. /.WORLD TRADE
ORGANIZATIONG/TRIMS/W/24
4 October 2002
(02-5358)
Committee on Trade-Related Investment Measures Original:  English
COMMUNICATION FROM THE SEPARATE CUSTOMS TERRITORY
OF TAIWAN, PENGHU, KINMEN AND MATSU
The following communication, dated 3 October 2002, has been received from the Permanent
Mission of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.
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TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 OF THE
PROTOCOL ON THE ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA ("CHINA")
Questions from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu
to China concerning Trade-Related Investment
1. Questions relating to the "Law of the PRC on Chinese-Foreign Equity Joint Ventures" , the
"Law of the PRC on Foreign Capital Enterprises" , and the "Law of the PRC on Chinese-Foreign
Contractual Joint Ventures".
(a) According to paragraph 203 of its Working Party Report, China agreed that upon
accession, it would comply fully with the TRIMs Agreement and would eliminate
foreign-exchange balancing and trade-balancing requirements, local content
requirements and export performance requirements.  In 2002, based on its
commitments, China already revised the Law of the PRC on Chinese-Foreign Equity
Joint Ventures , the Law of the PRC on Foreign Capital Enterprises  and the Law of
the PRC on Chinese-Foreign Contractual Joint Ventures  (or the Three Capital Laws
for short).  Meanwhile, enterprises still have doubts about the implementation of the
Three Capital Laws .
• Please explain how the central government ensures that local governments
comply with the new Three Capital Laws .
• Please explain the procedures by which an enterprise can seek the protection
of its rights if asked to follow the old Three Capital Laws , and please provide
the relevant laws and regulations.
(b) If an enterprise has put foreign-exchange balancing, trade-balancing, local content,
export performance and similar restrictions into  its contract or by-law of association
based on the old wording of the Three Capital Laws , please clarify whether,
according to the new Three Capital Laws , that enterprise has a right to amend its
contract or by-law of association in order to match the new laws.  What are the
relevant amendment procedures and consultation channels?  Please provide the
relevant regulations and information.G/TRIMS/W/24
Page 2
2. Questions relating to the "Guiding Industry Catalog of Foreign Investment"  (issued by
MOFTEC, 11 March 2002).
(a) According to paragraph 203 of China's Work ing Party Report, permission to invest,
import licenses, quotas and tariff rate quotas shall be granted without regard to the
existence of competing Chinese domestic suppliers.  Furthermore, according toChina's Guiding Industry Catalog of Foreign Investment , revised in 2002, the
production of recordable CDs (including CD-R, CD-RW, DVD-R and DVD-ARM) is
listed as an industry where foreign investment is encouraged, whereas it used to be
listed as a restricted area.  However, the production capacity of foreign enterprises is
regulated under a notice entitled Regarding Further Strengthen the Management of
Duplicating CD  (Dept. of Central Advocating, Notice No. 7, 1996).  We understand
that this notice is intended to maintain the quantity of recordable CDs in China's CDindustry.  Please explain how this notice can be justified under the WTO framework.
(b) In addition, in China's Guiding Industry Catalog of Foreign Investment , revised in
2002, cellular phone manufacturing is listed as an industry in which foreign
investment is encouraged, whereas it used to be listed as a restricted area.  However,
permission to produce cellular phones by foreign-invested enterprises is regulated byState Council Notice No. 5, 1998, which places restrictions on production and the
percentage of domestic sales.  Please explain how China's State Council Notice No. 5,
1998, conforms with paragraph 203 of its Working Party Report, and how it can be
justified.  Please also provide details of current laws and regulations pertaining to the
manufacture and domestic sale of cellular phones by foreign-invested enterprises.
3. Questions relating to the "Regulations of the PRC on the Exploitation of On-Shore Petroleum
Resources in Cooperation with Foreign Enterprises"  (State Council Order No. 317, 2001) and the
"Regulations of the PRC on the Exploitation of Offshore Petroleum Resources in Cooperation with
Foreign Enterprises"  (State Council Order No. 318, 2001).
According to paragraph 203 of its Working Party Report, China confirmed that the
allocation of and granting of permission or rights for importation and investment
would not be conditional upon performance requirements set by national or sub-
national authorities or subject to secondary conditions.  However, Article 18 of the
Regulations of the PRC on the Exploitation of On-Shore Petroleum Resources in
Cooperation with Foreign Enterprises  and Article 14 of the Regulations of the PRC
on the Exploitation of Offshore Petroleum Resources in Cooperation with Foreign
Enterprises  indicate that joint venture enterprises with a foreign partner must
accurately and in a timely manner report the state of their business in petroleum to
their Chinese partners during the process of implementing their contracts.  They must
also accurately and in a timely manner obtain numerical data, records, samples,
evidence, and other original data on each aspect of their petroleum business, and
provide these data and samples, according to regulations, to the Chinese petroleumcompany, as well as various reports on technology, economics, finance, and
administration.  In addition, Article 19 of the Regulations of the PRC on the
Exploitation of Offshore Petroleum Resources in Cooperation with Foreign
Enterprises  stipulates that Chinese Offshore Petroleum Company has the right to
dispatch personnel to participate in the general design or engineering design workbeing undertaken by the foreign operator in order to implement a petroleum contract.
Please explain how the measures described above may be justified under China's
WTO commitments, and how they conform to its Working Party Report.
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