World Trade Organization |
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WT/TPR/S/199 | |
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(08-1663) |
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Trade Policy Review Body |
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TRADE POLICY REVIEW Report by the Secretariat CHINA |
This report, prepared for the second Trade Policy Review of China, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Any technical questions arising from this report may be addressed to Mr. Masahiro Hayafuji (Tel.: 022 739 5873). Document WT/TPR/G/199 contains the policy statement submitted by |
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Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on China.
CONTENTS
Page
SUMMARY OBSERVATIONS ix
(1) Economic Environment ix
(2) Trade And Investment Policy Framework x
(3) Trade Policies and Practices by measure x
(4) Trade Policies By Sector xii
(5) Outlook xiv
I. Economic environment 1
(1) Introduction 1
(2) Recent Economic Developments 4
(3) Macroeconomic Policies 9
(i) Monetary policy 9
(ii) Fiscal policy 11
(4) Main Structural Reform Issues 13
(i) Environmental policies 13
(ii) Tax reforms 13
(iii) Financial sector reform 14
(iv) Labour market 16
(5) Developments in trade 17
(i) Composition of merchandise trade 17
(ii) Direction of merchandise trade 19
(iii) Composition of trade in services 19
(iv) Foreign investment 19
(6) Outlook 22
II. trade policy regime: framework and objectives 24
(1) Introduction 24
(2) Institutional and Legal Framework 24
(i) Institutional structure 25
(ii) Legal structure and the legislative process 27
(iii) Transparency 29
(iv) Centre–subnational relations and local barriers to internal trade 31
(3) Formulation, Administration, and Implementation of Trade Policy 31
(i) Main trade laws 31
(ii) Agencies involved in trade policy implementation 32
(4) Trade Policy Objectives 32
(5) Trade Agreements and Arrangements 33
(i) WTO 33
(ii) Regional agreements 33
(iii) Bilateral agreements 35
(iv) Unilateral preferences 38
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(6) Foreign Investment Regime 38
(i) Recent developments in FDI policy 38
(ii) Legislative framework and procedures 39
(iii) Examination and approval procedure 40
(iv) FDI incentives 41
(v) Bilateral investment and tax agreements 42
III. trade policies and practices by measure 43
(1) Introduction 43
(2) Measures Directly Affecting Imports 44
(i) Procedures 44
(ii) Customs valuation and rules of origin 46
(iii) Tariffs 47
(iv) Indirect taxes affecting imports 56
(v) Import prohibitions, restrictions, and licensing 57
(vi) State trading 59
(vii) Contingency measures 60
(viii) Standards and other technical requirements 63
(ix) Government procurement 70
(x) Import-related financing 73
(3) Measures Directly Affecting Exports 73
(i) Procedures 73
(ii) Export taxes 74
(iii) Tax rebates on exports 74
(iv) Tax concessions under processing trade 75
(v) Export prohibitions, restrictions and licensing 76
(vi) Measures maintained by importing countries 79
(vii) State trading 79
(viii) Export promotion and marketing assistance 79
(4) Measures Affecting Production And Trade 81
(i) Taxation and tax incentives 81
(ii) Direct transfers and non-tax subsidies 88
(iii) Other industrial policies and measures 89
(iv) State-owned enterprises, privatization, and corporate governance 92
(v) Competition and consumer protection policy 100
(vi) Intellectual property rights 103
IV. trade policies by sector 109
(1) Introduction 109
(2) Agriculture 111
(i) Features and market developments 111
(ii) Policy objective and administration 112
(iii) Policy instruments 114
(3) Energy 118
(i) Introduction 118
(ii) Key sub-sectors 119
(4) Manufacturing 128
(i) Iron and steel 128
(ii) Textiles and clothing 130
(iii) Automotive sector 132
(iv) Electronics and information industry 134
(5) Services 135
(i) Overview 135
(ii) Commitments under the General Agreement on Trade in Services 137
(iii) Financial Services 137
(iv) Telecommunications 163
(v) Transport services 168
(vi) Distribution services 175
(vii) Postal services 179
(viii) Legal services 182
(ix) Accountancy services 185
(x) Tourism 187
REFERENCES 189
APPENDIX TABLES 195
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CHARTS
I. ECONOMIC ENVIRONMENT
I.1 Product composition of merchandise trade, 2004 and 2007 18
I.2 Direction of merchandise trade, 2004 and 2007 20
I.3 Trade in services, 2004 and 2006 21
III. TRADE POLICIES AND PRACTICES BY MEASURES
III.1 Average applied MFN tariff rates 2005 and 2007 and final bound tariff,
by HS section 50
III.2 Distribution of MFN tariff rates, 2005 and 2007 51
III.3 Tariff escalation by 2-digit ISIC industry, 2007 52
III.4 Anti-dumping cases,
IV. TRADE POLICIES BY SECTOR
IV.1 Composition of GDP, 2006 136
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Basic economic and social indicators, 2004-07 2
I.2 Selected macroeconomic indicators, 2004-07 5
I.3 Balance of payments, 2004-07 (January-June) 8
III. TRADE POLICIES AND PRACTICES BY MEASURES
III.1
III.2 Structure of the MFN tariff 49
III.3 Summary analysis of
III.4
III.5 Government procurement of goods, construction projects, and services, 2004-06 70
III.6 Government procurement by procurement entities, 2004-06 71
III.7 Government procurement by procurement method, 2004-06 72
III.8 Tax revenue, 2004-06 82
III.9 Excise (or consumption) tax, 2007 83
III.10 VAT, 2007 85
III.11 Selected government transfers, 2004-06 88
III.12 Tradeable and non-tradeable shares of companies listed in
III.13 Number of enterprises, 2004-06 96
III.14 Enforcement of intellectual property rights, 2004-06 107
IV. TRADE POLICIES BY SECTOR
IV.1 Textiles and clothing industry, 2005-06 130
IV.2 Automotive industry, 2004-06 132
IV.3 Total assets of the financial system, 2003-06 138
IV.4 Financing by the domestic non-financial secor, 2005-06 139
IV.5 Total assets of banking institutions, 2003-06 140
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IV.6 Insurance premiums, 2001-06 152
IV.7 Overview of the stock market, 2000-06 157
IV.8 Telecommunications statistics, 2001-06 163
IV.9 Basic telecommunications service providers, 2005 164
IV.10 Law firms and representative offices, 2002-07 183
IV.11
APPENDIX TABLES
I. ECONOMIC ENVIRONMENT
AI.1 Merchandise exports by group of products, 2004-07 197
AI.2 Merchandise imports by group of products, 2004-07 198
AI.3 Merchandise exports by destination, 2004-07 199
AI.4 Merchandise imports by origin, 2004-07 200
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
AII.1
AII.2 Principal notifications under WTO Agreements, as at
AII.3 Involvement in the WTO dispute settlement mechanism, March 2008 209
III. TRADE POLICIES AND PRACTICES BY MEASURES
AIII.1 Inward duty, 2007 211
AIII.2 Imports allocated to state-trading enterprises, 2005-07 212
AIII.3 Export quotas allocated to state-trading enterprises, 2005-06 213
AIII.4 Tax revenues allocated to different levels of government: central, local, and
shared taxes, 2007 215
AIII.5 Special economic and other zones, 2006 216
AIII.6 Selected competition-related legislation, 2007 217
AIII.7
AIII.8 Patent and trade mark statistics, 2004-06 219
AIII.9 Intellectual property rights cases dealt with by courts, 2006 220
IV. TRADE POLICIES BY SECTOR
AIV.1 Tariff quota utilization in
AIV.2
AIV.3 Banking institutions in
AIV.4 Registration requirements and application procedures in maritime transport service, 2008 230
SUMMARY OBSERVATIONS
(1) Economic Environment
1. Continued trade liberalization has remained an integral part of the
2. In 2007, real GDP growth in
3. Since its previous
4. Since
5. With revenue increasing faster than expenditure since its previous
6. Notwithstanding
(2) Trade and Investment Policy Framework
7. The overall aim of
8.
9. During the period under Review, two free-trade agreements entered into force (the
10. Although some aspects of
11.
(3) Trade Policies and Practices by Measure
12. Since its previous Trade Policy Review in 2006,
13. The tariff remains one of
14. Whereas the average applied MFN tariff has remained largely unchanged, non-tariff barriers have been reduced; for example, the number of lines subject to automatic import licensing has declined.
15.
16.
17. China has continued to use policy tools to channel resources into certain activities, with a view, inter alia, to promoting investment in high technology, encouraging innovation, and protecting the environment (by, for example, reducing energy consumption). These tools include tax incentives, non-tax subsidies, price controls, and various forms of "guidance" including sector-specific "industrial policies". In April 2006,
18. Reform of the public sector, including state-owned enterprise (SOEs), remains a major challenge. Recent progress in the reform of SOEs by, inter alia, their reorganization, corporatization and privatization, has improved their performance; by reducing state involvement or freeing-up resources once owned by the State, the reform has also helped the development of the private (non-public) sector. Nonetheless, SOEs continue to play a dominant role in the economy (accounting for some 35% of GDP) and enjoy monopoly positions in certain sectors. By contrast, the private sector continues to face constraints, including in access to finance. A main challenge to SOEs is to raise their productivity through further reforms; private firms operating in
19. Corporate governance has been improved not only because of the development of the private sector and the corporatization of SOEs, but also because of the entry into force of the Law on Enterprise Bankruptcy, which applies to all enterprises (including SOEs) in
20. One of the major targets of the Eleventh Five-Year Plan is to ensure adequate returns to investment in innovation by protecting intellectual property rights. Thus,
(4) Trade Policies by Sector
21.
22. One of the main changes concerning agriculture has been the shift from taxing the sector to supporting it. Most agricultural taxes were eliminated in 2006, and farmers have been provided with financial support (since 2004). Nonetheless, agriculture's contribution to GDP has continued to decline (from 13.4% in 2004 to 11.8% in 2006). With agriculture accounting for some 40% of total employment in 2006, labour productivity is barely one-fifth of the level in the rest of the economy, and there is still a considerable surplus of labour in the sector. As a result, average rural incomes have fallen further behind the urban average, thus widening the gap between rural and urban living standards. The authorities are well aware of the need to further develop rural areas, raise productivity in the sector, and improve farmers' welfare. Against this background, the rural reform process has continued as stipulated in the Eleventh Five-Year-Plan (2006-10) through the implementation of a series of measures to increase productivity including improved infrastructure, production technologies, and training (for farmers). The plan also encourages the movement of rural labour, and reiterates the Government's intention to continue increasing the support granted to agriculture through direct transfers and subsidies.
23. Agricultural policy has traditionally been aimed at ensuring an adequate supply of food at stable prices. To meet this goal, procurement, distribution and marketing restrictions are used in addition to measures such as price controls and import and export restrictions.
24. Since the previous Review, there have been no major changes in policies concerning
25. Reflecting greater liberalization compared to other sectors of the economy, manufacturing, particularly by FIEs, and resulting exports, has been the main driving force behind
26. While the Government's intention is to open the services sector further to private and foreign participation as a means of boosting growth and providing alternative employment to agriculture, the pace of liberalization has been slower than that for manufacturing. As a result, most services sectors are still subject to a high degree of state control and, therefore, lack of competition.
27.
28. Since 2006,
29. Limitations to foreign participation still exist for maritime and air transport, legal and accounting, tourism, and postal services. As an important step in the reform of the latter, the China Post Group Corporation was formally established on
(5) Outlook
30. With continuing strong growth in the latter half of 2007,
31. First, there is the challenge posed by widening income disparities among regions and between urban and rural areas, one of the primary causes of which is wage differentials reflecting differences in labour productivity. A related challenge is the need to facilitate the movement of surplus labour from relatively low-productivity agriculture into other activities, notably services, which tend to be less labour-intensive than manufacturing. Moreover, as growth in the labour force slows, technological progress will assume much greater importance as a source of economic growth and productivity improvement, so that China needs to continue to pursue its goal of substantially raising expenditure on R&D as a percentage of GDP (and improve protection of intellectual property).
32. Although no forecasts of economic growth for 2008 were available from the authorities, the World Bank envisages a slowdown to 9.6% owing to decelerating exports and a weakening global outlook. Such a slowdown will bring the growth rate more into line with the Government's target of 8%, something that macroeconomic policies, especially monetary policy, have hitherto proved ineffective in achieving. Such a cooling of the economy could reduce inflationary pressure and contribute to its re-balancing. Nonetheless, there remains the immediate issue concerning the ability of monetary policy to combat rising inflation. In this regard, a more flexible exchange rate regime could enable