throughout its customs territory, including in  special economic zones and other areas
where special regimes for tariffs, taxes and regulations are established.  The Working Party took noteof these commitments.]
[xx. Members expressed concern about certain provisions of Chinese laws, regulations,
administrative notices and other requirements which could, directly or indirectly, result in[prejudicial] [less favourable] treatment of imported products in contravention of Article III of GATT1994.  Such requirements include product registration and certification, internal taxation, price andprofit controls and all distinct forms of licensing for imports, and distribution or sale of importedgoods.  Even where such requirements exist in relation to domestically produced goods, Members re-
iterated that any de facto  or de jure  [difference in the] [less favourable] treatment of imported goods
must be eliminated in order to ensure full conf ormity with the principle of national treatment.WT/ACC/SPEC/CHN/1/Rev.2
Page 7
xx. Members drew China’s attention to the variety of types of requirements which could
contravene GATT Article III. Specific reference was made to the procedures, charges and conditionsfor granting of business licences, whether to import, distribute, re-sell or retail goods of non-Chineseorigin.  Reference was also made to taxes and fiscal provisions whose impact depends, directly or
indirectly, upon the Chinese or non-Chinese origin of the good imported or traded.  Members drew
the attention of China to its obligation to ensure that product testing and certification requirements,including procedures for in situ  inspections, posed no greater burden – whether financial or practical -
on goods of non-Chinese origin than domestic goods.  Members underlined that technical assessmentprocedures and standards, including safety and other compliance requirements, had to respect theterms of the WTO Agreement on Technical Barriers to Trade as well as GATT Article III.
xx. The representative of China confirmed that the full respect of all laws, regulations and
administrative requirements with the principle of non-discrimination between domestically producedand imported products would be ensured and enforced by the date of China’s accession to the WTO.
China declared that, by accession, it would repeal and cease to apply all such existing [provisions and
restrictions,] [laws, regulations and other measures] whose effect was inconsistent with WTO rules onnational treatment.  This commitment was made in relation to final or interim laws, administrative
measures, rules and notices, or any other form of stipulation or guideline. The Working Party tooknote of these commitments.
xx. In particular, the representative of China confirmed that measures would be taken [at national
and subnational level], including repeal or modification of legislation, to provide full GATT nationaltreatment in respect of laws, regulations or other measures applying to [trade, distribution, sale and
supply] [internal sale, offer for sale, distribution, purchase and use] of the following:
- After sales service (repair, maintenance and assistance), including any conditions applying to
its provision,  such as the MOFTEC 3rd Decree of 6.9.93, imposing mandatory licensing
procedures for the supply of after-sales service on various imported products;
- Pharmaceutical products, including regulations, notices and measures which subject imported
pharmaceuticals to distinct procedures and formulas for pricing and classification, or which
set limits on profit margins attainable [and imports], or which create any other conditionsregarding price [inclusion in the National Essential Drug Reimbursement List] or localcontent which may result in [prejudicial] [less favourable] treatment of imported products;
- Cigarettes, including unification of the licensing requirements so that a single licence
authorises the sale of all cigarettes, irrespective of their country of origin, and elimination ofWT/ACC/SPEC/CHN/1/Rev.2
Page 8
any other restrictions regarding points of sale for imported products, such as may be imposed
by the China National Tobacco Corporation (CNTC). It is understood that in the case ofcigarettes, China may avail itself of a transitional period of 2 years to fully unify the licensingrequirements.  Immediately upon accession, and during the 2 year transitional period, the
number of retail outlets selling imported cigarettes shall be substantially increased throughout
the territory of China;
- Spirits, including requirements applied under China’s "Administrative Measures on Imported
Spirits in the Domestic Market", and other provisions which impose distinct criteria &
licensing for the distribution and sale of different categories of spirits, including unification ofthe licensing requirements so that a single licence authorises the sale of all spirits irrespectiveof their country of origin;
- Chemicals, including registration procedures applicable to imported products, such as those
applied under China’s "Environmental Control Regulations for Initial Imports of Chemical
Products and Imports and Export s of Toxic Chemical Products";
- Boilers and pressure vessels, including certification and inspection procedures which must be
no less favourable than those applied to goods of Chinese origin, and fees applied by the
relevant agencies or administrative bodies, which must be equitable in relation to thosechargeable for like products of domestic origin.
[The representative of China stated that in the ca ses of pharmaceuticals, spirits and chemicals cited
above China would reserve the right to use a transitional period of one year from the date of accessionin order to amend or repeal the relevant legislation.]  The Working Party took note of these specific
commitments by China.]
2. Monetary and Fiscal Policy
[xx. Through the reform and opening up in the last two decades, China has established a fiscal
management system which is compatible with the requirements of market economy. With respect to
fiscal revenue, a taxation system with the value-added tax as the main part has been established since
the taxation reform in 1994. With respect to fiscal expenditure, over recent years the government has,in line with the public fiscal requirement genera lly exercised by market economies, strengthened its
adjustment on the structure of expenditure and given priority to public needs so as to ensure the
normal operations of the government.
xx. In recent years, while pursuing proactive fiscal policy, China has implemented proper
monetary policy and has taken a series of adjusting and reform measures which include lowering theWT/ACC/SPEC/CHN/1/Rev.2
Page 9
interest rate for loans of financial institutions, improving the system of required deposit reserves and
lowering the ratio of required reserves, positively increasing the input of base money and encouraging
the commercial banks to expand their credit.
xx. In respect of future fiscal policy, the Chinese government will further improve its taxation
system and will be continuing to improve the efficiency of fiscal expenditure through implementing
reform measures such as sectoral budget, centralised payment by the national treasury and zero basebudget as well as improving management on fiscal expenditure. With respect to future monetarypolicy, the central bank will be continuing to pursue a prudent policy, to maintain the stability ofRMB, to promote the interest rate liberalization and to establish a modern commercial bankingsystem.]
3. Foreign Exchange and Payments
17. Some members of the Working Party raised concerns about China's use of foreign exchange
controls to regulate the level and composition of trade in goods and services.  In response, the
representative of China stated that its system of foreign exchange [controls] was undergoing rapid
change.  Significant moves had been taken to reform, rationalize and liberalize the foreign exchangemarket.  The practice of multiple exchange rates in swap centres had been abolished.  China [wasmoving towards a unified] [has already unified its] foreign exchange market and [had] removed manyof the restrictions on the use of foreign exchange.  Some members of the Working Party stated thatChina should undertake appropriate commitments on its reform of foreign exchange [controls].
18. In response, the representative of China stated that China was a member of the International
Monetary Fund (IMF). The purpose of China's foreign exchange [, (“forex”)] reform was to
gradually reduce administrative intervention and increase the role of market forces.  From 1979, a
[foreign exchange, "forex"] retention system was applied in China, although [forex] [foreignexchange] swap was gradually developed.  In early 1994, official RMB exchange rates were unifiedwith the market rates. The banking exchange system was adopted and a nation-wide unified inter-bank forex market was established, with conditional convertibility of the Renminbi on currentaccount.  Since 1996, foreign investment enterprises (FIEs) were also permitted into the bankingexchange system, and the remaining exchange re strictions on current account were eliminated. On
1 December 1996, China had formally accepted the obliga tions of Article VIII, Sections 2, 3, and 4 of
the IMF's Articles of Agreement, removing exchange restrictions on current account transactions.
Accordingly, since then the Renminbi had been fully convertible on current account.WT/ACC/SPEC/CHN/1/Rev.2
Page 10
19. The State Administration of Foreign Exchange (SAFE) was [affiliated with] [under the
auspices of] the People's Bank of China (PBC), and was the administrative organ empowered toregulate foreign exchange.  Its main functions were to monitor and advise on balance-of-payments,foreign exchange matters.  SAFE was also required to draft appropriate regulations and monitor
compliance.  He further noted that domestic and foreign banks and financial institutions could engage
in foreign exchange business, with the approval of the PBC.
20. In response to requests from members of the Working Party for further information he further
added that for foreign exchange payments under current account, domestic entities (including FIEs)could purchase forex at market exchange rates from designated banks or debit their forex accountsdirectly upon presentation of valid documents.  For payments such as pre-payment, commission andetc., exceeding the proportion or limit, the entities could also purchase forex from the banks uponmeeting the bona fide test administered by SAFE. Foreign exchange for personal use by individualscould be purchased directly from the banks upon presentation of valid documents (within a specified
limit).  For amounts exceeding the limit, individuals able  to prove their [legitimate and valid] need for
additional forex could purchase it from the banks.  He also noted that current account forex receiptsowned by domestic [firms] [entities] should be repatriated [promptly] into China and [some of whichcan be retained and some] be sold to the designated banks at the market rates [(unless the firm waspermitted to hold a domestic forex account)].  A [clearance] [verification] system for forex payment(imports) and forex receipt (exports) had also been adopted.
21. Concerning the exchange rate regime in particular, the representative of China noted that
since the unification of exchange rates on 1 January 1994, China had adopted a single and managed
floating exchange rate regime based on supply and demand.  PBC published the reference rates of
RMB against the US dollar, the HK dollar and Japanese yen based on the weighted average prices offoreign exchange transactions [at the interbank fo rex market] during the previous day's trading. The
buying and selling rates of RMB against the US dollar on the inter-bank forex market could fluctuatewithin 0.3% of the reference rate. For the HK dollar and Japanese yen, the permitted range was 1%.Designated foreign exchange banks could deal with their clients at an agreed rate.  Under suchcontracts the exchange rate of the US dollar was re quired to be within 0.15% of the reference rate,
whereas for the HK dollar and Japanese yen, the permitted range was 1%.  [Permitted] [Theexchange] rates for other foreign currencies were based on the rates of RMB against the US dollar and
cross-exchange rates of other foreign currency on international market. The [permitted margin
between the] buying and selling rate could not exceed 0.5% [of the middle rate].
22. The representative of China further noted that since 1 January 1994, designated forex banks
had become major participants in foreign exchange transactions.  On 1 April 1994, a [China] ForeignWT/ACC/SPEC/CHN/1/Rev.2
Page 11
Exchange Trading System was set up in Shanghai and branches were opened in [several] [dozens of]
cities.  That Foreign Exchange Trading System had adopted a system of membership, respectivequotation, concentrated trading and forex market settlement.  Designated forex banks dealt on theinter-bank market according to the [working] [turnover] position limit on banking exchange stipulated
by SAFE and covered the position on the market. Depending on its macro economic objectives, the
PBC could intervene in the forex open market in order to regulate market supply and demand andmaintain the stability of the RMB exchange rate.
23. The representative of China noted that since [1 December 1998] [1 July 1996], forex dealing
of the FIEs was carried out through the banking exchange system. He further noted that to encourage
foreign direct investment, China had granted national treatment to foreign investment enterprises in
exchange administration.  Accordingly, FIEs were allowed to open and hold forex settlement accountsto retain receipts under the current account, up to a maximum amount stipulated by SAFE.  Receipts
in excess of the maximum amount were required to be sold to designated forex banks.  No restrictions
were maintained on the payment and transfer of current transactions by FIEs, and FIEs could purchaseforex from designated forex banks or debit their forex accounts for any payment under current
transactions, upon the presentation of valid documents to the designated forex banks or SAFE for the
bona fide test.  FIEs could also open forex accounts to hold foreign-invested capital, and they couldsell from them upon the approval of SAFE.  FIEs could also borrow forex directly from domestic and
overseas banks, but were required to register [the loan and repayments] with SAFE afterwards, [and
obtain approval by SAFE for debt repayment and services].  FIEs could [remit foreign exchangedirectly] [make payment] from their forex accounts [or in foreign exchange purchased from
designated foreign exchange banks] after liquidation [upon approval by SAFE] according to law.
[xx. The laws and regulations mentioned above include:  Law of the People's Republic of China
on Chinese-Foreign Equity Joint Venture;  Law of the People's Republic of China on Chinese-Foreign
Contractual Joint Venture;  Regulations on the Exchange System of the People's Republic of China;and Regulations on the Sale and Purchase of and Payment in Foreign Exchange.]
 [xx. China noted the significant steps that had been taken to reform, rationalize, and liberalize its
foreign exchange market.  In particular, China had unified its foreign exchange market and achievedcurrent account convertibility.  Moreover, China had stated its acceptance of the obligations of ArticleVIII of the Articles of Agreement of the Internati onal Monetary Fund.  In the light of these advances,
China would provide complete information on its exchange controls in the context of the transitionalreview mechanism and such other information as is deemed necessary in the context of the
transitional review mechanism.  The Working Party took note of this commitment.
 xx. China  stated  that it would implement its oblig ations with respect to foreign exchange matters
in accordance with the provisions of the WTO Agreement and related declarations and decisions thatWT/ACC/SPEC/CHN/1/Rev.2
Page 12
concern the International Monetary Fund.  In particular, China confirmed that it would not subject
individual requests for foreign exchange for the making of payments and transfers  for current
international transactions, including the issuance of credit or credit guarantees for current internationaltransactions (e.g., letters of credit; direct loans; guarantees of loans by financial institutions or other
entities; or insurance of financing by financial instit utions or other entities), to any form of approval
or restriction (including a requirement for the presentation of an invoice), in a manner inconsistentwith its obligations under the Articles of Agreement of the International Monetary Fund. TheWorking Party took note of this commitment.]
4. Balance-of-Payments Measures
24. Some [members of the Working Party stated, in regard to BOP provisions, that China should
be accorded fair treatment and equal right as a WTO Member.  But some other] members of theWorking Party expressed concern that China shoul d not make indiscriminate use of balance-of-
payments measures pursuant to Article XII or XVIII:B of the GATT 1994 as justification for the
imposition of quantitative restrictions or [other,] price-based measures on imports.  Those members
stated that the provisions of Article XII or XVIII:B of the GATT 1994 and the Understanding on theBalance-of-Payments Provisions of the GATT 1994 should be strictly respected by China.  Thosemembers also stated that measures taken for balance-of-payments reasons should have the least tradedisruptive effect possible and should be limited to temporary import surcharges, import depositrequirements or other equivalent price-based trade measures, and those measures should not be usedto provide import protection for specific sectors, industries or products.
25. Those members further stated that any such measures should be notified pursuant to the
Understanding on the Balance-of-Payments Provisions of the GATT 1994 to the General Council not
later than the imposition of the measures, together with a time schedule for their elimination and a
programme of external and domestic policy measures to be used to restore balance-of-paymentsequilibrium.  Those members also stated that following deposit of such a notification, the Committeeon Balance-of-Payments should meet to examine the notification.  It was noted that paragraph 4 of theUnderstanding on the Balance-of-Payments Provisions of the GATT 1994 would be available toChina in the case of "essential products".
26. In response, the representative of China stated that China considered that it should have the
right to make full use of [WTO balance-of-payment provisions] [Article XVIII:B] to protect, as
necessary, its balance-of-payments situation.  Some members of the Working Party considered that
China should undertake specific commitments in connection with the invocation of [suchmeasures][Article XVIII:B].  Those members also stated that the Committee on Balance-of-PaymentsWT/ACC/SPEC/CHN/1/Rev.2
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should review the operation of any balance-of-payments measures taken by China on an annual basis,
if so requested by China or a WTO Member.
5. Investment Regime
[xx. Since the inception of the reform and opening up policy in late 1970's, China has carried out a
series of reforms of its investment regime. The highly centralised investment administration under theplanned economy has been progressively transformed into a new pattern of diversification of
investors, multi-channel of capital sources and diversification of investment modalities. The
government encourages foreign investment into the Chinese market and has uninterruptedly openedand expanded the scope for investment. At the same time, the Chinese government also encourages
the development of non-state-operated economy and is  speeding up the opening of areas for non-state
investment. With China's program in the establishment of its market economy, the constructionprojects of various enterprises utilising free capital and financed by the credit of the enterprise will be
fully subject to the decision-making of the enterprise concerned and at their own risk. The commercial
banks' credit activities to all kinds of investors will be based on the evaluation and decision-making oftheir own and be at their own risk. The business activ ities of intermediate investment agencies will be
fully subject to the market and will provide service at the instruction of the investors. These agencies
will break up their administrative relations with government agencies and the service activitiesfinanced by the government should also be subject to the terms and conditions agreed in the contracts
concerned.]
6. [State Ownership and Privatization ] [Commercial Operation of State Owned Enterprises]
[xx. The state-owned enterprises of China have basically operated in accordance with rules of
market economy. The government will no longer di rectly administer the human, finance and material
resources and operational activities such as production, supply and marketing. The prices of
commodities produced by state-own enterprises are decided by the market and resources in
operational areas are fundamentally allocated by the market. The state-owned banks have beencommercialised and the central revenue will no longer used to invest in these enterprises. China isfurthering its reform of the state-owned enterprises and establishing the modern enterprise system.]
[xx. In light of the role that state-owned and state-invested enterprises play in China’s economy,
Members expressed concerns about the continuing governmental influence and guidance on the
decisions and activities of such enterprises relating to the purchase and sale of goods and services.Such purchases and sales should be based solely on commercial considerations, without anygovernmental influence or application of discriminatory measures.  In addition, Members indicatedthe need for China to clarify its understanding of the types of activities that would not come within the
scope of Article III:8(a) of GATT 1994.  For example, any measure relating to state-owned and state-WT/ACC/SPEC/CHN/1/Rev.2
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invested enterprises importing materials and machinery used in the assembly of goods which are then
exported or otherwise made available for commercial sale or use or for non-governmental purposeswould not be considered to be [a measure relating to] government procurement.
xx. The representative of China emphasized the [evolving] nature of China’s economy and the
significant role of foreign-invested enterprises and the private sector in the economy.  Given the
increasing need and desirability of competing with private enterprises in the market, decisions bystate-owned and state-invested enterprises had to be based on commercial considerations as providedin the WTO.
xx. The representative of China confirmed that Ch ina would ensure that all state-owned and state-
invested enterprises will make purchases and sales based solely on commercial considerations, e.g.,price, quality, marketability, availability, and that the enterprises of other WTO members will have anadequate opportunity to compete for sales to and purchases from these enterprises on non-discriminatory terms and conditions.  In addition, China’s government would not influence, directly
or indirectly,  commercial decisions on the part of st ate-owned or state-invested enterprises, including
the quantity, value or country of origin of any goods purchased or sold, except in a manner consistentwith the WTO.  The Working Party took note of these commitments.
xx. China confirmed that, without prejudice to China’s rights in future negotiations in the
Government Procurement Agreement, all laws, regu lations and measures relating to the procurement
by state-owned and state-invested enterprises of goods and services for commercial sale, productionof goods [or supply of services] for commercial sale, or for non-governmental purposes would not beconsidered to be [laws, regulations and measures  relating to] government procurement. Thus, such
purchases or sales would be subject to the provisions of Articles II, XVI and XVII of the GATS and
Article III of GATT 1994.  The Working Party took note of this commitment.
xx. Members expressed concern about laws, regulations and measures in China affecting the
transfer of technology, in particular in the context of investment decisions.  Moreover, members of the
Working Party expressed concern about measures conditioning the receipt of benefits, includinginvestment approvals, upon technology transfer.  In their view, the terms and conditions of technology
transfer,  particularly in the context of an investment, should be agreed between the parties to theinvestment without government interference.  The government should not, for example, conditioninvestment approval upon technology transfer.
xx. China confirmed that it will only impose, apply or enforce laws, regulations or measures
relating to the transfer of technology, production processes, or other proprietary knowledge to anindividual or enterprise in it’s territory that ar e not inconsistent with the WTO Agreements on TradeWT/ACC/SPEC/CHN/1/Rev.2
Page 15
Related Aspects of Intellectual Property Rights and Trade Related Investment Measures.  China
confirmed that the terms and conditions of t echnology transfer, production processes or other
proprietary knowledge, particularly in the context of  an investment, will be agreed between the parties
to the investment.  The Working Party took note of these commitments.]
7. Pricing policies
27. Some members of the Working Party noted that China had made extensive use of price
controls, for example in the agricultural sector.  Those members requested that China undertakespecific commitments concerning its system of state pricing.  In particular, those members stated thatChina should allow prices for traded goods and services in every sector to be determined by marketforces, and multi-tier pricing practices for such goods and services should be eliminated.  Membersnoted, however, that the goods and services listed in Annex 4 to China's Protocol were expected to
remain subject to price controls, consistent with the WTO Agreement, in particular Article III of theGATT 1994 and Annex 2, paragraphs 3 and 4 of the Agreement on Agriculture.  Those members
noted that except in exceptional circumstances, a nd subject to notification to the WTO Secretariat,
price controls should  not be extended to goods or services beyond those listed in Annex 4, and Chinashould make its best efforts to reduce and eliminate those controls.  They also asked that Chinapublish in the appropriate official journal the list of goods and services subject to state pricing andchanges thereto.
[xx. The official journal providing the information of price is the Commodity Price Notice of the
People's Republic of China published in Beijing.  The floating range of guidance pricing referred to in
paragraph 30 is generally 5% to 15%. The short statement of liberalisation on future governmentpolicies referred to in paragraph 31 reads as follows:  China will be continuing to further its price
reform, adjusting the catalogue subject to state pr icing and further liberalise its pricing policies.]
28. China confirmed that it would publish in the official journal the list of goods and
services subject to state pricing and changes thereto, together with [cost and] price-setting
mechanisms and policies.  The Working Party took note of these commitments.
[xx.     Members expressed the view  that price controls and state pricing in China also encompassed
“guidance pricing” and  regulation of the range of profits that enterprises could enjoy.  Such policiesand practices would also be subject to China’s commitments.  In their view, price controls should beadopted only in extraordinary circumstances and should be removed as soon as the circumstancesjustifying their adoption were addressed.]WT/ACC/SPEC/CHN/1/Rev.2
Page 16
29. The representative of China noted that China currently applied a mechanism of market-based
pricing under macro-economic adjustment.  He noted that national treatment was applied in the areasof government pricing for all imported goods.  There were presently three types of prices: governmentprice, government guidance price and market-regulated  price.  The Government price was set by price
administration authorities and could not be changed without the approval by these authorities.
Products and services subject to Government pricing were those having a direct bearing on thenational economy and the basic needs of the people's livelihood, including those products that werescarce in China.
30. He further added that the Government guidance price mechanism was a more flexible form of
pricing.  The price administration authorities stipulated either a basic price or floating ranges[, guidingenterprises to set prices themselves].  [Enterpris es could, within the limits of the guidance and taking
into account the market situation, make their own decisions on prices.]  With market-regulated prices,enterprises were free to fix prices in accordance with supply and demand to the extent permitted by
generally applicable laws, regulations and policies concerning prices.
31. In formulating Government prices and Govern ment guidance prices, the following criteria
were taken into account: normal production costs, supply and demand situation, relevant governmentpolicies and prices of related products. When fixing prices of consumer goods, consideration wasgiven to the limit of consumers' purchasing power.  He noted that due to continued reform of China'sprice system, the share of Government prices had dropped substantially and that of market-regulated
prices had increased;  of social retailing products, the share of Government prices was about 4%, thatof Government guidance prices 1.2%, and that of  market-regulated prices 94.7%.  For agricultural
products, the share of Government prices was 9.1%, Government guidance prices 7.1%, and market-
regulated 83.3%.  For production inputs, the sh are of government prices was 9.6%, that of
government guidance prices 4.4%, and market-regulated prices 86%.  The share of directlygovernment-controlled prices had been much reduced such that it was even smaller than that in major
Western market economies.  The Chinese Government considered that China's price system wasbecoming increasingly rationalized, creating a relatively fair marketplace for all enterprises tocompete on an equal footing.
32. The representative of China recalled that Annex 4 of the Draft Protocol of Accession contains
a comprehensive listing of all products and services presently subject to Government guidance pricing
and Government pricing.WT/ACC/SPEC/CHN/1/Rev.2
Page 17
33. China confirmed that price controls shall not be used for purposes of affording
protection to domestic industries or services providers.  The Working Party took note of this
commitment.
[xx.  The representative of China confirmed that China  would apply its current  price controls  and
any other price controls applied from the entry into force of this Protocol in a WTO-consistent
fashion, and would take account of the interests of exporting WTO Members as provided for inArticle III. 9 of the GATT 1994. The Working Party took note of these commitments.]
8. Competition Policy
[xx. The Chinese government encourages fair competition and is against unfair competition acts of
all kinds. The Law of the People's Republic of China on Combating Unfair Competition promulgatedon September 2, 1992 and implemented on December 1, 1992 is the basic law to maintain the order ofcompetition in the market. In addition, the Price Law, the Law on Tendering and Bidding, theCriminal Law and other relevant laws also cont ains provisions on anti-monopoly and anti unfair
competition. China is now formulating the Law on Anti-Monopoly.]
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES
1. [Powers of Executive, Legislative and Judicial Branches of Government ] [Uniform
Administration of Laws and Regulations]
[xx. The Representative of China stated that China has been consistently performing its
international treaty obligations in good faith. A ccording to the Constitution and the Law on the
Procedure of Conclusion of Treaties, the WTO Agreement falls into the category of "important
international agreements" that is subject to the ra tification by the Standing Committee of the National
People's Congress. China shall make its best effort to  keep its laws and regulations pertaining to trade
or affecting trade in conformity with the WTO Ag reement and with its commitments so as to fully
perform its international obligations. China's domestic laws and regulations ensure the fullimplementation of the WTO Agreement in China. For this reason, China has commenced a plan tosystematically revise its relevant domestic laws. Therefore, the WTO Agreement will be implementedin an effective and uniform way after China's accession.]WT/ACC/SPEC/CHN/1/Rev.2
Page 18
34. The representative of China informed member s of the Working Party that in accordance with
the Constitution of the PRC, [the Standing Committee of the National People's Congress had thepower to annul those regulations and administrative decrees issued by both central and local [i.e. sub-national] government[s] that contravened the Constitution and laws. The State Council had the power
to annul those inappropriate regulations and administrative decrees issued by both central and local
government[s]] [the Law on Legislation of PRC, the National People’s Congress is the highest organof state power. Its permanent body is its Standing Committee. The National People’s Congress and itsStanding Committee exercise the legislative power of the State. They have the power to formulate theConstitution and laws. The State Council i.e., the Central People’s Government of PRC, is the
executive body of the highest organ of state power. The State Council, in accordance with theConstitution and relevant laws, is entrusted with the power to formulate administrative regulations.
The ministries and commissions of the State Council may issue department rules within thejurisdiction of their respective departments and in accordance with the laws and administrative
regulations. The provincial people’s congresses and their standing committees may adopt local
regulations. The provincial governments have th e power to make local government rules. The
National People’s Congress and its standing committee have the power to annul the administrativeregulations that contradict the Constitution and laws as well as the local regulations that contradict theConstitution, the laws and the administrative regulations. The State Council has the power to annulthe department rules and local government rules th at are inconsistent with the Constitution, the laws
or administrative regulations.]  The Chinese Government considered that these features of the Chineselegal system would ensure an effective and uniform implementation of the obligations resulting from
China's accession to the WTO Agreement.
[xx. The Representative of China stated that China has been consistently performing its
international treaty obligations in good faith. A ccording to the Constitution and the Law on the
Procedure of Conclusion of Treaties, the WTO agreement falls within the category of "importantinternational agreements" that is to be ratified by the Standing Committee of the National People'sCongress. China shall make its best effort to keep its laws and regulations pertaining to trade oraffecting trade in conformity with the WTO agr eement and with its commitments so as to fully
perform its international obligations. For this reason, China has commenced a plan to systematicallyrevise its relevant domestic laws. Therefore, the WTO agreement will be implemented in an effective
and uniform way after China's accession.]
35. Members of the Working Party stated that it should be made clear that China would apply the
requirements of the WTO Agreement and [its other accession commitments throughout China's][anyadditional obligations created by China's Protocol of Accession to its] entire customs territory,WT/ACC/SPEC/CHN/1/Rev.2
Page 19
including border trade regions, minority autonomous areas, Special Economic Zones, open coastal
cities, economic and technical development zones and other special economic areas.
36. Members of the Working Party also stated that China should ensure that the provisions of the
WTO Agreement and any additional obligations created by China's Protocol of Accession were
applied uniformly throughout its entire customs territory, including at the sub-national level.Members of the Working Party also noted that China should administer in a uniform, impartial andreasonable manner all its laws, regulations and other measures pertaining to or affecting trade ingoods, services or TRIPS or the control of foreign exchange. In this connection, members of theWorking Party requested that China establish a mechanism under which individuals and enterprisescould bring to the attention of the national authorities cases of non-uniform application of the traderegime.  Members of the Working Party also noted that China's laws, regulations and other measuresof government entities at the sub-national level would be required to conform to the obligations
undertaken in China's Protocol of Accession and the WTO Agreement.
2. Uniform administration of the trade regime
[xx. The representative of China  further confirmed that the mechanism established pursuant to
Section  2 (A) of the protocol would be operative upon entry into force of China’s protocol.  Allindividuals and entities could bring to the attention of central government authorities cases of non-uniform application of China’s trade regime, including its commitments under the WTO and protocol.When China’s authorities were informed of such cases,  relevant government authorities would
promptly act to remedy the situation without requiring affected parties to petition through the courts,
taking into consideration the need to provide a meaningful remedy. The individual or entity making
the notification would be informed promptly in writing of any decision and action taken.  The
Working Party took note of these commitments.]
3. Judicial Review
37. Some members of the Working Party stated that China should designate independent
tribunals, contact points, and procedures for the prompt review of all administrative actions relating tothe implementation of laws, regulations, judicial decisions and administrative rulings of generalapplication referred to in Article X:1 of the GATT 1994, including administrative actions relating toimport or export licences, non-tariff measures and any other measures within the scope of the WTO
Agreement.  Those members stated that notwithstanding Article X:3(c) of the GATT 1994, theWT/ACC/SPEC/CHN/1/Rev.2
Page 20
tribunals should be independent of the agencies entrusted with administrative enforcement of
provisions contained in the WTO Agreement.
38. Those members also stated that the administrative actions subject to review should include
measures relating to the availability and distribution of import and export licenses, permits or quotas;
application of measures for safeguard or balance-of-payments purposes or to protect against unfair
trade;  and any other measures within the scope of the WTO Agreement, in particular any [actionsrequired to be reviewed] [reviews required to be made available] under the relevant provisions of theTRIPS Agreement and the GATS.  Such review procedures should include the opportunity for appeal,without penalty, by individuals or enterprises aff ected by any administrative action subject to review.
If an initial right of appeal was to an administrative body, there should be an opportunity for a furtherappeal to a judicial body.  Any decision by any appellate body and the reasons therefore would becommunicated in writing to the appellant, together with notification of any right to further appeal.
39. Some members of the Working Party expressed concern about the functioning of China's
institutions and procedures for the prompt review of disputes over trade-related matters in China.
Those members requested that the existing system be improved to provide speedier and morepredictable access to those institutions and procedures.  Members of the Working Party also requestedthat the types of measures subject to independent judicial or administrative review should be extendedfrom those currently covered by Chinese domestic procedures.  In particular they requested thatmeasures related to services trade and intellectual property and services be subject to such reviewprocesses.
[xx. Members expressed concern that China needed to improve its institutions and procedures for
the prompt review of disputes over trade-related matters in China, in particular with respect to the
independence of the administrative and judicial authorities responsible for reviewing measures.Members also sought to ensure that all measures  related to the WTO, including foreign exchange
measures would be  subject to review under Chinese domestic procedures;  in particular they sought acommitment to cover measures related to services trade and intellectual property. Some Memberssought explicit confirmation that certain types of measures, such as decisions relating to statutoryinspection and chemical registration,  would be subject to judicial review.]
40. China confirmed that it would [revise its patent and trademark laws so that, upon
accession, all of its laws and regulations will be consistent with protocol requirements on
procedures for judicial review of administrative actions.  The Working Party took note of this
commitment. ]  [make the best effort to revise its relevant laws and regulations so that its relevantWT/ACC/SPEC/CHN/1/Rev.2
Page 21
domestic laws and regulations will be consistent with the requirements of all WTO covered
agreements on procedures for judicial review of specific administrative actions.]
[xx. The Representative of China also expressed his concern on the unreasonable expectation of a
few Members for China to assume even higher obligations than those required by the covered
agreements with regard to judicial review while no Member in WTO has ever undertaken such
additional obligations. Considering this situation, the Representative of China takes the position thatsuch unreasonable requirement on China would surely undermine the fundamental principle of non-discrimination of this Organization.]
[xx. In response to questions from Members, the representative of China confirmed that
administrative actions relating to any measure within the scope of the WTO, including decisionsrelating to national treatment, conformity assessments , grant or denial of a license to provide a service
and other matters, would be subject to the proced ures established for prompt review under Section
2(D) of the protocol and information on such pro cedures would be available through the enquiry point
that China would establish upon accession. The Working Party took note of these commitments.]
41. China confirmed that [measures] [specific administrative actions] subject to review would
include measures affecting in any way the regulation, control, supply or promotion of
transportation and transportation-related serv ices, insurance and insurance-related services,
banking and other financial services, telecommunications services, distribution services,entertainment services, information processing s ervices, construction and maintenance services,
professional services, and retail sales servi ces.  China undertook to ensure that all such
measures would be subject to review.  The Working Party took note of that commitment.
4. Authority of Sub-Central Governments
42. In response to questions, the representative of China recalled that the central government had
exclusive constitutional power to overturn all measures taken at sub-national level that wereinconsistent with China's international obligations.
43. Several members of the Working Party raised concerns about the continued presence of
multiple and overlapping trade instruments used by different levels of government within China.Those members considered that situation resulted in a lessening of the security and predictability ofaccess to the Chinese market.  In addition, some members expressed concerns about the limitedcontrol exercised by the central government over trade measures introduced at the sub-national level.WT/ACC/SPEC/CHN/1/Rev.2
Page 22
[44. The representative of China indicated that  China intended to apply the WTO Agreement to
the fullest extent not inconsistent with mandatory legislation in existence on the date of entry into
force of the Protocol.  Members raised concerns as to what China might consider to be existing"mandatory legislation".  China was requested to submit an illustrative list of such legislation.  Some
members of the Working Party stated that given the constitutional power of China's central
government to ensure compliance with China's WTO obligations by both its national and sub-nationalauthorities, and to override inconsistent measures at the sub-national level, very few, if any, Chineselaws could meet the criteria of existing mandatory legislation.  Some members of the  Working Partynoted that the GATT 1994, unlike the GATT 1947, did not permit the possibility of exemptingexisting mandatory legislation.]
[45. Some members raised concerns about the precise nature and scope of China's customs
territory and how China's customs territory inter-related with [the] [its] separate customs territories ofHong Kong, China, Macau, China and [the separate Customs Territory of Taiwan, Penghu, Kinmen
and Matsu ("Chinese Taipei")] [Chinese Taipei].  Members of the Working Party and China agreed
that [on the basis of one-China, China will be a Member of WTO as a sovereign state. "Hong Kong,China", "Macau, China" are and "Chinese Taipei" will be WTO Members as separate customsterritories of China.]  China [would] [will], [as a WTO Member,] in accordance withGATT Article XXIV:1, maintain [standard] [normal] WTO relations with [those other] [its] separatecustoms territories.]
46. Some members of the Working Party raised concerns in relation to the uniformity of
administration of the foreign trade and economic regi me within China.  In particular, those members
raised concerns about measures taken by sub-national authorities.  In response, the representative of
China emphasized that the central government had full constitutional authority to ensure compliancewith WTO obligations by both national and sub-national governmental authorities in China.  Somemembers requested that an appropriate commitment be undertaken in this regard by China.
47. Some members of the Working Party raised concerns about the limited ability of China's
central government to be sufficiently informed about non-uniform practices and to take necessaryenforcement actions.  Those members stated that China should establish a mechanism by which anyconcerned person could bring to the attention of the central government cases of non-uniformapplication of the trade regime.WT/ACC/SPEC/CHN/1/Rev.2
Page 23
IV. POLICIES AFFECTING TRADE IN GOODS
1. Trading Rights
48. Some members noted that few enterprises within China had full freedom to engage in foreign
trade, i.e., the right to import and export goods without restriction.  Those members noted that in
many cases, enterprises wishing to import or export goods had to conduct such trade through a state-
trading enterprise.  Those members stated that China should progressively liberalize the right to trade,so that, within three years of accession to the WTO all enterprises in China would have the right toimport and export as well as to trade in all goods throughout the customs territory of China.  Such acommitment would be without prejudice to China's right to regulate trade in a manner consistent withthe WTO Agreement and would not include those goods listed in Annex 2(a)1 and 2(a)2 of China'sProtocol of Accession,  which would continue to be subject to state-trading in accordance with that
Protocol.
49. Those members also stated that enterprises enjoying the right to trade should also be accorded
national treatment under Article III of GATT 1994, especially paragraph 4 thereof, in respect of
internal sale, offering for sale, purchase, transportation, distribution or use, including their directaccess to end-users. Those members also stated that all foreign individuals and enterprises, includingthose not invested or registered in China, should be accorded treatment no less favourable than that
accorded to enterprises in China with respect to the right to trade.  In respect of goods that would
remain subject to designated trading listed in Annex 2b of China's Protocol of Accession, China
should phase out limitations on the grant of trading rights pursuant to the schedule in that Annex.They also stated that China should complete all necessary legislative procedures to implement these
provisions during a transition period.
[xx. The end user herein refers to the Chinese enterprises without right to import and/or export. At
present, these enterprises import the products for their own use through enterprises with right to
import and export. Three years after China's accession to the WTO, the right to trade shall beliberalised, as a result of which, all enterprises in  China will have right to trade, therefore the end
users at that time will be legal persons of enterprises which use imported products.]
[Designated trading
xx. China will adjust and expand its list of enterprises under designated trading regime annually
during the transitional period, until such time as th e full implementation of the commitment contained
in Annex 2b. The criteria for enterprise under design ated trading regime include the registered capital,WT/ACC/SPEC/CHN/1/Rev.2
Page 24
import and export volume and the import volume of products subject to designated trading in the
previous year, bank credit rating and profits and losses.]
50. Some members of the Working Party expressed concern that China's restrictions on the right
of enterprises to engage in trade operated as significant limitations on secure and predictable access to
the Chinese market.  Members sought progressive elimination of all such restrictions and objective
and generally applicable criteria for the granting of trading rights pending the elimination of all suchrestrictions.  China noted that it was in the process of liberalizing trading rights but that certainproducts would remain the exclusive domain of designated foreign trade corporations.  China alsonoted that criteria for the granting of trading rights were set out in China's Foreign Trade Law.  Some
members of the Working Party considered that China should enter a specific commitment in relation
to trading rights.
[xx. Some members noted that few enterprises within China had full freedom to engage in foreign
trade, i.e., the right to import and export goods.  Those members noted that in many cases, enterprises
wishing to import or export goods had to conduct such trade through a state-trading enterprise.  Those
members expressed concern that China's restrictions on the right of enterprises to engage in trade wereamong the most significant limitations on securing access to the Chinese market.  Members soughtprogressive elimination of all such restrictions and the application of objective and generallyapplicable criteria for the granting of trading rights  pending the total elimination of such restrictions.
Those members stated that China should progressively liberalize the right to trade, so that, withinthree years of accession to the WTO all enterprises in China and foreign enterprises and individualswould have the right to import and export as well as to trade in all goods throughout the customs
territory of China.  Such a commitment would be without prejudice to China's right to regulate trade
in a manner consistent with the WTO Agreement and would not include those goods listed inAnnex 2(a)1 and 2(a)2 of China's Protocol of Accession, except as otherwise specified in China’sProtocol.
xx. Members noted that China was in the process of liberalizing the availability of the right to
import and export goods from China, but that such rights were now restricted to enterprises in China.Objective criteria for the grant of trading rights needed to be agreed and applied to facilitateimplementation of the national treatment provisions in this Section of China’s Protocol. Membersemphasized that upon accession China would need to apply the same criteria to foreign enterprises
and individuals that it applied to Chinese enterprises in authorizing foreign enterprises and individuals
to import and export goods, rather than approving the grant of such rights on case-by-case basis.  ThisWT/ACC/SPEC/CHN/1/Rev.2
Page 25
would ensure that the process of progressive liberalization would proceed more rapidly and
uniformly.
xx. Those members noted China’s commitment to accord foreign enterprises and individuals,
including those not invested or registered in Chin a, national treatment with respect to obtaining the
right to trade.  Moreover, goods imported or exported by foreign enterprises and individuals must also
be accorded national treatment under Article III of GATT 1994, especially paragraph 4 thereof, inrespect of internal sale, offering for sale, purchase, transportation, distribution or use, including theirdirect access to end-users. In respect of goods that would remain subject to designated trading listed in
Annex 2b of China's Protocol of Accession, China should phase out limitations on the grant of tradingrights pursuant to the schedule in that Annex.  They also stated that China should complete allnecessary legislative procedures to implement these commitments during this transition period.
xx. Members requested that China provide detailed information regarding the process for
enterprises and individuals to qualify to import and export goods.   The need for specific, objective
and automatic criteria for the prompt grant of rights was emphasized.  Existing enterprises should be
able to engage in importation and exportation without need to amend their scope of business or obtaina new business license, since the approval process could itself delay and form a barrier to obtainingthese important rights. Members sought assurances that China’s requirements for various licenses,such as import business licenses, would not adversely affect the realization of the right to trade.  Norshould enterprises be required to establish in a particular form or create separate entities to engage inimporting or exporting.
xx. The representative of China confirmed that China would progressively liberalize the scope
and availability of trading rights in China. Upon accession, China would eliminate export
performance and trade and foreign exchange balancing requirements as criteria for obtaining ormaintaining the right to import and export.   China would also immedi ately upon accession apply an
automatic registration system for obtaining the ri ght to trade instead of a licensing system. The
representative of China also confirmed that the right to trade will be granted promptly to anyenterprise seeking to import or export such g oods and an enterprise’s scope of business would
automatically encompass the right to import and export.  Enterprises would not be required to
establish in a particular form or as a separate entity to engage in importing and exporting nor wouldnew business licenses be required to engage in these activities.  Except as otherwise specified in its
Protocol, China would permit Chinese enterprises, in cluding foreign-invested enterprises, and foreign
enterprises and individuals to import and export all goods into its customs territory according to thefollowing schedule.  Upon accession:  All goods excep t those listed in appendix (1a);  within one yearWT/ACC/SPEC/CHN/1/Rev.2
Page 26
after entry into force of China’s Protocol, all goods except those listed in appendix (1b); and two
years after entry into force of China’s Protocol all goods except those listed in appendix (1c).  Threeyears after entry into force of its Protocol, the representative of China confirmed that all goods, exceptas otherwise specified in the Protocol, could be imported and exported throughout the customs
territory of China. The Working Party took note of these commitments.
xx. The representative of China further confirmed that China would grant to any enterprise
possessing the right to trade any product pursuant to Section 5 of the Protocol, the right to importgoods in Annex 2a that are subject to a tariff quota or to an agreed volume of  imports by non-statetrading enterprises, except for the quantity of such goods specifically reserved for importation by state
trading enterprises.  Any firm possessing the right to trade pursuant to Section 5 would also have theright to import that portion of a tariff rate quota reallocated to non-state trading enterprises pursuant tothe agreed rules on tariff rate quota administration.  China also confirmed that for goods in Annex 2asubject to a tariff rate quota, any enterprise grante d the right to trade, pursuant to Section 5 of the
Protocol, would be permitted to import such goods at  the out-of-quota tariff rate.  The Working Party
took note of these commitments.
xx. Members noted China’s commitment that it would phase out the limitation on the grant of
trading rights for goods specified in Annex 2b (“Products Subject to Designated Trading”) within[three] years of entry into force of its Protocol.  In responding to questions raised by WTO members,the representative of China said that China would progressively liberalize the right to trade in suchgoods by increasing the number of designated entities permitted to import goods in each of the threeyears of the transition period specified in Annex 2b.  The representative of China added that China
would extend the right to register as designated  importing and exporting enterprises for the goods in
Annex 2b in each of the first, second and third years af ter entry into force of its Protocol to enterprises
that used such goods in the production of finished goods and enterprises that distributed such goods inChina.  At the end of three years, all enterprise s in China and all foreign enterprises and individuals
would be permitted to import and export such goods  throughout the customs territory of China. The
Working Party took note of this commitment.]
A. IMPORT REGULATION
1. Ordinary customs duties
51. Members of the Working Party noted the substantial unilateral tariff reductions made in many
sectors by China in recent years.  They also acknowledged the increased breadth of bindings and
reduction in average tariff levels.  Some members expressed concern over continued high levels andthe lack of proposed tariff bindings in some sectors.WT/ACC/SPEC/CHN/1/Rev.2
Page 27
52. The representative of China provided members of the Working Party with a copy of the
Customs Tariff and related laws and regulations.  He noted that the Customs Tariff of China was acharge imposed on imported goods. The purpose of levying tariff was twofold:  (a) to regulate importsso as to promote and support domestic production, and (b) to serve as an important source of revenue
for the treasury of the Central Government.  China's tariff policy was to promote economic reform and
opening of the economy.  [The basic principles for establishing duty rates were as follows.  Duty-freeor low duty rates were applied to imported goods which were needed for the national economy andthe people's livelihood but which were not produced sufficiently domestically.  Import duty rates onraw materials were generally lower than those on semi-manufactured or manufactured products.  Forparts or components of machinery, equipment and instruments which were not produced domestically,or at a sufficiently high standard, the import duty was lower than the duty on complete products.Higher duty rates were applied to products which were produced domestically or which were
considered non-essential for the national economy and the people's livelihood.   A higher duty was
applied to imported products, the equivalent of which were produced domestically and the local
manufacturer of which needed protection.]
53. The representative of China noted that China had adopted the Harmonized Commodity
Description and Coding System (HS) as from 1 January 1992 and joined the International Conventionon the Harmonized Commodity Description and Coding System in the same year.  There [were] [are]
21 sections, 97 chapters and [7066] [7062] tariff headings in the Customs Import and Export Tariff ofthe PRC.  Tariff rates were fixed by the State Council. Partial adjustment to the duty rates was subjectto deliberation and final decision by the State [Council] Tariff Commission.  The [current] simple
average  of China's import duties [in 1999] [in 2000] was [14.44%] [16.4%].  Among the [7066]
[7062] tariff headings[, tariff rates for 709 headings were below 5%, those for 2015 were 5%-9%,those for 1356 were 10%-15% and those for 2896 were above 15%.]  [Tariff rates for 525 headingsare below 5%, 1488 are between 5% (inclusive) and 10% (exclusive), 2022 between 10% (inclusive)and 15% (inclusive) and 3027 are above 15%.]  Information on tariff rates for specific products andimport statistical data for recent years [was] [has been] provided to the Working Party.
[54. He also noted that there were two columns of import duty rates: general rates and preferential
rates. The preferential rates applied to imports or iginating in countries and regions with which China
had concluded reciprocal tariff agreements, whereas the general rates applied to imports from other
sources.]WT/ACC/SPEC/CHN/1/Rev.2
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[xx. Members welcomed China’s decision to bind tariffs for all products in its schedule on market
access for goods.  This action would increase the certainty and predictability of this aspect of China’strade regime.
xx. The representative of China confirmed that upon accession China will participate in the
Information Technology Agreement (ITA).  Furthermore, upon accession, China will eliminate all
other duties and charges for ITA products.  The Working Party took note of these commitments.
xx. Some Members, however, expressed concerns over the broad availability and application of
tariff reductions and exemptions for a wide variety of enterprises and other entities, including statetrading enterprises, state-owned enterprises, foreig n-invested enterprises and not-for profit entities.
Similar concerns also existed for exemptions from application of other duties, taxes and charges.Members noted the detrimental effect such reductions or exemptions had on revenues andpredictability and certainty in application of tariff and other trade measures.  The representative ofChina recognized that currently many foreign and domestic entities enjoyed exemptions from tariffs
and other duties and charges assessed at the border.   The representative of China confirmed that upon
entry into force of this Protocol, China would adopt and apply reductions and exemptions from thecommitments set forth in China’s market access sche dule so as to ensure MFN and national treatment
for imported goods.  The Working Party took note of this commitment.
xx. Members expressed particular concerns about tariff treatment in the auto sector.  In response
to questions about the tariff treatment for kits for motor vehicles, China confirmed that it has no tarifflines for completely knocked-down kits for motor vehicles or semi-knocked down kits for motorvehicles.  If China creates such tariff lines, the tariff rates will be no more than 10 percent.  The
Working Party took note of this commitment.
xx. With respect to future tariff liberalization, China stated its support for the ongoing Early
Voluntary Sectoral Liberalization program initia ted in the Asia Pacific Cooperation Forum (APEC)
and now under consideration in the WTO.  Without prejudice to its rights to participate in the WTOprocess, China will participate fully in the sectoral tariff liberalization programs that WTO Membersaccept for implementation.  The Working Party took note of this commitment.
xx. The representative of China further confirmed that tariff rates on paper and wood products
will be applied on an MFN basis even if China enters into an agreement pursuant to Article XXIV ofGATT 1994 or cuts tariffs on these goods as part of a WTO-consistent preference programme.  The
Working Party took note of this commitment.]WT/ACC/SPEC/CHN/1/Rev.2
Page 29
[xx. China will join the Information Technology Agreement upon its accession to the WTO and
the schedule of concessions will be incorporated in its final schedule.]
55. China undertook bilateral market access negotiations on goods with members of the Working
Party.  The results of those negotiations are contained in the Schedule of Concessions and
Commitments on Goods and forms Annex 10 to Ch ina's Draft Protocol of Accession to the WTO.
2. Other duties and charges levied on imports but not on domestic production
56. Some members of the Working Party stated that China should ensure that all other duties and
charges applied to imported products were applied in conformity with the requirements of the WTOAgreement, in particular Article VIII of the GATT 1994.
[xx. The representative of China confirmed that China had agreed to bind at zero other duties and
charges in its Schedule of Tariff Concessions pursuant to Article II:1(b) of the GATT 1994.  TheWorking Party took note of that commitment.]
3. Rules of Origin
[xx. China's rules of origin for import and export are non-preferential rules of origin. Upon its
accession to the WTO, China will implement the Agreement on Rules of Origin of the WTO. Oncethe international harmonisation of non-preferential rules of origin has concluded, China will fully
adopt the internationally harmonised non-preferential rules of origin.
xx. The criteria for making the determination of substantial transformation is (a) change in tariff
classification of a four-digit tariff line in the Customs Import and Export Tariff of the People's
Republic of China; or (b) the value added component is 30% or more in the total value of a newproduct.
xx. China will not use the rules of origin as an instrument to pursue trade objective directly or
indirectly.]
[xx. Some members of the Working Party requested information about the adoption and
application of rules of origin in China, whether in the context of free trade agreements or otherwise,and also requested China to confirm that its rules of origin for both preferential and non-preferential
trade complied fully with the WTO Agreement on Rules of Origin.]
57. The representative of China noted that when an imported product was processed and
manufactured in several countries, the country of origin of the product was determined to be the lastWT/ACC/SPEC/CHN/1/Rev.2
Page 30
country in which the product underwent substantial transformation. Substantial transformation was
understood to mean processing which results in a change of the four-digit level tariff classification oran added value (including all cost-related expenditures) exceeding 30% of the total value. These rulesof origin were applicable to all imported products. The rules of origin applied for statistical purposes
were the same.  However, for statistical purposes, the Customs also records countries of consumption
and trading countries.
[xx. The representative of China confirmed that from the date of accession, China’s preferential
and non-preferential rules of origin would comply fully with the WTO Agreement on Rules of Origin,and that a mechanism that meets the requirements of Article 2(h) and Annex II, paragraph 3(d) of theAgreement, which require provision upon request of an assessment of the origin of the import andoutline the terms under which it will be provided, would be established in China's legal frameworkprior to accession. The Working Party took note of this commitment.]
4. Fees and charges for services rendered
58. Some members of the Working Party expressed concern over an apparent lack of uniformity
of customs fees and charges administered by national and sub-national authorities.  Members of theWorking Party noted that as a condition of accession to the WTO China should undertake acommitment to ensure conformity of such fees and charges with Articles II and VIII of theGATT 1994.
[xx. China commits itself to comply with Articles II and VIII of GATT 1994 in this regard.]
5. Application of internal taxes to imports
59. Some members of the Working Party expressed concern that some internal taxes applied to
imports, including a Value-added Tax (VAT) were not administered in conformity with the
requirements of the GATT 1994, particularly Article III.  Those members of the Working Party notedthat China appeared to permit the application of discriminatory internal taxes and charges to importedgoods and services, including taxes and charges applied by sub-national authorities.  Those membersrequested that China undertake a commitment to ensure  that all such internal taxes and charges would
be in conformity with the requirements of the GATT 1994.
60. In response, the representative of China noted that there were three major types of taxes
levied on products and services:  (a.) VAT levied on goods and services for processing, maintenanceand assembling;  (b.) the Consumption Tax on some selected consumer products;  (c.) the Business
Tax on providing services, transferring intangible assets and selling real estate.   Both the VAT andWT/ACC/SPEC/CHN/1/Rev.2
Page 31
the Consumption Tax were applicable to entities importing goods. VAT and the Consumption Tax on
imported goods were collected by the Customs at the point of entry.  He noted that VAT wasreimbursed once goods were exported.  Exported goods were exempted from the Consumption Tax.
61. He further noted that the State Council determined all policies concerning the levying of VAT
and the Consumption Tax, adjustment of tax types and tax rates (tax value), as well as the tax
exemption of VAT, the Consumption Tax and the Business Tax.  The laws and regulations wereinterpreted and implemented by the Ministry of Finance and the State Administration of Taxation.VAT and the Consumption Tax were levied and administered by the State competent departments oftaxation, while the Business Tax was collected and administered by the local competent departmentsof taxation.
6. Tariff rate quotas, tariff exemptions
62. Some members of the Working Party expressed concern over the lack of transparency,
uniformity and security of China's administration of its tariff rate quota and tariff exemptions regime.
Those members suggested that China enter a commitment in relation to those matters.  [The
representative of China confirmed that administration of TRQ will be consistent with the importlicencing procedure Agreement.]
[xx. The tariff exemption policy of China is developed and implemented in accordance with the
Customs Law of the People's Republic of China and the Regulations of the People's Republic of
China on Import and Export Duties. The coverage of specific tariff reduction or exemption isprovided for by the State Council.  All the statutory tariff reduction and exemption are applied on a
m.f.n. basis.]
[xx. Members expressed concern that Scheduled tariff quotas should be administered simply,
effectively, transparently and in a non-trade restrictive manner.  China agreed that it would administerthe tariff quotas fully in accordance with WTO rules and principles and that the administration wouldbe along the following lines and in accord with the provisions set out in the Schedule. ] [ Paragraph
to be added which briefly outlines the arrangements for state-traded commodities and wool. ]
7. Quantitative import restrictions, including prohibitions and quotas
63. In response to requests for information from members of the Working Party, the
representative of China noted that China prohibited [or restricted] the importation of certaincommodities, including various types of weapons, ammunition and explosives, narcotic drugs,WT/ACC/SPEC/CHN/1/Rev.2
Page 32
poisons, obscene materials, and foodstuffs, medicines, animals and plants [which] were inconsistent
with China's standards on food, medicines, animals and plants.
64. Members of the Working Party noted that there were a large number of overlapping non-tariff
measures in existence in China, both at the national and sub-national levels, which appeared to have a
trade restrictive or trade distorting effect.  Those members requested that China undertake a
commitment to eliminate and not to introduce, re-introduce or apply non-tariff measures other thanthose specifically identified and subject to phased elimination in Annex 3 to China's Protocol ofAccession.
65. Some members of the Working Party also raised concerns that many non-tariff measures were
imposed by sub-national authorities in China on a non-transparent, discretionary and discriminatorybasis.  Those members of the Working Party asked that China undertake a commitment to ensure thatnon-tariff measures would only be imposed by the central government or by sub-national authoritieswith clear authorization from the central government.  [Authorities][Actions] lacking  authorization
from the national authorities, should not be implemented or enforced.
66. Some members of the Working Party noted that China had provided a list of non-tariff
measures in respect of which China was prepared to commence phased elimination.  That list wasentered in Annex 3 of China's Protocol of Accession.  Those members stated that China shouldeliminate the measures listed in accordance with the schedule provided in Annex 3, during the periodsspecified in Annex 3.  Those members also noted that the protection afforded by the measures listedin Annex 3 shall not be increased or expanded in size, scope, or duration, nor any new measures beapplied, unless in conformity with the provisions of the WTO Agreement.
67. Those members of the Working Party also noted that in implementing the provisions of
Articles III and XI of the GATT 1994 and the Agreement on Agriculture, China should eliminate andnot introduce any new nor re-introduce any old non-tari ff measures that could not be justified under
the provisions of the WTO Agreement.  Those members also stated that all non-tariff measuresadministered by China, whether or not referred to  in Annex 3 of the Protocol of Accession, which
were applied after China's accession to the WTO, should be allocated and otherwise administered instrict conformity with the provisions of the WTO Agreement, including Article XIII of theGATT 1994 and the Agreement on Import Licensing Pr ocedures, including notification requirements.
[xx. During the phasing-in period, China will admini ster relevant quotas, licenses and tendering
requirement in accordance with the current administ rative regulations which has been notified to the
Secretariat. China has also modified Annex 3 on the basis of the comments raised during the latestWT/ACC/SPEC/CHN/1/Rev.2
Page 33
session of the Working Party. Annex 3 contains all the products subject to quotas, licenses and
tendering requirement in China.]
[xx. The representative of China confirmed that, upon accession, China shall comply with the
Agreement on Trade-Related investment Measures and shall take the necessary legislative measures
to eliminate foreign-exchange balancing and trade balancing requirements, local content requirements
and export performance requirements. Chinese authorities–whether national or sub-national–shall notenforce the terms of contracts containing such requirements. The allocation or permission or rights forimportation and investment shall not be conditional upon performance requirements set by national orsub-national authorities, or subject to secondary conditions covering, for example, the conduct ofresearch, the provision of offsets or other forms of industrial compensation including specified typesor volumes of business opportunities, the use of local inputs or the transfer of technology.  Permission
to invest, import licenses, quotas and tariff rate quotas shall be granted without regard for theexistence of competing Chinese domestic suppliers.
xx. In addition to restrictions maintained on exports of silk, some Members expressed concern
about China’s  restrictions on exports of other goods, in particular raw materials or intermediateproducts that could be subject to further processing, such as tungsten ore concentrates, rare earths andother metals.  Members urged China to ensure that any such restrictions that were imposed ormaintained complied with the terms of the WTO and Protocol.  Some Members also noted that therequirements and procedures for obtaining import licenses and export licenses often were nottransparent, and, when known, proved overly burdensom e.  Often, it took a long time to obtain all of
the required approvals.
xx. The representative of China confirmed that upon entry into force of this Protocol, restrictions
on exports would be eliminated unless they could be justified under the WTO and this Protocol.  Inparticular, any export restrictions on tungsten ore concentrates would be eliminated upon accession.The Working Party took note of this commitment.
xx. Some Members requested information on how China would implement the quota and
licensing requirements for products listed in Annex 3, in particular the procedures and criteria forgrant of quota allocations and licensing during the phase-out period for these restrictions.  Membersexpressed concern about complex and burdensome requirements for obtaining a license or quotaallocation which often required approvals from various authorities within an organization as well as
approval from both the sub-central and central level.  Members sought a transparent, streamlined
system that would issue quota allocations and licenses through a simple, consolidated approvalWT/ACC/SPEC/CHN/1/Rev.2
Page 34
process that would ensure full use of the quota and its equitable distribution among importers.
Members also requested information on how China would establish the value of imports for thoseproducts whose quota is established in terms of value of imports.
xx. The representative of China confirmed that the products currently covered under the HS
categories listed in Annex 3 were the only products that would continue to be subject to quotas during
the agreed phase-out periods and that additional products would not be added to these HS categories.In response to questions from some Members, he confirmed that the quota for autos and certain partsdid not include CKD kits.  Further, the representative of China stated that for products listed in Annex3 as being subject to quota and licensing requirements, any entity possessing the right to trade,including enterprises in the sector importing the products or importing inputs for production purposes,will be permitted to apply for and receive a quota allocation and license to import  products listed inAnnex 3.  China’s system for quota allocation and licensing would ensure that those entities withquota allocations would also receive any necessary import license.  This system would conform to
WTO rules and would be transparent, timely, responsive to market conditions and would minimize
the burden on trade.  All applications for an import license and allocation of the quota would besubmitted to the organization authorized to grant such allocations and licenses. Applicants would berequired to approach only one organization at one level (central or sub-central) to obtain both anallocation and license.  In exceptional cases, an applicant may be required to approach up to threeorganizations for approval of an allocation and li cense.  The relevant organization, amount of quota,
including the growth in quota provided for in A nnex 3, and procedures for application for a quota
allocation and license, including the beginning and end date of the application period and any other
relevant procedures or criteria will be published in the official journal referred to in paragraph 2(C)(2)
of the Protocol no later than 30 days prior to the beginning of the application period. Such applicationperiod will be from 1-30 June. Quotas and licenses shall be allocated to applicants  no later than 30days after closure of the application period.
xx. The representative of China stated that China will grant quota allocations on a first-come-first
served basis, valid for importations on a calendar year basis.   If after the specified application periodadditional quota remains,  the relevant organization will receive and process requests for quotaallocations and licenses until the full amount of the quota has been allocated.  Such allocations will bemade within 10 days after receipt of a request.  If requests for a quota allocation received at the same
time exceed the quota level, the relevant organization will ensure that quota is allocated in an
equitable manner that promotes utilization of the allocation, including  granting a proportionate shareof individual requests and giving priority consideration to unfilled requests in the context ofreallocated quota.  In all cases, allocations will be established for commercially viable quantities andprovision will be made for partial shipments against a single allocation. Inquiries regarding quotaWT/ACC/SPEC/CHN/1/Rev.2
Page 35
allocation and grant of a license can be made to the relevant organization, with written responses
provided within 10 working days.
xx. The representative of China confirmed that all commercial terms of trade, including product
specifications, product mix, pricing, and packaging, will be at the sole determination of the quota
holder. Allocations will be valid for any article or mixture of articles subject to the same quota as
specified in Annex 3.  Allocations will be valid for a period of 12 months from the opening of thequota import period.  However, if the holder of a quot a allocation has not contracted for import of the
total quantity allocated to it within 6 months after the opening of the import period, the holder shallimmediately return the unused portion of the allocation to the relevant authority which shall reallocatethe quota immediately, if unfilled requests are pending, or otherwise within 10 days after receipt of arequest for an allocation.  The relevant organization will publish notice of the availability ofadditional allocations on a monthly basis. This reallocation shall be valid for the duration of theoriginal term.  For quota quantities specified in terms of value, China will determine the value of any
shipment based on the F.A.S. ship value listed on the bill of lading.   The Working Party took note of
these commitments.]
8. Import licensing
68. In response to requests for information, the representative of China stated that the list of all
entities responsible for the authorization or approval of imports would be updated and republished inthe official journal within 30 days of any change thereto.  [The Working Party took note of thiscommitment.]
[xx. MOFTEC Gazette, a weekly magazine published in Beijing under the sponsorship of
MOFTEC which is available at MOFTEC.]
[delete paras 69-71][69. Concerns were expressed by some members of the Working Party in relation to the use of
import licensing as restrictive non-tariff measures.  Some members of the Working Party asked thatChina undertake a commitment to comply with the requirements of the Agreement on ImportLicensing Procedures.  In response, the representative of China stated that the number of productssubject to restrictive licensing was being reduced and that China would comply with the requirements
of the Agreement on Import Licensing ProceduresWT/ACC/SPEC/CHN/1/Rev.2
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70. Some members of the Working Party stated that in implementing the WTO Agreement and
provisions of the Agreement on Import Licensing Procedures, China should undertake the followingmeasures to facilitate compliance with those agreem ents.  They stated that China should notify the
following on a regular basis in the official journal referred to in paragraph 2(C)2 of its Protocol of
Accession:
(a) a listing by product, of all organizations, including those organizations delegated such
authority by the national authorities, th at were responsible for authorizing or
approving imports or exports, whether through grant of license or other approval;
(b) a description of all procedures and criteria for obtaining such import or export
licenses or other approvals, and the conditions for deciding whether they should begranted;
(c) a list of all products, by HS system tariff number, that were subject to tendering
requirements, including information on products subject to such tendering
requirements and any changes, pursuant to the Agreement on Import Licensing
Procedures;
(d) a list of all goods and technologies whose import or export was restricted or
prohibited;  this  list should be notified to the Committee on Import Licensing;  and
(e) any changes to the list of goods and technologies whose import and export were
restricted or prohibited;
Those members also stated that within 75 days of each publication, copies of those notifications
should also be notified to the WTO Secretariat in a WTO official language for circulation to
WTO Members and for submission to  the Committee on Import Licensing.
71. Those members of the Working Party also stated that China should notify the WTO
Secretariat of all licensing and quota requirements remaining in effect after the date of entry into forceof this Protocol, listed separately by HS tariff line, with the quantities covered by the restriction, thejustification for maintaining the restriction or its scheduled date of termination.  Those members alsorequested that China submit the notification of its import licensing procedures to the Committee onImport Licensing, as required by Article 5 of  the Agreement on Import Licensing Procedures.
Moreover, those members of the Working Party stated that China should report annually to theCommittee on Import Licensing, on its automatic import licensing procedures noting the reasons for
the import licensing requirement and justifying the need for their continuation.  That notificationWT/ACC/SPEC/CHN/1/Rev.2
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would also contain the information listed in Article 3 of the Agreement on Import Licensing
Procedures.  In addition, those members stated that China should ensure that import licences remainedvalid for at least six months, except in exceptional circumstances.  In such cases, China shouldpromptly notify the Committee on Import Licensing of the exceptional circumstances requiring the
shorter period of licence validity.  Those members also stated that foreign individuals and enterprises
and foreign-funded enterprises should be accorded treatment no less favourable than that accorded toother individuals and enterprises in respect of the distribution of import licences and quotas.]
72. In response, the representative of China provided additional information on the system of
import licensing operating in China. He noted that the import licensing system was administeredwithout discrimination among countries or regi ons. In 1984, the State Council had promulgated the
"Interim Regulations on Licensing System for Import Commodities", and MOFTEC and the GeneralCustoms Administration had issued "Detailed Rules for the Implementation of the InterimRegulations on Licensing System for Import Commodities". The Interim Regulations were uniformly
implemented throughout China. The import licensing system ensured that limited foreign exchange
resources were used for imports most needed by national economic development and that necessaryassistance could be provided to the domestic industries. In 1999, of the total import value ofUS$ 165.7 billion, imports subject to licensing represented 8.45%, covering US$ 14 billion.  He notedthat MOFTEC determined which products should be subject to import licensing according to therelevant provisions of the "Foreign Trade Law".
73. He stated that in 1993, China had applied import restrictions to 53 product categories.  By
1999, the number had been reduced to 35.  Products covered were (1) Processed oil;  (2) Wool;
(3) Polyester fibre;  (4) Acrylic fibres;  (5) Polyester fillet;  (6) Natural rubber;  (7) Vehicles tyres;
(8) Sodium cyanide;  (9) Sugar;  (10) Fertilizer;  (11) Tobacco and its products;  (12) Acetate tow;(13) Cotton;  (14) Motor vehicles and their key parts;  (15) Motorcycles and their engines andchassises; (16) Colour television sets and TV kinescope;  (17) Radios, tape recorders and their mainparts;  (18) Refrigerators and their compressor;  (19) Washing machines;  (20) Recording equipmentand its key parts;  (21) Cameras and their bodies (without lenses);  (22) Watches;  (23) Airconditioners and their compressor;  (24) Audio and video tape duplication equipment;  (25) Cranelorries and their chassises;  (26) Electronic microscopes;  (27) Open-end spinning machines;(28) Electronic colour scanners;  (29) Grain;  (30) Vegetable oil;  (31) Wine;  (32) Colour sensitive
material;  (33) Chemical under supervision and control that were used for chemical weapon;
(34) Chemicals used to produce narcotics;  and (35) Laser disc production facilities.  He also notedthat in 1999, there were 13 commodity categories which were imported by the foreign tradecompanies designated by MOFTEC. These categories were as follows:  (1) Processed oilWT/ACC/SPEC/CHN/1/Rev.2
Page 38
(2) Fertilizer (3) Tobacco (4) Vegetable oil (5) Grain (6) Natural rubber (7) Wool (8) Acrylic fibers
(9) Sugar (10) Cotton (11) Crude oil (12) Steel and (13) Plywood.
74. Concerning the grant and administration of import licences, the representative of China noted
that the examination and approval of the licence t ook two to three working days. Applications for
import licences could be submitted to the Quota and License Administrative Bureau of MOFTEC, or
Special Commissioner Offices in 16 provinces, or  Commissions on Foreign Economic Relations and
Trade of various provinces, autonomous regions, and municipalities directly under the centralgovernment and those with independent budgetary st atus. Licensing agencies authorized by MOFTEC
could issue import licences on the basis of import documents submitted by the applicants,  approvedby the competent departments. A licence could not be bought, sold or transferred, and was valid forone year.  Import licences could be extended once.
[xx.   Working Party Members expressed concern that China’s Provisional Procedures for the
Administration of Automatic Registration for the Import of Special Commodities (13 August 1994),
in particular the criteria for approval of registration, would act as a restraint on imports.  The
representative of China emphasized that the purpose of the registration system was only to gatherstatistical information.  He confirmed that China would bring its automatic licensing system intoconformity with Article 2 of the Agreement on Import Licensing upon entry into force of the Protocoland would eliminate criterion,  such as the need to establish demand and foreign exchangeavailability, as conditions for approval.  The Working Party took note of this commitment.
xx.  Working Party Members noted that enterprises and individuals seeking to import  products
subject to tariff quota administration requirements had to go through extensive procedures to receive a
quota allocation and that the quota certificate would indicate whether the subject good was to be
imported through a state trading enterprise or a non- state trading enterprise and would be valid for a
certain period of time.  Moreover, the entity importing the good would need trading rights.  In thelight of these multiple requirements, a quota allocation certificate should satisfy any import licensingrequirement that might apply.
xx.    China confirmed that it would not require a separate import license approval for goods subject
to a tariff-quota allocation requirement but woul d provide any necessary import license in the
procedure that granted a quota allocation.  If quota is reallocated pursuant to China’s tariff-quotaadministration commitments, the provisions relating to licensing of such reallocated quantities shall
apply.  The Working Party took note of this commitment.
xx. China confirmed that the list of all entities responsible for the authorization or approval of
imports and exports would be updated and republished in the official journal within one month of anyWT/ACC/SPEC/CHN/1/Rev.2
Page 39
change thereto.  The Working Party took note of this commitment.
 xx.  China confirmed that it would implement the provisions of the Agreement on Import
Licensing with Procedures upon entry into force of th is Protocol without recourse to the provisions of
footnote 5 of that  Agreement.  The Working Party took note of this commitment.]
9. Customs Valuation
[xx. Some members expressed concern regarding the methods used to determine duty-paying
value of goods, in particular regarding the practice of using minimum or reference prices for certaingoods.  Use of such prices would be inconsistent with the WTO Agreement on Implementation ofArticle VII.  Other WTO-consistent means were available to Members doubting the veracity ofdeclared transaction values.]
[xx. The China side believes that there will not be a situation where the "normal transaction value"
cannot be "ascertained" since the WTO Customs Valuation Agreement provides several methods forvaluation.]
75. The representative of China recalled that the overwhelming majority of China's customs
duties were ad valorem  duties.  The customs or duty-paying value of imported goods was assessed
according to the C.I.F. price based on the normal transaction value. If the transaction value ofimported goods could not be [determined] [ascertained], the duty-paying value was determined basedon the transaction value or the computed value of identical or similar goods.  He also noted that theCustoms Law provided for appeal procedures. In the event of a dispute over calculation of duty paidor payable with the Customs, the dissatisfied importer could apply to the Customs for areconsideration of the case. If the appeal was rejected the importer could sue at the People's Court.
[move to section on Tariff rate Quotas/Exemptions ][76. He further noted that in accordance with
international practices and provisions of China’s Customs Law, import duty reductions or exemptionswere available for the following goods:
(a) A consignment of goods, on which customs duties were estimated below RMB
10 yuan;
(b) advertising articles and samples, which were of no commercial value;WT/ACC/SPEC/CHN/1/Rev.2
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(c) goods and materials, which were rendered gratis by international organizations or
foreign governments;
(d) fuels, stores, beverages and provisions for use en route loaded by any means of
transport, which was in transit across the border;
(e) exported goods being replaced;
(f) goods damaged prior to Customs release;(g) goods covered by international treaties providing for tariff reductions and exemptions
which China had entered into or acceded to;
(h) goods temporarily imported;(i) goods imported under the processing program;(j) goods imported at zero cost for offset purpose;(k) domestic- or foreign-funded projects encouraged by the country;(l) articles for scientific research, education and the disabled.
He noted that goods so imported were required to  be put under the Customs supervision and control.
The Customs duty was required to be recovered if such goods were sold, transferred or used for otherpurposes during the time period of supervision and control. ]
[xx. The representative of China  confirmed that, from the entry into force of this Protocol, China
would apply fully the WTO provisions concerning customs valuation and would not invoke theprovisions in Article 20 of the Agreement on Impl ementation of Article VII of the GATT 1994.  In
addition, China would apply the provisions on the Treatment of Interest Charges in Customs Value ofImported Goods and for the Valuation of Carrier Media Bearing Software for Data Processing
Equipment. In accordance with these latter provisions, only the cost of the carrier medium itself
would be accounted for in the customs value.   The Working Party took note of these commitments.]
10. Other customs formalities
[xx. China joined the International Convention on the Simplification and Harmonisation of
Customs System in 1988 and signed the Protocol on the Amendment the International Convention onthe Simplification and Harmonisation of Customs System. The Customs authorities of China haveWT/ACC/SPEC/CHN/1/Rev.2
Page 41
only adopted such customs formalities as declaration, examination, levying of duties and release
which are consistent with international practices.]
11. Preshipment inspection
[xx. Currently, there are trade and commerce inspection agencies (including joint venture
agencies) engaged in preshipment inspection. China commits itself to comply with the Agreement on
Preshipment Inspection of the WTO, and will regulate the existing trade and commerce inspectionagencies and permit the qualified agencies to be engaged in preshipment inspection in line with thegovernment mandate or the terms and conditions of commercial contracts.]
[xx. Some members of the Working Party requested information on whether China used the
services of a private preshipment inspection entity.  The representative of China confirmed that Chinadid not use private preshipment inspection entities and stated that China would ensure than any laws
and regulations relating to preshipment inspection by private entities now or in future would beconsistent with relevant WTO Agreements, in particular, the Agreements on Preshipment Inspection
and Customs Valuation.  Moreover, any fees charged in connection with such preshipment inspection
would be commensurate with the service provided.  The Working Party took note of thesecommitments.]
12. Anti-dumping, countervailing duties
77. The representative of China noted that Chin a had recently promulgated Anti-dumping and
Countervailing Regulations.  On safeguard measures, he noted that at present, China was goingthrough the legislative procedure of drafting legislation regarding safeguard measures in accordancewith the Article 29 of the Foreign Trade Law and the WTO Agreement on Safeguards.
[xx.  The representative of China confirmed that , notwithstanding Article 18 of the Agreement on
Implementation of Article VI of GATT 1994 (“Antidumping Agreement”),
(a) China shall apply the provisions of the Antidumping Agreement to:
(1)  proceedings under Article 9.3, including the calculation of margins of dumping, in
connection with antidumping measures adopted before the entry into force of China’sProtocol (“existing measures”) pursuant to requests made on or after the entry into force ofthis Protocol;WT/ACC/SPEC/CHN/1/Rev.2
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(2) reviews of existing measures initiated under Articles 9.5, 11.2, and 11.3 pursuant to
requests made on or after the entry into force of this Protocol.  Any review of an existingmeasure under Article 11.3 shall be initiated no later than five years from the date of itsimposition.
(b) China shall also provide the type of judicial review described in Article 13 of the
Antidumping Agreement with regard to proceeding s under Article 9.3 and reviews under Articles 9.5,
11.2, and 11.3.
The Working Party took note of these commitments.]78. Several members of the Working Party noted that China was continuing the process of
transition towards a full market economy.  Those members noted that under those circumstances, inthe case of imports of Chinese origin into a WTO Member, special difficulties could exist indetermining price comparability in the context of anti-dumping investigations and countervailing dutyinvestigations. Those members stated that in such cases, the importing WTO Member may find it
necessary to take into account the possibility that a strict comparison with domestic prices in China
may not always be appropriate.
[xx. The Representative of China expressed concern with regard to past measures taken by certain
Members which have treated China as a non-market economy and imposed antidumping duties onChinese companies without identifying or publishing the criteria used, without giving Chinesecompanies sufficient opportunity to present evidence and defend their interests in a fair manner, andwithout explaining the rationale underlying their determinations as well as using unreasonable methodof price comparison in the determinations. The Representative of China thereupon stated the
following positions with regard to the implementation of paragraph 1(b) of Article 20 of the Protocol
on Price Comparability in determining Dumping and Subsidization:
(a) When determining price comparability in a particular case in a manner not based on a strict
comparison with domestic prices or costs in China,  the importing WTO Member should ensure that it
has established and published rules in advance on (1) the criteria that it uses for determining whethermarket economy conditions prevail in the industry producing the like product and (2) themethodology that it uses in determining the price comparability.  The importing WTO Member shouldselect the prices or costs of the like product produced in a market economy which has a most
comparable level of development of that industry with China.WT/ACC/SPEC/CHN/1/Rev.2
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(b) The importing WTO Member should give notice of the information which it requires and
provide Chinese producers and exporters ample opportunity to present evidence in writing in aparticular case;
(c) The importing WTO Members should provide Chinese producers and exporters a full
opportunity for the defense of their interests in a particular case;
(d) The importing WTO Member should provide a sufficiently detailed reasoning of its
determinations in a particular case;  and
(e) The WTO Anti-dumping Agreement shall fully apply in proceedings involving imports of
Chinese origin except as otherwise provided in the Draft Protocol.
The Working Party took note of China’s positions.
xx. The Representative of China stated that in respect of Section 20(4) of the Protocol which
provides: "Once China has established under the national law of the importing WTO Member, that itis a market economy, the provisions of subparagraph (1) shall be terminated provided that theimporting Member's national law contain market economy criteria as of the date of entry into force ofChina's Protocol…..", China could accept this provision only under the condition that it will beapplied by Members in good faith and that Members would interpret the criteria of market economies
in a way consistent with the principles reflected in  the WTO agreement and  in international law so as
to prevent any arbitrary discrimination and other abuse. The acceptance of this mechanism is alsomade on the condition that an earlier termination de facto or de jure, of this mechanism be effected as
soon as possible. The Working Party took note of China’s positions.]
[xx. The representative of China expressed concern with regard to the implementation of
Article 20 on Price Comparability in determining Dumping and Subsidization, and stated thefollowing:
1. The provisions of the Anti-Dumping Agreement and the SCM Agreement shall apply
in proceedings involving imports of Chinese origin except as otherwise provided for
in the Protocol.WT/ACC/SPEC/CHN/1/Rev.2
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2. The provisions of the Dispute Settlement Understanding shall apply to consultations
and the settlement of disputes arising under Article 20 of the Protocol.
3. For the effective application of the above-mentioned subparagraph (1), the importing
WTO Member shall define clear and reasonable criteria of the market economy and
publish them before they are applied.
4. When invoking the methodology pursuant to subparagraph (1)(b) in the Protocol on
Price Comparability in determining Dumping and Subsidization, the importing WTOMember should select the prices or costs of the like product produced in a marketeconomy which has an equivalent level of economic development with that of China.The process of selection should be transparent and provide adequate opportunity forthe Chinese producers or exporters to make comments on it or makecounter-proposals for the purpose of fair treatment.
The Working Party took note of China's position.]
[Competent Authorities for Anti-dumping and Countervailing Duty Investigations and
Their Corresponding Responsibilities
xx. Pursuant to the stipulations of "Regulation on Anti-dumping and Anti-subsidy of the People's
Republic of China", there are four Chinese government bodies responsible for anti-dumping and
countervailing duty investigations. Their responsibilities are as follows:
A. Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
xx. Receiving anti-dumping and countervailing petitions; Conducting investigation on dumping
and dumping margin and issuing relevant preliminary determination decisions and notices;
Negotiating with foreign interested parties on "Pri ce Undertaking" if necessary; Providing proposal on
imposition of definitive anti-dumping or countervailing duties or proposals on duty refund, etc. Thereis an Anti-dumping Division established under th e Department of Treaties and Law of MOFTEC,
with responsibility to handle anti-dumping and countervailing investigations on alleged imports.
B. State Economics and Trade Commission (SETC)
xx. Responsible for the investigation of injury caused by the dumped or subsidised imports to the
domestic industry, the extent of such injury and make injury findings.
xx. There is a non-permanent decision and policy making body in SETC which named as the
"Injury Investigation and Determination Committee” (IIDC) which is composed of six commissionersWT/ACC/SPEC/CHN/1/Rev.2
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from the relevant departments of SETC. There is a permanent executive office in charge of the
investigation of injury to the industry and submitting its findings to the IIDC for approval.
C. General Customs Administration (CGA)
xx. Coordinating anti-dumping investigations with MOFTEC; Enforcing anti-dumping measures
such as collecting cash deposits, dumping or countervailing duties and monitoring its implementation.
D. Tariff Commission of State Council(TCSC)
xx. Making final decisions on whether or not to levy the dumping or countervailing duties and
refund duties based on the suggestions by MOFTEC with regard to imposing anti-dumping orcountervailing duties and reimburse excess amount of duties respectively.]
13. Safeguards
[The status of the draft legislation on safeguards
xx. Upon the accession to WTO, China will implement Regulation on Safeguard by which the
future Safeguard measures will be regulated. The drafting work of this regulation is still on the way. Itcan be expected that the contents of this new regulation will be fully consistent with Safeguardagreement of WTO.]
B. EXPORT REGULATIONS
1. Customs tariffs, fees and charges for services rendered, application of internal taxes to
exports
79. Some members of the Working Party noted that certain taxes and charges appeared to be
applied exclusively to exports.  Those members of the Working Party stated that those taxes and
charges should be eliminated unless applied in conformity with GATT Article VIII[.   In addition, allgoods subject to export duties should be listed]  in Annex 6 to China's Protocol of Accession [and
such duties applied in conformity with WTO requirements].
[xx. Some Members raised concerns over taxes and charges applied exclusively to exports.  In
their view, such taxes and charges should be eliminated unless applied in conformity withGATT Article VIII or listed in an Annex to the Protocol.]
80. The representative of China noted that the majority of products were free of export duty,
although 36 items, including tungsten ore, ferrosi licon and some aluminum products were subject toWT/ACC/SPEC/CHN/1/Rev.2
Page 46
export duties. He noted that the duty-paying value of exported goods was the F.O.B. price of the
goods deducting the export tariff.
2. Export licensing
81. The representative of China noted that China's export licencing system was administered in
accordance with the "Interim Procedures for the Export Licencing System". In 1992, there were
143 categories of products subject to export licencing which accounted for 48.3% of the total value ofthe China's exports, but by 1999, the total number of products subject to export licencing had beenreduced to 58 categories and 73 items with an export value of US$ 18.5 billion, taking up only 9.5%of total exports. Export licences for these products  were issued according to the stipulated commodity
scope respectively by the Administrative Bureau of Quota and License (ABQL), the SpecialCommissioner Offices (SCO) located in 16 provinces and the Commissions of Foreign EconomicRelations and Trade (COFTEC) of various province s, autonomous regions, municipalities directly
under the central government and those with independent budgetary status.  The main criteria used in
determining whether a products was subject to expo rt licencing were set down in the Foreign Trade
Law:  (1) to maintain national security or public interests;  (2) shortage of supply in the domesticmarket or for the effective protection of exhaustible domestic resources;  (3) limited market capacityof importing countries or regions;  or (4) obligations stipulated by international treaties.
82. He further noted that an application for an export licence had to be submitted to the licence
issuing institutions authorized by MOFTEC, together with documents approving the export by thecompetent departments, and other relevant materials (such as the Export Qualification Certificate forthe enterprises, export contract and so on). The procedures were the same for all export destinations.
A decision on the request for an export licence normally took three working days. Licences were valid
for six months and could be extended once.  FIEs engaged in exporting products not produced bythemselves were required to obtain export licences if the products to be exported were subject to thelicensing requirement.  If the products were not subject to licensing, customs clearance would begiven after examination by the Customs on the basis of export contracts and other relevant documents.
83. Some members of the Working Party noted that certain export licensing requirements
appeared to operate as restrictive non-tariff measures.  In response, the representative of Chinaindicated that the number of products subject to export licensing was being reduced and that Chinawould abide by its WTO obligations concerning export formalities and licensing.  In response to this
statement, members of the Working Party asked that China undertake such a commitment.
[xx. China applies its export license system to certain agricultural products, resource products and
chemicals, the underlying purposes of which are to ensure the reasonable and orderly exploitation ofWT/ACC/SPEC/CHN/1/Rev.2
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mineral resources, protect the biological environment and implement its obligations under
international conventions as well as for statistical purpose.]
[xx. Some members of the Working Party noted that China’s export licensing system was conflicting
with WTO rules, even in those cases where licenses we re withheld due to a shortage of supply in the
domestic market. China confirmed that the number of products subject to export licensing would be
gradually and progressively reduced, in such a manner that by 1.1.200.., such licensing requirementswould no longer apply on any products, unless justified by WTO provisions.]
 [xx.  Some Members expressed concern that China’s export licensing rules had been used to
restrict exports in a manner inconsistent with WTO requirements.  They noted that Article XI ofGATT 1994 applied to both import and export restrictions and the same need for certainty,predictability,  transparency and minimizing the burden on trade applied with respect to the grant ofexport licenses as pertained to import licenses.
xx.  The representative of China stated that upon accession, China would apply the same
procedures to the grant of export licenses as it applied to automatic and non-automatic import licenses
depending on the WTO justification for such export license.  The Working Party took note of thiscommitment]
3. Export restrictions
84. The representative of China noted that China prohibited export of narcotic drugs, poisons,
materials containing State secrets, precious and rare animals and plants.
4. Export subsidies
85. Some members of the Working Party noted concerns about the extent of China's use of
prohibited export subsidies.  In response, the representative of China stated that all direct export
subsidies on industrial and agricultural goods had been eliminated.  Some members of the WorkingParty stated that China should enter a commitment to  eliminate all export subsidies by a date to be
agreed.  Those  members of the Working Party stated that China should also provide a notificationpursuant to Article 25 of the WTO Agreement on Subsidies and Countervailing Measures ("SCMAgreement") detailing all subsidies within the m eaning of Article 3 of that Agreement.  [Those
members also noted that the existing practice of granting preferential treatment to imported products
and to joint venture production enterprises in China's special economic areas conditional upon exportor re-export of products manufactured or subject to additional processing in such areas, appeared toWT/ACC/SPEC/CHN/1/Rev.2
Page 48
meet the definition of prohibited subsidies pursuant to Article 3 of the Agreement on Subsidies and
Countervailing Measures.  Those members also stated that China should phase out all subsidies fallingwithin the scope of Article 3 of the SCM Agreement.  Those members noted that China had provideda list of subsidies and a timetable for their elim ination in Annex 5 of the Protocol of Accession of
China to the WTO.]
[xx. China has confirmed that all of its industrial subsidies have been notified to the Working
Party.]
[xx. China confirmed that it would eliminate all export subsidies by accession, including fiscal or
other financial measures referred to in Article 1 contingent upon export performance.  To this end,China would , by accession, cease to maintain all pre-existing export subsidy programmes and, uponaccession, make no further payments or disbursements, nor forego revenue or confer any otherbenefit, under such programmes. This commitment covers subsidies granted at all levels ofgovernment, including tax exemptions, reductions, deferrals or forgiveness to enterprises, which are
contingent, in law or in fact, upon an obligation to export.  The Working Party took note of this
commitment.
xx. On the same basis, China would eliminate, upon accession, all subsidies contingent upon the
use of domestic over imported goods.  The Working Party took note of this commitment.]
C. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS
1. Taxes and Charges Levied on Imports and Exports
xx. Members expressed particular concern about application of the value-added tax (VAT) and
additional charges levied by sub-central governments on imports.  In some cases,  producers of
domestic goods either did not pay the VAT or failed to pass the charge along to customers.  The loss
of revenue from this failure to pass along the VAT often put such firms into an unprofitable positionand loans or other measures would then be prov ided to address the situation. Non-discriminatory
application of the VAT and other internal taxes was deemed essential.  Moreover, central-governmentdiscipline over the practices of sub-central authorities to ensure their conformity with the provisionsof this Protocol and the WTO was essential.
xx. The representative of China confirmed that from the entry into force of this Protocol China
would ensure that its laws and regulations relating to all fees, charges or taxes levied on such rightswould be in full conformity with its WTO obligations, including Articles VIII, XI: I and III:2 and 4 ofWT/ACC/SPEC/CHN/1/Rev.2
Page 49
the GATT 1994 and that it would also implement such laws and regulations in full conformity with
these obligations. The Working Party took note of this commitment.]
2. Industrial policy, including subsidies
86. Some members of the Working Party noted that the situation of differential treatment of
minority autonomous regions and other areas of economic poverty within China was uncertain and
could raise problems in relation to the requirements of the Agreement on Subsidies andCountervailing Measures.  In response, the representative of China stated that the central governmentwas required by the Constitution to provide assistance to those disadvantaged areas.  Some membersof the Working Party stated that China should also provide a notification detailing all subsidies withinthe meaning of Article 1 of the SCM Agreement.
[xx. Members expressed concern about certain provisions  under Article 27 of the SCM
Agreement with regard to certain actionable and countervailable subsidies.  It was considered that[some of] the exemptions provided for under Article 27 would not be appropriate, given the special
situation which prevails in China. Members pointed to the many manufacturers that are still either
owned or controlled by the Government, and that  benefit from state support notwithstanding the
substantial reforms that are underway.  Furthermore, it was difficult to ascertain the conditions underwhich publicly-owned banks provide finance, as well as the extent to which state-owned enterprisesprovide goods and services on terms not normally available in a market economy. As a result of theseuncertain factors, including the conditions of pricing of certain important inputs and the ability toprice all such inputs and goods or services transparently and according to market conditions, thepotential level of actionable subsidies in China could be significant across sectors, and members
expressed concern over the possible trade distorting and adverse effects this might have. Therefore,
members concluded that actionable and countervailable subsidies granted by China should be subjectto available remedies under the SCM Agreement upon accession.
xx. In particular, members were concerned that China would not invoke the provisions of Articles
27.8 and 27.9, since this would severly restrict the scope for dispute settlement action against adverseeffects caused by actionable subsidies granted by China, notably by removing any remedy forsubsidies which displace or impede the exports of another Member in a third country market. TheChinese delegate confirmed that the above Articles would not be invoked.
xx. Members were concerned that, given the price sensitivity of a number of commodities
exported by China and the ability of a relatively small volume of imports of such products to depress
prices in the importing country, China should not benefit from the higher de-minimis thresholds forWT/ACC/SPEC/CHN/1/Rev.2
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countervailing duty investigations in Article 27.10.  The Chinese delegate agreed that China would
not seek to invoke the application of Article 27.10 in such investigations.
xx. Members, referring to the special situation with regard to actionable subsidies in China
described above, were concerned that China shou ld not invoke the provisions of Article 27.11 in
countervailing duty investigations.  China was not an Annex VII country, and in addition, a period of
time would be required after accession before members could be satisfied that China had ceased togrant export subsidies in all their forms (including those granted by sub-national levels of governmentand those granted on an ad-hoc basis).  The Chinese delegate confirmed that China would not makeany notifications under Article 27.11.
xx. Members confirmed their support for privatization in China but some considered that the
types of subsidy described in Article 27.13 had, in the context of the special situation with regard toactionable subsidies prevailing in China, potential to cause serious adverse effects to other members.It was therefore considered that these subsidies should not be exempted from Part III disciplines, even
if granted within and directly linked to a privatization programme. These Chinese delegate confirmed
that China would not make any notifications under Article 27.13.
xx. Members were concerned that the scope of subsidization in China should be adequately
defined.  In this regard, it was concluded that all activities of state-owned enterprises (includingbanks) which involve a financial contribution (e.g. provision of goods and services, purchases ofgoods, foregiveness of debt, provision of loans and/or guarantees) would fall within the scope ofArticle 1.1(a) of the SCM Agreement, since such enterprises are part of or controlled by the
Government.  The Chinese delegate confirmed this conclusion.
xx. Members took note of China’s updated subsidy notification of 31 May 2000, which provided
information concerning subsidies granted in 1998.  Members did not, however,  consider that thisnotification covered all specific subsidies granted within China’s territory, and it did not contain theinformation required by Article 25 of the SCM Agreement and Document G/SCM/6.
xx. Members noted that China had granted, on a discretionary basis, ad-hoc investment subsidies,
which included free or preferential provision of goods and services and tax benefits (e.g. taxexemptions, deferral, reductions, foregiveness). Such subsidies, whether granted at national or sub-national level, should be notified.
xx. Members also noted that the notification did not cover the main subsidies granted through
state-owned banks, some of which were only available to exporting firms, nor did it capture all sub-
national or tax subsidies.  It also did not cover all subsidies granted in Special Economic Zones, inWT/ACC/SPEC/CHN/1/Rev.2
Page 51
particular those contingent upon export obligations.  There was also no mention of subsidies to
compensate for currency changes.  Other specific subsidies were not reported.
xx. The Chinese delegate agreed that the notification was inadequate; China would make the
necessary improvements to the notification by the time of accession.]
[xx. In the context of discussions on the government’s Industrial Policy for the Automotive Sector,
the representative of China confirmed that this Policy will be amended to ensure compatibility withWTO rules and principles.
xx. The representative added that amendments would be made to ensure that all measures
applicable to motor vehicle producers restricting the categories, types or models of vehicle permittedfor production will gradually be lifted. Such measures will be completely removed two years afteraccession, thus ensuring that motor vehicle producers will be free to choose the categories, types andmodels they produce. However, it is understood that category authorisations by the government maycontinue to distinguish between trucks and buses, light commercial vehicles, and passenger cars
(including multi-purpose vehicles and sport utility vehicles).
xx. China also agreed to raise the limit within which investments in motor vehicle manufacturing
can be approved at provincial government level only, from the current level of $30 million, to $60million one year after accession, $90 million 2 years after accession, and $150 million 4 years afteraccession.
xx. With respect to the manufacture of motor ve hicle engines, China agreed to remove the 50%
foreign equity limit for joint ventures upon accession.]
3. Technical Barriers to Trade
[87. In response to requests for information from members of the Working Party, the
representative of China confirmed that internal m echanisms existed in China (e.g. policy guidelines,
inter-agency committees) to inform and consult with, on an ongoing basis, government agencies andministries (at national and sub-national levels), and private sector interests, on the rights andobligations under the GATT 1994 and the TBT Agreement 1994.  In response to further requests forinformation concerning the opportunity for public consultation and comment on proposed standardsand technical regulations, the representative of China noted that China had already established such amechanism.  Currently, China provided a 45 day period to allow for comments on proposed standards,technical regulations, and conformity assessment procedures.  If within that 45 day period a requestWT/ACC/SPEC/CHN/1/Rev.2
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for extension of the time-limit was received from a WTO Member, the period was extended to
60 days.  In addition, provision was also made a further extension of the time-limit beyond 60 days ifrequested by another Party to the TBT Agreement.]
88. Members of the Working Party noted that a list of products subject to statutory inspection
upon importation into China, together with the applicable technical regulations and standards, the
objectives which they fulfilled and their necessity to fulfil those objectives was contained in Annex 7of China's Protocol of Accession.
89. Some members of the Working Party stated that pursuant to the requirements of the TBT
Agreement, China's standards, technical regulation s and conformity assessment procedures should be
based, to the maximum extent possible, on relevant international standards, where they existed exceptwhere use of different standards, technical regulations and conformity assessment procedures could bejustified to the TBT Committee, pursuant to Article 2.4 of the TBT Agreement, as necessary to fulfillegitimate objectives as defined in Article 2.2 of the TBT Agreement.  Those members also stated that
any such standards, technical regulations and conformity assessment procedures should be
administered so as not to create unnecessary barriers to trade.
90. [Those members also stated that Government inspection agencies should not apply
compulsory standards to imported products which related solely to fulfilling unspecified criteria ofquality, quantity or weight, nor require statutory in spection of products solely because of the volume
of such imports.]  Those members stated that China should publish complete commodity inspectioncriteria, whether formal or informal, in its official journal.  In this connection those members notedthat pursuant to Article 15.2 of the TBT Agreement, China should provide a notification Statement on
Implementation and Administration of the Agreement consistent with the relevant Decisions adopted
by the Committee on Technical Barriers to Trade of the Tokyo Round Agreement on TechnicalBarriers to Trade (TBT/16/Rev.7).
91. [Some members stated that Government-mandated inspection agencies should not inspect
imported products to assess compliance with the terms of commercial contracts.]  Those membersnoted that China could inspect imported products or require conformity assessment when third-partytesting or certification was not able to fulfil the legitimate objectives listed in the TBT Agreement.
[They noted that once Mutual Recognition Agreements were concluded between China and aparticular  WTO Member, China should not require inspection nor retesting in respect of any product
exported from that Member which had been tested or certified to meet relevant international standards
by a widely recognized conformity assessment body.]  Concerning foreign and joint-ventureWT/ACC/SPEC/CHN/1/Rev.2
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commodity inspection agencies, members of the Work ing Party stated that China should not maintain
requirements which had the effect of acting as barriers to their operation.
[xx. The representative of China stated that ex cept those statutory inspection listed in annex 7a
and 7b, the Chinese Government, in accordance with legitimate objectives stipulated by TBT
Agreement for protection of human, animal and plant health, national security, environmental
protection, anti-deceptive behaviour and guaranteeing quality of exported goods, carries outadministration in terms of technical regulations, standards and conformity assessment, to a series ofsubjects such as medicine (including pesticide, vet medicine and organic medicine), air plane, vesselsand seaworthy installation, nuclear safety facili ties, measuring instrument, pressuring vessels,
pressuring tunnel and special equipment, fire extinguishing equipment, safety of telecom, wirelessequipment and network, mining safety facilities, dangerous chemicals.]
[92. Members of the Working Party also stated that in order to be fully consistent with the
requirements of the TBT Agreement and the GATT 1994, China should eliminate the two-tiered
system used for imports and domestic products, and otherwise consolidate the standards, technical
regulations and conformity assessment procedures (e.g. testing, inspection, certification, qualitysystem registration, laboratory accreditation) to ensure that the same measures applied to domesticproduction were applied to imports and in the same way.]
93. The representative of China stated that pursuant to the provisions of the Agreement on TBT,
China applied compulsory inspection and quarantine [to commodities as well as to animals, plants andtheir processed products] as required in the interests of national security, life and health of humanbeings, animals and plants, environmental protection, as well as [to prevent] [prevention of] deceptive
activities[, as well as to animals, plants and their processed products].  He also noted that most of
China's standards were [the same as] [equal] or eq uivalent to the international standards, and that
China implemented the same standards, technical regulations and accreditation procedures ofinspection and quarantine to both imported and domestic goods. There was no discrimination against
the imported goods, animals and plants and their processed products.
94. The representative of China noted that China had set up a TBT enquiry point [of inspection
and quarantine] which had been notified to the WTO's TBT Committee.  Laws, regulations, rules,standards and procedures on entry-exit inspection and quarantine had been published in publicationssuch as the "MOFTEC Gazette".  Information could also be gathered from the [State Administration
of Entry-Exit Inspection and Quarantine,] [MOFTEC] or from China's TBT enquiry point.WT/ACC/SPEC/CHN/1/Rev.2
Page 54
[xx. For the information of WTO Members, a compilation of technical regulations and relevant
standards in force in China was provided in Anne x 7 to China’s Protocol of Accession.  The Members
of the Working Party agreed that Annex 7 does not prejudge the legal status, nature or effects of thenotified standards and technical regulations under the WTO Agreement.]
95. Some members of the Working Party expressed concerns about the complexity and lack of
consistency of China's standards and inspection regime.  In addition, members of the Working Partynoted that imported and domestic products were not inspected by the same governmental entities andthat this situation could result in less favourable treatment for imports.  Some members also criticized
mandatory government inspection requirements for compliance with terms of commercial contracts.
In response to those concerns, the representative of China stated that [national treatment for importsdepends on whether same standards, technical regulations and conformity assessment proceduresapplied to domestic products are also applied to imports. China shall apply full national treatmentwith respect to domestic products and import products.  And] China intended to comply fully with its
WTO obligations concerning its standards, technical regulations and inspection regime.
[Notwithstanding the fact that many of the features of China's economy were at present those of adeveloping country economy, China was prepared to undertake a commitment not to apply theprovisions in Article 12 of the TBT Agreement.]
[xx. The representative of China also indicated th at China would ensure the transparency of its
standard and certification systems by publishing all relevant laws and regulations, including theregulations concerning domestic products, which are not currently published.
xx. Some members of the Working Party raised specific concerns regarding the standards and
certification systems in China, including such matters as (a) registration of initial imports of chemical
products, (b) procedures for the Chinese Commodity Inspection Bureau (CCIB) safety mark and the“Great Wall” mark, (c) standards and certification for automobiles, and (d) safety and quality licensesystem for boilers and pressure vessels. In response to those concerns, the representative of Chinastated that China intended to implement the following measures. These measures would beimplemented prior to China’s accession to the WTO, unless otherwise indicated.
(a) Registration of Initial Imports of Chemical Products
- Enact and implement, within two years after its accession to the WTO, a new law and
relevant regulations regarding assessment and control of chemicals for the protection of the
environment, in which complete national treatment and full consistency with international
practices will be ensured.WT/ACC/SPEC/CHN/1/Rev.2
Page 55
- Ensure that chemicals listed in the “inventory chemicals” annexed to the above new law and
its regulations will be exempted from a registration obligation and that a unified assessmentprocedure will be established for domestic a nd imported products under the new law and its
regulations.
(b) CCIB Safety Mark and the “Great Wall” Mark
- Promulgate implementation regulations on the harmonization of the CCIB safety mark and
the “Great Wall” mark, by introducing into these regulations the principle of “a singleapplication, a single inspection and a single fee payment” for obtaining both marks at thesame time. This principle will be applied before the promulgation of the regulations.
- Accept testing reports for products subject to the CB Scheme to which China is a party, and
simplify the procedures for obtaining the CCIB safety mark and/or the “Great Wall” mark.
- Shorten the time period needed for the importers to obtain both marks regarding the same
products, to around 3 months in principle.
(c) Standards and Certification for Automobiles
- Unify its laws, regulations and standards applied to domestic and imported automobiles.
- Formulate, publish and implement laws and regulations, standards and implementation
regulations to establish a transparent system under which all the laws and regulations will beapplied so as to accord imported products treatment no less favourable than that accorded tolike products of national origin.
(d) Safety and Quality License System for Boilers and Pressure Vessels
- Accord imported products treatment no less fa vourable than that accorded to products of
national origin, including fees imposed for conformity assessment and the effective period
of factory certification.
- Adopt international standards to the greatest extent possible, and exempt imported products
from inspection where like domestic products are not subject to such inspection.
Simplify the inspection methods and procedures for factories and products certified by inspection
agencies having bilateral mutual recognition arrangement.]WT/ACC/SPEC/CHN/1/Rev.2
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96. Further to China's application of the provisions of the GATT 1994 and the TBT
Agreement, China confirmed that:
(a)  internal mechanisms exist (e.g. policy gu idelines, inter-agency committees) to inform
and consult with, on an ongoing basis, government agencies and ministries (at national
and sub-national levels), and private sector interests, of the rights and obligations under
the GATT 1994 and the TBT Agreement 1994;  and
(b)  the recommended time to allow for co mments on proposed standards, technical
regulations, and conformity assessment procedures of sixty days (or forty-five days if nocomments or request for extension of the time -limit have been received from other WTO
Members within that time) is observed, and provision is made for giving dueconsideration to a time-limit beyond sixty days if requested by another Party to the TBTAgreement 1994.
The Working Party took note of these commitments.
4. Sanitary and phytosanitary measures
97. Some members of the Working Party considered that China should provide a notification of
all laws and regulations relating to its sanitary and phytosanitary measures, including all productscovered by such measures.  In addition, some members of the Working Party raised specific concernsin relation to the use of quarantine procedures as non-tariff barriers.  In response, the representative ofChina stated that China's quarantine procedures were not used as non-tariff [measures] [barriers].  TheWorking Party took note of China's notification on SPS in document WT/ACC/CHN/[14] [21] andCorr.1.
98. The representative of China stated that pursuant to the provisions of the Agreement on SPS,
China applied compulsory inspection and quarantine as required in the interests of national security,life and health of human beings, animals and plants, environmental protection, as well as to preventdeceptive activities[, as well as to animals, plants and their processed products].  He also noted thatmost of China's standards were [the same as] [equal] or equivalent to the international standards, andthat China implemented the same standards, technical regulations and accreditation procedures ofinspection and quarantine to both imported and domestic goods. There was no discrimination against
the imported goods, animals and plants and their processed products.
99. The representative of China noted that China had set up a SPS enquiry points of inspection
and quarantine which had been notified to the WTO's SPS Committee.  Laws, regulations, rules,WT/ACC/SPEC/CHN/1/Rev.2
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standards and procedures on entry-exit inspection and quarantine had been published in publications
such as the "MOFTEC Gazette".  Information could also be gathered from the [State Administrationof Entry-Exit Inspection and Quarantine] [MOFTEC], or from China's SPS enquiry point.
[xx. The notification of laws, regulations and other measures relating to sanitary and phytosanitary
measures referred to in China’s Protocol of A ccession was provided in document  WT/ACC/CHN/__.
Members of the Working Party agreed that this notification does not prejudge the legal status, natureor effects of the notified laws, regulations and other measures under the WTO Agreement.]
5. Trade-Related Investment Measures
[100. Some members of the Working Party requested  that China enter a commitment to comply in
full with the requirements of the Agreement on Trade-related Investment Measures (TRIMsAgreement) from the date of accession to the WTO.  In response, the representative of China statedthat [notwithstanding the fact that many of the features of China's economy were at present those of adeveloping country economy,] China was prepared to undertake a commitment to notify [and
eliminate] by the date of entry into force of  the WTO Agreement all trade-related investment
measures inconsistent with the provisions of the TRIMs Agreement [and gradually eliminate thosemeasures within the time-limit as required by the TRIMs Agreement].  [Such measures included, butwere not limited to:  requirements that foreign firms balance their foreign exchange for importationwith foreign exchange receipts;  requirements that firms meet specified export target levels inpursuance of such foreign exchange balancing requirements, including by contract;  requirements forminimum export levels;  local content requirements;  and restrictions on the sale of "non-resultantproducts", i.e., products not produced in China.]  [He further stated that, after the date of expiration of
that time limit, the Government of China would not  impose any measures that are inconsistent with
the TRIMs Agreement through domestic laws or regulations, meanwhile, the principle of freedom ofcontract enjoyed by enterprises and individuals must be enforced. He emphasized that the universalprinciple of freedom of contract must be strictly respected and should never be jeopardized by anyinternational agreement, either bilateral or multilateral.]
[xx. Upon accession, China shall comply with the Agreement on Trade-related Investment
Measures.  China shall take the necessary legislative measures to eliminate foreign-exchangebalancing and trade balancing requirements, local content requirements and export performancerequirements.  Chinese authorities – whether national or sub-national - shall not enforce the terms of
contracts containing such requirements.WT/ACC/SPEC/CHN/1/Rev.2
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xx. The allocation of permission or rights for importation and investment shall not be conditional
upon performance requirements set by national or sub-national authorities, or subject to secondaryconditions covering, for example, the conduct of research, the provision of offsets or other forms ofindustrial compensation including specified types or volumes of business opportunities, the use of
local inputs or the transfer of technology.  Permission to invest, import licenses, quotas and tariff rate
quotas shall be granted without regard for the existence of equivalent Chinese domestic suppliers.
xx. In accordance with Article 3.1 (a) of the WTO Agreement on Subsidies and Countervailing
Measures China shall eliminate all export subsidies by accession, including fiscal or other financialmeasures referred to in Article 1 contingent upon export performance.]
6. State-trading entities
101. Some members of the Working Party stated that the activities of China's state-trading
enterprises were not sufficiently transparent.  Some members also raised concerns regarding the
conformity of the activities of those enterprises with the requirements of Article XVII of the GATT
1994, and the Understanding on the Interpretation of Article XVII of the GATT 1994.
102. Those members also stated that China should ensure that the import purchasing practices and
procedures of state-trading enterprises were fully transparent, and in compliance with the
requirements of the WTO Agreement. China should al so refrain from taking any measure to influence
or direct state-trading enterprises as to the quantity, value, or country of origin of goods purchased orsold, except in accordance with the requirements of the WTO Agreement.  Those members also statedthat [in accordance with] [as part of China's notification under] the GATT 1994 and theUnderstanding on the Interpretation of Article XVII of the GATT 1994, China should notify
information on the pricing mechanisms of its state-trading enterprises for exported goods, including
domestic procurement prices, contract terms for delivery and financing terms and conditions.
103. In response, the representative of China stated that its state-trading enterprises had full
management autonomy and responsibility for their own profits and losses.  However, some membersof the Working Party again stated that China should undertake a commitment to ensure that all state-trading enterprises should comply with the requir ements of the WTO Agreement.  The representative
of China noted that a list of products subject to state-trading had been provided in Annex 2a ofChina's Protocol of Accession.
[xx.  Members of the Working Party took note of the specific arrangements that would apply for
fertilisers and crude and processed oil. A key feature of those arrangements related to the annual
allocation of import quantities. The differences in the regimes that would apply to those products wereWT/ACC/SPEC/CHN/1/Rev.2
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noted, in particular in regard of the obligation on state entreprises trading in fertilisers to carry over to
the next year any unused import quantities.
xx. Members requested assurances that, for oil products, quantities reserved for non-state traders
would be allocated in such a manner that they would be fully utilised. In this respect, China confirmed
that imports allocated to non-state traders of crude and processed oil, as specified in Annex …, would
be carried over to the next year if they were not fully utilised. In addition, China agreed that it wouldpublish, on a quarterly basis, the requests for imports that had been made by non-state traders, as wellas the licenses granted, and to supply information relevant to such traders upon request. The WorkingParty took note of these commitments.]
[xx. Members expressed concern that the activities of China's state trading enterprises were not
sufficiently transparent and were not in accordan ce with WTO obligations.  China indicated, however,
that its state trading enterprises have full mana gement autonomy and responsibility for their own
profits and losses and that it had undertaken broad and significant commitments to improve the
transparency of state trading enterprises’ operation and the measures relating to such operation.
xx. Members noted that prior to accession, enterprises in China were permitted to import goods
for production purposes, including those goods included in Annex 2a. China confirmed that,notwithstanding section 5 paragraph 1 of the Protocol,  non-state trading enterprises, including privatetraders, will still be permitted to import for production purposes goods which continue to be subject tostate trading under the Protocol and WTO and that such enterprises would have direct access to end-users of these goods including processors.  The Working Party took note of these commitments.
xx. Members expressed their concerns about supplies of raw materials in the textiles sector and
particularly concerning supplies of silk, in the light of China’s position as the major world supplier of
silk, currently subject to state trading rights concerning exports.
xx. In this regard, the representative of China confirmed that China will progressively abolish the
system of state trading in respect of silk by measur es increasing and extending trading rights with the
result that China will remove completely the silk products set out in numbers 10 and 11 from Annex2a-2 to China’s Protocol of Accession (being the list of products subject to state trading on exports)and grant the right to trade in such products to al l individuals and enterprises no later than 1 January
2005.  Pending the implementation of this right, China undertook not to introduce any changes of amore restrictive nature to the existing structures in  place for the supply of silk.  The representative of
China further confirmed that access to supplies of raw materials in the textiles sector will remain at
conditions no less favorable than for domestic users and gave his assurance that access to supplies ofWT/ACC/SPEC/CHN/1/Rev.2
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raw materials as enjoyed under existing arrangemen ts would not be adversely affected following
China’s accession to the WTO.  The Working Party took note of these commitments.
xx. Members raised concerns regarding the current operation of China’s tariff quota (TRQ)
system for bulk agricultural commodities and the practices of state trading enterprises in relation to
importing such products.  These concerns included the current lack of transparent regulations for
administering TRQs; failure to establish and publish annual TRQ quantities; trade-restrictive and non-competitive practices of state-trading enterprises; and general uncertainty, inconsistency anddiscrimination in trade of bulk commodities.  Members requested that China reduce tariffs andregulate access for bulk commodities by using TRQs with low  in-quota duties.
xx. The representative of China confirmed that China would adopt TRQs for certain goods and
would ensure that these TRQs are administered on a transparent, predictable, and non-discriminatorybasis using clearly specified time frames, administrative procedures and requirements that wouldprovide effective import opportunities and promote filling each TRQ, including the grant of trading
rights and import licenses to non-state trading entities to import quota allocations permitted to be
imported by such entities. China confirmed that for the goods listed in Annex 2 that are subject to a
tariff quota, China would apply the provisions of its market access schedule relating to TRQadministration and related commitments in the Protocol , including those relating to the right to trade.
The Working Party took note of these commitments.
xx.  The representative of China also confirmed that China  would eliminate state trading of
cottonseed oil, sunflower seed oil, and corn oil upon entry into force of the Protocol.  The WorkingParty took note of these commitments.
xx. Members noted that domestic prices for most agricultural commodities in China are higher
than world prices, and this differential allows Chin a’s state trading enterprises to import at low prices
and then mark up the price when selling the product to wholesalers and end users.  Membersexpressed concern that this practice could become more widespread when access opportunities arecreated under TRQs.  Members were particularly concerned that mark-ups could be used to reduce thecompetitiveness of imported products and limit the range of qualities and grades available to end usersin China.  China stated that currently state trading enterprises do not mark up imported products,instead they only charge a nominal transaction fee.  Consequently, China claimed that its practice isconsistent with WTO obligations, did not result in any trade-distorting effect, and that limits exist
under China’s law on the fees charged by state trading enterprises.
xx. The representative of China stated that furthe r to the requirements of Article II.4 of the GATT
1994 and Article 4.2 of the Agreement on Agriculture, China shall ensure that no price increase inWT/ACC/SPEC/CHN/1/Rev.2
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respect to imports, in particular by state trading enterprises, will result in protection beyond that
provided by the tariff in its schedule.  The Working Party took note of this commitment.]
7. Free zones, special economic areas
104. Members of the Working Party noted that there was insufficient information available
concerning special economic areas, in particular their names, geographic boundaries, and relevant
laws, regulations and other measures relating thereto.  In response, the representative of China statedthat since 1979 China had established a number of zones and areas where more open policies wereapplied.  They included five Special Economic Zones (SEZs), 14 coastal open cities, six open citiesalong the Yangtze River, 21 provincial capital cities and 13 inland boundary cities.  Those areasenjoyed greater flexibility in utilizing foreign capital, introducing foreign technology and conductingeconomic cooperation overseas.  At present, foreign investors were entitled to the certain preferentialtreatment.
105. He further stated that FIEs located in SEZs or the Economic and Technical Development
Zones of open coastal cities were entitled to a corporate income tax rate of 15% (the normal income
tax was 33%).  Profits remitted abroad by foreign investors were exempted from income tax.  Thepreferential income tax rate of 15% was applicable to technology-intensive or knowledge-intensiveitems or projects with foreign investment of over US$30 million, as well as enterprises that operatedin the fields of energy, transport and port construction.
106. The representative of China noted that throug hout the customs territory of China, a socialist
market economy system was applied.  The sole exception to this general principle concerned all FIEsacross the country and state-owned firms within SEZs, which operated under a market mechanism. In
1999, the foreign trade volume of SEZs accounted for nearly one fifth of the nation's total. The
national laws and regulations on taxation were applicable to SEZs in a uniform manner. Laws andregulations on patent, copyright, trade marks and bankruptcy applied to state-owned enterprises inSEZs, and the SEZs were required to conform with all other laws and regulations applied throughoutthe customs territory of China.
107. In response to further requests for information, the representative of China indicated that,
pursuant to governmental policy, the importance of the special trade regimes continued to expand andthe differences between these regimes and those of other parts of its customs territory continued tonarrow. He noted, however, that the establishment of SEZs and other special economic areas was
required to be approved by the State Council, and there was no current plan to establish any new
special economic zones.  China noted that the long-term objective was to unify the application of itsWT/ACC/SPEC/CHN/1/Rev.2
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trade regime throughout the customs territory on pr inciples of a market-oriented economy.  Members
of the Working Party expressed concern that products introduced from these special economic areasinto other parts of China's customs territory should be  subject to the same treatment in the application
of all taxes, import restrictions and customs and tariff charges as that normally applied to imports into
these other parts of the customs territory.  The representative of China stated that China would
undertake to ensure such non-discriminatory treatment.
108. Some members also raised concerns about the differential treatment within areas of minority
autonomous regions and other areas of economic poverty.  In response, the representative of Chinastated that China had a clear commitment to uniform administration of trade regime within each sucharea and was [also] determined to prevent smuggling.
109. Some members of the Working Party requested that China take steps to ensure that all
products imported into the customs territory of China from special economic areas should be subjectto the same normal customs duties and charges as any other product imported into the customs
territory of China.  In particular, those members requested that China undertake a commitment to
apply all taxes, charges and measures affecting imports, including import restrictions and customs andtariff charges, that were normally applied to imports into the other parts of China's customs territory toall imported products, including physically incorporated components, imported into China's customsterritory from the special economic areas.
110. China confirmed that it would strengthen th e uniform enforcement of taxes, tariffs and
non-tariff measures on trade between its special  economic areas and the other parts of China's
customs territory.  China further confirmed that  statistics on trade between China's special
economic areas and the other parts of its custom s territory would be maintained and improved,
and would be notified to the WTO on a regular basis.  The Working Party took note of these
commitments.
111. Some members of the Working Party requested that China notify to the WTO Secretariat all
the relevant laws, regulations and other measures relating to its special economic areas or zones.They asked that the notification list and identify all those areas or zones.  Those members alsorequested that China notify the WTO Secretariat promptly, but in any case within 60 days, of anyadditions or modifications to its special economic areas, including notification of the laws, regulationsand other measures relating thereto.
112. China confirmed that it would provide information in its notifications describing how
the special trade, tariff, and tax regulations applied are limited to the designated specialWT/ACC/SPEC/CHN/1/Rev.2
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economic areas, including information concerning their enforcement.  The Working Party took
note of this commitment.
113. Some members of the Working Party also requested that any preferential arrangements
provided for enterprises located within the special export areas should be applied on the basis of non-
discrimination.
8. Government procurement
[xx. In order to promote China's government procurement, the Ministry of Finance promulgated
the Interim Regulations on Government Procurement in April 1998. The Interim Regulations isstipulated in line with the spirit of the Agr eement on Government Procurement of the WTO and on
the basis of the relevant provisions of the United Nations Model Law on Procurement of Goods,Construction and Services while making reference to the laws and regulations of some WTOMembers on government procurement. The policy and procedure regarding government procurementprovided for therein are consistent with the interna tional conventions. China sticks to the fundamental
principles of being open, fair, equitable, efficient and in the public interest when carrying out
government procurement. At present, China is  formulating the Government Procurement Law.]
[xx. Some Members stated that China shoul d become a Signatory to the Agreement on
Government Procurement (GPA) and that prior to its accession to the GPA, China should conduct all
government procurement within the meaning of China’s protocol of accession, in a transparent andnon-discriminatory manner.  Members noted that China’s public entities engaged exclusively incommercial activities would not be conducting government procurement and thus laws, regulationsand other measures regulating these entities procurement practices would be fully subject to WTO
requirements.
xx The representative of China stated that upon accession to the WTO, China would seek to
become an observer to the GPA and would initiate negotiations for membership in the Agreement bytabling an Appendix 1 offer within one year of acces sion with the aim of becoming a signatory of the
GPA by [200x].  The Working Party took note of these commitments.
xx. Until such time as China becomes a signatory to the GPA, all government entities at the
central and sub-central level would conduct their procurement in a transparent manner and  provide allforeign suppliers with equal opportunity to participat e in that procurement pursuant to the  principle of
most-favoured nation treatment.  Such procurements would be subject only to laws, regulations,WT/ACC/SPEC/CHN/1/Rev.2
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judicial decisions, administrative rulings of gene ral application, and procedures (including standard
contract clauses) which have been published and made available to the public.]
9. Transit
[xx. The current regulation of transit in China is the Regulations of the Customs of the People's
Republic of China on the Supervision and Administration of Transit Goods which is consistent with
Article V of GATT 1994.]
10. Agricultural policies
[delete this paragraph ][114. Some members raised concerns in relation to China's intention to
maintain certain quantitative import restrictions  and restrictive licensing requirements in the
agricultural sector. China indicated that it was willing to convert most quantitative restrictions onagricultural products to their tariff-based equivalents in conformity with the Agreement onAgriculture, but that for a very few products it was necessary to maintain restrictive licensing over thelonger term.]
115. Some members requested further information concerning administrative guidance provided at
the national and sub-national level which could have the effect of influencing the quantity andcomposition of agricultural imports.  Those members requested that China undertake an appropriatecommitment to eliminate these practices.
116. China confirmed that it would not maintain, resort to or revert to guidance plans or
administrative guidance at the national or s ub-national level that regulate the quantity of
imports, import controls, import substitution practices, or other non-tariff trade measuresmaintained through state trading enterprises at  the national or sub-national level.  The
Working Party took note of this commitment.
117. Some members requested additional information about the use of fiscal transfers and other
forms of domestic subsidies to government-owned and government-controlled entities in theagricultural sector.  Those members stated that China's notifications under the Agriculture and other
Agreements and related commitments for subsidies should include reference to such measures.  Thosemembers also stated that the information notified should also detail export subsidies within themeaning of Article 9 of the Agreement on Agriculture.  [In response, the representative of Chinanoted that China continued to maintain export subsidies on certain agricultural products.]WT/ACC/SPEC/CHN/1/Rev.2
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118. Some members of the Working Party stated that China should undertake a commitment not to
invoke the provisions in Articles 6:2, 6:4(b), 9:4, 12:2 and 15, and Annex 5, Section B of theAgreement on Agriculture.
119. China's commitments on agricultural tariffs, on domestic support and export subsidies for
agricultural products are contained in the Schedule of Concessions and Commitments on Goods
annexed to China's Draft Protocol of Accession to the WTO.
[xx. Since  China is a country with vast agricultural base, as well as a country with vast population,
agricultural security, food security in particular, is an issue of supreme importance. China will base itspolicies on domestic agricultural supply, especially on balanced supply and demand of grains.Meanwhile, China will actively seek international resources as a necessary supplement. With its deedsthe Chinese government has provided its consistent support for the progressive liberalization ofinternational trade in agriculture. As a matter of fact, this process has to be sensitive to developmentrealities of different members.]
11. Trade in civil aircraft
[xx. China's civil aircraft industry was established in 1980's. With more than ten enterprises and
over 10,000 employees, the industry has developed, improved and rebuilt more than ten types ofaircraft. The industry is characterised by backward production equipment, insufficient investment andlow technical level. Besides, it has not formed economy of scale. Therefore, China is not in theposition to commit to joining the Agreement on Trade in Civil Aircraft at present stage.]
[xx. China confirmed that it would not impose any provisions of offsets or other forms of
industrial compensation when purchasing civil aircraft, including specified types or volumes of
business opportunities.]
12. Textiles
[xx. Some members of the Working Party proposed and the representative of China accepted that
the quantitative restrictions maintained by WTO Members on imports of textiles and apparel productsoriginating in China that are in force on the date pr ior to the date of the accession of China to the
WTO shall be notified to the Textiles Monitoring  Body (TMB) as being the base levels for the
purpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing. For such
Members,  the phrase “day prior to the date of entry into force of the WTO Agreement,” contained inArticle 2.1 of the Agreement on Textiles and Clothing shall be deemed to refer to the day prior to theWT/ACC/SPEC/CHN/1/Rev.2
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date of accession of China to the WTO.  To these base levels, the increase in growth rates provided
for in Articles 2.13 and 2.14 of the Agreement on Textiles and Clothing shall be applied, asappropriate,  from the date of accession of China to the WTO.  The Working Party took note of thesecommitments.]
[Move following paragraph to Protocol.]
[xx. China agreed that the following provisions would apply to trade in textiles and clothing
products until 31 December 2008 and be part of the terms and conditions for China's accession to theWTO:
(a) In the event that a WTO Member maintaining bilateral textile agreements with China and
notifying restrictions on imports of textiles and apparel from China believes that imports ofChinese origin of textiles and apparel products covered by the Agreement on Textiles andClothing as of the date the WTO Agreement entered into force, are, due to market disruption,threatening to impede the orderly development of trade in these products, such Member may
request consultations with China with a view to  easing or avoiding such market disruption.
The Member requesting consultations shall provide China, at the time of the request, with adetailed factual statement of reasons and justifications for its request for consultations withcurrent data which, in the view of the requesting Member, shows:  (1) the existence or threatof market disruptions;  and (2) the role of products of Chinese origin to that disruption;
(b) Consultations will be held within 30 days of receipt of the request.  Every effort will be made
to reach agreement on a mutually satisfactory solution within 90 days of the receipt of suchrequest, unless extended by mutual agreement;
(c) Upon receipt of the request for consultations, China agrees to hold its shipments to the
requesting Member of textile or textile products in the category or categories subject to theseconsultations to a level no greater than 7.5 per cent (6 per cent for wool product categories)above the amount entered during the first 12 mont hs of the most recent 14 months preceding
the month in which the request for consultations was made;
(d) If no mutually satisfactory solution is reached during the 90-day consultation period,
consultations shall continue and the Member requesting consultations may continue the limitsfor textiles or textile products in the category or categories subject to these consultations;
(e) The term of any restraint limit established under subparagraph (d) will be effective for the
period beginning on the date of the request for consultations and ending on 31 December ofWT/ACC/SPEC/CHN/1/Rev.2
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the year in which consultations were requested, or where three or fewer months remain in the
year at the time of the request for consultations, for the period ending 12 months after therequest for consultations;
(f) No action taken under this provision shall remain in effect beyond one year, without
reapplication, unless otherwise agreed.
The Working Party took note of these commitments.]
13. Measures Maintained Against China
120. The representative of China stated that WTO Members should eliminate all discriminatory
non-tariff measures maintained against Chinese exports from the date of China's accession to theWTO.  [In response, some members of the Working Party stated that, in their view, such measures didnot need to be phased out until after China's foreign trade regime fully conformed to WTOobligations.]  [In respect to those Members maintaining inconsistent discriminative measures againstChina, China reserves the right to protect its legitimate interests against such discrimination in
response.  The Working Party took note of this statement.]
14. Transitional Safeguards
121. Some members of the Working Party stated that there was a need during a transitional period
for a special safeguard mechanism to guard against imports from China in such increased quantities orunder such conditions as to cause or threaten injury to domestic producers of like or directlycompetitive products.  The representative of China stated that China opposed the creation of such adiscriminatory safeguards provision and considered that the safeguards provisions of the GATTprovided sufficient protection to the domestic industries of WTO Members.  Some members of the
Working Party considered that the provision of a transitional safeguard would have to be carefully
circumscribed to prevent abuse in its invocation.
[xx. The Representative of China expressed the following position concerning the implementation
of Product-Specific Safeguard:
(1) The Safeguard Agreement shall apply in proceedings involving imports of Chinese
origin except as otherwise provided in the Protocol.WT/ACC/SPEC/CHN/1/Rev.2
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(2) The Dispute Settlement Understanding shall apply to consultations and the settlement
of disputes arising under Section 19 of the Protocol.
(3) "Diversions of trade" mentioned in paragraph 8 of Product-Specific Safeguard
Section of the Protocol, exist only when there are clear evidences to show: (a) that
imports of a product, like or directly competitive with a product produced by thedomestic industry, are increasing significantly and absolutely as a result of theimposition of the Product-Specific Safeguard measure by other WTO Memberagainst import from China; and (b) Such increased imports are a significant cause ofmaterial injury to domestic industry. The affected WTO member shall considerobjective factors including the volume of imports, the effects of imports on prices forthe like or directly competitive products and the effect of such imports on thedomestic industry producing like or directly competitive products and any such other
factors.
(4) If a measure taken as a result of diversions of trade remains in effect more than
90 days, China has a right to suspend the application of substantially equivalentconcessions or obligations under GATT 1994 to the Member applying the measure.
The Working Party took note of China’s position.]
[xx. The representative of China expressed concern with regard to the implementation of the
Product-Specific Safeguard, and stated the following:
1. The provisions of the Safeguard Agreement shall apply in proceedings involving
imports of Chinese origin except as otherwise provided for in the Protocol.
2. The provisions of the Dispute Settlement Understanding shall apply to consultations
and the settlement of disputes arising under Article 19 of the Protocol.
3. "Diversions of trade" mentioned in paragraph 8 of the Product-Specific Safeguard
Section of the Protocol exists only when there is clear evidence to show:
(a) that imports of an article, like or directly competitive with an article produced
by the domestic industry, are increasing significantly and absolutely as a result of the
imposition of the Product-Specific Safeguard measure by other WTO Membersagainst imports from China;  andWT/ACC/SPEC/CHN/1/Rev.2
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(b) such increased imports to be a significant cause of material injury to domestic
industry.  The affected WTO Member shall consider objective factors including thevolume of imports, the effect of imports on prices for like or directly competitivearticles and the effect of such imports on the domestic industry producing like or
directly competitive products.
4. If a measure taken as a result of diversions of trade remains in effect more than two
years, China has a right to suspend the application of substantially equivalentconcessions or obligations under GATT 1994 to the Member applying the measures.
The Working Party took note of China's position.]
15. Transitional Review Mechanism
122. Members of the Working Party stated that following China's accession to the WTO it would
be necessary to establish a transitional review mechanism constituted by a Working Party to monitorChina's compliance with its Protocol of Accession and the WTO Agreement within the overall
framework of China's progress in the reform of its economic and foreign trade regimes.  Members
considered that the review should be held every two years (or more frequently upon request of China
or another WTO Member), and that a major review  should be held, e.g., every six years.  That
Working Party would have regard to the outline contained in Annex 9 to the Protocol of Accession ofChina, and could make recommendations, as approp riate, to China or to the other WTO Members
concerned.  Those members stated that that Working Party should also decide whether and to whatextent the transitional provisions provided in paragraphs … of this Report should no longer apply.Those members noted that once the transitional provisions ceased to apply, the Transitional Review
Mechanism would be extinguished.
123. The representative of China stated that hi s government did not in principle oppose such a
review mechanism but considered that the review could be carried out as part of the regular TradePolicy Review to which China would be subject.   In response, members of the Working Party statedthat they considered that the WTO Agreement's Trade Policy Review Mechanism was not welladapted to the type of specific review of compliance with conditions of accession that they consideredto be necessary.  Some members stated that the Trade Policy Review of China in the WTO shouldoccur as regularly scheduled, notwithstanding the possible creation of a special transitional reviewmechanism for China.WT/ACC/SPEC/CHN/1/Rev.2
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V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME
1. General
[xx. Members of the Working Party expressed concern that certain elements of China's laws were
not yet fully compatible with the provisions of the Agreement on Trade Related Aspects of
Intellectual Property Rights. This related, in particular, to provisions in the fields of copyright and
neighbouring rights, trademarks, patents, geographical indications and layout-designs of integratedcircuits, and to enforcement of intellectual property rights. Members also expressed concern that therewas a continued need for additional enforcement efforts by the Chinese Government.
xx. The representative of China confirmed that China will apply the provisions of the TRIPS
Agreement upon accession. To this end, China agreed to amend existing legislation and, wherenecessary, introduce new legislation to fully implement the TRIPS Agreement.  In particular, Chinawould amend the following laws: the Copyright La w to provide for a rental right for computer
programmes and phonograms; the Trademark Law to provide for protection of trade-names, famous
marks and marks consisting of colours, letters or numerals; the Patent Law to allow compulsory
licensing only within the limits prescribed in the TR IPS Agreement, and the Criminal Code to provide
remedies which constitute a deterrent to further infringements. In addition, China would provide forthe protection of geographical indications and layout-designs of integrated circuits to implement therespective provisions of the TRIPS Agreement.  China confirmed that it would strengthen the
legislative framework for the enforcement of intellectual property rights for all right-holders. Inparticular, national treatment would be fully applied, so that copyright enforcement action by localcopyright bureaus involving foreign right-holders, would no longer require clearance by the National
Copyright Administration in Beijing. Other procedural rights would be strengthened as well, so that
right-holders can obtain information on government enforcement activities and that investigations areconducted within reasonable time-limits supported, where necessary, by significant fines thatconstitute an effective deterrent to further infringements. In addition, China would ensure the vigorousapplication by Chinese authorities of the enforcement legislation in order to considerably reduce theexisting high levels of piracy and counterfeiting. Action would include the closure of manufacturingfacilities as well as markets and retail shops that have been the object of administrative convictionsfor infringing activities.  The Working Party took note of these commitments, and recalled that a fullreview of China's intellectual property laws would take place after accession.]  alternative text
[xx. Some members of the Working Party  expressed their concerns over the infringement cases of
intellectual property rights in China, including the counterfeit of many products orginating in thosemembers.  In response, the representative of  China stated that China was fully committed toWT/ACC/SPEC/CHN/1/Rev.2
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complying with its obligations under the TRIPS Ag reement, including the appropriate enforcement
for the protection of intellectual property rights.]
[xx. Noting the advanced state of protection for intellectual property rights in China, the
representative of China confirmed that China will apply the provisions of the Agreement on Trade
Related Aspects of Intellectual Property, upon accession, without recourse to the provisions of Article
65 of that Agreement.  The Working Party took note of this commitment.]
124. Some members of the Working Party stated that China should undertake a commitment to
fully comply with the requirements of the Agreement on TRIPS from ….
2. Specific aspects of the intellectual property regime
[to be completed]
VI. POLICIES AFFECTING TRADE IN SERVICES
125. Members of the Working Party expressed concerns about the lack of transparency in China's
services regime.  The representative of China stated that China was prepared to enter a commitment to
improve this aspect of its trade regime.
Licensing
[xx. Some Members expressed concern regarding the lack of transparency in China’s services
regime in particular in respect of obtaining, extending and renewing licenses and other approvalsrequired to provide services in China’s market.  Members welcomed  the broad ranging andcomprehensive commitments that China was undertaking  to increase transparency and to provideinformation to governments and service providers on any matter relating to the GATS includingChina’s schedule of specific commitments.   Upon its accession, China will, inter alia , publish a list
of authorities responsible for authorizing, approving or regulating those service sectors in which
China made specific commitments as well as the specific procedures and conditions for obtaining,extending,  renewing, denying or terminating licenses or approvals.  Members also stated the need toensure the independence and impartiality of regulatory authorities from the enterprises and individualsthat they regulate.
xx. Members noted that the procedures and conditions for obtaining, extending or renewing
licenses or approvals for providing services must be consistent with the provisions of the WTOAgreement, including the Protocol and China’s schedule of specific commitments.  Any licensing orWT/ACC/SPEC/CHN/1/Rev.2
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approval process must not itself act as a barrier to market access and not be more trade restrictive than
necessary.  Specific time frames for decision, the opportunity to cure deficiencies in an applicationand to submit additional information, and the prompt provision in writing of reasons for denial of anapplication should be provided for in the procedures. Fees charged for processing of applications
should be commensurate with the administrative cost of processing the application.   Conditions for
filing an application and the time taken to approve applications are not to have the effect ofquantitative limitations on service suppliers or denial of national treatment.  Members expressedparticular concern regarding the practice of inviting only certain service providers to apply forlicenses or approvals and the practice of automatically  terminating the effectiv eness of an application
if the approving authority has not acted within a set period of time.  Moreover, automaticallyterminating the effectiveness of pending applications  after a certain period of time without providing
reasons had the effect of denying a license with no effective right of appeal as required under China’sprotocol.  Applicants needed to be informed of the reasons for denial of a license and such reasons
needed to be consistent with China’s WTO commitments.
xx. The representative of China confirmed that, in the application of its commitments under the
WTO Agreement, the Protocol and its schedule of specific commitments, China shall, upon accession,ensure that the procedures for obtaining, expanding and renewing licenses or approvals for providingservices will not be more trade restrictive than necessary and will be in accordance with Article XVIIof GATS.  All procedures and conditions for pro cessing applications will be published prior to
becoming effective.  Such procedures will include specific time frames for review and decision by allrelevant authorities.   Decisions will be taken promptly on all applications and, if denied, reasons for
such action would be provided in writing to the applicant, together with the possibility of resubmitting
the application without delay.  If the application is accepted , the applicant will be informed, withoutdelay, of the date of entry into force of the license or approval which normally should be immediate.All necessary forms and applications would be readily available on request and without specialinvitation. Elements such as  the opportunity to cure  deficiencies in an application (after promptly
informing the applicant about these) and to submit additional information will be included in theprocedures.  Any fees charged would be commensura te with the cost of processing an application.
Relevant regulatory authorities will be separate from, and not accountable to, any service suppliersthat they regulate.  The decisions and procedures used by regulators shall be impartial with respect to
all market participants.  Where China requires an examination to license professionals, such
examinations will be scheduled at frequent intervals.  The Working Party took note of thesecommitments.
xx. Some Members also expressed concern regarding China’s current practice of imposing
conditions on the Chinese companies that are allowed to partner with foreign service suppliers.  TheseWT/ACC/SPEC/CHN/1/Rev.2
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Members indicated that this may amount to a “ de facto ” quota, as the number of potential partners
meeting those conditions may be very limited.  The representative of China confirmed that a foreignservice supplier will be able to partner with the Chinese entity of its choice, including outside the
sector of operation of the joint venture, as long as the Chinese partner is legally established in China.
The Working Party took note of this commitment.
xx. With respect to its schedule of specific commitments, China confirmed that, while it had
limited its market access commitments in some sectors to permit foreigners to hold only a minorityequity interest, a minority shareholder can enforce, under China’s laws, regulations and measures,rights in the investment, Moreover, WTO Members will have recourse to WTO dispute settlement toensure implementation of all commitments in Chin a’s GATS schedule.  The Working Party took note
of these commitments.
xx. The representative of China also confirmed that established foreign service suppliers will be
able to agree with their joint venture partners on the modification of their equity interest and
implement this.  He further confirmed that such an agreement will be approved if consistent with the
relevant equity commitments in China’s GATS schedule.  The Working Party took note of thesecommitments.
xx. The representative of China submitted an action plan for implementing China’s services and
related commitments, circulated to the Working Party in [WT/ACC/CHN/X].  The action planoutlined the steps that China was taking to ensure full implementation of its services commitments, inparticular, focusing on revisions in its laws, regulations and other measures relating to licensing ofenterprises to provide services to comply with its obligations.  The representative of China confirmed
that China would consult with WTO Members regarding its revision of relevant laws, regulations and
other measures to comply with China’s obligations.   The Working Party took note of thiscommitment.
xx. Members welcomed China’s commitments in the area of distribution, noting that
implementation of its commitments in this area would modernize China’s infrastructure for supplyingthis essential service.  Moreover, China’s commitments were subject to a progressive phase-in ofrights which would require changes in China’s laws and regulations concerning distribution activitiesgenerally.  New regulations on sales away from a fixed location, for example, were specificallyreferenced in China’s schedule of specific commitments.  Some Members noted that the World Code
of Conduct provided a strong ethical basis for re gulating sales away from a fixed location.  Members
also sought confirmation that the supply of franch ising services was different from the establishmentWT/ACC/SPEC/CHN/1/Rev.2
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of a “chain store” since franchises with numerous establishments could be envisioned in a country of
the size and population of China.
xx. China confirmed that it will consult with WTO Members and develop regulations, consistent
with the commitments in its services schedule, on sales away from a fixed location.  The Working
Party took note of this commitment.
xx. The representative of China confirmed that franchising services were distinct from the
establishment of a chain store and that the limitations on certain chain stores would not apply toenterprises established and operating under franchising agreements.  The Working Party took note ofthis commitment.
xx. In response to questions from Members regarding certain terms in China’s GATS schedule,
the representative of China confirmed the following:
(a) A “master policy” is a policy that provides blanket coverage for the same legal
person’s property and liabilities located in different places.  A master policy may only be
issued by the business department of an insurer’s head office or that of its authorized
province-level branch offices.  Other branches are not allowed to issue master policies.
(I) Master policy business with the state key construction projects as it subject-
matter insured.
 If investors on the state key construction projects (i.e., projects that are so
listed and annually announced by the State Development and Planning Commission)meet either of the following requirements, they may purchase a master policy frominsurers that are located in the same place as the investors’ legal persons are located.
(1) The investment on the subject-matter insured is all from China (including
the reinvestment from the foreign-invested enterprises in China) and the sum ofinvestment of the investor accounts for over 15% of the total investment.
(2) The investment is partially from abroad, and partially from China
(including the reinvestment from the foreig n-invested enterprises in China) and the
sum of investment of the Chinese investor accounts for over 15% of the totaldomestic investment.
For those projects that draw investment all from abroad, every insurer may provide
coverage in the form of master policy.WT/ACC/SPEC/CHN/1/Rev.2
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II.  A Master policy covering different subject-matters insured of the same legal
person.
For those subject-matters insured located in different places and owned by the same
legal person (excluding financial, railway, and post and telecommunications industries and
enterprises), a master policy may be issued on the basis of either of the following conditions.
(1)  Insurance companies incorporated where the legal person or accounting
unit of the insurance applicant is located are allowed to issue a master policy and paythe premium tax at that location.
(2)  If over 50% of the insurance amount of the subject-matter insured is from
a larger or medium sized city, then insurers in that city are allowed to issue a masterpolicy, no matter whether the insurance applicant’s legal person or accounting unit islocated in the city.
(b) Large commercial risk means an insurance risk written on any large scale commercial
enterprise in which the aggregate annual premium exceeds $10,000 (RMB), or construction
projects where the investment amount is greater than $12 million.
 (c) Statutory insurance products are limited to the following specific categories, and that
no additional products or categories will be added: Mandatory third-party auto insurance,driver and operator liability for busses and other commercial vehicles; and the reinsurance ofstatutory insurance associated with each of the above-listed categories.
xx. Members welcomed China’s commitment to perm it internal branching for all insurance firms
consistent with the phase-out of geographic restrictions.   Members  noted that China had included
certain qualifications that foreign insurers must m eet to obtain authorization to provide services in
China.  Those qualifications related to a minimum period of establishment in another WTO member,total global assets and maintenance of a representative office in China.   Since these qualificationsrelated to the general characteristics of the fore ign insurance company seeking to obtain the initial
authorization  to enter China’s market, a company should only need to meet these qualifications inconnection with the grant of such authorization and not in connection with subsequent approvalsrelating to branching or other activities.
xx. The representative of China confirmed that China will only require a foreign insurance
supplier to obtain one authorization to enter China’s market to provide services in the territory ofWT/ACC/SPEC/CHN/1/Rev.2
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China.  Furthermore, China will permit internal branching for all insurance firms, including those
currently established in China, consistent with the phase-out of geographic restrictions.  He confirmedthat a branch, including a sub-branch, is an extension of the parent enterprise and not a separate legalentity and that China will permit internal branchin g accordingly on that basis.  The Working Party
took note of these commitments.]
[xx. Some members expressed concern regarding the lack of transparency in China’s services
regime in particular in respect of obtaining, extending or renewing licenses and other approvalsrequired to provide services in China’s market.  Members welcomed  the broad ranging andcomprehensive commitments that China was undertaking  to increase transparency and to provideinformation to governments and service providers on any matter relating to the GATS includingChina’s schedule of specific commitments.   Upon its accession, China will, inter alia , publish a list
of authorities responsible for authorizing, approving or regulating those service sectors in whichChina made specific commitments as well as the specific procedures and conditions for obtaining,
extending and renewing licenses or approvals.
xx. Members noted that the procedures and conditions for obtaining, extending or renewing
licenses or approvals for providing services must be consistent with the provisions of the WTO,including the Protocol and China’s schedule of specific commitments.  Any licensing or approvalprocess must not itself act as a barrier to market access and not be more burdensome than necessary.Specific time frames for decision, the opportunity to cure minor deficiencies in an application and tosubmit additional information, and the prompt provision in writing of reasons for denial of anapplication should be provided for in the procedures. Fees charged for processing of applications
should be commensurate with the administrative cost of processing the application. Conditions for
filing an application and the time taken to approve applications are not to have the effect ofquantitative limitations on service suppliers or denial of national treatment.  Members expressedparticular concern regarding the practice of inviting only certain service providers to apply forlicenses or approvals and the practice of automatically  terminating the effectiv eness of an application
if the approving authority has not acted within a set period of time.  Moreover, automaticallyterminating the effectiveness of pending applications  after a certain period of time without providing
reasons had the effect of denying a license with no effective right of appeal as required under China’sprotocol.  Applicants needed to be informed of the reasons for denial of a license and such reasons
needed to be consistent with China’s WTO commitments.
xx. The representative of China confirmed that, in application of its commitments under the WTO
Agreement, the Protocol and its schedule of specific commitments, China shall, upon accession,ensure that the procedures for obtaining, expanding and renewing licenses or approvals for providingWT/ACC/SPEC/CHN/1/Rev.2
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services will not be more burdensome than necessary and n accordance with Article XVII of GATS.
All procedures and conditions for processing applications will be published prior to becomingeffective.  Such procedures will include specific time frames for review and decision by all relevantauthorities.   Decisions will be taken promptly on all applications and, if denied or terminated, reasons
for such action would be provided in writing to the applicant, together with the possibility to resubmit
the application without delay. If the application is accepted, the applicant will be informed withoutdelay of the date of entry into force of the licen se or approval, which should normally be immediate.
All necessary forms and applications will be readily available on request and without specialinvitation, and information requested will be directly relevant to GATS-consistent criteria. Elementssuch as the opportunity to cure deficiencies in an application (after promptly informing the applicant
about these) and to submit additional information will be included in the procedures. Any feescharged will be commensurate with the cost of processing an application. Relevant regulatoryauthorities will be separate from, and not accountable to, any service suppliers that they regulate. The
decisions of and the procedures used by regulato rs shall be impartial with respect to all market
participants. Where China requires an examination to licence professionals, such examinations will bescheduled at frequent intervals. The Working Party took note of these commitments.
Choice of partner
xx. Some members expressed concern regarding the existing practice of imposing conditions on
the Chinese companies that are allowed to partne r with foreign service suppliers. These members
indicated that this may amount to “de facto” quotas, as the number of potential partners meeting thoseconditions may be limited. The representative of China confirmed that a foreign service supplier will
able to partner with Chinese entity of their choice, including outside the sector of operation of the
joint venture, as long as the Chinese partner is legally established in China. The Working Party tooknote of this commitment.
Modification of the equity interest
xx. With respect to its schedule of specific commitments, China confirmed that established
foreign service suppliers will be able to agree with their joint venture partners on the modification oftheir equity interest and implement this. The representative of China confirmed that such anagreement will be approved if consistent with the relevant equity commitments in China’s GATSschedule. The Working Party took note of this commitment.WT/ACC/SPEC/CHN/1/Rev.2
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Prior experience requirement for establishment
xx. In response to questions from members, the representative of China confirmed that, the merging,
division, restructuring or other change of legal form of a foreign company will not impact on the priorexperience requirements included in China’s GATS schedule, as long as the activities of the company,
for which establishment in China is requested, are maintained in the new or restructured entity.
Market research
xx. Some members expressed concern regarding the recent additional requirements imposed on
market research activities. In response to questions from members in this respect, the representative ofChina confirmed that, upon accession to the WTO, it will remove the prior approval requirement formarket research services, defined as investigation services designed to secure information on theprospects and performance of an organisation’s products in the market, including market analysis (ofthe size and other characteristics of a market) and analysis of consumer attitudes and preferences.Market research firms registered in China which are engaged in such services, would only be only
required to file the survey plan and the questionna ire form on record in the statistical agencies of
government at or above the provincial level. The Working Party took note of these commitments.
Legal services
xx. In response to questions from members, the representative of China confirmed that "Chinese
national registered lawyers", as indicated in China’s GATS schedule, are those nationals holding apractising licence.]
126. China's Schedule of Specific Commitments on Services is annexed to its draft Protocol of
Accession reproduced in the Appendix to this Draft Report.  This Schedule of Specific Commitments
on Services contains the market access commitments of China in respect of services.
VII. OTHER ISSUES
1. Notifications
127. Members of the Working Party requested that China provide to the WTO Secretariat the
notifications described in paragraphs … of this Draft Report.
2. Trade Agreements
128. Some members of the Working Party raised specific concerns in relation to China's special
trade arrangements, including barter trade arrangements, with third countries and separate customsWT/ACC/SPEC/CHN/1/Rev.2
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territories.  Those members requested that Chin a enter a commitment to eliminate or bring such
arrangements into conformity with WTO obligations by no later than the date of its accession to the
WTO Agreement.
3. Publication of information on trade
[to be completed]
4. Transparency
129. Some members of the Working Party requested that China undertake to ensure that upon
request, and prior to implementation or enforcement, all laws, regulations and other measurespertaining to or affecting trade in goods, services, TRIPS or the control of foreign exchange would bepublished and made available to WTO Members.
130. Those members also requested that China designate an official journal in which all laws,
regulations and other measures pertaining to or affecting the subject-matter of the WTO Agreementwould be published and that those laws regulations and other measures should only become effective
following a period within which interested parties could submit comments to the designated
authorities.  They asked that China publish that journal on a regular basis and make copies of allissues of this journal readily available to individuals and enterprises.
131. Members of the Working Party also requested  that China set up an enquiry point where
information relating to all laws, regulations and other measures pertaining to or affecting trade ingoods, services, TRIPS or the control of foreign exchange could be obtained.  Those members statedthat replies to such enquiries should generally be provided within 30 days of a request, though in nocase take longer than 45 days, and if so delayed a statement of indicating the reasons therefore should
be provided in writing to the interested party.  Members noted that replies to enquiries would need to
be complete and represent the authoritative view of the Chinese Government.
[xx. The Representative of China stated that Chin a would, according to the requirements of all WTO
covered agreements, make available to WTO members, upon request, relevant laws, regulations and other
measures when such measures are implemented or enfo rced. He further stated that China would establish
or designate an enquiry point where, upon request of other WTO members, laws, regulations and othermeasures pertaining to or affecting the subject-matte rs of the WTO agreement may be obtained and replies
to relevant inquiries from other WTO members be provided within a reasonable period of time.]WT/ACC/SPEC/CHN/1/Rev.2
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132. Members of the Working Party further requested that China provide the WTO Secretariat
with statistical data and information describing China's economy and trading system specified inAnnex 1 of its Protocol of Accession every two year s, and thirty calendar days prior to a meeting of
the Working Party on Trade with China that would be established by China's Protocol of Accession.
[xx. Members expressed concern about the lack of transparency regarding the laws, regulations
and other measures that applied to matters covered in the WTO Agreement and this Protocol.  Inparticular, Members noted the difficulty in finding and obtaining copies of regulations and othermeasures undertaken by various ministries as well as those taken by provincial and local authorities.Transparency of regulations and other measures, particularly of sub-central authorities was essentialsince these authorities often provided the details on how the more general laws, regulations and othermeasures of the central government would be implemented and often differed among variousjurisdictions. Members emphasized the need to receive such information in a timely fashion so thatgovernments and traders could be prepared to comply  with such provisions and could exercise their
rights in respect of implementation and enforcement of such measures.  Members noted the
development of the Internet and other means to ensure that information from all government bodies atall levels could be assembled in one place and made readily available.  The creation and maintenanceof a single, authoritative journal and enquiry point would greatly facilitate dissemination ofinformation and help promote compliance.
xx. Members also emphasized the importance of a meaningful opportunity to provide comments
prior to final implementation of laws, regulations and other measures.  Such an opportunity couldenhance understanding of the provision and permit China to take such comments into account before
implementing a measure.]
133. In response, the representative of China noted that the Chinese Government regularly issued
publications providing information on China's foreign trade system, such as the: "Almanac of Foreign
Economic Relations and Trade" and "The Bulletin of MOFTEC" published by MOFTEC; "StatisticalYearbook of China", published by the State Statistical Bureau; "China's Customs Statistics(Quarterly)", edited and published by the Customs General Administration.  China's laws andadministrative rules and regulations of the State C ouncil relating to foreign trade were all published,
as were regulations issued by Ministries and Commissions. Such laws and regulations were availablein the "Bulletin of the State Counc il", the "Collection of the Laws and Regulations of the People's
Republic of China (PRC)" and "MOFTEC Gazette". The administrative regulations and directives
relating to foreign trade were also published in MOFTEC's official website(http://www.moftec.gov.cn) and periodicals.WT/ACC/SPEC/CHN/1/Rev.2
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134. He further noted that information on exchange controls affecting import and export was
published by the State Administration of Foreign Exchange.  All the valid laws and regulations offoreign exchange control were reproduced on the website of the State Administration of ForeignExchange (http://www.safe.gov.cn) and via the news media.
135. Concerning administration of import and export, the representative of China noted that
MOFTEC, together with the relevant department s, decided the items and specific quantities of
products subject to import and export licensing and made timely adjustments according to the need ofthe current situation.  Such information would be published on "International Business" newspaperand "MOFTEC Gazette".
136. He also noted that information on China's customs laws and regulations, import and export
duty rates, and customs procedures were published in the "State Council Bulletin" and in the pressmedia, and were available upon request. The procedures  concerning application of duty rates, customs
value and duty determination, drawback and duty recovery, as well as the procedures concerning duty
exemptions and reduction, were also published.  The State Statistics Bureau also published quarterly
customs statistics, calculated according to country of origin and consumption. The Customs GeneralAdministration published trade figures on the basis of eight-digit H.S. headings.
137. The representative of China noted that any bilateral trade agreements concluded between
China and its trading partners and protocols on the exchange of goods negotiated under them werepublished in "The Treaty Series of the PRC".  He also noted that the "Directory of China's Foreign
Economic Relations and Trade Enterprises" and "China's Foreign Trade Corporations andOrganizations" were two publications, which identify foreign trade corporations and other enterprises
in China engaged in foreign trade.
138. [ China confirmed that it would, to the maximum extent possible, make available to
WTO Members translations into one or more of the official languages of the WTO all laws,
regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the
control of foreign exchange, [___ calendar days] before such measures are implemented or
enforced.  The Working Party took note of these commitments.]  [The Representative of China
noted that China would translate, to the maximum ex tent possible, relevant laws, regulations and other
measures into English.  Upon request, the English translations may be obtained from the designatedinquiry point.  He emphasized that  those translations are for reference and that only the text in
Chinese is authentic.]WT/ACC/SPEC/CHN/1/Rev.2
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139. China confirmed that publication of all laws, regulations and other measures pertaining
to or affecting trade in goods, services, TRIPS or the control of foreign exchange would include
[the period for comment,] the effective date of these measures and the products and services
affected by a particular measure [, identified by appropriate tariff line and CPC classification if
necessary].  The Working Party took note of these commitments.
140. China confirmed that it would [apply on a most-favoured-nation basis all transparency
commitments agreed bilaterally with other countries and separate customs territories] [fulfil the
requirements of transparency under the WTO Agreement and apply its transparency commitments] .
The Working Party took note of this [commitment] [confirmation] .
141. China confirmed that it would publish in the official journal, by appropriate
classification and by service where relevant, a list of all organizations, including those
organizations delegated such authority from the national authorities, that are responsible for
authorizing, approving or regulating services activities whether through grant of license or
other approval.  Procedures and the conditions for obtaining such licen ses or approval would
also be published.  The Working Party took note of these commitments.
142. China confirmed that none of the informat ion required by the WTO or the Protocol to
be disclosed shall be withheld as confidential information.  The Working Party took note of this
commitment.
143. China confirmed that it would establish or designate an enquiry point where all
information relating to the laws, regulations and other measures pertaining to or affecting trade
in goods, services, TRIPS or the control of foreign exchange, as well as the published texts,
could be obtained.  This information would include the names of national or sub-national
authorities (including contact points) responsible for implementing a particular measure.  TheWorking Party took note of these commitments.
[xx. The representative of China stated that the full listing of official journals was as follows:
Gazette of the Standing Committee of the National People's Congress of the People's Republic ofChina;  Gazette of the State Council of the People's Republic of China;  Collection of the Laws of thePeople's Republic of China;  Collection of the Laws and Regulations of the People's Republic ofChina;  Gazette of MOFTEC of the People's Republic of China;  Proclamation of the People's Bank ofthe People's Republic of China;  Proclamation of the Ministry of Finance of the People's Republic of
China.]WT/ACC/SPEC/CHN/1/Rev.2
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VIII. CONCLUSIONS
144. The Working Party took note of the explanations and statements of China concerning its
foreign trade regime, as reflected in this report .  The Working Party took note of the commitments
given by China in relation to certain specific matters which are reproduced in paragraphs […] of this
Draft Report and noted that these commitments are incorporated in paragraph 1.2 of the Draft
Protocol of Ac cession of China.
145. Having carried out the examination of the foreign trade regime of China and in the light of the
explanations, commitments and concessions made by the representative of China, the Working Partyreached the conclusion that China be invited to accede to the Marrakesh Agreement Establishing theWTO under the provisions of Article XII.  For this purpose, the Working Party has prepared the draftDecision and Protocol of Accession reproduced in the Appendix to this Report, and takes note of itsSchedule of Concessions and Commitments on Goods [(document WT/ACC/SPEC/CHN…)] and
China's Schedule of Specific Commitments on Services [(document WT/ACC/SPEC/CHN…)] that
are annexed to the Draft Protocol.  It is proposed that these texts be adopted by the General Council
when it adopts the Draft Report.  When the Draft Decision is adopted, the Draft Protocol of Accessionwill be open for acceptance by China which will become a Member thirty days after it accepts the saidDraft Protocol.  The Working Party agreed, therefore, that it had completed its work concerning thenegotiations for the accession of China to the WTO.
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