2014 Report to Congress on China's WTO Compliance

2014 Report to Congress
On China’s WTO Compliance
United States Trade Representative
December 2014

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2014 USTR Report to Congress on China’s WTO Compliance
TTAABBLLEE OOFF CCOONNTTEENNTTSS
FOREWORD ……………………………………………………………………………………..………………………………………….. 1
EXECUTIVE SUMMARY ………………………………………………………………………….……………………………………… 2
OVERVIEW …………………………………………………………………………………………………………………………………..……. 2
CHINA’S FIRST 13 YEARS AS WTO MEMBER ………………………………………………………………………………………… 3
2014 DEVELOPMENTS…………………………………………………………………………………………………………………………… 5
CONCLUSIONS REGARDING CHINA’S WTO COMPLIANCE EFFORTS …………………………………………….……… 8
PRIORITY ISSUES ….……..…………………………………………………….………………………………………………………….…….. 8
Intellectual Property Rights ……………………………………………………………………………………………..………. 8
Industrial Policies …………………………………………………………………………………………………………….……… 10
Services ……………………………………………………………………………………………………………..…………………… 14
Agriculture ……………………………………………………………………………………………………………………….……….… 17
Transparency …………………………………………………………………………………………………………………….…..… 18
Legal Framework …………………………………………………………………………………………………………….……… 19
NEXT STEPS …………………………………………………………………………………………………………………………… 19
Table 1: Summary Conclusions regarding China’s WTO Compliance Efforts ………………..……………………… 21
INTRODUCTION ………………………………………………………………………………………………………………………...… 27
CHINA’S WTO ACCESSION NEGOTIATIONS ………………………………………………………………………………………… 27
CHINA’S WTO COMMITMENTS …………………………………….…………………………………………………………..…… 27
OVERVIEW OF U.S. ENGAGEMENT ………………………………………………………………………………………… 29
DIALOGUE ………………………………………………………………………………………………………………………..………… 29
Bilateral Engagement ………………………………………………………………….………………………………..………… 29
Multilateral Meetings ………………………………………………………………….…………………………………..……… 32
ENFORCEMENT ………………………………………………………………………………..….……………………………………………… 32
Table 2: Active U.S. WTO Disputes against China ………………………………………………………………………….. 36
CHINA’S WTO COMPLIANCE ………………………………………………………………….……………………..……… 38
TRADING RIGHTS ……………....……………………………………………………….………………………………………………….……… 38
IMPORT REGULATION ………………………………………………………………….…………………………………..……… 39
Tariffs ………………………………………………………………….…………………………………..……… 39
Customs and Trade Administration ………………………………………………………………….……….……… 40
CUSTOMS VALUATION ………………………………………………………………….…………………………………..……… 40
RULES OF ORIGIN ………………………………………………………………….…………………………………..……… 42
IMPORT LICENSING ………………………………………………………………….…………………………………..……… 42
Non-tariff Measures ………………………………………………………………….…………………………………..……… 44
Tariff-rate Quotas on Industrial Products …………………………………………………………………………..……… 44
Other Import Regulation ………………………………………………………………….…………………………………..……… 45
ANTIDUMPING ………………………………………………………………….…………………………………..……… 45
COUNTERVAILING DUTIES ………………………………………………………………….…………………………………..……… 48

CHINA’S WTO COMPLIANCE (cont’d)
IMPORT REGULATION (cont’d)
Other Import Regulation (cont’d)
SAFEGUARDS ………………………………………………………………….…………………………………..……… 50
EXPORT REGULATION ………………………………………………………………….…………………………………..……… 50
INTERNAL POLICIES AFFECTING TRADE …….…………………………………………………………….……..……… 54
Non-discrimination ………………………………………………………………….…………………………………..……… 54
Taxation …………….………………………………………………………………….…………………………………..……… 56
Subsidies …………….………………………………………………………………….…………………………………..……… 57
Price Controls ………………………………………………………………….…………………………………..……… 61
Standards, Technical Regulations and Conformity Assessment Procedures ………………………………... 63
RESTRUCTURING OF REGULATORS ………………………………………………………………………………………… 64
STANDARDS AND TECHNICAL REGULATIONS ……………………………………………………………………………….… 64
CONFORMITY ASSESSMENT PROCEDURES ………………………………………………………………………………………… 72
TRANSPARENCY ………………………………………………………………….…………………………………..…….. 78
Other Internal Policies ………………………………………………………………….…………………………………..……… 78
STATE-OWNED AND STATE-INVESTED ENTERPRISES …………………………………………………………….……….…… 78
STATE TRADING ENTERPRISES ………………………………………………………………………………………… 81
GOVERNMENT PROCUREMENT ………………………………………………………………………………………… 81
INVESTMENT ………………………………………………………………………………………………………………………………….. 86
AGRICULTURE ………………………………………………………………………………………………………………………………….. 97
Tariffs ………………………………………………………………………………………………………………………………….. 99
Tariff-rate Quotas on Bulk Agricultural Commodities ……………………………………………………………………. 100
China’s Biotechnology Regulations ………………………………………………………………………………………… 101
Sanitary and Phytosanitary Issues ………………………………………………………………………………………… 103
Inspection-related Requirements ………………………………………………………………………………………… 109
Domestic Support ………………………………………………………………………………………………………..………….. 110
Export Subsidies ………………………………………………………………………………………………………..………….. 111
INTELLECTUAL PROPERTY RIGHTS ………………………………………………………………………………………… 111
Legal Framework ………………………………………………………………….…………………………………..……… 112
Enforcement ………………………………………………………………….…………………………………..……… 117
SERVICES ………………………………………………………………………………………………………………………………….. 122
Distribution Services ………………………………………………………………….…………………………………..…….… 124
WHOLESALING SERVICES ………………………………………………………………….…………………………………..……… 124
RETAILING SERVICES ………………………………………………………………….…………………………………..……… 126
FRANCHISING SERVICES ………………………………………………………………….…………………………………..……… 127
DIRECT SELLING SERVICES ………………………………………………………………….…………………………………..……… 127
Financial Services ………………………………………………………………….…………………………………..……… 128
BANKING ………………………………………………………………….…………………………………..……… 128
MOTOR VEHICLE FINANCING ………………………………………………………………………………………… 130
INSURANCE ………………………………………………………………….…………………………………..……… 131
FINANCIAL INFORMATION ………………………………………………………………….…………………………………..……… 133
ELECTRONIC PAYMENT SERVICES ………………………………………………………………………………………… 133

CHINA’S WTO COMPLIANCE (cont’d)
SERVICES (cont’d)
Legal Services ………………………………………………………………….…………………………………..……… 134
Telecommunications ………………………………………………………………….…………………………………..……… 136
Audiovisual and Related Services ………………………………………………………………………………………… 137
Internet-related Services ………………………………………………………………….…………………………………..……… 138
Construction and Related Engineering Services …………………………………………………………………………… 140
Education Services …………………………………………………………………………………………………………………….. 141
Express Delivery Services ………………………………………………………………….…………………………………..……… 142
Logistics Services …………………………………………………………………………………………………………………….. 143
Aviation Services …………………………………………………………………………………………………………………….. 143
Maritime Services …………………………………………………………………………………………………………………….. 144
Tourism and Travel-related Services ………………………………………………………………………………………… 144
LEGAL FRAMEWORK …………………………………………………………………………………………………………………….. 144
Transparency …………………………………………………………………………………………………………………….. 145
OFFICIAL JOURNAL …………………………………………………………………………………………………………………….. 145
TRANSLATIONS …………………………………………………………………………………………………………………….. 146
PUBLIC COMMENT …………………………………………………………………………………………………………………….. 146
ENQUIRY POINTS …………………………………………………………………………………………………………………….. 148
Uniform Application of Laws ………………………………………………………………………………………………………. 148
Judicial Review …………………………………………………………………………………………………………………….. 149
Other Legal Framework Issues ………………………………………………………………………………………………………. 149
ADMINISTRATIVE LICENSING ……………………………………………………………………………………………….. 149
COMPETITON POLICY …………………………………………………………………………………………………………………….. 150
COMMERCIAL DISPUTE RESOLUTION ……………………………………………………………………………………………….. 152
LABOR LAWS …………………………………………………………………………………………………………………….. 153
LAND LAWS …………………………………………………………………………………………………………………….. 154
CORRUPTION …………………………………………………………………………………………………………………….. 154
APPENDICES
Appendix 1: List of Written Submissions Commenting on China’s WTO Compliance
September 17, 2014
Appendix 2: List of Witnesses Testifying on China’s WTO Compliance
October 1, 2014
Appendix 3: U.S. Fact Sheet for 25th U.S.-China Joint Commission on Commerce and Trade Meeting
December 18, 2014
Appendix 4: Excerpts from Joint Fact Sheet for 6th U.S.-China Strategic and Economic Dialogue
July 11, 2014

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ACFTU All China Federation of Trade Unions
APEC Asia-Pacific Economic Cooperation
AQSIQ State Administration of Quality Supervision, Inspection and Quarantine
BOFT Bureau of Fair Trade for Imports and Exports
CFDA China Food and Drug Administration
CIRC China Insurance Regulatory Commission
CNCA National Certification and Accreditation Administration
CNIS China National Institute for Standards
Codex Codex Alimentarius
CUP China UnionPay
GAPP General Administration of Press and Publication
IBII Bureau of Industry Injury Investigation
ISO International Organization for Standardization
JCCT U.S.-China Joint Commission on Commerce and Trade
MIIT Ministry of Industry and Information Technology
MOA Ministry of Agriculture
MOC Ministry of Construction
MOF Ministry of Finance
MOFCOM Ministry of Commerce
MOFTEC Ministry of Foreign Trade and Economic Cooperation
MOH Ministry of Health
MOST Ministry of Science and Technology
NCA National Copyright Administration
NDRC National Development and Reform Commission
NPC National People’s Congress
OIE World Organization for Animal Health
PBOC People’s Bank of China
SAC Standardization Administration of China
SAIC State Administration for Industry and Commerce
SARFT State Administration of Radio, Film and Television
SASAC State-owned Assets Supervision and Administration Commission
SAT State Administration of Taxation
SCLAO State Council’s Legislative Affairs Office
SDPC State Development and Planning Commission
S&ED U.S.-China Strategic and Economic Dialogue
SFDA State Food and Drug Administration
SIPO State Intellectual Property Office
SPB State Postal Bureau
SPC Supreme People’s Court
WIPO World Intellectual Property Organization
WTO World Trade Organization

1
FFOORREEWWOORRDD
This is the thirteenth report prepared pursuant to
section 421 of the U.S.-China Relations Act of 2000
(P.L. 106-286), 22 U.S.C. § 6951 (the Act), which
requires the United States Trade Representative
(USTR) to report annually to Congress on compliance
by the People’s Republic of China (China) with
commitments made in connection with its accession
to the World Trade Organization (WTO), including
both multilateral commitments and any bilateral
commitments made to the United States. The report
also incorporates the findings of the Overseas
Compliance Program, as required by section
413(b)(2) of the Act, 22 U.S.C. § 6943(b)(2).
Like the prior reports, this report is structured as an
examination of the nine broad categories of WTO
commitments undertaken by China. Throughout the
report, USTR has attempted to provide as complete
a picture of China’s WTO compliance as possible,
subject to the inherent constraints presented by the
sheer volume and complexity of the required
changes to China’s trade regime and transparency
obstacles. The report identifies areas where
progress has been achieved and underscores areas
of concern, as appropriate, with regard to the
commitments that became effective upon China’s
accession to the WTO as well as those commitments
scheduled to be phased in over time.
The focus of the report’s analysis continues to be on
trade concerns raised by U.S. stakeholders that, in
the view of the U.S. Government, merit attention
within the WTO context. The report does not
attempt to provide an exhaustive analysis of those
concerns or the individual commitments made in
China’s WTO accession agreement that might be
implicated by them.
In preparing this report, USTR drew on its experience
in overseeing the U.S. Government’s monitoring of
China’s WTO compliance efforts. USTR chairs the
Trade Policy Staff Committee (TPSC) Subcommittee
on China, an inter-agency body whose mandate is,
inter alia, to assess China’s efforts to comply with its
WTO commitments. This TPSC subcommittee is
composed of experts from USTR, the Departments of
Commerce, State, Agriculture and Treasury, and the
U.S. Patent and Trademark Office, among other
agencies. It works closely with State Department
economic officers, Foreign Commercial Service
officers, Enforcement and Compliance officers and
Market Access and Compliance officers from the
Commerce Department, Foreign Agricultural Service
officers, Customs and Border Protection attachés
and Immigration and Customs Enforcement attachés
at the U.S. Embassy and Consulates General in China,
who are active in gathering and analyzing
information, maintaining regular contacts with U.S.
industries operating in China and maintaining a
regular dialogue with Chinese government officials
at key ministries and agencies. The subcommittee
meets in order to evaluate, coordinate U.S.
engagement of China in the trade context.
To aid in its preparation of this report, USTR also
published a notice in the Federal Register on August
15, 2014, asking for written comments and
testimony from the public and scheduling a public
hearing before the TPSC, which took place on
October 1, 2014. A list of the written submissions
received from interested parties is set forth in
Appendix 1, and the persons who testified before
the TPSC are identified in Appendix 2.

2
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Thirteen years ago, on December 11, 2001, China
acceded to the World Trade Organization. The terms
of its accession called for China to implement
numerous specific commitments over time, with all
key commitments phased in by December 11, 2006.
The data confirm a dramatic expansion in trade and
investment among China and its many trading
partners, including the United States, since China
joined the WTO:
 U.S. exports of goods to China totaled $122
billion in 2013, representing an increase of 535
percent since 2001 and positioning China as the
United States’ largest goods export market
outside of North America.
 U.S. services exports reached $38 billion in
2013, representing an increase of 603 percent
since 2001. Services supplied through majority
U.S.-invested companies in China also have been
increasing dramatically, totaling an additional
$39 billion in 2012, the latest year for which
data is available.
Despite these results, however, the overall picture
currently presented by China’s WTO membership
remains complex, largely due to the Chinese
government’s interventionist policies and practices
and the large role of state-owned enterprises and
other national champions in China’s economy.
In 2014, as in past years, when trade frictions have
arisen, the United States pursued dialogue with
China to resolve them. However, when dialogue
with China has not led to the resolution of key trade
issues, the United States has not hesitated to invoke
the WTO’s dispute settlement mechanism. Since
China’s accession to the WTO, the United States has
brought 15 WTO cases against China, more than
twice as many WTO cases as any other WTO
member has brought against China. In doing so, the
United States has placed a strong emphasis on the
need for China to adhere to WTO rules, holding
China fully accountable as a mature participant in,
and a major beneficiary of, the WTO’s global trading
system.
The United States recognizes the tremendous
potential of the U.S.-China trade relationship for
both the United States and China, and it therefore
has sought to underscore the importance of China’s
economic reform. The United States views
economic reform in China as a win-win for the
United States and China. If China is going to deal
successfully with its economic challenges at home, it
must allow market forces to operate, which requires
altering the role of the state in planning the
economy. It likewise must reform state-owned
enterprises, eliminate preferences for domestic
national champions and remove market access
barriers currently confronting foreign goods and
services. Economic reform in China is also strongly
in the United States’ interest, not only because the
Chinese government’s interventionist policies and
practices and the large role of state-owned
enterprises in China’s economy are principal drivers
of trade frictions, but also because a sustainable
Chinese economy will lead to increased U.S. exports
and a more balanced U.S.-China trade and
investment relationship will help drive global
economic growth.
China’s first 13 years as a WTO member are
described below, followed by a review of key
developments in 2014. Then, USTR describes its
conclusions regarding China’s WTO compliance
efforts to date, which are subsequently summarized
in Table 1 (beginning on page 21).
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The commitments to which China’s leaders agreed
when China joined the WTO in 2001 were sweeping
in nature and required the Chinese government to
make changes to hundreds of laws, regulations and
other measures affecting trade and investment.
These changes largely coincided with the economic

3
reform goals of China’s leaders at the time, which
built on the economic reforms that China had begun
under Deng Xiaoping in 1978. The Chinese leaders
who negotiated the terms of China’s WTO accession
correctly believed that China’s economy needed to
rely more on market signals and less on Chinese
government economic planners and state-owned
enterprises. Indeed, these leaders had initiated a
dramatic and rapid reform of state-owned
enterprises in the mid-1990s.
Following China’s accession to the WTO, the Chinese
government took many steps to implement China’s
numerous commitments. These steps
unquestionably deepened China’s integration into
the WTO’s rules-based international trading system,
while also strengthening China’s ongoing economic
reforms.
New leaders took over in China in 2003, two years
after China’s WTO accession. While the Chinese
government continued to take steps to implement
China’s outstanding WTO commitments, it generally
did not pursue economic reforms as aggressively as
before. Instead, the Chinese government
increasingly emphasized the state’s role in the
economy, diverging from the path of economic
reform that had driven China’s accession to the
WTO. With the state leading China’s economic
development, the Chinese government pursued new
and more expansive industrial policies, often
designed to limit market access for imported goods,
foreign manufacturers and foreign service suppliers,
while offering substantial government guidance,
resources and regulatory support to Chinese
industries, particularly ones dominated by state-
owned enterprises. This heavy state role in the
economy, reinforced by unchecked discretionary
actions of Chinese government regulators,
generated serious trade frictions with China’s many
trade partners, including the United States.
In particular, beginning with the creation of the
State-owned Assets Supervision and Administration
Commission (SASAC) in 2003, China’s new leaders
de-emphasized their predecessors’ move toward a
greater reliance on market forces and a lesser
reliance on Chinese government economic planners
and state-owned enterprises. Instead, the new
leaders set out to bolster the state sector by seeking
to improve the operational efficiency of state-owned
enterprises and by orchestrating mergers and
consolidations in order to make these enterprises
stronger. These actions soon led to institutionalized
preferences for state-owned enterprises and the
creation of national champions in many sectors.
By 2006, when China had taken steps to implement
the last of its key WTO commitments, China’s policy
shift became more evident. It was at this time that
the United States began reporting on Chinese
government policies and practices that
demonstrated a stronger embrace of state
capitalism, a trend that continued into 2012. The
United States also reported that some of these
policies and practices suggested that China had not
yet fully embraced key WTO principles, such as
market access, non-discrimination and transparency.
Exacerbating this situation was China’s incomplete
adoption of the rule of law, including through
government officials’ abuse of administrative
processes.
For example, as USTR reported previously, and as
remains true today, confidential accounts from
foreign enterprises indicate that Chinese
government officials, acting without fear of legal
challenge, at times require foreign enterprises to
transfer technology as a condition for securing
investments approvals, even though Chinese law
does not – and cannot under China’s WTO
commitments – require technology transfer.
Similarly, in the trade remedies context, China’s
regulatory authorities at times seem to pursue
antidumping and countervailing duty investigations
and impose duties for the purpose of striking back at
trading partners that have legitimately exercised
their rights under WTO trade remedy rules. As three
WTO cases won by the United States confirm,
China’s regulatory authorities appear to pursue
these investigations even when necessary legal and
factual support for the duties is absent. More

4
recently, U.S. industry has asserted that China’s
competition policy enforcement authorities not only
are targeting foreign companies, but also at times
use Anti-monopoly Law investigations as a tool to
protect and promote domestic national champions
and domestic industries.
By 2013, when China’s next leadership transition
was complete, some positive signs emerged
suggesting a strong commitment among China’s new
leaders to further economic reform. As USTR noted
in last year’s report, a series of developments in
2013 seemed to confirm a re-focusing of China’s
energies and a high-level determination to
accelerate needed economic reform, which, if
realized, would provide tremendous benefits not
only to China but also to its trading partners.
The new Chinese leadership’s focus on economic
reform in China led to a Decision reached in
November 2013 at the Third Plenum of the 18th
Central Committee of the Chinese Communist Party.
The Third Plenum Decision endorsed a number of
far-reaching economic reform pronouncements,
calling for the market to play a “decisive” role in
allocating resources, reducing Chinese government
intervention in the economy, accelerating China’s
opening up to foreign goods and services, reforming
China’s state-owned enterprises and improving
transparency and the rule of law to allow fair
competition in China’s market. Although these
important pronouncements have yet to be fully
translated into actions that would significantly
change China’s trade regime, much of the broad
policy direction that they potentially indicate is
encouraging.
Another notable development took place in July
2013, when China announced that it was prepared
to negotiate a high-standard Bilateral Investment
Treaty (BIT) with the United States. This
announcement was followed a few months later by
the creation of the Shanghai Free Trade Zone, which
was intended to serve as a pilot project for
significant trade and investment liberalization and
financial reform. While little material reduction of
trade and investment restrictions has occurred to
date, the BIT negotiations have proceeded with
China’s full engagement.
Despite this re-focusing on economic reform,
however, a wide range of Chinese policies and
practices continued to generate significant concerns
among U.S. stakeholders in 2014. The Chinese
government’s provision of preferences and financial
support to state-owned enterprises and domestic
national champions continued to skew the
commercial playing field in many sectors, both in
China’s market and abroad. In addition, major areas
of specific concern continued to include: serious
problems with intellectual property rights
enforcement, including in the area of trade secrets;
indigenous innovation policies; technology transfer
initiatives; export restraints; government
subsidization; the development of unique national
standards; investment restrictions; troubling
agricultural policies directly blocking U.S. market
access; inappropriate use of anti-monopoly and
trade remedy laws; transparency; and China’s slow
movement toward accession to the WTO
Government Procurement Agreement (GPA).
Going forward, as reported in prior years, the United
States looks to China to reduce market access
barriers, uniformly follow the fundamental principles
of non-discrimination and transparency, significantly
reduce the level of government intervention in the
economy, fully institutionalize market mechanisms,
require state-owned enterprises to compete with
other enterprises on fair and non-discriminatory
terms, and fully embrace the rule of law. Taking
these steps is critical to realizing the tremendous
potential presented by China’s WTO membership,
including the breadth and depth of trade and
investment – and prosperity – possible in a thriving,
balanced global trading system. China’s new leaders
seem to have embraced many elements of this
approach, and the United States will continue to
work with China going forward to help make it a
reality.

5
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In 2014, the United States worked hard to increase
the benefits that U.S. businesses, workers, farmers,
ranchers, service providers and consumers derive
from trade and economic ties with China.
Throughout the past year, the United States focused
on outcome-oriented dialogue at all levels of
engagement with China, while also taking concrete
steps to enforce U.S. rights at the WTO as
appropriate in areas where dialogue had not
resolved U.S. concerns.
On the bilateral front, the United States and China
pursued numerous formal and informal meetings
and dialogues over the past year, including working
groups and high-level meetings under the auspices
of the U.S.-China Strategic and Economic Dialogue
(S&ED) and the U.S.-China Joint Commission on
Commerce and Trade (JCCT). The United States and
China held their sixth S&ED meeting in July 2014 and
the 25th
meeting of the JCCT in December 2014.
Constructive dialogue also took place when
President Xi hosted President Obama in Beijing
following the APEC Leaders Meeting in November
2014. The United States used all of these avenues to
engage China’s leadership on trade and economic
matters and to seek resolutions to a number of
pressing trade issues.
The two sides were able to make significant progress
on the following key trade issues through their
bilateral engagement in 2014:
 While both the United States and China
acknowledged that the government properly
can take measures to encourage innovation,
China clarified and underscored that it will treat
intellectual property rights owned or developed
in other countries the same as domestically
owned or developed intellectual property rights.
China further agreed that enterprises are free to
base technology transfer decisions on business
and market considerations, and are free to
independently negotiate and decide whether
and under what circumstances to assign or
license intellectual property rights to affiliated
or unaffiliated enterprises.
 China committed to take several specific steps
to streamline and speed up its regulatory review
and approval system for new pharmaceuticals.
 China committed to take several specific steps
to streamline and speed up its regulatory review
and approval system for new medical devices.
 China recognized that the objective of
competition policy is to promote consumer
welfare and economic efficiency rather than
promote individual competitors or industries,
and that enforcement of China’s competition
laws should be fair, objective, transparent and
non-discriminatory. China agreed to provide any
party under an Anti-monopoly Law investigation
with information about the enforcement
agency’s concerns and an effective opportunity
for the party to present evidence in its defense.
 China committed that, in Anti-monopoly Law
enforcement proceedings, the Chinese
authorities would treat domestic and foreign
companies equally and normally would permit
an investigated foreign company to have foreign
counsel present, to advise it and to provide
information on its behalf.
 China agreed to hold an annual, multi-
ministerial dialogue with the United States at
the Vice Minster level to carry out balanced,
mutually beneficial discussions addressing
science-based agricultural innovation and the
increased use of innovative technologies in
agriculture.
 In the area of geographical indications (GIs),
China agreed that a term is not eligible for
protection as a GI in its territory where the term
is generic in its territory, such as trademarks or
common names like “parmesan” and “feta”
cheese.

6
 China committed to pursue criminal and other
actions to deter the misappropriation of trade
secrets, to ensure that criminal and civil cases
are tried and the resulting judgments are
published, and to protect trade secrets
contained in materials submitted by companies
as part of regulatory, administrative and other
proceedings.
 China confirmed that trade secrets submitted to
the government in administrative or regulatory
proceedings are to be protected from improper
disclosure to the public and only disclosed to
government officials in connection with their
official duties and that government officials who
illegally disclose companies’ trade secrets are to
be subject to administrative or legal liability.
China further committed to study various
specified ways in which it could improve its
laws, regulations and administrative procedures
governing the protection of trade secrets in the
context of administrative or regulatory
proceedings.
 China committed to protect the legal rights of
inventors in respect of their inventions and
creations, and to respect the legitimate rules
and regulations developed by employers and
the legitimate contracts between employers and
inventors concerning inventor remuneration
and awards.
 China committed to strengthen enforcement
against unlawful trademark counterfeiting and
copyright piracy activities in the online
environment and to deter the occurrence of
infringement and counterfeiting through
criminal, civil and administrative remedies and
penalties. China further committed to classify
products with significant impacts on public
health and safety as priorities, and to carry out
enhanced enforcement actions.
 China committed to develop and seriously
consider amendments to the Drug
Administration Law that will require regulatory
control of the manufacturers of bulk chemicals
that can be used as active pharmaceutical
ingredients.
 China committed to further deepen the reform
of state-owned enterprises by improving and
standardizing modern corporate governance
structure and by reasonably increasing the
proportion of market-based recruitment of
management personnel for state-owned
enterprises.
 China committed to establish mechanisms that
strictly prevent the expansion of crude
steelmaking capacity and that are designed to
achieve, over the next five years, major progress
in addressing excess production capacity in the
steel sector.
 China agreed to improve its value-added tax
rebate system, including by actively studying
international best practices, and to deepen
communication with the United States on this
matter, including regarding its impact on trade.
 China committed to treat applicants for
administrative licenses and approvals under the
same rules and standards as the United States
with regard to the resources available to accept
and process applications and the number of
applications permitted at one time from an
applicant, and to strictly implement existing
laws and regulations to adequately protect any
trade secret or sensitive commercial
information provided by the applicant during
the administrative licensing or approval process,
as required by law.
 China committed to continue to improve
procedures for foreign investment approval and
record-filing.
 China committed to revise regulations to further
open the construction and engineering design
sectors to foreign suppliers.

7
 China confirmed that it welcomes foreign
insurance companies to submit applications for
approval of new internal branches and that it
will review and issue decisions on these
applications within the timeframes set forth in
Chinese law.
 China committed that it will translate into
English not only trade-related laws and
administrative regulations but also trade-related
departmental rules.
 China agreed to work with the United States to
combat illegal, unreported or unregulated
fishing, including by developing and sharing
improved data on trade in fish and fish
products.
 The United States and China committed to
intensify their negotiations toward a BIT.
While progress was made on some meaningful
issues, as described above, many issues of concern
remain. The United States will continue to engage
China on important issues in the areas of investment
restrictions, intellectual property rights
enforcement, technology localization, indigenous
innovation, market access for U.S. beef,
biotechnology product approvals, export restraints,
strategic emerging industries, state-owned
enterprises, government subsidization, excess
capacity, administrative licensing, government
procurement, taxation, standards development,
pharmaceuticals, medical devices, cosmetics, legal
services, financial services, Internet-related services,
telecommunications services, express delivery
services and transparency, among others.
On the enforcement side, the United States
continued to pursue a robust agenda in 2014. The
United States worked on seven separate WTO cases
against China during the course of the past year.
The United States won a WTO case against China this
past year in which it challenged antidumping and
countervailing duties that China had imposed on
imports of U.S. automobiles. In 2012 and 2013, the
United States won similar cases involving
antidumping and countervailing duties on imports of
U.S. chicken products known as “broiler products”
and antidumping and countervailing duties on
imports of U.S. grain-oriented electrical steel (GOES),
a product used by the power generating industry. In
each of these three cases, the United States has
been determined to hold China fully accountable for
adherence to WTO rules, given serious concerns
shared by the U.S. government and U.S.
stakeholders that China’s Ministry of Commerce
(MOFCOM) may have imposed the duties in question
in response to the United States having legitimately
exercised its rights under WTO trade remedy rules
against China.
In the WTO case involving U.S. GOES, China had
agreed to come into compliance with the WTO’s
rulings by July 2013. However, the redetermination
that MOFCOM issued appears to be inconsistent
with the WTO’s rulings. In January 2014, the United
States therefore launched a challenge to China’s
redetermination in a proceeding under Article 21.5
of the DSU. A decision from the panel hearing the
case is expected to be issued in 2015.
Similarly, in the WTO case involving U.S. chicken
broiler products, China had agreed to come into
compliance with the WTO’s rulings by July 2014.
Again, however, MOFCOM’s redetermination left the
challenged duties in place. As of December 2014,
the United States was evaluating next steps to take
in this dispute.
The United States won a WTO case in 2014
challenging highly trade-distortive export quotas,
export duties and other restraints maintained by
China on the export of rare earths, tungsten and
molybdenum, which are key inputs in a multitude of
U.S. manufacturing sectors and U.S.-made products,
including hybrid car batteries, wind turbines, energy-
efficient lighting, steel, advanced electronics,
automobiles, petroleum and chemicals. This win
follows a win in a similar case in 2012 involving
several raw materials of key importance to U.S.

8
steel, aluminum and chemicals industries. China
previously took steps to comply with the WTO’s
rulings in the first case, and it has agreed to comply
with the WTO’s rulings in the second case by May
2015.
Meanwhile, in another WTO case, in which the
United States successfully challenged restrictions
that China had put in place to create and maintain a
domestic national champion as the exclusive
supplier of electronic payment services, i.e., the
services needed to process most credit and debit
card transactions in China, China missed its July 2013
deadline for complying with the WTO’s rulings. In
October 2014, China’s State Council announced that
China would be opening its market to foreign
suppliers of electronic payment services, but as of
December 2014 it still had not taken any steps to do
so, and U.S. suppliers therefore remain blocked from
entering the market. Accordingly, the United States
was considering its further options at the WTO while
continuing to press China to comply with the WTO’s
rulings.
CCOONNCCLLUUSSIIOONNSS RREEGGAARRDDIINNGG CCHHIINNAA’’SS WWTTOO
CCOOMMPPLLIIAANNCCEE EEFFFFOORRTTSS
A summary of USTR’s conclusions regarding China’s
WTO compliance efforts is set forth in Table 1. Each
of these conclusions is discussed in more detail in
subsequent sections of this report, and at the end of
each of those sections, the report describes the next
steps that the United States intends to take going
forward to address shortcomings in China’s WTO
compliance efforts.
PPRRIIOORRIITTYY IISSSSUUEESS
At present, China’s trade policies and practices in
several specific areas cause particular concern for
the United States and U.S. stakeholders, including in
relation to China’s approach to the obligations of
WTO membership. The key concerns in each of
these areas are summarized below. In 2015, the
United States will continue to pursue vigorous and
expanded bilateral engagement to resolve the
serious issues that remain in these areas. The
United States also will continue to hold China
accountable for adherence to WTO rules when
dialogue does not resolve U.S. concerns, including
through the use of the dispute settlement
mechanism at the WTO.
IInntteelllleeccttuuaall PPrrooppeerrttyy RRiigghhttss
OOvveerrvviieeww
Since its accession to the WTO, China has
undertaken a wide-ranging revision of its framework
of laws and regulations aimed at protecting the
intellectual property rights (IPR) of domestic and
foreign right holders, as required by the WTO
Agreement on Trade-Related Aspects of Intellectual
Property Rights (the TRIPS Agreement). However,
inadequacies in China’s IPR protection and
enforcement regime continued to present serious
barriers to U.S. exports and investment. China was
again placed on the Priority Watch List in USTR’s
2014 Special 301 report. In addition, in 2014, USTR
announced the results of its 2013 Out-of-Cycle
Review of Notorious Markets, which identifies
Internet and physical markets that exemplify key
challenges in the global struggle against piracy and
counterfeiting. Several Chinese markets were
among those named as notorious markets.
TTrraaddee SSeeccrreettss
The protection and enforcement of trade secrets in
China is a serious problem that has attained a higher
profile in recent years. Thefts of trade secrets that
benefit Chinese companies have occurred both
within China and outside of China. Offenders in
many cases continue to operate with impunity, while
the Chinese government too frequently has failed to
recognize serious infringements of IPRs that violate
Chinese law. Most troubling are reports that actors
affiliated with the Chinese government and the
Chinese military have infiltrated the computer
systems of U.S. companies, stealing terabytes of
data, including the companies’ intellectual property.
In order to help address these challenges, the United

9
States has urged China to update and amend its
trade secrets laws and regulations, particularly the
Anti-unfair Competition Law. The United States also
has urged China to take actions to address this
problem across the range of state-sponsored actors
and to promote public awareness of this issue.
At the December 2013 JCCT meeting, China
committed to adopt and publish an action plan to
address trade secrets protection and enforcement
for 2014, as well as to work with the United States
on proposals to amend China’s trade secrets laws
and regulations. Six months later, at the July 2014
S&ED meeting, China pledged to pursue criminal and
other actions to deter the misappropriation of trade
secrets, to ensure that criminal and civil cases are
tried and the resulting judgments are published, and
to protect trade secrets contained in materials
submitted by companies as part of regulatory,
administrative and other proceedings. Most
recently, at the December 2014 JCCT meeting, China
confirmed that trade secrets submitted to the
government in administrative or regulatory
disclosure to the public. China further confirmed
that government officials shall only disclose trade
secrets in connection with their official duties and
that government officials who illegally disclose
companies’ trade secrets are to be subject to
administrative or legal liability. China also
committed to study various specified ways in which
it could improve its laws, regulations and
administrative procedures governing the protection
of trade secrets in the context of administrative or
regulatory proceedings.
PPhhaarrmmaacceeuuttiiccaall PPaatteennttss
The United States continues to engage China on a
range of patent and technology transfer concerns
relating to pharmaceuticals. One year ago, China
committed to permit supplemental data supporting
pharmaceutical patent applications. However, it
appears that China has not yet fully implemented
that commitment. In addition, many other concerns
remain, including the need to provide effective
protection against unfair commercial use of
undisclosed test or other data generated to obtain
marketing approval for pharmaceutical products,
and to provide effective enforcement against
infringement of pharmaceutical patents.
SSooffttwwaarree PPiirraaccyy
Due to the serious obstacles in China to the effective
protection and enforcement of IPR in all forms, sales
of legitimate IP-intensive goods and services,
including software and audiovisual products, remain
disproportionately low compared to similar markets
with stronger IPR protection and enforcement. The
United States continues to work with China on a
series of JCCT and S&ED commitments to foster a
better IP environment that will facilitate increased
sales of legitimate IP-intensive goods and services.
For example, sales of legitimate software to the
Chinese government by U.S. companies have seen
only a modest increase, while losses to U.S. software
companies from the use of pirated software by
Chinese state-owned enterprises and other
enterprises remain very high. The United States
continues to call on China to fulfill its existing
commitments with regard to software legalization
and to urge all levels of the Chinese government,
state-owned enterprises and state-owned banks to
take necessary steps to ensure the use of legitimate
software.
OOnnlliinnee PPiirraaccyy
Online piracy in China is widespread and continues
on a large scale, affecting industries distributing
legitimate music, motion pictures, books and
journals, software and video games. Increased
enforcement activities have yet to slow online sales
of pirated goods. At the December 2014 JCCT
meeting, China committed to strengthen
enforcement against copyright piracy activities in the
online environment and to deter the occurrence of
copyright piracy through criminal, civil and
administrative remedies and penalties.

10
CCoouunntteerrffeeiitt GGooooddss
Although rights holders report increased
enforcement efforts by Chinese government
authorities, counterfeiting in China, affecting a wide
range of goods, remains widespread. One area of
particular U.S. concern involves medications.
Despite sustained engagement by the United States,
China still needs to improve its regulation of the
manufacture of active pharmaceutical ingredients to
prevent their use in counterfeit and substandard
medications. At the July 2014 S&ED meeting, in a
positive development, China agreed to develop and
seriously consider amendments to the Drug
Administration Law that will require regulatory
control of the manufacturers of bulk chemicals that
can be used as active pharmaceutical ingredients.
China further committed to hold a multi-ministerial
meeting by the end of 2014 for the purpose of
developing a possible framework for regulatory
oversight of bulk chemicals.
IInndduussttrriiaall PPoolliicciieess
OOvveerrvviieeww
China continued to pursue industrial policies in 2014
that seek to limit market access for imported goods,
foreign manufacturers and foreign service suppliers,
while offering substantial government guidance,
resources and regulatory support to Chinese
industries. The principal beneficiaries of these
policies are state-owned enterprises, as well as other
favored domestic companies attempting to move up
the economic value chain.
IInnddiiggeennoouuss IInnnnoovvaattiioonn
In 2014, policies aimed at promoting “indigenous
innovation” continued to represent an important
component of China’s industrialization efforts.
Through intensive, high-level bilateral engagement,
the United States previously secured a series of
critical commitments from China that generated
major progress in de-linking indigenous innovation
policies at all levels of the Chinese government from
government procurement preferences, culminating
in the issuance of a State Council measure
mandating that provincial and local governments
eliminate any remaining linkages by December 2011.
Since then, the principal challenge has been to
address a range of discriminatory indigenous
innovation preferences proliferating outside of the
government procurement context. Using the U.S.-
China Innovation Dialogue, the United States was
able to persuade China to take an important step in
this direction at the May 2012 S&ED meeting, where
China committed to treat IPR owned or developed in
other countries the same as IPR owned or developed
in China. The United States also used the 2012 JCCT
process to press China to revise or eliminate specific
measures that appeared to be inconsistent with this
commitment. Throughout 2013 and 2014, China
reviewed specific U.S. concerns, and the United
States and China intensified their discussions. At the
December 2014 JCCT meeting, China clarified and
underscored that it will treat IPR owned or
developed in other countries the same as
domestically owned or developed IPR, and it further
agreed that enterprises are free to base technology
transfer decisions on business and market
considerations, and are free to independently
negotiate and decide whether and under what
circumstances to assign or license intellectual
property rights to affiliated or unaffiliated
enterprises.
TTeecchhnnoollooggyy TTrraannssffeerr
While some longstanding concerns regarding
technology transfer remain unaddressed, and new
ones have emerged, such as tying government
preferences to the localization of technology in
China (discussed above), some progress has been
made in select areas. For example, China committed
at the December 2013 JCCT meeting not to finalize
or implement a selection catalogue and rules
governing official use vehicles. The catalogue and
rules would have interfered with independent
decision making on technology transfer and would

11
have effectively excluded vehicles produced by
foreign and foreign-invested enterprises from
important government procurement opportunities.
EExxppoorrtt RReessttrraaiinnttss
China continues to deploy a combination of export
restraints, including export quotas, export licensing,
minimum export prices, export duties and other
restrictions, on a number of raw material inputs
where it holds the leverage of being among the
world’s leading producers. Through these export
restraints, it appears that China is able to provide
substantial economic advantages to a wide range of
downstream producers in China at the expense of
foreign downstream producers, while creating
pressure on foreign downstream producers to move
their operations, technologies and jobs to China. In
2013, China removed its export quotas and duties on
several raw material inputs of key interest to the
U.S. steel, aluminum and chemicals industries after
the United States won a dispute settlement case
against China at the WTO. In 2014, the United States
won a second WTO case, where the claims focused
on China’s export restraints on rare earths, tungsten
and molybdenum, which are key inputs for a
multitude of U.S.-made products, including hybrid
automobile batteries, wind turbines, energy-efficient
lighting, steel, advanced electronics, automobiles,
petroleum, and chemicals. China has agreed to
comply with the WTO’s rulings in this second case by
May 2015.
EExxppoorrtt SSuubbssiiddiieess
China has continued to provide a range of injurious
subsidies to its domestic industries, some of which
appear to be prohibited under WTO rules. The
United States has addressed these subsidies both
through countervailing duty proceedings conducted
by the Commerce Department and through dispute
settlement proceedings at the WTO. The United
States and other WTO members also have continued
to press China to notify its subsidies to the WTO in
accordance with its WTO obligations. Since joining
the WTO 13 years ago, China has yet to submit to
the WTO a complete notification of subsidies
maintained by central and sub-central governments.
EExxcceessss CCaappaacciittyy
Chinese government actions and financial support in
manufacturing industries like steel and aluminum
have contributed to massive excess capacity in
China, with the resulting over-production distorting
global markets and hurting U.S. producers and
workers. For example, from 2000 to 2013, China
accounted for more than 75 percent of global
steelmaking capacity growth. Currently, China’s
capacity alone exceeds the combined steelmaking
capacity of the EU, Japan, the United States, and
Russia. China has no comparative advantage with
regard to the energy and raw material inputs for
steelmaking, yet China’s capacity has continued to
grow exponentially and is estimated to have
exceeded one billion metric tons (MT) in 2013,
despite weakening demand domestically and
abroad. Yet, China’s steel exports have grown to be
the largest in the world, at 62 million MT in 2013, an
11 percent increase over 2012 levels, despite
sluggish steel demand abroad. Excess capacity in
China – whether in the steel industry or other
industries like aluminum – hurts U.S. industries and
workers not only because of direct exports from
China to the United States, but because lower global
prices and a glut of supply make it difficult for even
the most competitive producers to remain viable.
Domestic industries in many of China’s trading
partners have continued to respond to the effects of
the trade-distortive effects of China’s excess capacity
by petitioning their governments to impose trade
remedies such as antidumping and countervailing
duties.
VVaalluuee--aaddddeedd TTaaxx RReebbaatteess aanndd RReellaatteedd PPoolliicciieess
As in prior years, in 2014, the Chinese government
attempted to manage the export of many primary,
intermediate and downstream products by raising or
lowering the value-added tax rebate available upon
export. China sometimes reinforces its objectives by
imposing or retracting export duties. These

12
practices have caused tremendous disruption,
uncertainty and unfairness in the global markets for
some products, particularly downstream products
where China is a leading world producer or exporter,
such as products made by the steel, aluminum and
soda ash industries. These practices, together with
other policies, such as excessive government
subsidization, also have contributed to severe excess
capacity in these same industries. A positive
development took place at the July 2014 S&ED
meeting, when China agreed to improve its value-
added tax rebate system, including by actively
studying international best practices, and to deepen
AAiirrccrraafftt TTaarriiffffss
In August 2013, China increased the import tariff on
narrow body aircraft with an empty weight of
between 25 tons and 45 tons from 1 percent to the
bound rate of 5 percent. Because the tariff for
narrow body aircraft weighing more than 45 tons
remains at 1 percent, and many comparable narrow
body aircraft have an empty weight of between 40
tons and 50 tons, this change is having the
consequence of encouraging Chinese airlines to
purchase heavier, less fuel-efficient aircraft in order
to fall within the 1 percent tariff category and
thereby save millions of dollars on the purchase
price. As a result, this change could adversely affect
U.S.-manufactured narrow body aircraft in
particular, as they tend to be lighter and more fuel-
efficient than competing aircraft. The United States
has been encouraging China to revise its tariff policy.
SSttrraatteeggiicc EEmmeerrggiinngg IInndduussttrriieess
In 2010, China’s State Council issued a decision on
accelerating the cultivation and development of
“strategic emerging industries” (SEIs) that called
upon China to develop and implement policies
designed to promote rapid growth in government-
selected industry sectors viewed as economically
and strategically important for transforming China’s
industrial base into one that is more internationally
competitive in cutting-edge technologies. China
subsequently identified seven sectors for focus
under the SEI initiative, including energy-saving and
environmental protection, new generation
information technology, biotechnology, high-end
equipment manufacturing, new energy, new
materials and new-energy vehicles.
To date, import substitution policies have been
included in some SEI development plans at the sub-
central government level. For example, a
development plan for the LED industry issued by the
Shenzhen municipal government included a call to
support research and development in products and
technologies that have the ability to substitute for
imports. Shenzhen rescinded the plan in 2013
following U.S. Government intervention with China’s
central government authorities.
Similarly, some central and sub-central government
measures use local content requirements as a
condition for enterprises in SEI sectors to receive
financial support or other preferences. For example,
in the high-end equipment manufacturing sector,
China maintains a program that conditions the
receipt of a subsidy on an enterprise’s use of at least
60 percent Chinese-made components when
manufacturing intelligent manufacturing equipment.
Citing WTO concerns, the United States has been
pressing China to repeal or modify these measures.
In addition, an array of Chinese policies designed to
assist Chinese automobile enterprises in developing
electric vehicle technologies and in building
domestic brands that can succeed in global markets
continued to pose challenges in 2014. As previously
reported, these policies have generated serious
concerns about discrimination based on the country
of origin of intellectual property, forced technology
transfer, research and development requirements,
investment restrictions and discriminatory treatment
of foreign brands and imported vehicles. Although
significant progress has been made in addressing
some of these policies, more work remains to be
done.

13
IImmppoorrtt BBaann oonn RReemmaannuuffaaccttuurreedd PPrroodduuccttss
China prohibits the importation of remanufactured
products, which it typically classifies as used goods.
China also maintains restrictions that prevent
remanufacturing process inputs (known as cores)
from being imported into China’s customs territory,
except special economic zones. These import
prohibitions and restrictions undermine the
development of industries in many sectors in China,
including mining, agriculture, healthcare,
transportation and communications, among others,
because companies in these industries are unable to
purchase high-quality, lower-cost remanufactured
products produced outside of China.
SSttaannddaarrddss aanndd TTeecchhnnoollooggyy
In the standards area, two principal types of
problems harm U.S. companies. First, Chinese
government officials in some instances have
reportedly pressured foreign companies seeking to
participate in the standards-setting process to
license their technology or intellectual property on
unfavorable terms. Second, China has continued to
pursue unique national standards in a number of
high technology areas where international standards
already exist, such as 3G and 4G telecommunications
standards, Wi-Fi standards and information security
standards. To date, bilateral engagement has
yielded minimal progress in resolving these matters.
GGoovveerrnnmmeenntt PPrrooccuurreemmeenntt
The United States continues to press China to take
concrete steps toward fulfilling its commitment to
accede to the WTO’s Government Procurement
Agreement (GPA) and to open up its vast
government procurement market to the United
States and other GPA parties. To date, however, the
United States, the EU, and other GPA parties have
viewed China’s offers of coverage as highly
disappointing in scope and coverage. China
submitted its fourth revised offer in December 2013.
This offer showed some progress in areas consistent
with a commitment that China had made at the July
2013 S&ED meeting, including by lowering
thresholds and increasing sub-central entities
coverage and other coverage, but it fell short of U.S.
expectations and remains far from acceptable to the
United States and other GPA parties. At the
December 2013 JCCT meeting, China agreed to
accelerate its GPA accession negotiations and submit
in 2014 an additional revised offer that is on the
whole commensurate with the coverage of GPA
parties. China submitted a revised offer near the
end of December 2014.
China’s current government procurement regime is
governed by two important laws. The Government
Procurement Law, which is administered by the
Ministry of Finance, governs purchasing activities
conducted with fiscal funds by state organs and
other organizations at all levels of government in
China. The Tendering and Bidding Law falls under
the jurisdiction of the National Development and
Reform Commission and imposes uniform tendering
and bidding procedures for certain classes of
procurement projects in China, notably construction
and works projects, without regard for the type of
entity that conducts the procurement. Both laws
cover important procurements that GPA parties
would consider to be government procurement
eligible for coverage under the GPA. The United
States will continue to work with the Chinese
government to ensure that China’s future GPA offers
include coverage of government procurement
regardless of which law it falls under, including
procurement conducted by both government
entities and other entities, such as state-owned
enterprises.
IInnvveessttmmeenntt RReessttrriiccttiioonnss
China seeks to protect many domestic industries
through a restrictive investment regime, which
adversely affects foreign investors in services
sectors, such as financial services,
telecommunications services, Internet-related
services, legal services and express delivery services,
as well as in certain manufacturing industries and
the agricultural sector. In addition to prohibitions

14
and restrictions on market access imposed through
China’s foreign investment catalogue or other
means, China can readily impose additional
constraints on investment through its foreign
investment approval processes, where Chinese
government officials can use vaguely defined powers
on an ad hoc basis to delay or restrict market entry.
For example, foreign enterprises report that Chinese
government officials may condition investment
approval on a requirement that a foreign enterprise
conduct research and development in China,
transfer technology, satisfy performance
requirements relating to exportation or the use of
local content, or make valuable, deal-specific
commercial concessions.
The United States has repeatedly raised concerns
with China about its restrictive investment regime.
To date, this sustained bilateral engagement has not
led to a significant relaxation of China’s investment
restrictions, nor has it appeared to curtail ad hoc
actions by Chinese government officials. However,
China is starting to take steps to reform its
investment approval system.
As a separate matter, China has started to
implement the Third Plenum’s call to unify domestic
and foreign investment laws and regulations by
revoking many registered capital requirements and
by imposing the remaining registered capital
requirements on a non-discriminatory basis.
However, much work remains in this area. In
addition, the United States has been urging, and will
continue to urge, China to eliminate its system of
separate investment laws for domestic and foreign
investors and to instead apply one law to both
domestic and foreign investors.
Meanwhile, the United States continues to pursue
negotiations with China for a BIT. These
negotiations intensified after China committed at
the July 2013 S&ED meeting to negotiate a high-
standard BIT that will embrace the principles of
openness, non-discrimination and transparency,
provide national treatment at all phases of
investment, including market access (i.e., the “pre-
establishment” phase of investment), and employ a
“negative list” approach in identifying exceptions
(meaning that all investments are permitted except
for those explicitly excluded). At the 2014 S&ED
meeting, China built on this commitment by
agreeing to provide its first negative list offer by
early 2015.
TTrraaddee RReemmeeddiieess
China’s regulatory authorities in some instances
seem to be pursuing antidumping and countervailing
duty investigations and imposing duties for the
purpose of striking back at trading partners that
have exercised their WTO rights against China, even
when necessary legal and factual support for the
duties is absent. The U.S. response has been the
filing and prosecution of three WTO disputes. The
decisions reached by the WTO in those three
disputes – the most recent of which was issued in
May 2014 – confirm that China failed to abide by
WTO disciplines when imposing the duties at issue.
SSeerrvviicceess
OOvveerrvviieeww
The prospects for U.S. service suppliers in China are
promising, given the size of China’s market and the
Chinese leadership’s stated intention to promote the
growth of China’s services sectors. The United
States continues to enjoy a substantial surplus in
trade in services with China, as the United States’
cross-border supply of services into China totaled
$38 billion in 2013. In addition, services supplied
through majority U.S.-invested companies in China
totaled $39 billion in 2012, the latest year for which
data are available. This success has been largely
attributable to the market openings phased in by
China pursuant to its WTO commitments, as well as
the U.S. Government’s comprehensive engagement
with China’s various regulatory authorities, including

15
in the pursuit of sector openings that go beyond
China’s WTO commitments.
Nevertheless, in 2014, numerous challenges
persisted in a range of services sectors. As in past
years, Chinese regulators continued to use
discriminatory regulatory processes, informal bans
on entry and expansion, overly burdensome
licensing and operating requirements, and other
means to frustrate efforts of U.S. suppliers of
banking, insurance, telecommunications, Internet-
related, audiovisual, express delivery, legal and other
services to achieve their full market potential in
China. Some sectors, including electronic payment
services and theatrical film distribution, have been
the subject of WTO dispute settlement. While China
declared an intent to further liberalize a number of
services sectors in its Third Plenum Decision,
concrete steps have not yet been taken.
EElleeccttrroonniicc PPaayymmeenntt SSeerrvviicceess
China continued to place unwarranted restrictions
on foreign companies, including the major U.S. credit
card and processing companies, which supply
electronic payment services to banks and other
businesses that issue or accept credit and debit
cards. The United States prevailed in a WTO case
challenging those restrictions, and China agreed to
comply with the WTO’s rulings by July 2013, but
China has not yet taken needed steps to authorize
access by foreign suppliers to this market. The
United States is actively pressing China to comply
with the WTO’s rulings and also is considering
appropriate next steps at the WTO.
TThheeaattrriiccaall FFiillmm DDiissttrriibbuuttiioonn
In February 2012, the United States and China
reached an alternative solution with regard to
certain rulings relating to the importation and
distribution of theatrical films in a WTO case that the
United States had won. The two sides signed a
memorandum of understanding (MOU) providing for
substantial increases in the number of foreign films
imported and distributed in China each year, along
with substantial additional revenue for foreign film
producers. Significantly more U.S. films have been
imported and distributed in China since the signing
of the MOU, and the revenue received by U.S. film
producers has increased significantly. However,
China has not yet fully implemented its MOU
commitments, including with regard to a critical
commitment to open up film distribution
opportunities for imported films that are distributed
in China on a flat-fee basis rather than a revenue-
sharing basis. As a result, the United States has been
pressing China for full implementation.
BBaannkkiinngg SSeerrvviicceess
China has exercised significant caution in opening up
the banking sector to foreign competition. In
particular, China has imposed working capital
requirements and other requirements that have
made it more difficult for foreign banks to establish
and expand their market presence in China. Many of
these requirements, moreover, have not applied
equally to foreign and domestic banks. For example,
China has limited the sale of equity stakes in existing
state-owned banks to a single foreign investor to 20
percent, while the total equity share of all foreign
investors is limited to 25 percent. Another
problematic area involves the ability of U.S. and
other foreign banks to participate in the domestic
currency business in China. This is a market segment
that foreign banks are most eager to pursue in
China, particularly with regard to Chinese
individuals. Under existing governing regulations,
only foreign-funded banks that have had a
representative office in China for two years and that
have total assets exceeding $10 billion can apply to
incorporate in China. After incorporating, moreover,
these banks only become eligible to offer full
domestic currency services to Chinese individuals if
they can demonstrate that they have operated in
China for three years and have had two consecutive
years of profits. The regulations also restrict the
scope of activities that can be conducted by foreign
banks seeking to operate in China through branches
instead of through subsidiaries.

16
IInnssuurraannccee SSeerrvviicceess
China’s regulation of the insurance sector has
resulted in market access barriers for foreign
insurers, whose share of China’s market remains
very low. In the life insurance sector, China only
permits foreign companies to participate in Chinese-
foreign joint ventures, with foreign equity capped at
50 percent. The market share of these joint
ventures is less than 4 percent. For the health
insurance sector, China also caps foreign equity at 50
percent. While China allows wholly foreign-owned
subsidiaries in the non-life insurance (i.e., property
and casualty) sector, the market share of foreign-
invested companies in this sector is only 1 percent.
China also limits foreign insurance brokers from
providing a full scope of services, and its market for
political risk insurance is completely closed to
foreign participation. In addition, some U.S.
insurance companies established in China continue
to encounter difficulties in getting the Chinese
regulatory authorities to issue timely approvals of
their requests to open up new internal branches to
expand their operations.
TTeelleeccoommmmuunniiccaattiioonnss SSeerrvviicceess
Restrictions maintained by China on value-added
telecommunications services have created serious
barriers to market entry for foreign suppliers seeking
to provide value-added services. In addition, China’s
restrictions on basic telecommunications services,
such as informal bans on new entry, a requirement
that foreign suppliers can only enter into joint
ventures with state-owned enterprises, and
exceedingly high capital requirements, have blocked
foreign suppliers from accessing China’s basic
services market. In May 2013, China introduced
rules establishing a pilot program for the resale of
mobile services, which can increase competitive
opportunities in China’s heavily concentrated
market. The United States is very concerned that
foreign firms continue to be excluded from the pilot
program, while China has issued licenses to more
than a dozen Chinese suppliers.
IInntteerrnneett--rreellaatteedd SSeerrvviicceess
China’s Internet regulatory regime is restrictive and
non-transparent, affecting a broad range of
commercial services activities conducted via the
Internet. In addition, China’s treatment of foreign
companies seeking to participate in the
development of cloud computing, including
computer data and storage services provided over
the Internet, raises concerns. For example, China
has sought to impose value-added
telecommunications licensing requirements on this
sector, including a 50 percent equity cap on
investments by foreign companies, even though the
services at issue are not telecommunications
services.
AAuuddiioo--vviissuuaall SSeerrvviicceess
China’s restrictions in the area of theater services
have wholly discouraged investment by foreign
suppliers, and China’s restrictions on services
associated with television and radio greatly limit
participation by foreign suppliers.
EExxpprreessss DDeelliivveerryy SSeerrvviicceess
The United States continues to raise concerns with
China regarding implementation of the 2009 Postal
Law and related regulations. China has blocked
foreign companies’ access to the document segment
of China’s domestic express delivery market, and it
has threatened troubling restrictions on foreign
companies’ access to the package segment of
China’s domestic express delivery market, including
discriminatory treatment in approving their business
permits.
LLeeggaall SSeerrvviicceess
China has issued measures intended to implement
the legal services commitments that it made upon
joining the WTO. However, these measures restrict
the types of legal services that can be provided and
impose lengthy delays for the establishment of new
offices.

17
AAggrriiccuullttuurree
OOvveerrvviieeww
China is the largest agricultural export market for the
United States, with nearly $26 billion in U.S.
agricultural exports in 2013. Much of this success
resulted from intensive engagement by the United
States with China’s regulatory authorities.
Notwithstanding this success, China remains among
the least transparent and predictable of the world’s
major markets for agricultural products, largely
because of uneven enforcement of regulations and
selective intervention in the market by China’s
regulatory authorities. As in past years, seemingly
capricious practices by Chinese customs and
quarantine agencies delay or halt shipments of
agricultural products into China. In addition, SPS
measures with questionable scientific bases and a
generally opaque regulatory regime frequently
create difficulties and uncertainty for traders in
agricultural commodities, who require as much
certainty and transparency as possible.
BBeeeeff,, PPoouullttrryy aanndd PPoorrkk
In 2014, beef, poultry and pork products were
affected by questionable SPS measures implemented
by China’s regulatory authorities. For example,
China continued to block the importation of U.S.
beef and beef products, more than seven years after
these products had been declared safe to trade
under international scientific guidelines established
by the World Organization for Animal Health (known
by its historical acronym OIE), and despite the
further fact that in 2013 the United States received
the lowest risk status from the OIE, i.e., negligible
risk. China also continued to impose some
unwarranted state-level Avian Influenza import
suspensions on poultry. Additionally, China
continued to maintain overly restrictive pathogen
and residue standards for raw meat and poultry.
Consequently, anticipated growth in U.S. exports of
these products was again not realized.
BBiiootteecchhnnoollooggyy AApppprroovvaallss
In 2014, delays in China’s approvals of agricultural
products derived from biotechnology worsened,
creating increased uncertainty among traders and
also resulting in trade disruptions, particularly for
U.S. exports of corn and dried distillers’ grains
(DDGs). In early December 2014, shortly before the
JCCT meeting, China announced that it would be
issuing import approvals for three outstanding
biotechnology products of significant importance to
U.S. farmers, including two soybean events and one
corn event. In addition, while China still needs to
improve its regulatory process and begin reviewing
biotechnology products in a transparent and
predictable manner, China did agree at the
December 2014 JCCT meeting to hold an annual,
multi-ministry dialogue with the United States at the
Vice Minister level to discuss science-based
agricultural innovation and the increased use of
innovative technologies in agriculture.
AAggrriiccuullttuurraall SSuuppppoorrtt
Over the past several years, China has been
significantly increasing domestic subsidies and other
support measures for its agricultural sector. China
has established a direct payment program, instituted
minimum support prices for basic commodities and
sharply increased input subsidies. China has
implemented a cotton reserve system, based on
minimum purchase prices, and cotton target price
programs. China also has begun several new
support schemes for hogs and pork, along with a
purchasing reserve system for pork. China has not
submitted a notification concerning domestic
support measures since October 2011, and that
notification covered only the period 2005-2008. This
notification documents an increase in China’s
support levels, but the United States is concerned
that the methodologies used by China to calculate
support levels, particularly with regard to its price
support policies and direct payments, result in
underestimates.

18
TTrraannssppaarreennccyy
OOvveerrvviieeww
One of the core principles reflected throughout
China’s WTO accession agreement is transparency.
China’s WTO transparency commitments in many
ways required a profound historical shift in Chinese
policies. Although China has made strides to
improve transparency following its accession to the
WTO, there remains a lot more for China to do in
this area.
PPuubblliiccaattiioonn ooff TTrraaddee--rreellaatteedd LLaawwss,, RReegguullaattiioonnss aanndd
OOtthheerr MMeeaassuurreess
In its WTO accession agreement, China committed to
adopt a single official journal for the publication of
all trade-related laws, regulations and other
measures, and China adopted a single official
journal, to be administered by MOFCOM, in 2006.
To date, it appears that some but not all central-
government entities publish trade-related measures
in this journal, and these government entities tend
to take a narrow view of the types of trade-related
measures that need to be published in the official
journal. As a result, while trade-related
administrative regulations and departmental rules
are more commonly (but still not regularly)
published in the journal, it is less common for other
measures such as opinions, circulars, orders,
directives and notices to be published, even though
they are in fact all binding legal measures. In
addition, China does not normally publish in the
journal certain types of trade-related measures, such
as subsidy measures, nor does it normally publish
sub-central government trade-related measures in
the journal.
NNoottiiccee--aanndd--ccoommmmeenntt PPrroocceedduurreess
provide a reasonable period for public comment
before implementing new trade-related laws,
regulations and other measures. China has taken
several steps related to this commitment. In 2008,
the National People’s Congress (NPC) instituted
notice-and-comment procedures for draft laws, and
shortly thereafter China indicated that it would also
publish proposed trade and economic related
for public comment. Subsequently, the NPC began
regularly publishing draft laws for public comment,
and China’s State Council often (but not regularly)
published draft administrative regulations for public
comment. In addition, many of China’s ministries
were not consistent in publishing draft departmental
rules for public comment. At the May 2011 S&ED
meeting, China committed to issue a measure
implementing the requirement to publish all
proposed trade and economic related administrative
regulations and departmental rules on the website
of the State Council’s Legislative Affairs Office
(SCLAO) for a public comment period of not less than
30 days. In April 2012, the SCLAO issued two
measures that appear to address this requirement.
Since then, despite continuing U.S. engagement, no
noticeable improvement in the publication of
departmental rules for public comment appears to
have taken place, even though China recently
confirmed that those two SCLAO measures are
binding on central government ministries.
TTrraannssllaattiioonnss
make available translations of all of its trade-related
laws, regulations and other measures at all levels of
government in one or more of the WTO languages,
i.e., English, French and Spanish. To date, however,
China has focused only on translations of trade-
related laws and administrative regulations, and
China is years behind in translating these measures.
At the July 2014 S&ED meeting, China committed
that it will extend its translation efforts to include
not only trade-related laws and administrative
regulations but also trade-related departmental
rules. The United States is pressing China to ensure
that a translation normally is made available before
a measure’s implementation, as required by China’s
WTO accession agreement.

19
LLeeggaall FFrraammeewwoorrkk
OOvveerrvviieeww
In addition to the area of transparency, several other
areas of China’s legal framework can adversely affect
the ability of the United States and U.S. exporters
and investors to access or invest in China’s market.
Key areas include administrative licensing,
competition policy, commercial dispute resolution,
labor laws and laws governing land use. Corruption
among Chinese government officials, enabled in part
by China’s incomplete adoption of the rule of law, is
also a key concern.
AAddmmiinniissttrraattiivvee LLiicceennssiinngg
Despite numerous changes made by the Chinese
government since the issuance of the Third Plenum
Decision in November 2013, U.S. companies
continue to encounter significant problems with a
variety of administrative licensing processes in
China, including processes to secure product
approvals, investment approvals, business expansion
approvals, business license renewals and even
approvals for routine business activities. While U.S.
companies are encouraged by the overall reduction
in license approval requirements and the focus on
decentralizing licensing approval processes, U.S.
companies report that these efforts have only had a
marginal impact on their licensing experiences so
far.
AAnnttii--mmoonnooppoollyy LLaaww
Chinese regulatory authorities’ implementation of
China’s Anti-monopoly Law poses multiple
challenges. One key concern relates to how the
Anti-Monopoly Law will be applied to state-owned
enterprises, given that a provision in the Anti-
Monopoly Law protects the lawful operations of
state-owned enterprises and government
monopolies in industries deemed nationally
important. To date, China has enforced the Anti-
monopoly Law against state-owned enterprises, but
concerns remain that enforcement against state-
owned enterprises will be more limited.
Another serious concern relates to the procedural
fairness of Anti-monopoly Law investigations. U.S.
industry has expressed concern about insufficient
predictability, fairness and transparency in NDRC’s
investigative processes, including NDRC pressure to
“cooperate” in the face of unspecified allegations or
face steep fines. U.S. industry also has reported
pressure from NDRC against seeking outside counsel,
in particular foreign counsel, or having counsel
present at meetings. At the July 2014 S&ED
meeting, China recognized that the objective of
competition policy is to promote consumer welfare
and economic efficiency rather than promote
individual competitors or industries, and that
enforcement of China’s competition laws should be
fair, objective, transparent and non-discriminatory.
China also committed to provide any party under an
Anti-monopoly Law investigation with information
about the enforcement agency’s concerns and an
effective opportunity for the party to present
evidence in its defense. More recently, at the
December 2014 JCCT meeting, China committed
that, in Anti-monopoly Law enforcement
proceedings, the Chinese authorities would treat
domestic and foreign companies equally and
normally would permit an investigated foreign
company to have foreign counsel present, to advise
it and to provide information on its behalf.
NNEEXXTT SSTTEEPPSS
In 2015, as in prior years, the Administration will
continue to vigorously pursue increased benefits for
U.S. businesses, workers, farmers, ranchers and
service providers from our trade and economic ties
with China. The Administration will use all available
tools to achieve these objectives, including the
pursuit of productive, outcome-oriented dialogue in
both bilateral and multilateral settings, as well as the
vigorous use of enforcement mechanisms, where
appropriate.

20
On the bilateral front, the United States will continue
to pursue robust engagement with China at all levels
of government focused on producing practical and
meaningful outcomes. The United States will also
take full advantage of multilateral venues such as
the WTO to engage China. Key goals of this
engagement will include ensuring that the benefits
of China’s WTO commitments are fully realized by
the United States and other WTO members, and that
trade frictions that may arise in the U.S.-China trade
relationship are effectively resolved.
At the same time, as the United States has
repeatedly demonstrated, when dialogue is not
successful in resolving concerns, the United States
will not hesitate to invoke the dispute settlement
mechanism at the WTO where appropriate.
Similarly, the United States will continue to
rigorously enforce U.S. trade remedy laws, in
accordance with WTO rules, when U.S. interests are
being harmed by unfairly traded or surging imports
from China.
As part of this upcoming engagement, the United
States will continue to focus on China’s
implementation of the Third Plenum Decision. While
this initiative has not yet evolved to the point where
concrete changes have been made, it does signal a
high-level determination by China to accelerate
needed economic reform, which, if realized, would
provide tremendous benefits not only to China but
also to its trading partners and the global economy.
The United States shares the Third Plenum
Decision’s goals of reducing Chinese government
intervention in the economy, accelerating China’s
opening up to foreign goods and services, reforming
China’s state-owned enterprises and improving
transparency and the rule of law to allow fair
competition in China’s market. The United States
therefore will urge China to speedily implement
these promising Third Plenum Decision economic
reform elements, which have many similarities with
the U.S. trade agenda with China.
In addition, the United States looks forward to
intensified negotiations with China in order to reach
agreement on a BIT that embraces the principles of
openness, non-discrimination and transparency,
provides pre-establishment national treatment and
employs a negative list approach in identifying
exceptions. A high-standard BIT between two of the
world’s largest economies would not only provide
significant benefits to U.S. and Chinese investors but
also would have broad significance for the global
economy.
Going forward, the Administration will continue to
consult closely with the Congress and U.S.
stakeholders in order to ensure that the actions
being pursued by the United States address their
concerns. The Administration remains dedicated to
maximizing U.S. stakeholders’ opportunities to
compete in China and the global marketplace.

21
Table 1
SSuummmmaarryy CCoonncclluussiioonnss rreeggaarrddiinngg CChhiinnaa’’ss WWTTOO CCoommpplliiaannccee EEffffoorrttss
TRADING RIGHTS
China appears to be in compliance with its trading rights commitments in most areas. One significant exception involves China’s
restrictions on the right to import theatrical films, which China reserves for state trading. In 2012, following a successful WTO case
brought by the United States challenging these restrictions, the United States and China entered into an MOU providing for substantial
increases in the number of U.S. films imported and distributed in China each year and substantial additional revenue for foreign film
producers, although China has not yet fully implemented its MOU commitments.
IMPORT REGULATION
Tariffs
China has timely implemented its tariff commitments for industrial goods each year.
Customs and Trade Administration
Customs Valuation
China has issued measures that bring its legal regime for making customs valuation determinations into compliance with WTO rules,
but implementation of these measures has been inconsistent from port to port, both in terms of customs clearance procedures and
valuation determinations.
Rules of Origin
China has issued measures that bring its legal regime for making rules of origin determinations into compliance with WTO rules.
Import Licensing
China has issued measures that bring its legal regime for import licenses into compliance with WTO rules, although a variety of specific
compliance issues continue to arise.
Non-Tariff Measures
China has adhered to the agreed schedule for eliminating non-tariff measures, but new prohibitions on the import of remanufactured
products have generated concerns.
Tariff-rate Quotas on Industrial Products
Concerns about transparency and administrative guidance have plagued China’s tariff-rate quota system for industrial products,
particularly fertilizer, since China’s accession to the WTO.
Other Import Regulation
Antidumping
China has issued laws and regulations bringing its legal regime in the AD area largely into compliance with WTO rules, although China still
needs to issue additional procedural guidance such as rules governing expiry reviews. More significantly, China needs to improve its
commitment to the transparency and procedural fairness requirements embodied in WTO rules, as the WTO found in three disputes
brought by the United States. In addition, China needs to eliminate its apparent use of trade remedy investigations as a retaliatory tool.
Countervailing Duties
China has issued laws and regulations bringing its legal regime in the CVD area largely into compliance with WTO rules, although China
still needs to issue additional procedural guidance such as rules governing expiry reviews. More significantly, China needs to improve its
commitment to the transparency and procedural fairness requirements embodied in WTO rules, as the WTO found in three disputes
brought by the United States. In addition, China needs to eliminate its apparent use of trade remedy investigations as a retaliatory tool.
Safeguards
China has issued measures bringing its legal regime in the safeguards area largely into compliance with WTO rules, although concerns
about potential inconsistencies with WTO rules continue to exist.

22
Table 1 (cont’d)
EXPORT REGULATION
China maintains numerous export restraints that raise serious concerns under WTO rules, including specific commitments that China
made in its WTO accession agreement. In the two WTO cases decided to date in this area, the WTO found that exports restraints
maintained by China on raw material inputs violated China’s WTO obligations.
INTERNAL POLICIES AFFECTING TRADE
Non-discrimination
While China has revised many laws, regulations and other measures to make them consistent with WTO rules relating to MFN and
national treatment, concerns about compliance with these rules still arise in some areas.
Taxation
China has used its taxation system to discriminate against imports in certain sectors, raising concerns under WTO rules relating to national
treatment.
Subsidies
China continues to provide injurious subsidies to its domestic industries, and some of these subsidies appear to be prohibited under WTO
rules. Although China filed a long-overdue WTO subsidies notification in 2011, this notification only covered subsidies provided during
the period from 2005 to 2008 and was far from complete. In addition, China has a poor record of responding to other WTO members’
questions about its subsidies before the WTO’s Subsidies Committee.
Price Controls
China has progressed slowly in reducing the number of products and services subject to price control or government guidance pricing.
Standards, Technical Regulations and Conformity Assessment Procedures
China continues to take actions that generate WTO compliance concerns in the areas of standards, technical regulations and conformity
assessment procedures, particularly with regard to transparency, national treatment, the pursuit of unique Chinese national standards,
and duplicative testing and certification requirements.
Restructuring of Regulators
China has restructured its regulators for standards, technical regulations and conformity assessment procedures in order to eliminate
discriminatory treatment of imports, although in practice China’s regulators sometimes do not appear to enforce regulatory
requirements as strictly against domestic products as imports.
Standards and Technical Regulations
China continues to pursue the development of unique Chinese national standards, despite the existence of well-established
international standards, apparently as a means for protecting domestic companies from competing foreign technologies and standards.
Conformity Assessment Procedures
China appears to be turning more and more to in-country testing for a broader range of products, which does not conform with
international practices that generally accept foreign test results and conformity assessment certifications.
Transparency
China has made progress but still does not appear to notify all new or revised standards, technical regulations and conformity
assessment procedures as required by WTO rules.
Other Industrial Policies
State-owned and State-invested Enterprises
The Chinese government has heavily intervened in investment and other strategic decisions made by state-owned and state-invested
enterprises in certain sectors.

23
Table 1 (cont’d)
Other Industrial Policies (cont’d)
State Trading Enterprises
It is difficult to assess the activities of China’s state trading enterprises, given inadequate transparency and China’s failure to meet the
WTO’s reporting requirements for state trading enterprises.
Government Procurement
While China is moving slowly toward fulfilling its commitment to accede to the GPA, it is maintaining and adopting government
procurement measures that give domestic preferences.
INVESTMENT
China has revised many laws, regulations and other measures on foreign investment to eliminate WTO-inconsistent requirements relating
to export performance, local content, foreign exchange balancing and technology transfer. However, some of the revised measures
continue to “encourage” these requirements, and it appears that Chinese government officials at times continue to use the foreign
investment approval process to pressure foreign companies to accept one or more of these requirements or other conditions. China has
also issued industrial plans covering the auto and steel sectors that include guidelines that appear to conflict with its WTO obligations. In
addition, China has added a variety of restrictions on investment that appear designed to shield inefficient or monopolistic Chinese
enterprises from foreign competition.
AGRICULTURE
While China has timely implemented its tariff commitments for agricultural goods, a variety of non-tariff barriers continue to impede
market access, particularly in the areas of SPS measures and inspection-related requirements.
Tariffs
China has timely implemented its tariff commitments for agricultural goods each year.
Tariff-rate Quotas on Bulk Agricultural Commodities
China’s administration of TRQs on bulk agricultural commodities does not seem to be functioning entirely as envisioned in China’s WTO
accession agreement, due to opaque management practices and low quota fill despite reports of unmet demand for imported products.
China’s Biotechnology Regulations
China’s dysfunctional biotechnology approval process continues to affect trade.
Sanitary and Phytosanitary Issues
China’s regulatory authorities continue to impose SPS measures in a non-transparent manner and without clear scientific bases, including
BSE-related import bans on U.S. beef and beef products, pathogen standards and residue standards for raw meat and poultry products,
and Avian Influenza-related import suspensions on poultry products from several states. Meanwhile, China has made some progress but
still does not appear to notify all proposed SPS measures as required by WTO rules.
Inspection-related Requirements
China’s regulatory authorities continue to administer inspection-related requirements in a seemingly arbitrary manner.
Domestic Support
In recent years, China has been significantly increasing domestic subsidies and other support measures for its agricultural sector, including
a number of products competing with imports from the United States.
Export Subsidies
It is difficult to determine whether China maintains export subsidies in the agricultural sector, in part because China has not notified all of
its subsidies to the WTO.

24
Table 1 (cont’d)
INTELLECTUAL PROPERTY RIGHTS
Despite ongoing revisions of laws and regulations relating to intellectual property rights, and greater emphasis on rule of law and
enforcement campaigns in China, key weaknesses remain in China’s protection and enforcement of intellectual property rights,
particularly in the area of trade secrets. Intellectual property rights holders face not only a complex and uncertain enforcement
environment, but also pressure to transfer intellectual property rights to enterprises in China through a number of government policies
and practices.
SERVICES
While China has implemented most of its services commitments, concerns remain in some service sectors. In addition, challenges still
remain in ensuring the benefits of many of the commitments that China has nominally implemented are available in practice, as China has
continued to maintain or erect restrictive or cumbersome terms of entry or internal expansion in some sectors. These barriers, often
imposed through non-transparent and lengthy licensing processes, prevent or discourage foreign suppliers from gaining market access
through informal bans on entry, high capital requirements, branching restrictions or restrictions taking away previously acquired market
access rights.
Distribution Services
China has made substantial progress in implementing its distribution services commitments, although significant concerns remain in some
areas.
Wholesaling Services
China has issued regulations generally implementing its commitments in the area of wholesaling and commission agents’ services. One
significant exception involves China’s restrictions on the distribution of imported theatrical films. In 2012, following a successful WTO
case brought by the United States challenging these restrictions, the United States and China entered into an MOU providing for
substantial increases in the number of U.S. films imported and distributed in China each year and substantial additional revenue for
foreign film producers, although China has not yet fully implemented its MOU commitments. Meanwhile, U.S. companies continue to
have concerns about restrictions on the distribution of other products, such as pharmaceuticals, crude oil and processed oil.
Retailing Services
China has issued regulations generally implementing its commitments in the area of retailing services, although some concerns remain
with regard to licensing discrimination. China continues to maintain restrictions on the retailing of processed oil.
Franchising Services
China has issued regulations generally implementing its commitments in the area of franchising services.
Direct Selling Services
China has issued regulations generally implementing its commitments in the area of direct selling services, although significant
regulatory restrictions, including service center requirements imposed on the operations of direct sellers, continue to generate
concerns.
Financial Services
Banking
China has taken a number of steps to implement its banking services commitments, although some of these efforts have generated
concerns, and there are some instances in which China still does not seem to have fully implemented particular commitments, such as
with regard to Chinese-foreign joint banks and bank branches.
Motor Vehicle Financing
China has implemented its commitments with regard to motor vehicle financing.
Insurance
China has issued measures implementing most of its insurance commitments, but these measures have also created market access
problems and foreign insurers’ share of China’s market remains very low.
Financial Information
In response to a WTO case brought by the United States, China has established an independent regulator for the financial information
sector and has removed restrictions that had placed foreign suppliers at a serious competitive disadvantage.

25
Table 1 (cont’d)
SERVICES (cont’d)
Financial Services (cont’d)
Electronic Payment Services
China has not yet implemented electronic payment services commitments that were scheduled to have been phased in no later than
December 11, 2006. China agreed to implement these commitments by July 2013 in order to comply with the rulings in a WTO case
brought by the United States, but it has not yet done so.
Legal Services
China has issued measures intended to implement its legal services commitments, although these measures give rise to WTO compliance
concerns because they impose an economic needs test, restrictions on the types of legal services that can be provided and lengthy delays
for the establishment of new offices.
Telecommunications
It appears that China has nominally kept to the agreed schedule for phasing in its WTO commitments in the telecommunications sector.
However, restrictions maintained by China on value-added services have created serious barriers to market entry for foreign suppliers
seeking to provide value-added services. In addition, China’s restrictions on basic services, such as informal bans on new entry, a
requirement that foreign suppliers can only enter into joint ventures with state-owned enterprises and exceedingly high capital
requirements, have totally blocked foreign suppliers from accessing China’s basic services market.
Audio-Visual and Related Services
China has taken steps to comply with the rulings in a WTO case brought by the United States with regard to the distribution of DVDs and
sound recordings, although more steps are needed. Meanwhile, China’s restrictions in the area of theatre services have wholly
discouraged investment by foreign suppliers, and China’s restrictions on services associated with television and radio greatly limit
Internet-related Services
China’s Internet regulatory regime is restrictive and non-transparent and impacts a broad range of commercial services activities
conducted via the Internet. In addition, China’s treatment of foreign companies seeking to participate in the development of cloud
computing, including computer data and storage services provided over the Internet, raises concerns in light of China’s GATS
commitments.
Construction and Related Engineering Services
China has issued measures intended to implement its construction and related engineering services commitments, although these
measures are problematic because they also impose high capital requirements and other constraints that limit market access.
Educational Services
China made only limited GATS commitments in the educational services sector, and it has not sought to go beyond those commitments.
Express Delivery Services
China has allowed foreign express delivery companies to operate in the express delivery sector and has implemented its commitment to
allow wholly foreign-owned subsidiaries by December 11, 2004. However, China has blocked foreign companies’ access to the document
segment of China’s domestic express delivery market, and it has threatened restrictions on foreign companies’ access to the package
segment of China’s domestic express delivery market, which raises questions in light of China’s WTO obligations.
Logistics Services
China has generally allowed foreign companies to supply logistics services, but foreign companies can face restrictions that are not
applied to domestic companies.

26
Table 1 (cont’d)
SERVICES (cont’d)
Aviation Services
China has provided additional market access to U.S. providers of air transport services through progressive liberalization of a bilateral
agreement with the United States.
Maritime Services
Even though China made only limited WTO commitments relating to its maritime services sector, it has increased market access for U.S.
service providers through a bilateral agreement.
Tourism and Travel-related Services
China treats foreign travel agencies less favorably than domestic travel agencies in some respects, while China’s regulation of foreign
suppliers of global distribution system services has generated concerns in light of China’s GATS commitments.
LEGAL FRAMEWORK
Transparency
Official Journal
China has re-confirmed its commitment to use a single official journal for the publication of all trade-related laws, regulations and other
measures. To date, it appears that some but not all central government entities publish their trade-related measures in this journal,
although they take a narrow view of the types of trade-related measures that need to be published.
Translations
China has not yet established an appropriate infrastructure to undertake the agreed upon translations of its trade-related measures
into one or more of the WTO languages.
Public Comment
China has adopted notice-and-comment procedures for proposed laws and committed to use notice-and-comment procedures for
proposed trade- and economic-related regulations and departmental rules, subject to specified exceptions. However, in practice, many
of these measures are not made public prior to implementation.
Enquiry Points
China has complied with its obligation to establish enquiry points.
Uniform Application of Laws
Some problems with the uniform application of China’s laws and regulations persist.
Judicial Review
China has established courts to review administrative actions involving trade-related matters, but few U.S. or other foreign companies
have had experience with these courts.
Other Legal Framework Issues
Various other areas of China’s legal framework can adversely impact the ability of the United States and U.S. exporters and investors to
enjoy fully the rights to which they are entitled under the WTO agreements.

27
IINNTTRROODDUUCCTTIIOONN
CCHHIINNAA’’SS WWTTOO AACCCCEESSSSIIOONN NNEEGGOOTTIIAATTIIOONNSS
In July of 1986, China applied for admission to the
WTO’s predecessor, the General Agreement on
Tariffs and Trade (GATT). The GATT formed a
Working Party in March of 1987, composed of all
interested GATT contracting parties, to examine
China’s application and negotiate terms for China’s
accession. For the next eight years, negotiations
were conducted under the auspices of the GATT
Working Party. Following the formation of the WTO
on January 1, 1995, pursuant to the Marrakesh
Agreement Establishing the World Trade
Organization (WTO Agreement), a successor WTO
Working Party, composed of all interested WTO
members, took over the negotiations.
Like all WTO accession negotiations, the negotiations
with China had three basic aspects. First, China
provided information to the Working Party regarding
its trade regime. China also updated this
information periodically during the 15 years of
negotiations to reflect changes in its trade regime.
Second, each interested WTO member negotiated
bilaterally with China regarding market access
concessions and commitments in the goods and
services areas, including, for example, the tariffs that
would apply on industrial and agricultural goods and
the commitments that China would make to open up
its market to foreign services suppliers. The most
trade liberalizing of the concessions and
commitments obtained through these bilateral
negotiations were consolidated into China’s Goods
and Services Schedules and apply to all WTO
members. Third, overlapping in time with these
bilateral negotiations, China engaged in multilateral
negotiations with Working Party members on the
rules that would govern trade with China.
Throughout these multilateral negotiations, U.S.
leadership in working with China was critical to
removing obstacles to China’s WTO accession and
achieving a consensus on appropriate rules
commitments. These commitments are set forth in
China’s Protocol of Accession and an accompanying
Report of the Working Party.
WTO members formally approved an agreement on
the terms of accession for China on November 10,
2001, at the WTO’s Fourth Ministerial Conference,
held in Doha, Qatar. One day later, China signed the
agreement and deposited its instrument of
ratification with the Director-General of the WTO.
China became the 143rd member of the WTO on
December 11, 2001.
China’s Protocol of Accession, accompanying
Working Party Report and Goods and Services
Schedules are available on the WTO’s website
(www.wto.org).
CCHHIINNAA’’SS WWTTOO CCOOMMMMIITTMMEENNTTSS
In order to accede to the WTO, China had to agree to
take concrete steps to remove trade barriers and
open its markets to foreign companies and their
exports from the first day of accession in virtually
every product sector and for a wide range of
services. Supporting these steps, China also agreed
to undertake important changes to its legal
framework, designed to add transparency and
predictability to business dealings.
Like all acceding WTO members, China also agreed
to assume the obligations of more than 20 existing
multilateral WTO agreements, covering all areas of
trade. Areas of principal concern to the United
States and China’s other trading partners, as
evidenced by the accession negotiations, included
the core principles of the WTO, including most-
favored nation treatment, national treatment,
transparency and the availability of independent
review of administrative decisions. Other key
concerns arose in the areas of agriculture, SPS
measures, technical barriers to trade, trade-related
investment measures, customs valuation, rules of
origin, import licensing, antidumping, subsidies and
countervailing measures, trade-related aspects of

28
intellectual property rights and services. For some
of its obligations in these areas, China was allowed
minimal transition periods, where it was considered
necessary.
Even though the terms of China’s accession
agreement are directed at the opening of China’s
market to WTO members, China’s accession
agreement also includes provisions establishing
several mechanisms or other authority, independent
of provisions applicable to all WTO members under
the WTO Agreement, designed to prevent or remedy
injury that U.S. or other WTO members’ industries
and workers might experience based on import
surges or unfair trade practices. These mechanisms
include (1) a special textile safeguard mechanism
(which expired on December 11, 2008, 7 years after
China’s WTO accession), (2) a unique, China-specific
safeguard mechanism allowing a WTO member to
restrain increasing Chinese imports that disrupt its
market (which expired on December 11, 2013, 12
years after China’s WTO accession), (3) the authority
for WTO members whose national laws contain
market economy criteria as of the date of China’s
WTO accession to utilize a special non-market
economy methodology for measuring dumping in
anti-dumping cases against Chinese companies and
(4) the authority to use methodologies for
identifying and measuring subsidy benefits to
Chinese enterprises that are not based on terms and
conditions prevailing in China. The Administration is
committed to maintaining the effectiveness of these
mechanisms, to the extent that they remain
available, for the benefit of affected U.S. businesses,
workers and farmers.
With China’s consent, the WTO also created a special
multilateral mechanism for reviewing China’s
compliance on an annual basis. Known as the
Transitional Review Mechanism, this mechanism
operated annually for 8 years after China’s
accession. A final review, looking back over the first
10 years of China’s WTO membership, took place in
year 10, i.e., 2011.

29
OOVVEERRVVIIEEWW OOFF UU..SS.. EENNGGAAGGEEMMEENNTT
DDIIAALLOOGGUUEE
BBiillaatteerraall EEnnggaaggeemmeenntt
In 2014, the United States continued to pursue
intensified, focused bilateral dialogue with China.
Throughout the year, the United States and China
engaged in a range of formal and informal bilateral
meetings, including numerous working groups and
dialogues under the auspices of the U.S.-China Joint
Commission on Commerce and Trade (see Box 1),
the U.S.-China Strategic and Economic Dialogue (see
Box 2) and a Presidential summit.
Chaired by U.S. Trade Representative Froman and
Commerce Secretary Pritzker on the U.S. side and
Vice Premier Wang on the Chinese side, the JCCT
meets annually and focuses on seeking resolutions
to pressing trade and investment issues while also
encouraging China to accelerate its movement away
from reliance on government intervention and
toward full institutionalization of market
mechanisms. In December 2014, following several
months of preparatory meetings, the JCCT met for
the 25th
time (see Appendix 3).
Box 1: JCCT
The United States and China founded the U.S.-China Joint
Commission on Commerce and Trade in 1983 as a
government-to-government consultative mechanism between
the U.S. Department of Commerce and MOFCOM’s
predecessor, the Ministry of Foreign Economic Relations and
Trade, designed to provide a forum for resolving trade
concerns and pursuing bilateral commercial opportunities. In
2003, President Bush and Premier Wen agreed to elevate the
JCCT, with the Commerce Secretary and the U.S. Trade
Representative chairing the U.S. side and a Vice Premier
chairing the Chinese side. The JCCT holds plenary meetings on
an annual basis, while a number of JCCT working groups and
dialogues meet throughout the year in areas such as industrial
policies, competitiveness, intellectual property rights,
structural issues, steel, agriculture, pharmaceuticals and
medical devices, information technology, insurance, tourism,
environment, commercial law, trade remedies and statistics.
This year’s JCCT engagement produced meaningful
progress in some key areas, including (1)
commitments in which China clarified and
underscored that it will treat intellectual property
rights owned or developed in other countries the
same as domestically owned or developed
intellectual property rights and further agreed that
enterprises are free to base technology transfer
decisions on business and market considerations,
and are free to independently negotiate and decide
whether and under what circumstances to assign or
license intellectual property rights to affiliated or
unaffiliated enterprises, (2) a commitment to take
several specific steps to streamline and speed up its
regulatory review and approval system for new
pharmaceuticals, (3) a commitment to take several
specific steps to streamline and speed up its
regulatory review and approval system for new
medical devices, (4) a commitment that, in Anti-
Monopoly Law enforcement proceedings, the
Chinese authorities would treat domestic and
foreign companies equally and normally would
permit an investigated foreign company to have
foreign counsel present, to advise it and to provide
information on its behalf, (5) an agreement to hold
an annual, multi-ministerial dialogue with the United
States at the Vice Minster-level to carry out
balanced, mutually beneficial discussions addressing
science-based agricultural innovation and the
agriculture, (6) confirmation that a term is not
eligible for protection as a GI where the term is
generic in its territory, such as trademarks or
common names like “parmesan” and “feta” cheese,
(7) a commitment to pursue criminal and other
actions to deter the misappropriation of trade
administrative and other proceedings, (8) a
commitment that trade secrets submitted to the
government officials in connection with their official

30
duties and that government officials who illegally
disclose companies’ trade secrets are to be subject
to administrative or legal liability, (9) commitments
to protect the legal rights of inventors in respect of
their inventions and creations and to respect the
legitimate rules and regulations developed by
employers and the legitimate contracts between
employers and inventors concerning inventor
remuneration and awards, (10) a commitment to
strengthen enforcement against unlawful trademark
counterfeiting and copyright piracy activities in the
online environment and to deter the occurrence of
infringement and counterfeiting through criminal,
civil and administrative remedies and penalties and
(11) an agreement to work with the United States to
combat illegal, unreported or unregulated fishing,
including by developing and sharing improved data
on trade in fish and fish products. In addition, China
agreed to engage in further serious discussions with
the United States on outstanding issues related to
government procurement, trade secrets, GIs, sales of
IP-intensive goods and services, online infringement,
pharmaceutical patents, bad faith trademark filings,
market access for pharmaceuticals and medical
devices, the protection of IP in the standards-setting
process, fisheries trade, food and drug safety, legal
services, administrative licensing and judicial best
practices.
The sixth meeting of the S&ED, which included a
Strategic Track and an Economic Track, took place in
July 2014 (see Appendix 4). The Economic Track of
the S&ED allows U.S. and Chinese officials at the
highest levels to work together to address cross-
cutting and long-term economic issues through
candid and constructive engagement. The S&ED also
produces near-term results in the areas of trade and
investment.
At this year’s S&ED meeting, in the areas of trade
and investment, China made a number of
commitments, including (1) a commitment to further
deepen the reform of state-owned enterprises by
improving and standardizing modern corporate
governance structure and by reasonably increasing
the proportion of market-based recruitment of
management personnel for state-owned enterprises,
(2) commitments recognizing that the objective of
competition policy is to promote consumer welfare
and economic efficiency rather than promote
individual competitors or industries, that
enforcement of China’s competition laws should be
fair, objective, transparent and non-discriminatory,
and that it would provide any party under an Anti-
monopoly Law investigation with information about
the enforcement agency’s concerns and an effective
opportunity for the party to present evidence in its
defense, (3) commitments to pursue criminal and
other actions to deter the misappropriation of trade
Box 2: S&ED
The U.S.-China Strategic and Economic Dialogue was
established by Presidents Obama and Hu in April 2009 and
represents the highest-level bilateral forum between the
United States and China. The S&ED is an essential mechanism
for advancing a positive, constructive and comprehensive
relationship between the two countries. Treasury Secretary
Lew and Secretary of State Kerry, as special representatives of
President Obama, and Vice Premier Wang and State Councilor
Yang, as special representatives of President Xi, co-chair the
S&ED, which includes Strategic and Economic tracks and takes
place annually in alternating capitals. In the Economic Track,
the two sides have focused on four pillars that have formed
the basis of our economic engagement over the course of the
Administration: (1) promoting a strong recovery and achieving
more sustainable and balanced growth; (2) promoting more
resilient, open and market-oriented financial systems; (3)
strengthening trade and investment; and (4) strengthening the
international financial architecture.
administrative and other proceedings, (4) a
commitment to improve China’s value-added tax
rebate system, including by actively studying
matter, including regarding its impact on trade, (5) a
commitment to establish mechanisms that strictly

31
prevent the expansion of crude steelmaking capacity
and that are designed to achieve, over the next five
years, major progress in addressing excess
production capacity in the steel sector, (6) a
commitment to accelerate the process of market-
based price reforms for petroleum, electricity and
natural gas, and to realize market-based prices in
competitive sectors as soon as possible, (7) a
commitment to develop and seriously consider
amendments to the Drug Administration Law that
will require regulatory control of the manufacturers
of bulk chemicals that can be used as active
pharmaceutical ingredients, together with a
commitment to hold a multi-ministerial meeting by
the end of 2014 for the purpose of developing a
possible framework for regulatory oversight of bulk
chemicals, (8) commitments to treat applicants for
same rules and standards as the United States with
regard to the resources available to accept and
process applications and the number of applications
permitted at one time from an applicant, and to
strictly implement existing laws and regulations to
adequately protect any trade secret or sensitive
commercial information provided by the applicant
during the administrative licensing or approval
process, as required by law, (9) a commitment to
continue to improve procedures for foreign
investment approval and record-filing, (10)
commitments to promote the orderly opening-up of
the finance, education, cultural and medical services
sectors, and to remove foreign investment access
restrictions in the architectural design, construction
and engineering design, accounting and auditing,
child and old-age care, commerce and logistics, and
electronic commerce services sectors, (11) a
commitment confirming that China welcomes
foreign insurance companies to submit applications
for approval of new internal branches and will
review and issue decisions on these applications
within the timeframes set forth in Chinese law, (12)
commitments to continue the opening-up of the
securities and futures sectors and to actively study
policies concerning the further expansion of the
business scope of newly established securities joint
ventures and the further opening-up of the banking
sector and securities sector and (13) a commitment
confirming that China will publish English
translations of trade-related laws, administrative
regulations and departmental rules.
The United States and China also committed to
intensify their negotiations toward a BIT with high
standards, including non-discrimination, fairness,
openness, and transparency, to narrow differences
and to reach agreement on core issues and major
articles of the treaty text by the end of 2014, and to
initiate the “negative list” negotiation early in 2015
based on each side’s “negative list” offers.
The United States and China further announced their
support for the ongoing international negotiations
on official export financing to actively pursue and
complete work on guidelines for two sectors as soon
as possible and reaffirmed their shared commitment
to develop a set of new horizontal international
guidelines on official export credit support that
promote international trade and that, taking into
account varying national interests and situations, are
consistent with international best practices.
Constructive discussions also took place when
President Xi hosted President Obama in Beijing
following the APEC Leaders Meeting in November
2014. This summit produced important results in
the economic sphere, including a joint commitment
to accelerate the U.S.-China BIT negotiations and a
breakthrough leading to the resumption of
plurilateral negotiations to update and expand the
coverage of the Information Technology Agreement
(ITA). According to U.S. industry estimates, a
successful expansion of the ITA’s coverage would
eliminate tariffs on approximately $1 trillion in
annual global sales of information and
communications technology products and increase
annual global GDP by an estimated $190 billion. In
addition, because the United States is a global leader
in high-technology manufacturing, U.S. industry also
estimates that an expanded ITA will support up to
60,000 additional U.S. jobs.

32
Despite the progress made through this year’s
bilateral engagement with China, it is clear that
much more work remains to be done to open
China’s market to trade and investment. In 2015,
the United States will continue to use the JCCT and
S&ED processes and engagement with China’s
leaders to remove trade and investment barriers,
open China’s market further to foreign companies
and their exports and accelerate China’s movement
away from reliance on government intervention and
toward full institutionalization of market
mechanisms.
MMuullttiillaatteerraall MMeeeettiinnggss
In 2014, as in prior years, the United States
supplemented its bilateral engagement of China with
active participation in meetings at the WTO
addressing China and its adherence to its WTO
obligations. Throughout the year, the United States
Box 3: Trade Policy Review Mechanism
The Trade Policy Review Mechanism (TPRM) was created by
the WTO Agreement to facilitate the smooth functioning of the
multilateral trading system by enhancing the transparency of
WTO members’ trade policies. All WTO members are subject
to review under the TPRM. The four WTO members with the
largest shares of world trade (currently, the European Union,
the United States, Japan and China) are reviewed every two
years, the next 16 largest are reviewed every four years, and all
others are reviewed every six years (except that a longer period
may be fixed for least-developed country members of the
WTO). The reviews are conducted by the Trade Policy Review
Body (TPRB) on the basis of a policy statement by the WTO
member under review and a report prepared by economists in
the Secretariat’s Trade Policy Review Division. In preparing its
report, the Secretariat seeks the cooperation of the Member,
but has the sole responsibility for the facts presented and
views expressed about the member’s trade policies. During a
meeting that takes place over two days, the TPRB’s debate is
stimulated by a discussant, selected beforehand for this
purpose. Members also make their own observations, while
the member under review is required to respond orally and in
writing to written questions that have been submitted by other
members. The Secretariat’s report and the member’s policy
statement are published after the review meeting, along with
the minutes of the meeting.
raised China-related issues at regular meetings of
WTO committees and councils. The United States
also played an active role in the WTO’s fourth Trade
Policy Review of China (see Box 3), held in July 2014,
presenting a critical evaluation of China’s conduct as
a WTO member and submitting more than 180
written questions about various aspects of China’s
trade and investment regimes.
EENNFFOORRCCEEMMEENNTT
While engaging in intense dialogue with China
throughout the year, the United States also
continued to hold China accountable for adherence
to WTO rules when dialogue did not resolve U.S.
concerns. The United States continued to pursue
seven WTO cases against China during the past year,
as set out in Table 2 below, with support from the
Interagency Trade Enforcement Center, created by
Presidential Executive Order in 2012 in order to
provide additional resources for ensuring that all of
the United States’ trading partners adhere to their
obligations under international trade agreements.
In a WTO case initiated in September 2012, the
United States is challenging numerous subsidies
provided by the central government and various sub-
central governments in China to automobile and
automobile-parts enterprises located in regions in
China known as “export bases.” These subsidies
appear to be inconsistent with China’s obligation
under Article 3 of the Agreement on Subsidies and
Countervailing Measures (Subsidies Agreement) not
to provide subsidies contingent upon export
performance. In addition, the United States is
challenging the apparent failure of China to abide by
WTO transparency obligations requiring it to publish
the measures at issue in an official journal, to make
translations of them available in one or more WTO
languages and to notify them to the WTO
Committee on Subsidies and Countervailing
Measures. Consultations took place in November
2012. Since then, the two sides have been engaging
in further discussions exploring the steps that China
could take to address U.S. concerns.

33
In a WTO case initiated in July 2012, the United
States challenged China’s imposition of antidumping
and countervailing duties on imports of certain U.S.
automobiles. As in certain other recent antidumping
(AD) and countervailing duty (CVD) investigations,
China’s regulatory authorities appear to have
imposed the duties at issue without necessary legal
and factual support and without observing certain
transparency and procedural fairness requirements,
in violation of various WTO obligations under the
Agreement on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994 (AD
Agreement) and the Subsidies Agreement.
Consultations took place in August 2012. A WTO
panel was established to hear this case at the United
States’ request in October 2012, and eight other
WTO members joined the case as third parties.
Hearings before the panel took place in June 2013
and then in October 2013. Two months later, in
December 2013, China terminated the duties at
issue. In May 2014, the panel issued its decision,
finding in favor of the United States on all significant
claims.
In March 2012, the United States, joined by the
European Union (EU) and Japan, initiated a WTO
case challenging export quotas, export duties and
other restraints maintained by China on the export
of rare earths, tungsten and molybdenum, which are
key inputs in a multitude of U.S.-made products,
including hybrid car batteries, wind turbines, energy-
efficient lighting, steel, advanced electronics,
automobiles, petroleum and chemicals. China is a
leading world producer of these materials, and its
export restraints can skew the playing field against
the United States and other countries by creating
substantial competitive benefits for downstream
Chinese producers that use these materials as inputs
in the production and export of further processed
and finished products. The export restraints also can
create substantial pressure on U.S. and other non-
Chinese downstream producers to move their
operations, jobs and technologies to China. The
export restraints appear to be inconsistent with
China’s obligations under various provisions of the
GATT 1994 and China’s accession agreement. Joint
consultations took place in April 2012. A WTO panel
was established to hear the case at the complaining
parties’ request in July 2012, and 18 other WTO
members joined the case as third parties. Hearings
before the panel took place in February and June
2013. The panel issued its decision in March 2014.
The panel rejected China’s defenses, which had
attempted to portray China’s export restraints as
conservation measures or environmental protection
measures, and found in favor of the United States
and its co-complainants on all significant claims,
ruling that the export restraints at issue were
inconsistent with China’s WTO obligations. China
appealed certain aspects of the panel’s decision in
April 2014, and the WTO’s Appellate Body rejected
China’s appeal in August 2014, confirming that the
export restraints at issue were inconsistent with
China’s WTO obligations. China subsequently agreed
to come into compliance with the WTO’s rulings by
May 2015.
United States successfully challenged China’s
imposition of antidumping and countervailing duties
on imports of certain U.S. chicken products known as
“broiler products.” In the course of its AD and CVD
investigations, China’s regulatory authorities
in violation of various WTO obligations under the AD
Agreement and the Subsidies Agreement.
Consultations were held in October 2011. A WTO
States’ request in January 2012, and seven other
Hearings before the panel took place in September
and December 2012, and the panel issued its
decision in August 2013, finding in favor of the
United States on all significant claims. China decided
not to appeal the panel’s decision and subsequently
rulings by July 2014. China issued a redetermination
in July 2014 that left the duties in place. As of
December 2014, the United States was evaluating
next steps to take in this dispute.

34
United States challenged China’s restrictions on
foreign suppliers of electronic payment services.
Suppliers like the major U.S. credit card companies
provide these services in connection with the
operation of electronic networks that process
payment transactions involving credit, debit, prepaid
and other payment cards. They also enable,
facilitate and manage the flow of information and
the transfer of funds from cardholders’ banks to
merchants’ banks. China’s regulatory regime places
severe restrictions on foreign suppliers of electronic
payment services. Among other things, China
prohibits foreign suppliers from handling the typical
payment card transaction in China, in which a
Chinese consumer is billed in and makes a payment
in China’s domestic currency, known as the
renminbi, or RMB. Instead, China has created a
national champion, allowing only one domestic
entity, China UnionPay (CUP), to provide these
services. Consultations were held in October 2010.
A WTO panel was established to hear this case at the
United States’ request in March 2011, and six other
Hearings before the panel took place in October and
December 2011, and the panel issued its decision in
July 2012. The panel ruled that China’s
commitments under the General Agreement on
Trade in Services (GATS) required China to allow
foreign suppliers to provide electronic payment
services for payment card transactions denominated
in RMB through commercial presence in China on
non-discriminatory terms. China decided not to
appeal the panel’s decision and subsequently agreed
July 2013. China took some steps toward complying
with the WTO’s rulings by that deadline. China
repealed certain challenged measures, and it issued
new measures that imposed a new licensing
requirement for foreign suppliers to be able to
provide these services, without also taking the
critical step of establishing a process for foreign
suppliers actually to obtain the needed licenses. In
rulings.
In another WTO case initiated in September 2010,
the United States successfully challenged China’s
imposition of antidumping and countervailing duties
on imports of grain-oriented electrical steel (GOES) –
a soft magnetic material used by the power
generating industry in transformers, rectifiers,
reactors and large electric machines – from the
United States. In the course of its AD and CVD
investigations, China’s regulatory authorities
in violation of various WTO obligations under the AD
Agreement and the Subsidies Agreement.
Consultations were held in November 2010. A WTO
States’ request in March 2011, and eight other WTO
before the panel took place in September and
June 2012, finding in favor of the United States on all
significant claims. China appealed the panel’s
decision in July 2012. The WTO’s Appellate Body
rejected China’s appeal in October 2012, and China
subsequently agreed to come into compliance with
the WTO’s rulings by July 2013. China issued a
redetermination in July 2013, but it appears to be
inconsistent with the WTO’s rulings. In January
2014, the United States launched a challenge to
China’s redetermination in a proceeding under
Article 21.5 of the WTO’s Understanding on Rules
and Procedures Governing the Settlement of
Disputes (DSU). A hearing before the panel took
place in October 2014, and the panel is expected to
issue its decision in 2015.
The final WTO case active in 2014 involved U.S.
challenges to market access restrictions maintained
by China that restricted the importation and

35
distribution of copyright-intensive products such as
books, newspapers, journals, theatrical films, DVDs
and music. In this case, hearings before a WTO
panel took place in 2008, and the panel issued its
decision in August 2009, ruling in favor of the United
States on every significant claim in the case. China
appealed the panel’s decision in September 2009.
The WTO’s Appellate Body rejected China’s appeal
on all counts in December 2009. China agreed to
come into compliance with the WTO’s rulings by
March 2011. China subsequently issued several
revised measures, and repealed other measures,
relating to the market access restrictions on books,
newspapers, journals, DVDs and music. As China
acknowledged, however, it did not issue any
measures addressing theatrical films. Instead, China
proposed bilateral discussions with the United States
in order to seek an alternative solution. After
months of negotiations, which included discussions
between the two sides’ Vice Presidents, the United
States and China reached agreement in February
2012 on a Memorandum of Understanding (MOU)
providing for substantial increases in the number of
foreign films imported and distributed in China each
year and substantial additional revenue for foreign
film producers. The MOU provides that it will be
reviewed after five years in order for the two sides
to discuss issues of concern, including additional
compensation for the U.S. side. To date, while
significantly more U.S. films have been imported and
distributed in China on a revenue-sharing basis since
the signing of the MOU and the revenue received by
U.S. film producers has increased significantly, China
has not yet fully implemented its MOU
commitments, including with regard to a critical
commitment to open up film distribution
opportunities for imported films that are distributed
in China on a flat-fee basis rather than a revenue-
sharing basis. In addition, U.S. industry reports that
China has been imposing an informal quota on the
total number of U.S. revenue-sharing films and flat-
fee films that can be imported each year, which, if
true, would undermine the terms of the MOU. As a
result, the United States has been pressing China for
full implementation and will continue to do so in
2015.

36
Table 2
AAccttiivvee UU..SS.. WWTTOO DDiissppuutteess aaggaaiinnsstt CChhiinnaa iinn 22001144
China – Subsidies for Automobile and Automobile-Parts Export Base Enterprises
Initiation: September 2012
Dispute: The United States is challenging China’s provision of what appear to be export subsidies to automobile and automobile-
parts enterprises in China.
Third Parties: It is not yet clear whether other WTO members will join in as third parties.
Status: Consultations took place in November 2012. Currently, the two sides are engaging in further discussions exploring the
steps that China could take to address U.S. concerns.
China – Antidumping and Countervailing Duties on Automobiles
Initiation: July 2012
Dispute: The United States is challenging China’s imposition of antidumping and countervailing duties on imports of automobiles
from the United States.
Third Parties: Colombia, the EU, India, Japan, Korea, Oman, Saudi Arabia and Turkey
Status: Hearings before a WTO panel took place in June and October 2013. China terminated the duties at issue in December
2013. The panel issued its decision in May 2014, finding in favor of the United States on all significant claims.
China – Export Restraints on Raw Materials II
Initiation: March 2012
Dispute: The United States, the EU and Japan are challenging China’s export restraints on rare earths, tungsten and molybdenum.
Third Parties: Argentina, Australia, Brazil, Canada, Colombia, India, Indonesia, Korea, Norway, Oman, Peru, Russian Federation, Saudi
Arabia, Chinese Taipei, Turkey and Vietnam
Status: Hearings before a WTO panel took place in February and June 2013. The panel issued its decision in March 2014,
rejecting China’s defenses and finding in favor of the United States and its co-complainants on all significant claims.
China appealed certain aspects of the panel’s decision in April 2014, and the WTO’s Appellate Body rejected China’s
appeal in August 2014.
China – Antidumping and Countervailing Duties on Chicken Broiler Products
Dispute: The United States is challenging China’s imposition of antidumping and countervailing duties on imports of chicken
broiler products from the United States.
Third Parties: Chile, the EU, Japan, Mexico, Norway, Saudi Arabia and Thailand
Status: Hearings before a WTO panel took place in September and December 2012. The panel issued its decision in August
2013, finding in favor of the United States on all significant claims. China decided not to appeal the panel’s decision and
subsequently agreed to come into compliance with the WTO’s rulings by July 2014. China issued a redetermination in
July 2014 that left the duties in place. As of December 2014, the United States was evaluating next steps to take in this
dispute.
China – Antidumping and Countervailing Duties on Grain-Oriented Electrical Steel
Dispute: The United States challenged China’s imposition of antidumping and countervailing duties on imports of grain-oriented
electrical steel from the United States.
Third Parties: Argentina, the EU, Honduras, India, Japan, Korea, Saudi Arabia and Vietnam

37
Table 2 (cont’d)
AAccttiivvee UU..SS.. WWTTOO DDiissppuutteess aaggaaiinnsstt CChhiinnaa iinn 22001144
China – Antidumping and Countervailing Duties on Grain-Oriented Electrical Steel (cont’d)
Status: Hearings before a WTO panel took place in September and December 2011. The panel issued its decision in June 2012,
finding in favor of the United States on all significant claims. China appealed the panel’s decision in July 2012. The
WTO’s Appellate Body rejected China’s appeal in October 2012, and China subsequently agreed to come into compliance
with the WTO’s rulings by July 2013. China issued a redetermination in July 2013, but it appears to be inconsistent with
the WTO’s rulings. In January 2014, the United States launched a challenge to China’s redetermination in a proceeding
under Article 21.5 of the DSU. A hearing before the panel took place in October 2014, and the panel is expected to issue
its decision in 2015.
China – Electronic Payment Services
Dispute: The United States challenged China’s restrictions on foreign suppliers of electronic payment services like the major U.S.
credit card companies.
Third Parties: Australia, Ecuador, the EU, India, Japan and Korea
Status: Hearings before a WTO panel took place in October and December 2011. The panel issued its decision in July 2012,
ruling that China made GATS commitments to allow foreign suppliers to provide electronic payment services for payment
card transactions denominated in RMB through commercial presence in China on non-discriminatory terms, and finding
specific measures challenged by the United States to be inconsistent with those commitments. China decided not to
appeal the panel’s decision and agreed to come into compliance with the WTO’s rulings by July 2013. China took some
compliance steps by July 2013. However, China has not yet taken the critical step of issuing regulations establishing a
needed licensing process for foreign suppliers so that they can provide electronic payment services for payment card
transactions denominated in RMB through commercial presence in China as contemplated by the WTO’s rulings. As of
December 2014, the United States was considering its further options at the WTO while continuing to press China to
comply with the WTO’s rulings.
China – Market Access for Books, Movies and Music
Initiation: April 2007
Dispute: The United States challenged China’s barriers to importing and distributing books, newspapers, journals, theatrical films,
DVDs and music in China.
Third Parties: Australia, the EU, Japan, Korea and Chinese Taipei
Status: A WTO panel issued its decision in August 2009, ruling in favor of the United States on all significant claims. China
appealed the panel’s decision in September 2009. The WTO’s Appellate Body rejected China’s appeal in December 2009.
China agreed to come into compliance with the WTO’s rulings by March 2011. Since then, China has taken compliance
steps with regard to the market access barriers on books, newspapers, journals, DVDs and music. With regard to
theatrical films, the United States and China concluded an MOU providing for substantial increases in the number of
foreign films imported and distributed in China each year and substantial additional revenue for foreign film producers.
To date, while significantly more U.S. films have been imported and distributed in China on a revenue-sharing basis since
the signing of the MOU and the revenue received by U.S. film producers has increased significantly, China has not yet
implemented a critical commitment to open up film distribution opportunities for imported films that are distributed in
China on a flat-fee basis rather than a revenue-sharing basis.

38
CCHHIINNAA’’SS WWTTOO CCOOMMPPLLIIAANNCCEE
Set forth below is a detailed analysis of the
commitments that China made upon acceding to the
WTO on December 11, 2001, the progress that China
has made in complying with those commitments and
the United States’ efforts to address compliance
concerns that have arisen as of December 2014. As
noted above, a summary of China’s WTO compliance
efforts is reproduced in Table 1.
TTRRAADDIINNGG RRIIGGHHTTSS
China appears to be in compliance with its trading
rights commitments in most areas. One significant
exception involves China’s restrictions on the right to
import theatrical films, which China reserves for
state trading. In 2012, following a successful WTO
case brought by the United States challenging these
restrictions, the United States and China entered into
an MOU providing for substantial increases in the
number of U.S. films imported and distributed in
China each year and substantial additional revenue
for foreign film producers, although China has not
yet fully implemented its MOU commitments.
Within the context of China’s WTO commitments,
the concept of “trading rights” includes two
elements, i.e., the right to import goods (into China)
and the right to export goods (from China). It does
not include the right to sell goods within China, as
that right is governed by separate commitments
principally relating to “distribution services” set forth
in China’s Services Schedule (see the Distribution
Services section below). Nevertheless, together with
China’s distribution services commitments, China’s
trading rights commitments call for the elimination
of significant barriers to a wide range of U.S. and
other foreign industries doing business, or seeking to
do business, in China.
Until shortly before its WTO accession, China
severely restricted the number and types of
enterprises that could import or export goods, and it
also restricted the goods that a particular enterprise
could import or export. For the most part, China
confined trading rights to certain state-owned
manufacturing and trading enterprises, which could
import or export goods falling within their approved
scopes of business. China also granted trading rights
to certain foreign-invested enterprises, allowing
them to import inputs for their production purposes
and export their finished products.
In its accession agreement, China committed to
substantial liberalization in the area of trading rights.
Most importantly, China agreed to eliminate its
system of examination and approval of trading rights
and make full trading rights automatically available
for all Chinese enterprises, Chinese-foreign joint
ventures, wholly foreign-owned enterprises and
foreign individuals, including sole proprietorships,
within three years of its accession, or by December
11, 2004, the same deadline for China to eliminate
most restrictions in the area of distribution services.
The only exceptions applied to products listed in an
annex to China’s accession agreement, such as
grains, cotton and tobacco, for which China reserved
the right to engage in state trading.
As previously reported, the NPC issued a revised
Foreign Trade Law, which provided for trading rights
to be automatically available through a registration
process for all domestic and foreign entities and
individuals, effective July 2004, while MOFCOM
issued implementing rules setting out the
procedures for registering as a foreign trade
operator. U.S. companies have reported few
problems with this trading rights registration
process.
BBooookkss,, MMoovviieess aanndd MMuussiicc
Under the terms of China’s accession agreement,
trading rights for copyright-intensive products such
as books, newspapers, journals, theatrical films,
DVDs and music should have been automatically
available to all Chinese enterprises, Chinese-foreign
joint ventures, wholly foreign-owned enterprises
and foreign individuals as of December 11, 2004.
These products are not included in the list of
products for which China reserved the right to

39
engage in state trading. Nevertheless, China did not
liberalize trading rights for these products. China
continued to reserve the right to import these
products to state trading enterprises, as reflected in
a complex web of measures issued by numerous
agencies, including the State Council, the State
Administration of Radio, Film and Television (SARFT),
MOFCOM, the National Development and Reform
Commission (NDRC), the Ministry of Culture, the
General Administration of Press and Publication
(GAPP) and the General Administration of Customs.
As previously reported, the United States initiated a
WTO dispute settlement case against China in April
2007, challenging China’s restrictions on the
importation and distribution of copyright-intensive
products such as books, newspapers, journals,
theatrical films, DVDs and music. The WTO panel
established to hear this case issued its decision in
August 2009, ruling in favor of the United States on
all significant claims. China appealed the panel’s
decision in September 2009, and the WTO’s
Appellate Body rejected China’s appeal on all counts
in December 2009. China agreed to comply with
these rulings by March 2011. China subsequently
issued several revised measures, and repealed other
measures, relating to the importation restrictions on
books, newspapers, journals, DVDs and music.
However, China did not issue any measures
addressing theatrical films and instead proposed
bilateral discussions with the United States in order
to seek an alternative solution. After months of
negotiations, which included discussions between
the two sides’ Vice Presidents, the United States and
China reached agreement in February 2012 on an
MOU providing for substantial increases in the
number of foreign films imported and distributed in
for foreign film producers. The MOU provides that it
will be reviewed after five years in order for the two
sides to discuss issues of concern, including
additional compensation for the U.S. side. To date,
while significantly more U.S. films have been
imported and distributed in China on a revenue-
sharing basis since the signing of the MOU and the
revenue received by U.S. film producers has
increased significantly, China has not yet fully
implemented its MOU commitments, including with
regard to a critical commitment to open up film
distribution opportunities for imported films that are
distributed in China on a flat-fee basis rather than a
revenue-sharing basis. In addition, U.S. industry
reports that China has been imposing an informal
quota on the total number of U.S. revenue-sharing
films and flat-fee films that can be imported each
year, which, if true, would undermine the terms of
the MOU. As a result, the United States has been
pressing China for full implementation and will
continue to do so in 2015.
IIMMPPOORRTT RREEGGUULLAATTIIOONN
TTaarriiffffss
China has timely implemented its tariff commitments
for industrial goods each year.
During its bilateral negotiations with interested WTO
members leading up to its accession, China agreed
to greatly increase market access for U.S. and other
foreign companies by reducing tariff rates on
industrial goods over a period of years running from
2002 through 2010. The agreed reductions are set
forth as tariff “bindings” in China’s Goods Schedule,
meaning that while China cannot exceed the bound
tariff rates, it can decide to apply them at a lower
rate, as many members do when trying to attract
particular imports. As previously reported, each
year, China implemented its scheduled tariff
reductions on January 1 as required.
The annual tariff changes that China made following
its WTO accession significantly increased market
access for U.S. exporters in a range of industries, as
China reduced tariffs on goods of greatest
importance to U.S. industry from a base average of
25 percent (in 1997) to approximately 7 percent,
while it made similar reductions throughout the
agricultural sector (see the Agriculture section
below). In addition, U.S. exports have benefited
from China’s ongoing participation in the
Information Technology Agreement, which requires

40
the elimination of tariffs on computers,
semiconductors and other information technology
products. U.S. exports also have continued to
benefit from China’s ongoing adherence to another
significant tariff initiative, the WTO’s Chemical Tariff
Harmonization Agreement, completed in 2005.
Overall, U.S. exports to China continued to increase
in 2014, rising approximately four percent from
January through October 2014, when compared to
the same time period in 2013.
A breakthrough in the plurilateral negotiations to
update and expand the coverage of the ITA,
achieved during the run-up to the November 2014
summit meeting between President Obama and
President Xi, should lead to significant additional
benefits for U.S. manufacturers and exporters in the
future. According to U.S. industry estimates, a
successful expansion of the ITA’s coverage would
eliminate tariffs on approximately $1 trillion in
annual global sales of information and
communications technology products and increase
annual global GDP by an estimated $190 billion. In
addition, because the United States is a global leader
in high-technology manufacturing, U.S. industry also
estimates that an expanded ITA will support up to
60,000 additional U.S. jobs.
Despite the significant reductions in China’s tariffs
that WTO members were able to negotiate with
China in connection with its accession to the WTO
and through plurilateral initiatives like the ITA, China
retains the right to impose relatively high tariffs on
some products that compete with sensitive domestic
industries. For example, the tariff on most
automobiles is 25 percent, and most audio and video
recorders still face 30 percent tariffs.
In August 2013, China increased the tariff on narrow
body aircraft weighing between 25 and 45 tons from
one percent to the bound rate of five percent.
Because the tariff for narrow body aircraft weighing
more than 45 tons is one percent, and many
comparable narrow body aircraft weigh between 40
and 50 tons, this change is having the unintended
consequence of encouraging Chinese airlines to
purchase heavier, less fuel-efficient aircraft in order
to fall within the one percent tariff category and
thereby save millions of dollars on the purchase
price. This change also adversely affects U.S.-
manufactured narrow body aircraft in particular, as
they tend to be lighter and more fuel-efficient than
competing European aircraft. The United States has
discussed this issue with China and is hopeful that a
more rational tariff policy will be put in place soon.
CCuussttoommss aanndd TTrraaddee AAddmmiinniissttrraattiioonn
Like other acceding WTO members, China agreed to
take on the WTO obligations that address the means
by which customs and other trade administration
officials check imports and establish and apply
relevant trade regulations. These agreements cover
the areas of customs valuation, rules of origin and
import licensing.
CCUUSSTTOOMMSS VVAALLUUAATTIIOONN
China has issued measures that bring its legal regime
for making customs valuation determinations into
compliance with WTO rules, but implementation of
these measures has been inconsistent from port to
port, both in terms of customs clearance procedures
and valuation determinations.
The WTO Agreement on the Implementation of
GATT Article VII (Agreement on Customs Valuation)
is designed to ensure that determinations of the
customs value for the application of duty rates to
imported goods are conducted in a neutral and
uniform manner, precluding the use of arbitrary or
fictitious customs values. Adherence to the
Agreement on Customs Valuation is important for
U.S. exporters, particularly to ensure that market
access opportunities provided through tariff
reductions are not negated by unwarranted and
unreasonable “uplifts” in the customs value of goods
to which tariffs are applied. China agreed to
implement its obligations under the Agreement on
Customs Valuation upon accession, without any
transition period. In addition, China’s accession
agreement reinforces China’s obligation not to use

41
minimum or reference prices as a means for
determining customs value. It also called on China
to implement the Decision on Valuation of Carrier
Media Bearing Software for Data Processing
Equipment and the Decision on Treatment of Interest
Charges in Customs Value of Imported Goods by
December 11, 2003.
As previously reported, in 2002, shortly after China
acceded to the WTO, China issued regulations
addressing the inconsistencies that had existed
between China’s customs valuation methodologies
and the Agreement on Customs Valuation. China’s
Customs Administration subsequently issued rules
that were intended to clarify provisions of the
regulations addressing the valuation of royalties and
license fees. In addition, China issued a measure on
interest charges and a measure requiring duties on
software to be assessed on the basis of the value of
the underlying carrier medium, meaning, for
example, the CD-ROM or floppy disk itself, rather
than based on the imputed value of the content,
which includes, for example, the data recorded on a
CD-ROM or floppy disk.
CCuussttoommss CClleeaarraannccee PPrroocceedduurreess
U.S. exporters continue to be concerned about
inefficient and inconsistent customs clearance
procedures in China. These procedures vary from
port to port, lengthy delays are not uncommon, and
the fees charged appear to be excessive, giving rise
to concerns about China’s compliance with its
obligations under Article VIII of GATT 1994.
TTaarriiffff CCllaassssiiffiiccaattiioonnss
U.S. industry notes that Chinese customs officers
appear to have wide discretion in classifying goods
for tariff purposes, and their classifications
sometimes appear to be arbitrary. This lack of
uniformity and predictability creates unnecessary
challenges for U.S. and other foreign companies
seeking to export their goods to China.
CCuussttoommss VVaalluuaattiioonn DDeetteerrmmiinnaattiioonnss
China has still not uniformly implemented the
various customs valuation measures issued following
its accession to the WTO. U.S. exporters continue to
report that they are encountering valuation
problems at many ports.
According to U.S. exporters, even though the
Customs Administration’s measures provide that
imported goods normally should be valued on the
basis of their transaction price, meaning the price
the importer actually paid, many Chinese customs
officials are still improperly using “reference
pricing,” which usually results in a higher dutiable
value. Indeed, it appears that the practice of using
reference prices is increasing. Imports of
information technology products are often subjected
to reference pricing, as are other imported products,
such as wood products.
In addition, some of China’s customs officials are
reportedly not applying the rules set forth in the
Customs Administration’s measures as they relate to
software royalties and license fees. Rather,
following their pre-WTO accession practice, these
officials are still automatically adding royalties and
license fees to the dutiable value (for example, when
an imported personal computer includes pre-
installed software), even though the rules expressly
direct them to add those fees only if they are
import-related and a condition of sale for the goods
being valued.
U.S. exporters have also continued to complain that
some of China's customs officials are assessing
duties on digital products based on the imputed
value of the content, such as the data recorded on a
floppy disk or CD-ROM. China’s own regulations
require this assessment to be made on the basis of
the value of the underlying carrier medium, meaning
the floppy disk or CD-ROM itself.
When the United States first presented its concerns
about the customs valuation problems being
encountered by U.S. companies several years ago,

42
China indicated that it was working to establish
more uniformity in its adherence to WTO customs
valuation rules. Since then, the United States has
sought to assist in this effort in part by conducting
technical assistance programs for Chinese
government officials on WTO compliance in the
customs area. The United States has also raised its
concerns about particular customs valuation
problems before the WTO’s Committee on Customs
Valuation and during the WTO’s biannual Trade
Policy Reviews of China, the most recent of which
was held in July 2014. At present, China still needs
to improve its adherence to applicable customs
valuation measures.
RRUULLEESS OOFF OORRIIGGIINN
for making rules of origin determinations into
compliance with WTO rules.
Upon its accession to the WTO, China became
subject to the WTO Agreement on Rules of Origin,
which sets forth rules designed to increase
transparency, predictability and consistency in both
the establishment and application of rules of origin,
which are necessary for import and export purposes,
such as determining the applicability of import
quotas, determining entitlement to preferential or
duty-free treatment and imposing antidumping or
countervailing duties or safeguard measures, and for
the purpose of confirming that marking
requirements have been met. The Agreement on
Rules of Origin also provides for a work program
leading to the multilateral harmonization of rules of
origin. This work program is ongoing, and China
specifically agreed to adopt the internationally
harmonized rules of origin once they were
completed. In addition, China confirmed that it
would apply rules of origin equally for all purposes
and that it would not use rules of origin as an
instrument to pursue trade objectives either directly
or indirectly.
As previously reported, it took China nearly three
years after its accession to the WTO for China’s State
Council to issue the regulations intended to bring
China’s rules of origin into conformity with WTO
rules for import and export purposes. Shortly
thereafter, the Customs Administration issued
implementing rules addressing the issue of
substantial transformation. U.S. exporters have not
raised concerns with China’s implementation of
these measures.
IIMMPPOORRTT LLIICCEENNSSIINNGG
for import licenses into compliance with WTO rules,
although a variety of specific compliance issues
continue to arise.
The Agreement on Import Licensing Procedures
(Import Licensing Agreement) establishes rules for
all WTO members, including China, that use import
licensing systems to regulate their trade. Its aim is
to ensure that the procedures used by members in
operating their import licensing systems do not, in
themselves, form barriers to trade. The objective of
the Import Licensing Agreement is to increase
transparency and predictability and to establish
disciplines to protect the importer against
unreasonable requirements or delays associated
with the licensing regime. The Import Licensing
Agreement covers both “automatic” licensing
systems, which are intended only to monitor
imports, not regulate them, and “non-automatic”
licensing systems, which are normally used to
administer import restrictions, such as tariff-rate
quotas, or to administer safety or other
requirements, such as for hazardous goods,
armaments or antiquities. While the Import
Licensing Agreement’s provisions do not directly
address the WTO consistency of the underlying
measures that licensing systems regulate, they do
establish the baseline of what constitutes a fair and
non-discriminatory application of import licensing
procedures. In addition, China specifically
committed not to condition the issuance of import
licenses on performance requirements of any kind,
such as local content, export performance, offsets,

43
technology transfer or research and development, or
on whether competing domestic suppliers exist.
Shortly after China acceded to the WTO, the Ministry
of Foreign Trade and Economic Cooperation
(MOFTEC) issued regulations revising China’s
automatic import licensing regime, and it later
supplemented these regulations with implementing
rules. MOFTEC also issued regulations revising
China’s non-automatic licensing regime. In 2014, as
in prior years, the United States continued to
monitor MOFCOM’s implementation of these
regulations.
IIrroonn OOrree
In 2005, China began imposing new import licensing
procedures for iron ore, a key steel input, for which
Chinese steel producers are dependent on foreign
suppliers. China restricted the number of licensed
importers, but did not make public a list of the
qualified enterprises or the qualifying criteria used.
The WTO’s Import Licensing Agreement calls for
import licensing procedures that do not have a
restrictive effect on trade. However, procedures
that direct iron ore imports toward certain
producers significantly distort trade, particularly
because China is by far the largest iron ore importer
in the world, and global prices for iron ore have
reached historically high levels, led by Chinese
demand. China’s procedures also set a troubling
precedent for the handling of imports of other raw
materials. Indeed, when viewed in light of Chinese
measures to restrict exports of other steelmaking
raw materials and Chinese government involvement
in iron ore contract negotiations, the licensing
system for iron ore appears to be part of a program
to control raw material prices to provide an unfair
advantage to Chinese steel producers.
In the years after 2005, China further reduced the
number of licensed importers. China also issued a
stimulus plan to revitalize its steel industry which
provided that the Chinese government would
regulate iron ore imports to ensure market order
and that Chinese steel producers and iron ore
suppliers would establish a mutually beneficial
import pricing mechanism and long-term
cooperation relationship. In addition, China
reportedly temporarily suspended the issuance of
licenses to importers of Australian iron ore in 2008 in
an effort to limit price increases being negotiated
between foreign exporters of iron ore and Chinese
steelmakers.
In response, the United States raised its concerns
about China’s restrictive iron ore licensing
procedures bilaterally, such as through U.S.-China
Steel Dialogue meetings. The United States also
raised its concerns in meetings before the WTO’s
Committee on Import Licensing and Council for
Trade in Goods as well as during the June 2012 Trade
Policy Review of China at the WTO.
In June 2013, MOFCOM issued the Notice Regarding
Implementing Online Registration for Iron Ore and
Aluminum Oxide Automatic Import Licensing, which
purports to establish an automatic online import
licensing system for iron ore (and aluminum oxide).
While this measure does not on its face impose any
qualification requirements for importers, it is not yet
clear how the new import licensing procedures will
be administered. Currently, it appears that the
number of iron ore importers is increasing.
In 2015, the United States will continue to monitor
China’s iron ore import licensing system procedures
closely. The United States also will examine other
Chinese government actions that may seek to
influence iron ore prices.
OOtthheerr IIssssuueess
The United States has focused considerable
attention on import licensing issues that have arisen
in a variety of other specific contexts since China’s
WTO accession. In 2014, these included the
administration of the tariff-rate quota system for
fertilizer (discussed below in the section on Tariff-
rate Quotas on Industrial Goods), the administration
of the tariff-rate quota system for cotton (discussed

44
below in the section on Tariff-rate Quotas on Bulk
Agricultural Commodities), various SPS measures
(discussed below in the section on Sanitary and
Phytosanitary Issues) and inspection-related
requirements for soybeans, meat, poultry, pork and
dairy products (discussed below in the section on
Inspection-Related Requirements).
NNoonn--ttaarriiffff MMeeaassuurreess
China has adhered to the agreed schedule for
eliminating non-tariff measures, but new
prohibitions on the import of remanufactured
products have generated concerns.
In its WTO accession agreement, China agreed that it
would eliminate numerous trade-distortive non-
tariff measures (NTMs), including import quotas,
licenses and tendering requirements covering
hundreds of products. Most of these NTMs,
including, for example, the NTMs covering
chemicals, agricultural equipment, medical and
scientific equipment and civil aircraft, had to be
eliminated by the time that China acceded to the
WTO. China committed to phase out other NTMs,
listed in an annex to the accession agreement, over a
transition period ending on January 1, 2005. These
other NTMs included import quotas on industrial
goods such as air conditioners, sound and video
recording apparatuses, color TVs, cameras, watches,
crane lorries and chassis, and motorcycles as well as
licensing and tendering requirements applicable to a
few types of industrial goods, such as machine tools
and aerials.
As previously reported, China’s import quota system
was beset with problems, despite consistent
bilateral engagement by the United States. Some of
the more difficult problems were encountered with
the auto import quota system, resulting at times in
significant disruption of wholesale and retail
operations for imported autos. However, China did
fully adhere to the agreed schedule for the
elimination of all of its import quotas as well as all of
its other NTMs, the last of which China eliminated in
January 2005. In some cases, China even eliminated
NTMs ahead of schedule, as it did with the import
quotas on crane lorries and chassis, and
motorcycles.
RReemmaannuuffaaccttuurreedd PPrroodduuccttss
China prohibits the importation of remanufactured
products, which it typically classifies as used goods.
China also maintains restrictions that prevent
remanufacturing process inputs (known as cores)
from being imported into China’s customs territory,
except special economic zones. These import
prohibitions and restrictions undermine the
development of industries in many sectors in China,
including mining, agriculture, healthcare,
transportation and communications, among others,
because companies in these industries are unable to
purchase high-quality, lower-cost remanufactured
products produced outside of China.
Despite these import prohibitions and restrictions,
China does permit foreign companies to participate
with domestic companies in pilot programs, which
allow them to engage in a limited way in the
manufacture and sale of remanufactured goods in
China. However, overall China’s import prohibitions
and restrictions remain a serious problem and U.S.
companies’ activities remain severely restricted. To
help address this problem, since 2011, the United
States has convened annual U.S.-China
Remanufacturing Dialogues, which include relevant
government and industry stakeholders from both
countries as participants. In addition, the United
States has continued to press China to lift its import
prohibitions and to expand the scope of
remanufacturing activity allowed to be conducted in
China through other bilateral engagement, including
both the JCCT and the Asia-Pacific Economic
Cooperation (APEC) forum, where the United States
has urged China to join the APEC Pathfinder Initiative
on Facilitating Trade in Remanufactured Goods.
TTaarriiffff--rraattee QQuuoottaass oonn IInndduussttrriiaall PPrroodduuccttss
Concerns about transparency and administrative
guidance have plagued China’s tariff-rate quota

45
system for industrial products, particularly fertilizer,
since China’s accession to the WTO.
In its WTO accession agreement, China agreed to
implement a system of tariff-rate quotas (TRQs)
designed to provide significant market access for
three industrial products, including fertilizer, a major
U.S. export. Under this TRQ system, a set quantity of
imports is allowed at a low tariff rate, while imports
above that level are subject to a higher tariff rate. In
addition, the quantity of imports allowed at the low
tariff rate increases annually by an agreed amount.
China’s accession agreement specifies detailed rules,
requiring China to operate its fertilizer TRQ system in
a transparent manner and dictating precisely how
and when China is obligated to accept quota
applications, allocate quotas and reallocate unused
quotas.
As previously reported, since China began
implementing its TRQ system for fertilizer in 2002, it
has not functioned smoothly. Despite repeated
bilateral engagement and multilateral engagement
at the WTO, including formal consultations with
China in Geneva under the headnotes in China’s
Goods Schedule, concerns about inadequate
transparency and administrative guidance have
persisted. Meanwhile, U.S. fertilizer exports to
China have declined sharply since China acceded to
the WTO, as separate Chinese government policies
promoting domestic fertilizer – including export
duties (discussed below in the Export Regulation
section) and discriminatory internal taxes (discussed
below in the Taxation section) – appear to have
made it difficult for foreign producers to compete in
China’s market.
OOtthheerr IImmppoorrtt RReegguullaattiioonn
AANNTTIIDDUUMMPPIINNGG
China has issued laws and regulations bringing its
legal regime in the AD area largely into compliance
with WTO rules, although China still needs to issue
additional procedural guidance such as rules
governing expiry reviews. More significantly, China
needs to improve its commitment to the
transparency and procedural fairness requirements
embodied in WTO rules, as the WTO found in three
disputes brought by the United States. In addition,
China needs to eliminate its apparent use of trade
remedy investigations as a retaliatory tool.
By the time of its accession to the WTO, China
agreed to revise its regulations and procedures for
AD proceedings, in order to make them consistent
with the AD Agreement. That agreement sets forth
detailed rules prescribing the manner and basis on
which a WTO member may take action to offset the
injurious dumping of products imported from
another WTO member. China also agreed to provide
for judicial review of determinations made in its AD
investigations and reviews.
China has become a leading user of AD measures
since its accession to the WTO. Currently, China has
in place 103 AD measures, some of which pre-date
China’s membership in the WTO, affecting imports
from 16 countries or regions. China also has 7 AD
investigations in progress. The greatest systemic
shortcomings in China’s AD practice continue to be
in the areas of transparency and procedural fairness.
In addition, as discussed below, in recent years,
China has invoked AD and CVD remedies under
troubling circumstances. In response, the United
States has pressed China both bilaterally and in WTO
meetings to adhere strictly to WTO rules in the
conduct of its AD investigations, and the United
States has consistently pursued WTO litigation
where necessary.
LLeeggaall RReeggiimmee
As previously reported, China has put in place much
of the legal framework for its AD regime. Under this
regime, until 2014, MOFCOM’s Bureau of Fair Trade
for Imports and Exports (BOFT) was charged with
making dumping determinations, and MOFCOM’s
Bureau of Industry Injury Investigation (IBII) was
charged with making injury determinations. In 2014,
MOFCOM consolidated BOFT and IBII into a new
entity, the Trade Remedy and Investigation Bureau

46
(TRIB), which makes both dumping and injury
determinations. In cases where the subject
merchandise is an agricultural product, the Ministry
of Agriculture may be involved in the injury
investigation. The State Council Tariff Commission
continues to make the final decision on imposing,
revoking or retaining AD duties, based on
recommendations provided by the TRIB, although its
authority relative to MOFCOM has not been clearly
defined in the regulations and rules since MOFCOM
was established.
China continues to add new regulations and rules to
its AD legal framework, although not all of these
measures have been notified to the WTO in a timely
manner. In July 2009, MOFCOM solicited public
comments on draft revisions of its rules on new
shipper reviews, AD duty refunds and price
undertakings. To date, however, China still has not
finalized revisions to any of these rules. Once
finalized, China is obligated to notify these revised
rules to the WTO so that all Members have an
opportunity to review the rules for compliance with
the AD Agreement and seek any needed
clarifications. Meanwhile, another area generating
concern involves expiry reviews. China has still not
issued any regulations specifically establishing the
rules and procedures governing expiry reviews. In
May 2013, MOFCOM solicited public comments on
rules concerning the implementation of WTO rulings
in trade remedy cases. While purportedly final,
these rules have not yet been notified to the WTO.
CCoonndduucctt ooff AAnnttiidduummppiinngg IInnvveessttiiggaattiioonnss
In practice, it appears that China’s conduct of AD
investigations in many respects continues to fall
short of full commitment to the fundamental tenets
of transparency and procedural fairness embodied in
the AD Agreement. In 2014, respondents from the
United States and other WTO members continued to
express concerns about key lapses in transparency
and procedural fairness in China’s conduct of AD
investigations. The principal areas of concern
include the inadequate disclosure of key documents
placed on the record by domestic Chinese
producers, insufficiently detailed disclosures of the
essential facts underlying MOFCOM decisions, such
as the results of on-site verification, dumping margin
calculations and evidence supporting injury and
dumping conclusions, and MOFCOM not adequately
addressing critical arguments or evidence put
forward by interested parties. These aspects of
China’s AD practice have been challenged by the
United States in the WTO cases involving GOES,
chicken broiler products and automobiles. In each of
the cases, the WTO has upheld U.S. claims relating to
transparency and procedural fairness.
The United States and other WTO members have
also expressed serious concerns about China’s
evolving practice of launching AD and CVD
investigations that appear designed to discourage
the United States or other trading partners from the
legitimate exercise of their rights under WTO AD and
CVD rules and the trade remedy provisions of
China’s accession agreement. This type of
retaliatory conduct is not typical of WTO members,
and it may have its roots in China’s Foreign Trade
Law and AD and CVD implementing regulations,
which authorize “corresponding countermeasures”
when China believes that a trading partner has
discriminatorily imposed antidumping or
countervailing duties against imports from China.
Further, when China has pursued investigations
under these circumstances, it appears that its
regulatory authorities have tended to move forward
with the imposition of duties regardless of the
strength of the underlying legal and factual support.
The United States’ successful WTO cases challenging
the duties imposed by China on imports of U.S.
GOES, U.S. chicken broiler products and U.S.
automobiles offer telling examples of this problem.
The United States initiated the GOES WTO case in
September 2010, claiming that China’s regulatory
authorities appeared to have imposed the duties at
issue without necessary legal and factual support
and without observing certain transparency and
procedural fairness requirements, in violation of
various WTO obligations under the AD Agreement
and the Subsidies Agreement. Consultations were

47
held in November 2010. A WTO panel was
established to hear this case at the United States’
request in March 2011, and eight other WTO
before the panel took place in September and
December 2011. The panel issued its decision in
June 2012, finding in favor of the United States on all
significant claims. China appealed the panel’s
decision in July 2012. The WTO’s Appellate Body
rejected China’s appeal in October 2012, and China
redetermination in July 2013, but it appears to be
inconsistent with the WTO’s rulings. In January
2014, the United States launched a challenge to
China’s redetermination in a proceeding under
Article 21.5 of the DSU. A hearing before the panel
took place in October 2014, and the panel is
expected to issue its decision in 2015.
In September 2011, the United States initiated a
WTO case challenging the antidumping and
countervailing duties that China imposed on imports
of certain U.S. chicken products known as “broiler
products.” Once again, in the course of its AD and
CVD investigations, China’s regulatory authorities
appeared to have imposed the duties at issue
without necessary legal and factual support and
without observing certain transparency and
and the Subsidies Agreement. Consultations were
held in October 2011. A WTO panel was established
to hear this case at the United States’ request in
January 2012, and seven other WTO members joined
the case as third parties. Hearings before the panel
took place in September and December 2012, and
the panel issued its decision in August 2013, finding
in favor of the United States on all significant claims.
China decided not to appeal the panel’s decision and
redetermination in July 2014 that left the duties in
place. As of December 2014, the United States was
evaluating next steps to take in this dispute.
In July 2012, the United States initiated a WTO case
challenging China’s imposition of antidumping and
countervailing duties on imports of certain U.S.
automobiles. Again, China’s regulatory authorities
appeared to have imposed the duties at issue
without necessary legal and factual support and
without observing certain transparency and
and the Subsidies Agreement. Consultations took
place in August 2012. A WTO panel was established
to hear this case in October 2012, and eight other
Hearings before the panel took place in June 2013
and then in October 2013. Two months later, in
December 2013, China terminated the duties at
issue. In May 2014, the panel issued its decision,
finding in favor of the United States on all significant
claims.
Throughout 2014, as in prior years, the United States
continued to work closely with U.S. companies
subject to Chinese AD investigations in an effort to
help them better understand the Chinese system.
The United States also advocated on their behalf in
connection with ongoing AD investigations, with the
goal of obtaining fair and objective treatment for
them, consistent with the AD Agreement.
In addition, the United States continued to engage
China vigorously on the various concerns generated
by China’s AD practices, including systemic concerns
in the areas of transparency and procedural fairness.
The United States also raised concerns about China’s
apparent decisions to use AD and CVD remedies
against U.S. imports as a means to discourage the
United States from the legitimate exercise of its
rights under WTO AD and CVD rules and the trade
remedy provisions of China’s accession agreement.
In addition to pursuing litigation at the WTO to
address these concerns, as discussed above, the
United States has engaged China during meetings
before the WTO’s AD Committee. The United States
also has engaged China bilaterally through the Trade
Remedies Working Group, which was established

48
under the auspices of the JCCT in 2004. This working
group has given U.S. AD experts a dedicated forum
to speak with China’s AD authorities directly and in
detail on issues facing U.S. exporters subject to
Chinese AD investigations. The working group has
held several meetings since its creation in April 2004,
including a meeting in November 2014. In between
meetings, U.S. experts also have frequent informal
exchanges with China’s AD authorities, which are
intended to promote greater accountability in
China’s AD regime.
Meanwhile, as China’s AD regime has matured,
many of the AD orders put in place have reached the
five-year mark, warranting expiry reviews.
MOFCOM is currently conducting 13 expiry reviews,
three of which involve products from the United
States. Every expiry review involving U.S. products
to date has resulted in the measure at issue being
extended. In addition, several of China’s AD
measures are due to expire in 2015, including ones
covering U.S. products. Given the problems that
respondents have encountered in China’s AD
investigations, it is critical that China publish rules
and procedures specifically governing the conduct of
expiry reviews, as required by the AD Agreement.
The United States has repeatedly pressed China to
issue regulations governing expiry reviews and will
continue to do so.
Finally, it appears that no interested party from the
United States or any other WTO member to date has
filed for judicial review of a Chinese AD proceeding.
However, as China continues to launch AD
investigations and apply AD measures against
imports, the opportunity for interested parties to
seek judicial review will become more critical.
CCOOUUNNTTEERRVVAAIILLIINNGG DDUUTTIIEESS
China has issued laws and regulations bringing its
legal regime in the CVD area largely into compliance
with WTO rules, although China still needs to issue
additional procedural guidance such as rules
governing expiry reviews. More significantly, China
needs to improve its commitment to the
transparency and procedural fairness requirements
embodied in WTO rules, as the WTO has found in
three disputes brought by the United States. In
addition, In addition, China needs to eliminate its
apparent use of trade remedy investigations as a
retaliatory tool.
revising its regulations and procedures for
conducting CVD investigations and reviews by the
time of its accession, in order to make them
consistent with the Subsidies Agreement. The
Subsidies Agreement sets forth detailed rules
prescribing the manner and basis on which a WTO
member may take action to offset the injurious
subsidization of products imported from another
WTO member. Although China did not separately
commit to provide judicial review of determinations
made in CVD investigations and reviews, Subsidies
Agreement rules require independent review.
China initiated its first CVD investigations in 2009.
Each of these investigations involved imports of
products from the United States – GOES, chicken
broiler products and automobiles – and were
initiated concurrently with AD investigations of the
same products. As discussed above in the
Antidumping section, China initiated these CVD
investigations under troubling circumstances. China
also appears to have committed significant
methodological errors that raise concerns, in light of
Subsidies Agreement rules. In addition, many of the
concerns generated by China’s AD practice with
regard to transparency and procedural fairness also
apply to these CVD investigations. In response, the
United States has pressed China both bilaterally and
in WTO meetings to adhere strictly to WTO rules in
the conduct of its CVD investigations, and the United
States has pursued WTO litigation to address the
problems with China’s imposition of duties on
imports of GOES, chicken broiler products and
automobiles from the United States, as discussed
below.

49
As previously reported, China has put in place much
of the legal framework for its CVD regime. Under
this regime, like in the AD area, MOFCOM’s TRIB is
charged with making both subsidy and injury
determinations.
It appears that China has attempted to conform its
CVD regulations and procedural rules to the
provisions and requirements of the Subsidies
Agreement and the commitments in its WTO
accession agreement. China’s regulations and
procedural rules generally track those found in the
Subsidies Agreement, although there are certain
areas where key provisions are omitted or are
vaguely worded. In addition, China has not yet
issued regulations specifically establishing the rules
and procedures governing expiry reviews.
Since China’s accession, the United States and other
WTO members have sought clarifications on a
variety of issues concerning China’s regulatory
framework and have pressed China for greater
transparency both during regular meetings and the
annual transitional reviews before the WTO’s
Subsidies Committee. The United States will
continue to seek clarifications as needed in 2015.
CCoonndduucctt ooff CCoouunntteerrvvaaiilliinngg DDuuttyy IInnvveessttiiggaattiioonnss
MOFCOM initiated China’s first CVD investigation in
June 2009. This investigation addressed alleged
subsidies being provided to the U.S. GOES industry,
concurrently with MOFCOM’s AD investigation of
imports of GOES from the United States. Later that
year, MOFCOM initiated additional CVD
investigations involving imports of chicken broiler
products and automobiles from the United States,
along with concurrent AD investigations.
These three CVD investigations, along with a fourth
one involving imports of U.S. polysilicon initiated in
July 2012, make clear that, as in the AD area, China
needs to improve its transparency and procedural
fairness when conducting these investigations. In
addition, the United States has noted procedural
concerns specific to China’s conduct of CVD
investigations. For example, China initiated
investigations of alleged subsidies that raised
concerns, given the requirements regarding
“sufficient evidence” in Article 11.2 of the Subsidies
Agreement. The United States is also concerned
about China’s application of facts available under
Article 12.7 of the Subsidies Agreement. In addition,
as in the AD area, the United States has expressed
serious concerns about China’s pursuit of AD and
CVD remedies that appear intended to discourage
the United States and other trading partners from
the legitimate exercise of their rights under WTO AD
and CVD rules and the trade remedy provisions of
China’s accession agreement.
As discussed above in the Antidumping section, in
September 2010, the United States initiated – and
later won – a WTO case challenging the final AD and
CVD determinations in China’s GOES investigations
because China’s regulatory authorities appeared to
have imposed the duties at issue without necessary
legal and factual support and without observing
certain transparency and procedural fairness
requirements, in violation of various WTO
obligations under the AD Agreement and the
Subsidies Agreement. For similar reasons, the
United States initiated a second WTO case in
September 2011 challenging the final AD and CVD
determinations in China’s chicken broiler products
investigations and won that case, too. The United
States initiated a third WTO case in July 2012
challenging the final AD and CVD determinations in
China’s automobiles investigations; again, the United
States won.
In addition to pursuing WTO dispute settlement, the
United States has raised its concerns bilaterally with
MOFCOM, principally though the JCCT Trade
Remedies Working Group, as well as at the WTO in
meetings before the Subsidies Committee. The
United States has also actively participated in
MOFCOM’s ongoing CVD investigations, and will

50
continue to do so as envisioned by WTO rules, in
order to safeguard the interests of U.S. industry.
Going forward, the United States will continue to
impress upon China the importance of strictly
adhering to WTO rules when conducting CVD
investigations and imposing countervailing duties.
SSAAFFEEGGUUAARRDDSS
China has issued measures bringing its legal regime
in the safeguards area largely into compliance with
WTO rules, although concerns about potential
inconsistencies with WTO rules continue to exist.
revising its regulations and procedures for
conducting safeguard investigations by the time of
its WTO accession in order to make them consistent
with the WTO Agreement on Safeguards (Safeguards
Agreement). That agreement articulates rules and
procedures governing WTO members’ use of
safeguard measures.
As previously reported, it appears that China has
made an effort to establish a WTO-consistent
safeguard regime through the issuance of
regulations and procedural rules that became
effective in January 2002. While the provisions of
these measures generally track those of the
Safeguards Agreement, there are some potential
inconsistencies, and certain omissions and
ambiguities remain. In addition, some provisions do
not have any basis in the Safeguards Agreement. In
earlier transitional reviews before the WTO’s
Committee on Safeguards, the United States noted
several areas of potential concern, including
transparency, determination of developing country
status, treatment of non-WTO members, protection
of confidential data, access to non-confidential
information, refunding of safeguard duties collected
pursuant to provisional measures when definitive
measures are not imposed, and the conditions
governing the extension of a safeguard measure.
CCoonndduucctt ooff SSaaffeegguuaarrddss IInnvveessttiiggaattiioonnss
To date, as previously reported, China has conducted
only one safeguard proceeding, which resulted in the
imposition of tariff-rate quotas on imports of nine
categories of steel products from various countries,
including the United States, in November 2002.
Although U.S. companies exported little of this
merchandise to China, there were complaints from
interested parties that China’s process for allocating
quotas under the safeguard measures was unclear,
making it difficult for them to determine the quota
available and obtain a fair share. China terminated
the safeguard measures in December 2003.
EEXXPPOORRTT RREEGGUULLAATTIIOONN
China maintains numerous export restraints that
raise serious concerns under WTO rules, including
specific commitments that China made in its WTO
accession agreement. In the two WTO cases decided
to date in this area, the WTO found that exports
restraints maintained by China on raw material
inputs violated China’s WTO obligations.
Upon acceding to the WTO, China took on the
obligations of Article XI of the GATT 1994, which
generally prohibits WTO members from maintaining
export restraints (other than duties, taxes or other
charges), although certain limited exceptions are
allowed. China also agreed to eliminate all taxes and
charges on exports, including export duties, except
as included in Annex 6 to its WTO accession
agreement or applied in conformity with Article VIII
of GATT 1994. Article VIII of GATT 1994 only permits
fees and charges limited to the approximate cost of
services rendered and makes clear that any such
fees and charges shall not represent an indirect
protection to domestic products or a taxation of
exports for fiscal purposes.
As in prior years, China maintains numerous export
restraints that appear to violate WTO rules, including
specific commitments that China made in its
accession agreement. These export restraints distort

51
trade in raw materials as well as intermediate and
downstream products.
EExxppoorrtt RReessttrraaiinnttss oonn RRaaww MMaatteerriiaallss
Since its accession to the WTO, China has continued
to impose restraints on exports of raw materials,
including export quotas, related export licensing and
bidding requirements, minimum export prices and
export duties, as China’s economic planners have
continued to guide the development of downstream
industries. These export restraints are widespread.
For example, China maintains some or all of these
types of export restraints on antimony, bauxite,
coke, fluorspar, indium, lead, magnesium carbonate,
manganese, molybdenum, phosphate rock, rare
earths, silicon, silicon carbide, talc, tin, tungsten,
yellow phosphorus and zinc, all of which are of key
interest to U.S. downstream producers.
These types of export restraints can significantly
distort trade, and for that reason WTO rules
normally outlaw them. In the case of China, the
trade-distortive impact can be exacerbated because
of the size of China’s production capacity. Indeed,
for many of the raw materials at issue, China is the
world’s leading producer.
China’s export restraints affect U.S. and other
foreign producers of a wide range of downstream
products, such as steel, chemicals, hybrid and
electric cars, energy efficient light bulbs, wind
turbines, hard-disk drives, magnets, lasers, ceramics,
semiconductor chips, refrigerants, medical imagery,
aircraft, refined petroleum products, fiber optic
cables and catalytic converters, among numerous
others. The export restraints can create serious
disadvantages for these foreign producers by
artificially increasing China’s export prices for their
raw material inputs, which also drives up world
prices. At the same time, the export restraints
appear to artificially lower China’s domestic prices
for the raw materials due to significant increases in
domestic supply, enabling China’s domestic
downstream producers to produce lower-priced
products from the raw materials and thereby
creating significant advantages for China’s domestic
downstream producers when competing against
foreign downstream producers both in the China
market and in other countries’ markets. The export
restraints can also create pressure on foreign
downstream producers to move their operations,
technologies and jobs to China.
As previously reported, the United States began
raising its concerns about China’s continued use of
export restraints shortly after China’s WTO
accession, while also working with other WTO
members with an interest in this issue, including the
EU and Japan. In response to these efforts, China
refused to modify its policies in this area. In fact,
over time, China’s economic planners expanded
their use of export restraints and also made them
increasingly restrictive, particularly on raw materials.
In June 2009, the United States and the EU initiated
a WTO case challenging export quotas, export duties
and other restraints maintained by China on the
export of several key raw material inputs for which
China is a leading world producer. The materials at
issue include bauxite, coke, fluorspar, magnesium,
manganese, silicon carbide, silicon metal, yellow
phosphorus and zinc. Mexico subsequently became
a co-complainant in August 2009.
At the time of the initiation of this case, China’s
treatment of coke, a key steel input, provided a clear
example of the trade distortions engineered by
China’s export restraints. In 2008, China produced
336 million metric tons (MT) of coke, but it limited
exports of coke to 12 million MT and additionally
imposed 40 percent duties on coke exports. With
these export restraints in place, the effects of the
export restraints on pricing were dramatic. In
August 2008, the world price for coke reached $740
per MT at the same time that China’s domestic price
was $472 per MT. This $268 per MT price difference
created a huge competitive advantage for China’s
downstream steel producers over their foreign

52
counterparts, as coke represents about one-third of
the input costs for integrated steel producers.
The WTO panel established to hear the export
restraints case issued its decision in July 2011. The
panel rejected China’s defenses, which had
attempted to portray China’s export restraints as
conservation or environmental protection measures
or measures taken to manage critical shortages of
supply, and found in favor of the United States and
its co-complainants on all significant claims, ruling
that the export restraints at issue were inconsistent
with China’s WTO obligations. China appealed
certain aspects of the panel’s decision in August
2011, and the WTO’s Appellate Body rejected
China’s appeal in January 2012, confirming that the
export restraints at issue were inconsistent with
China’s WTO obligations. China subsequently agreed
the end of December 2012. China timely took steps
to remove the export quotas and export duties on
the raw materials at issue, while imposing automatic
export licensing requirements on a subset of those
materials. Since then, the United States has been
closely monitoring China’s export licensing regime to
ensure that it operates automatically and does not
distort trade.
In 2010, China’s export restraints on rare earths – a
collection of 17 different chemical elements used in
a variety of green technology products, among other
products – began to generate significant concern
among China’s trading partners. At the time, China
controlled about 97 percent of the global rare earths
market and had been imposing increasingly
restrictive export quotas and export duties on rare
earth ores, oxides and metals. In July 2010, China
sharply reduced its export quotas, causing world
prices for some of the rare earths to rise
dramatically higher than China’s domestic prices and
further hindering efforts in other countries to
develop expertise in the increasingly important
downstream manufacturing of green technology
products. Then, in September 2010, China
reportedly imposed a de facto ban on all exports of
rare earths to Japan, causing even more concern
among China’s trading partners.
The United States pressed China during the run-up
to the December 2010 JCCT meeting to eliminate its
export restraints on rare earths and also used the
November 2010 G-20 meeting, as did Japan, the EU
and other trading partners, to try to persuade China
to pursue more responsible policies on raw
materials. However, China refused to abandon its
use of export restraints.
In 2011, China expanded the scope of products
covered by the rare earths export quota to include
more processed rare earths products, making the
quota even more restrictive than it had been in
2010. In addition, according to several reports,
China’s customs authorities began imposing
minimum export prices on rare earth exports. It
appeared that this practice disrupted the export
quota process and contributed to rapidly increasing
prices outside China.
The United States continued to press China and seek
its agreement to eliminate its export restraints on
rare earths, using both bilateral engagement
through the JCCT process and multilateral
engagement at the WTO during the final transitional
reviews before the Market Access Committee, the
Council for Trade in Goods and the General Council.
Japan, the EU and other trading partners made
similar efforts. However, China continued to refuse
to abandon its use of export restraints.
In March 2012, the United States, joined by the EU
and Japan, initiated a WTO case challenging export
quotas, export duties and other restraints
maintained by China on the export of rare earths,
tungsten and molybdenum. These materials are key
inputs in a multitude of U.S.-made products,
including not only a variety of green technology
products, such as hybrid car batteries, wind turbines
and energy-efficient lighting, but also steel,
advanced electronics, automobiles, petroleum and
chemicals. The export restraints appear to be

53
inconsistent with China’s obligations under various
provisions of the GATT 1994 and China’s accession
agreement. Joint consultations took place in April
2012. A WTO panel was established to hear the case
at the complaining parties’ request in July 2012, and
18 other WTO members joined the case as third
parties. Hearings before the panel took place in
February and June 2013, and the panel issued its
decision in March 2014. It rejected China’s defenses,
which had attempted to portray China’s export
restraints as conservation or environmental
protection measures, and found in favor of the
United States and its co-complainants on all
significant claims, ruling that the export restraints at
issue were inconsistent with China’s WTO
obligations. China appealed certain aspects of the
panel’s decision in April 2014, and the WTO’s
Appellate Body rejected China’s appeal in August
2014, confirming that the export restraints at issue
violated China’s WTO obligations. China
the WTO’s rulings by May 2015.
BBoorrddeerr TTaaxx PPoolliicciieess
China’s economic planners attempt to manage the
export of many primary, intermediate and
downstream products by raising or lowering the
value-added tax (VAT) rebate available upon export
and sometimes by imposing or retracting export
duties. With VAT rebates ranging from zero to 17
percent and export duties typically ranging from zero
to 40 percent, these border tax practices have
caused tremendous disruption, uncertainty and
unfairness in the global markets for the affected
products – particularly when these practices operate
to incentivize the export of downstream products for
which China is a leading world producer or exporter
such as steel, aluminum and soda ash.
Typically, the objective of China’s border tax
adjustments is to make larger quantities of primary
and intermediate products in a particular sector
available domestically at lower prices than the rest
of the world, giving China’s downstream producers
of finished products using these inputs a competitive
advantage over foreign downstream producers. To
accomplish this objective, China discourages the
export of the relevant primary and intermediate
products by reducing or eliminating VAT rebates and
perhaps also imposing export duties on them,
resulting in increased domestic supply and lower
domestic prices. China’s downstream producers, in
turn, benefit not only from these lower input prices
but also from full VAT rebates when they export
their finished products.
In some situations, China has also used its border
taxes to encourage the export of certain finished
products over other finished products within a
particular sector. For example, in the past, China has
targeted value-added steel products, particularly
wire products and steel pipe and tube products,
causing a surge in exports of these products, many
of which ended up in the U.S. market.
For several years, the United States and other WTO
members raised broad concerns about the trade-
distortive effects of China’s VAT export rebate and
export duty practices the annual transitional reviews
before the Committee on Market Access and the
Council for Trade in Goods. The United States and
other WTO members also have used the Trade Policy
Reviews of China at the WTO, held in April 2006,
May 2008, May 2010, June 2012 and July 2014, to
raise their concerns. Bilaterally, the United States
also raised broad concerns about the trade-
distortive effects of China’s variable VAT export
rebate practices in connection with the July 2009,
May 2010, May 2011 and July 2014 S&ED meetings
and the October 2009, December 2010, November
2011, December 2012 and December 2013 JCCT
meetings. Through this engagement, the United
States highlighted in particular the harm being
caused to specific U.S. industries, including steel,
aluminum and soda ash.
To date, China has been unwilling to commit to
abandon its use of trade-distortive VAT export
rebates. However, China has acknowledged that its
eventual goal is to provide full VAT rebates for all
exports like other WTO members with VAT systems.

54
In addition, at the December 2012 JCCT meeting,
China agreed to begin holding serious discussions
with the United States in order to work toward a
mutual understanding of China’s VAT system and the
concepts on which a trade-neutral VAT system is
based. Subsequently, at the July 2014 S&ED
meeting, China agreed to improve its value-added
tax rebate system, including by actively studying
IINNTTEERRNNAALL PPOOLLIICCIIEESS AAFFFFEECCTTIINNGG TTRRAADDEE
NNoonn--ddiissccrriimmiinnaattiioonn
While China has revised many laws, regulations and
other measures to make them consistent with WTO
rules relating to MFN and national treatment,
concerns about compliance with these rules still arise
in some areas.
assume the obligations of GATT 1994, the WTO
agreement that establishes the core principles that
constrain and guide WTO members’ policies relating
to trade in goods. The two most fundamental of
these core principles are the Most-Favored Nation
(MFN), or non-discrimination, rule – referred to in
the United States as “normal trade relations” – and
the rule of national treatment.
The MFN rule (set forth in Article I of GATT 1994)
attempts to put the goods of all of an importing
WTO member’s trading partners on equal terms with
one another by requiring the same treatment to be
applied to goods of any origin. It generally provides
that if a WTO member grants another country’s
goods a benefit or advantage, it must immediately
and unconditionally grant the same treatment to
imported goods from all WTO members. This rule
applies to customs duties and charges of any kind
connected with importing and exporting. It also
applies to internal taxes and charges, among other
internal measures.
The national treatment rule (set forth in Article III of
GATT 1994) complements the MFN rule. It is
designed to put the goods of an importing WTO
member’s trading partners on equal terms with the
importing member’s own goods by requiring, among
other things, that a WTO member accord no less
favorable treatment to imported goods than it does
for like domestic goods. Generally, once imported
goods have passed across the national border and
import duties have been paid, the importing WTO
member may not subject those goods to internal
taxes or charges in excess of those applied to
domestic goods. Similarly, with regard to measures
affecting the internal sale, purchase, transportation,
distribution or use of goods, the importing WTO
member may not treat imported goods less
favorably than domestic goods.
repeal or revise all laws, regulations and other
measures that were inconsistent with the MFN rule
upon accession. China also confirmed that it would
observe this rule with regard to all WTO members,
including separate customs territories, such as Hong
Kong, Macau and Taiwan. In addition, China
undertook to observe this rule when providing
preferential arrangements to foreign-invested
enterprises within special economic areas. With
regard to the national treatment rule, China similarly
agreed to repeal or revise all inconsistent laws,
regulations and other measures. China also
specifically acknowledged that its national treatment
obligation extended to the price and availability of
goods or services supplied by government
authorities or state-owned enterprises, as well as to
the provision of inputs and services necessary for the
production, marketing or sale of finished products.
Among other things, this latter commitment
precludes dual pricing, i.e., the practice of charging
foreign or foreign-invested enterprises more for
inputs and related services than Chinese enterprises.
China also agreed to ensure national treatment in
respect of certain specified goods and services that
had traditionally received discriminatory treatment
in China, such as boilers and pressure vessels (upon
accession), after sales service (upon accession), and

55
pharmaceuticals, chemicals and spirits (one year
after accession).
As previously reported, China reviewed its pre-WTO
accession laws and regulations and revised many of
those which conflicted with its WTO MFN and
national treatment obligations in 2002 and 2003.
However, since then, concerns have arisen regarding
China’s observation of MFN and national treatment
requirements in some areas.
SSttrraatteeggiicc EEmmeerrggiinngg IInndduussttrriieess
In 2010, China unveiled a new high-level government
plan to rapidly spur innovation in seven high-
technology sectors dubbed the strategic emerging
industries (SEIs). The Decision of the State Council
on Accelerating the Cultivation and Development of
Strategic Emerging Industries established an early,
broad framework for “developing and cultivating”
innovation in energy efficient environmental
technologies, next generation information
technology, biotechnology, high-end equipment
manufacturing, new energy, new materials and new
energy vehicles (NEVs). The subsequently issued
National 12th Five-year Plan for the Development of
Strategic Emerging Industries defined SEI sectors, set
priorities, and recommended fiscal and taxation
policy support.
By 2012, China had issued additional policy
documents and catalogues explaining the
development priorities for key technologies and
products considered to be SEIs, identifying specific
sub-sectors, technologies and products in each SEI
sector, and setting forth a variety of specific policies
and support measures designed to spur
development in each sub-sector. One of these
documents, a catalogue issued by MIIT, instructed
sub-central government authorities to identify firms,
technologies and measures supporting the central
government’s SEI initiative, listed relevant
companies and research and development units for
each sub-sector and further indicated that the list
should be used by other Chinese government
ministries to “issue targeted supporting fiscal and
taxation policies.” Only a very small number of
companies listed had any foreign investment, as the
list was dominated by Chinese-invested companies,
particularly state-owned enterprises and domestic
national champions.
By January 2013, China had created a central
government-level support fund for SEI development
while encouraging local governments to establish
their own local SEI support funds. Sub-central
government transparency varies greatly, and in
many provinces very limited information on the SEI
initiative is publicly available.
Since the unveiling of China’s SEI plan in 2010, the
United States has voiced strong concerns over the
direction of some of China’s SEI policy development,
particularly with regard to policies that discriminate
against U.S. firms or their products, encourage
excessive government involvement in determining
market winners and losers, encourage technology
transfer, are targeted at exports or tied to
localization or the use of domestic intellectual
property, or could lead to injurious subsidization.
Through this engagement, the United States was
able to obtain commitments from China at the
November 2011 and December 2012 JCCT meetings.
Specifically, China committed in 2011 to provide a
“fair and level playing field for all companies,
including U.S. companies” in the development of
China’s SEIs. In 2012, China went further by
committing to provide foreign enterprises with fair
and equitable participation in the development of
SEIs, and announcing that policies supporting SEI
development would be equally applicable to
qualified domestic and foreign enterprises.
In 2013 and 2014, the United States continued to
follow closely China’s SEI policy development,
including the various forms of financial support that
the Chinese government provides to SEI sectors.
Through the JCCT process, the United States urged
China to be more transparent about the financial
and other benefits being provided to these sectors.
In addition, at the WTO, the United States submitted
a request for information pursuant to Article 25.8 of

56
the Subsidies Agreement regarding Chinese
government subsidies available to enterprises in
China’s SEI sectors, as discussed below in the
Subsidies section.
The United States also has pressed China to repeal
or modify several problematic measures. For
example, a development plan for the LED industry
issued by the Shenzhen municipal government
included a call to support research and development
in products and technologies that have the ability to
substitute for imports. Shenzhen rescinded the plan
in 2013 following U.S. Government intervention with
China’s central government authorities. Another
example involves the high-end equipment
manufacturing sector. In this sector, China
maintains central, provincial and local government
measures that condition the receipt of subsidies on
an enterprise’s use of at least 60 percent Chinese-
made components when manufacturing intelligent
manufacturing equipment. As the United States has
made clear to China, these measures raise serious
concerns, both in light of China’s WTO obligations
and China’s past bilateral commitments relating to
SEIs and the fair and equitable treatment of foreign
enterprises.
developments closely. The United States also will
continue to raise concerns over any policies that
appear to run counter to China’s WTO or bilateral
commitments.
OOtthheerr AArreeaass
U.S. industries report that China continues to apply
the value-added tax in a manner that unfairly
discriminates between imported and domestic
goods, both through official measures and on an ad
hoc basis, as discussed below in the Taxation section.
In addition, China’s industrial policies on
automobiles and steel call for discrimination against
foreign producers and imported goods, as discussed
below in the Investment section. It also appears that
China has applied sanitary and phytosanitary
measures in a discriminatory manner since it
acceded to the WTO, as discussed below in the
Agriculture section, while concerns about
discriminatory treatment also remain prevalent in a
variety of services sectors, as discussed below in the
Services section. Additionally, various aspects of
China’s legal framework, such as China’s extensive
use of administrative licensing, create opportunities
for Chinese government officials to treat foreign
companies and foreign products less favorably than
domestic companies and domestic products, as
discussed below in the Other Legal Framework
Issues section. The United States continued to
address these and other MFN and national
treatment issues with China in 2014, both bilaterally
and in WTO meetings. The United States will
continue to pursue these issues vigorously in 2015.
TTaaxxaattiioonn
China has used its taxation system to discriminate
against imports in certain sectors, raising concerns
under WTO rules relating to national treatment.
China committed to ensure that its laws and
regulations relating to taxes and charges levied on
imports and exports would be in full conformity with
WTO rules upon accession, including, in particular,
the MFN and national treatment provisions of
Articles I and III of GATT 1994.
Since China’s WTO accession, certain aspects of
China’s taxation system have raised national
treatment concerns under Article III of GATT 1994.
One of these issues – the discriminatory VAT rates
applied to imported versus domestically produced
integrated circuits – was resolved in 2004 after the
United States filed a WTO case, as previously
reported. Other taxation issues remain, however.
FFeerrttiilliizzeerr VVAATT
China has used VAT policies to benefit domestic
fertilizer production. In July 2001, the Ministry of
Finance (MOF) and the State Administration of
Taxation (SAT) issued a circular exempting all
phosphate fertilizers except diammonium phosphate

57
(DAP) from a 13 percent VAT. DAP, a product that
the United States exports to China, competes with
similar phosphate fertilizers produced in China,
particularly monoammonium phosphate.
The United States raised this issue bilaterally with
China soon after it acceded to the WTO and in many
subsequent bilateral meetings, including high-level
meetings. The United States has also raised this
issue at the WTO in meetings before the Committee
on Market Access. To date, China has not eliminated
its discriminatory treatment of DAP.
Meanwhile, a larger concern for U.S. fertilizer
exporters remains the rapid expansion of China’s
domestic fertilizer production. This expanded
production, which appears to have been brought on
in part by China’s export duties on phosphate rock, a
key fertilizer input, has saturated China’s market
with low-priced fertilizer and greatly reduced
demand for imported fertilizer.
VVAATT IIrrrreegguullaarriittiieess
Several U.S. industries have continued to express
concerns more generally about the unfair operation
of China’s VAT system. They report that Chinese
producers are often able to avoid payment of the
VAT on their products, either as a result of poor
collection procedures, special deals or even fraud,
while the full VAT still must be paid on competing
imports. In discussions with Chinese government
officials on this issue, the United States has raised its
serious concerns about the de facto discriminatory
treatment accorded to foreign products, while also
continuing to emphasize the value to China of a
properly functioning VAT system as a revenue
source.
BBoorrddeerr TTrraaddee
China’s border trade policy also continues to
generate MFN and other concerns. China provides
preferential import duty and VAT treatment to
certain products, often from Russia, apparently even
when those products are not confined to frontier
traffic as envisioned by Article XXIV of GATT 1994.
China began to address these concerns in 2003
shortly after acceding to the WTO when it eliminated
preferential treatment for boric acid and 19 other
products. However, several other products continue
to benefit from preferential treatment. During past
meetings before the WTO’s Council for Trade in
Goods, the United States has urged China to
eliminate the preferential treatment for these
remaining products.
SSuubbssiiddiieess
China continues to provide injurious subsidies to its
domestic industries, and some of these subsidies
appear to be prohibited under WTO rules. Although
China filed a long-overdue WTO subsidies
notification in 2011, this notification only covered
subsidies provided during the period from 2005 to
2008 and was far from complete. In addition, China
has a poor record of responding to other WTO
members’ questions about its subsidies before the
WTO’s Subsidies Committee.
Upon its accession to the WTO, China agreed to
assume the obligations of the WTO Subsidies
Agreement, which addresses not only the use of CVD
measures by individual WTO members (see the
section above on Import Regulation, under the
heading of Countervailing Duties), but also a
government’s use of subsidies and the application of
remedies through enforcement proceedings at the
WTO. As part of its accession agreement, China
committed that it would eliminate, by the time of its
accession, all subsidies prohibited under Article 3 of
the Subsidies Agreement, which includes subsidies
contingent on export performance (export subsidies)
and subsidies contingent on the use of domestic
over imported goods (import substitution subsidies).
This commitment expressly extends throughout
China’s customs territory, including in special
economic zones and other special economic areas.
China also agreed to various special rules that apply
when other WTO members pursue the disciplines of
the Subsidies Agreement against Chinese subsidies,

58
either in individual WTO members’ CVD proceedings
or in WTO enforcement proceedings. These rules
address the identification and measurement of
Chinese subsidies and also govern the actionability
of subsidies provided to state-owned enterprises in
China.
SSuubbssiiddiieess NNoottiiffiiccaattiioonn
As previously reported, following repeated pressure
from the United States and other WTO members,
China submitted its first subsidies notification to the
WTO’s Subsidies Committee in April 2006, nearly five
years late. Although the notification reported on
more than 70 subsidy programs, it was also notably
incomplete, as it failed to notify any subsidies
provided by provincial and local government
authorities or any subsidies provided by state-owned
banks, whether in the form of preferential loans,
debt forgiveness or otherwise. In addition, while
China notified several subsidies that appear to be
prohibited, it did so without making any
commitment to withdraw them, and it failed to
notify other subsidies that appear to be prohibited.
Following the submission of China’s 2006 subsidies
notification, the United States devoted significant
time and resources to monitoring and analyzing
China’s subsidy practices, and these efforts helped
to identify significant omissions in China’s subsidies
notification. These efforts also made clear that
provincial and local governments play an important
role in implementing China’s industrial policies,
including through subsidization of enterprises, much
of which is misdirected into sectors with excess
capacity, such as steel and aluminum.
In the ensuing years, the United States repeatedly
raised concerns about China’s incomplete subsidies
notification and identified numerous unreported
subsidies both in bilateral meetings and in meetings
before the Subsidies Committee as well as during the
WTO’s Trade Policy Reviews of China. At the
October 2009 meeting of the Subsidies Committee,
China indicated that it would finalize a second
subsidies notification in the coming months while
noting that this notification would again not include
any subsidies provided by provincial and local
government authorities. China reiterated this same
pledge a year later at the October 2010 meeting of
the Subsidies Committee.
In response to these unfulfilled promises from China,
the United States sought to make progress on this
issue through the filing of a counter notification
under Article 25.10 of the Subsidies Agreement in
October 2011. In its counter notification, the United
States identified 200 unreported subsidy measures
that China has maintained since 2004, including
many emanating from provincial and local
government authorities. Shortly after the United
States filed its counter notification, China finally
submitted the new subsidies notification that it had
been promising. Unfortunately, China’s new
notification covered only the period from 2005 to
2008, and it again failed to notify a single subsidy
administered by provincial or local governments. In
addition, the central government subsidies included
in the new notification were largely the same partial
listing of subsidies as those notified in China’s 2006
notification, and only included a small number of the
more than 200 subsidy measures identified in the
U.S. counter notification. As a result, China’s new
notification was again far from complete.
In 2012 and 2013, the United States continued to
highlight China’s failure to abide by its important
transparency obligations under the Subsidies
Agreement. For example, both bilaterally and
before the Subsidies Committee, the United States
has regularly noted that China should have
submitted its subsidies notification for the period
2009-2010 in July 2011 and its subsidies notification
for the period 2010-2012 in July 2013. In addition, in
connection with the October 2012 meeting of the
Subsidies Committee, the United States submitted a
written request for information pursuant to Article
25.8 of the Subsidies Agreement in which it provided
more evidence of central government and sub-
central government subsidies that China has not yet
notified. In April 2014, the United States submitted
an additional request for information pursuant to

59
Article 25.8 regarding extensive subsidies provided
by China in support of its so-called “strategic
emerging industries.” To date, China has not
responded to either of these requests for
information, nor has China submitted an updated
subsidy notification. Indeed, China also has failed to
accept multiple requests for bilateral meetings
focused on the more than 200 unreported subsidy
measures identified in the United States’ Article 25.8
and Article 25.10 submissions.
In October 2014, the United States submitted
another counter notification under Article 25.10 of
the Subsidies Agreement. This counter notification
addresses the same Chinese subsidies that were the
subject of the United States’ written request for
information pursuant to Article 25.8 of the Subsidies
Agreement in 2012, and it provides English
translations of the 110 subsidy measures at issue for
the benefit of other WTO members and the public.
In 2015, the United States will continue to research
and analyze the various forms of financial support
that the Chinese government provides to
manufacturers and exporters in China, including in
the steel sector, the green technology sector, the
textiles and apparel sectors, and the fisheries sector,
among other sectors, and assess whether this
support is consistent with WTO rules. The United
States will also continue to raise its concerns with
China’s subsidies practices in bilateral meetings with
China. In addition, before the WTO’s Subsidies
Committee, the United States will continue to press
China to submit a complete and up-to-date subsidies
notification.
PPrroohhiibbiitteedd SSuubbssiiddiieess
Immediately after China submitted its first subsidies
notification in April 2006, the United States began
seeking changes to China’s subsidies practices. As
previously reported, after bilateral dialogue failed to
resolve the matter, the United States, together with
Mexico, initiated WTO dispute settlement
proceedings against China in February 2007,
challenging tax-related subsidies that took the form
of both export subsidies, which make it more
difficult for U.S. manufacturers to compete against
Chinese manufacturers in the U.S. market and third-
country markets, and import substitution subsidies,
which make it more difficult for U.S. manufacturers
to export their products to China. China
subsequently agreed to and did eliminate all of the
subsidies at issue by January 2008.
After bringing the WTO case challenging China’s tax-
related prohibited subsidies, the United States
developed information that appeared to show that
China may have been attempting to use prohibited
subsidies outside its taxation system in an effort to
increase the market share of numerous Chinese
brands in markets around the world. Many of these
subsidies appeared to be provided by provincial and
local governments seeking to implement central
government directives found in umbrella programs,
such as the “Famous Export Brand” program and the
“World Top Brand” program. These subsidies
appeared to offer significant payments and other
benefits tied to qualifying Chinese companies’
exports. The United States also developed
information about several other export subsidies
apparently provided by sub-central governments
independent of the two brand programs. As
previously reported, after unsuccessfully pressing
China to withdraw these subsides, the United States,
together with Mexico, initiated a WTO dispute
settlement proceeding against China in December
2008. Guatemala became a co-complainant in
January 2009. Joint consultations were held in
February 2009, followed by intense discussions as
China took steps to repeal or modify the numerous
measures at issue. In December 2009, the parties
concluded a settlement agreement in which China
confirmed that it had eliminated all of the export-
contingent benefits in the challenged measures.
In December 2010, following an investigation in
response to a petition filed under section 301 of the
Tariff Act of 1974, as amended, USTR announced the
filing of a WTO case challenging what appeared to be
prohibited import substitution subsidies being
provided by the Chinese government to support the

60
production of wind turbine systems in China.
Specifically, the United States challenged subsidies
being provided by the Chinese government to
manufacturers of wind turbine systems that
appeared to be contingent on the use of domestic
over imported components and parts. Consultations
were held in February 2011. Following consultations,
China issued a notice invalidating the measures that
had created the subsidy program at issue.
In September 2012, the United States initiated a
WTO case challenging numerous subsidies provided
by the central government and various sub-central
governments in China to automobile and
automobile-parts enterprises located in regions in
China known as “export bases.” These subsidies
appear to be inconsistent with China’s obligation
under Article 3 of the Subsidies Agreement not to
provide subsidies contingent upon export
performance. In addition, the United States is
challenging the apparent failure of China to abide by
WTO transparency obligations requiring it to publish
the measures at issue in an official journal, to make
translations of them available in one or more WTO
languages and to notify them to the Subsidies
Committee. Consultations were held in November
2012. Since then, the two sides have been engaging
in further discussions exploring the steps that China
could take to address U.S. concerns.
UU..SS.. CCVVDD IInnvveessttiiggaattiioonnss
Concerns about China’s subsidies practices led the
U.S. paper industry to file a petition with the
Commerce Department in October 2006 requesting
the initiation of a CVD investigation based on
allegations of subsidized imports of coated free
sheet paper from China causing injury in the U.S.
market. As previously reported, in the ensuing
investigation, the Commerce Department changed
its longstanding policy of not applying U.S. CVD law
to China or any other country considered a “non-
market economy” for AD purposes. The Commerce
Department began applying U.S. CVD law to China
after finding that reforms to China’s economy in
recent years had removed the obstacles to applying
the CVD law that were present in the “Soviet-era
economies” at issue when the Commerce
Department first declined to apply the CVD law to
non-market economies in the 1980s.
Since then, many other U.S. industries, including the
steel, textiles, chemicals, tires and paper industries,
among others, have expressed concern about the
injurious effects of various Chinese subsidies in the
U.S. market as well as in China and third-country
markets, leading to the filing of additional CVD
petitions, together with companion AD petitions. In
response, the Commerce Department has initiated
CVD investigations of imports of Chinese passenger
vehicle and light truck tires, dry 53-foot containers,
boltless shelving, chlorinated isocyanurates, calcium
hypochlorite, tetrafluoroethane, off-road tires, oil
country tubular goods and various other types of
steel pipe, laminated woven sacks, magnets, thermal
paper, citric acid, kitchen racks and shelves, lawn
groomers, pre-stressed concrete wire strand, steel
grating, wire decking, narrow woven ribbons, carbon
bricks, coated paper for high-quality print graphics,
steel fasteners, phosphate salts, drill pipe, aluminum
extrusions, multilayered wood flooring, steel wheels,
galvanized steel wire, high pressure steel cylinders,
photovoltaic cells and modules, wind towers, drawn
stainless steel sinks, plywood, frozen warmwater
shrimp and grain-oriented electrical steel. The
subsidy allegations investigated have involved
preferential loans, income tax and VAT exemptions
and reductions, the provision of goods and services
on non-commercial terms, among other subsidies
provided by the central government, along with a
variety of provincial and local government subsidies.
In September 2008, China requested WTO
consultations with the United States regarding the
Commerce Department’s final determinations in the
AD and CVD investigations on Chinese imports of
steel pipe, steel tube, off-road tires and laminated
woven sacks. Among other things, China challenged
the imposition of anti-dumping duties calculated
using a “non-market economy” measurement
methodology while also imposing countervailing

61
duties to address subsidization of the same imports
(known as the “double remedies” issue).
Consultations were held in November 2008, and
proceedings before a WTO panel took place in July
and November 2009. The panel issued a decision in
October 2010, finding in favor of the United States
on the “double remedies” issue. China filed an
appeal with the WTO’s Appellate Body in December
2010. In March 2011, the Appellate Body issued its
decision, which overturned the panel’s findings on
double remedies. The United States subsequently
ruling, which required the Commerce Department to
revisit its double remedies approach. The
Commerce Department accordingly undertook so-
called “Section 129” proceedings pursuant to U.S.
law and issued final determinations in August 2012
that complied with the WTO’s rulings on the double
remedies. Pursuant to the new approach
announced in the Section 129 proceedings, when the
Commerce Department is imposing antidumping
duties calculated using a “non-market economy”
measurement methodology while also imposing
countervailing duties to address subsidization of the
same imports, it now adjusts the antidumping duty
rates in circumstances in which factual evidence
shows that the domestic subsidies at issue lowered
export prices.
Separately, in September 2012, China initiated a
WTO case challenging, among other things, Public
Law 112-99, new U.S. legislation enacted in March
2012 that expressly confirms the applicability of the
U.S. CVD law to countries that have been
determined to be “non-market economies” for
purposes of the U.S. AD law and that grants the
Commerce Department authority to adjust for the
possibility of “double remedies” when AD duties and
CVD duties are applied concurrently to the same
imports. Consultations were held in November
2012. Hearings before the panel took place in July
and August 2013. The panel issued its decision in
March 2014, rejecting China’s challenge to the U.S.
legislation. China appealed the panel’s decision in
April 2014, and the WTO’s Appellate Body rejected
Chia’s appeal in July 2014.
PPrriiccee CCoonnttrroollss
China has progressed slowly in reducing the number
of products and services subject to price control or
government guidance pricing.
In its WTO accession agreement, China agreed that it
would not use price controls to restrict the level of
imports of goods or services. In addition, in an
annex to the agreement, China listed the limited
number of products and services remaining subject
to price control or government guidance pricing, and
it provided detailed information on the procedures
used for establishing prices. China agreed that it
would try to reduce the number of products and
services on this list and that it would not add any
products or services to the list, except in
extraordinary circumstances.
In 2014, China continued to maintain price controls
on several products and services provided by both
state-owned enterprises and private enterprises.
Published through the China Economic Herald and
NDRC’s website, these price controls may be in the
form of either absolute mandated prices or specific
pricing policy guidelines as directed by the
government. Products and services subject to
government-set prices include pharmaceuticals,
tobacco, natural gas and certain telecommunications
services. Products and services subject to
government guidance prices include gasoline,
kerosene, diesel fuel, fertilizer, cotton, edible oils,
various grains, wheat flour, various forms of
transportation services, professional services such as
engineering and architectural services, and certain
telecommunications services.
The United States obtained additional information
about China’s use of price controls in connection
with the Trade Policy Reviews of China at the WTO,
held in April 2006, May 2008, May 2010, June 2012

62
and July 2014. The United States will continue to
use that mechanism to monitor China’s progress in
eliminating price controls.
At the July 2014 S&ED meeting, building on the Third
Plenum pronouncement directing that the market
should play a decisive role in the allocation of
resources, the United States was able to secure a
commitment from China to move toward market-
based prices. Specifically, China agreed to accelerate
the process of market-based price reforms for
petroleum, electricity and natural gas, and to realize
market-based prices in competitive sectors as soon
as possible.
MMeeddiiccaall DDeevviicceess
Beginning in 2006, NDRC released proposals for
managing the prices of medical devices, with the
stated objectives of avoiding excessive mark-ups by
distributors and reducing health care costs. Among
other things, the proposals would impose limits on
the allowable mark-ups on medical devices. The
proposals also would require manufacturers to
provide sensitive pricing information. The United
States and U.S. industry have been concerned about
the proposals’ limits on price mark-ups, which would
reduce competition as well as patient and physician
choice, and the proposals’ collection of sensitive
pricing data, the publication of which could be very
damaging to U.S. companies’ operations in China.
Since 2006, the United States and U.S. industry have
raised their concerns about NDRC’s proposals. In
particular, U.S. industry has been able to engage in
an informal dialogue with NDRC, and the United
States has pressed China in this area using the JCCT
process. While acknowledging China’s legitimate
concerns regarding the need to provide effective and
affordable medical devices to patients and the need
to address inefficiency, excessive mark-ups and
irregular business practices among wholesalers and
distributors of medical devices, the United States
and U.S. industry have urged China to develop an
approach that will not inhibit increased imports of
the same innovative and effective health care
products that China is seeking to encourage.
In 2012, NDRC released an updated draft of a pricing
proposal, which would impose price mark-up
controls on six major categories of implantable
medical devices. U.S. industry expressed concern
that NDRC’s proposal would significantly
discriminate against foreign manufacturers. Similar
pricing proposals had appeared at the provincial
government level in the past. For example, in
September 2010, Guangdong Province published a
medical device pricing system for public comment
that is similar to the one proposed by NDRC. Going
forward, the United States will continue to work to
ensure that NDRC and provincial government
authorities seek its input and input from U.S.
industry stakeholders in a transparent and
meaningful way as China develops new policies and
measures.
Separately, in 2008, China’s Ministry of Health
(MOH) published procedures for the centralized
tender of certain medical devices. These tendering
procedures built on a 2007 MOH measure
establishing a centralized procurement system for
medical devices for the stated purposes of reigning
in escalating healthcare costs and ensuring high-
quality healthcare. The United States and U.S.
industry immediately expressed concern to the
Chinese government that MOH’s tendering
procedures could operate to unfairly disadvantage
high-quality, advanced technology products, a large
proportion of which are made by U.S. companies. In
response to these concerns, at the September 2008
JCCT meeting, China agreed to hold discussions with
the United States and U.S. industry to ensure that
MOH’s tendering policies are fair and transparent
and that the quality and innovation of medical
devices are given adequate consideration in
purchasing decisions. MOH subsequently entered
into discussions directly with U.S. industry.
During the run-up to the December 2010 JCCT, U.S.
industry presented a risk-based approach to medical
device classification based on Global Harmonization

63
Task Force principles. Since then, the United States
has continued to work closely with U.S. industry and
to promote a cooperative resolution of U.S.
concerns.
committed that any measures affecting the pricing
of medical devices will treat foreign and domestic
manufacturers equally. China further committed
that it will take into account comments that it
receives from the United States, including on the
issue of how to improve transparency.
Since then, the United States has been engaging
China on its proposals to centralize pricing and
tendering procedures. At the same time, provincial
governments have begun pushing for consolidated
tendering of medical devices for purchase by public
hospitals and clinics within their territories. While
provincial governments’ centralized purchasing plans
vary widely, many of them contain requirements
that unfairly disadvantage foreign manufacturers.
U.S. industry reports that some plans impose ceiling
prices for tenders to be determined in a manner that
is unfair and discriminates against imported medical
technology products, and some plans require the
manufacturers to disclose sensitive data. Certain
provincial government tendering plans also impose
controls on imported products, and limit certain
procurements to only domestically produced
products. The United States and U.S. industry have
expressed concerns to the Chinese government
about developments in this area, and continue to
press the relevant government authorities to
develop sound payment systems that adequately
reward research and development.
SSttaannddaarrddss,, TTeecchhnniiccaall RReegguullaattiioonnss aanndd
CCoonnffoorrmmiittyy AAsssseessssmmeenntt PPrroocceedduurreess
China continues to take actions that generate WTO
compliance concerns in the areas of standards,
technical regulations and conformity assessment
procedures, particularly with regard to transparency,
national treatment, the pursuit of unique Chinese
national standards, and duplicative testing and
certification requirements.
With its accession to the WTO, China assumed
obligations under the Agreement on Technical
Barriers to Trade (TBT Agreement), which establishes
rules and procedures regarding the development,
adoption and application of standards, technical
regulations and the conformity assessment
procedures (such as testing or certification) used to
determine whether a particular product meets such
standards or regulations. Its aim is to prevent the
use of technical requirements as unnecessary
barriers to trade. The TBT Agreement applies to all
products, including industrial and agricultural
products. It establishes rules that help to distinguish
legitimate standards and technical regulations from
protectionist measures. Among other things,
standards, technical regulations and conformity
assessment procedures are to be developed and
applied transparently and on a non-discriminatory
basis by WTO members and should be based on
relevant international standards and guidelines,
when appropriate.
In its WTO accession agreement, China also
specifically committed that it would ensure that its
conformity assessment bodies operate in a
transparent manner, apply the same technical
regulations, standards and conformity assessment
procedures to both imported and domestic goods
and use the same fees, processing periods and
complaint procedures for both imported and
domestic goods. China agreed to ensure that all of
its conformity assessment bodies are authorized to
handle both imported and domestic goods within
one year of accession. China also consented to
accept the Code of Good Practice (set forth in Annex
3 to the TBT Agreement) within four months after
accession, which it has done, and to speed up its
process of reviewing existing technical regulations,
standards and conformity assessment procedures
and harmonizing them with international norms.
In addition, in the Services Schedule accompanying
its WTO accession agreement, China committed to

64
permit foreign service suppliers that have been
engaged in inspection services in their home
countries for more than three years to establish
minority foreign-owned joint venture technical
testing, analysis and freight inspection companies
upon China’s accession to the WTO, with majority
foreign ownership no later than two years after
accession and wholly foreign-owned subsidiaries
four years after accession. China further agreed that
qualifying joint venture and wholly foreign-owned
enterprises would be eligible for accreditation in
China and accorded national treatment.
RREESSTTRRUUCCTTUURRIINNGG OOFF RREEGGUULLAATTOORRSS
China has restructured its regulators for standards,
procedures in order to eliminate discriminatory
treatment of imports, although in practice China’s
regulators sometimes do not appear to enforce
regulatory requirements as strictly against domestic
products as imports.
As previously reported, in anticipation of its WTO
accession, China made significant progress in the
areas of standards and technical regulations. China
addressed problems that foreign companies had
encountered in locating relevant regulations and
how they would be implemented, and it took steps
to overcome poor coordination among the
numerous regulators in China. In October 2001,
China announced the creation of the Standardization
Administration of China (SAC) under the State
Administration of Quality Supervision, Inspection
and Quarantine (AQSIQ). SAC is charged with
unifying China’s administration of product standards
and aligning its standards and technical regulations
with international practices and China’s
commitments under the TBT Agreement. SAC is the
Chinese member of the International Organization
for Standardization and the International Electro-
technical Commission.
China also began to take steps in 2001 to address
problems associated with its multiplicity of
conformity assessment bodies, whose task it is to
determine if standards and technical regulations are
being observed. AQSIQ was established as a new
ministry-level agency in April 2001. It is the result of
a merger of the State Administration for Quality and
Technical Supervision and the State Administration
for Entry-Exit Inspection and Quarantine. China’s
officials explained that this merger was designed to
eliminate discriminatory treatment of imports and
requirements for multiple testing simply because a
product was imported rather than domestically
produced. China also formed the quasi-independent
National Certification and Accreditation
Administration (CNCA), which is attached to AQSIQ
and is charged with the task of unifying the country’s
conformity assessment regime.
Despite these changes, U.S. industry still has
concerns about significant conformity assessment
and testing-related issues in China. For example,
U.S. exporters representing several sectors continue
to report that China’s regulatory requirements are
not enforced as strictly or uniformly against
domestic producers as compared to foreign
producers. In addition, in some cases, China’s
regulations provide only that products will be
inspected or tested upon entry into China’s customs
territory, without any indication as to whether or
how the regulations will be applied to domestic
producers. The United States will continue to
monitor these issues in 2015 to determine if U.S.
industry is being adversely affected.
SSTTAANNDDAARRDDSS AANNDD TTEECCHHNNIICCAALL RREEGGUULLAATTIIOONNSS
China continues to pursue the development of unique
Chinese national standards, despite the existence of
well-established international standards, apparently
as a means for protecting domestic companies from
competing foreign technologies and standards.
Shortly after its accession to the WTO, China began
the task of bringing its standards regime more in line
with international practice. One of its first steps
was AQSIQ’s issuance of rules designed to facilitate
China’s adoption of international standards. China
subsequently embarked on the task of reviewing all

65
of China’s existing 21,000 standards and technical
regulations to determine their continuing relevance
and consistency with international standards.
During transitional reviews before the TBT
Committee, China has periodically reported on the
status of this review process and the number of
standards and technical regulations that have been
nullified, but it remains unclear whether these
actions have had a beneficial impact on U.S. market
access.
The United States continues to make efforts to assist
China through bilateral exchanges and training, as
China works to improve its standards regime. For
example, in May 2005, a new U.S. private sector
standards office, using funding from the U.S.
Department of Commerce, opened in Beijing. Its
goals are to strengthen ties with Chinese
government regulatory authorities, Chinese industry
associations and Chinese standards developers and,
in particular, to ensure that close communication
exists between U.S. and Chinese standards
developers. The United States also continued to
provide technical assistance to China. Since 2004,
this technical assistance has focused on broad
standards-development issues, such as the
relationship between intellectual property rights and
standards, and specific standards in a number of
industries, including petroleum, information and
telecommunications technology, chemicals, steel,
water conservation, energy efficiency, hydrogen
infrastructure, elevators, electrical safety, gas
appliances, distilled spirits, heating, ventilation and
air conditioning, and building fire safety. The United
States has also conducted programs addressing
China’s regulation of hazardous substances and
China’s new chemical management system.
In 2006, the U.S. Trade and Development Agency
(TDA) launched the U.S.-China Standards and
Conformity Assessment Cooperation Project. This
project, with funding from TDA and U.S. industry,
provides education and training to Chinese policy
makers and regulators with regard to U.S. standards
and conformity assessment procedures. In addition,
the American National Standards Institute, with
funding and participation from the U.S. Department
of Commerce, announced the launching of a
Standards Portal in cooperation with SAC. The
Standards Portal contains dual language educational
materials on the structure, history and operation of
the U.S. and Chinese standards systems, a database
of U.S. and Chinese standards and access to other
standards from around the world.
At the same time, concern has grown over the past
few years that China seems to be actively pursuing
the development of unique requirements, despite
the existence of well-established international
standards, as a means for protecting domestic
companies from competing foreign standards and
technologies. Indeed, China has already adopted
unique standards for digital televisions, and it is
trying to develop unique standards and technical
regulations in a number of other sectors, including,
for example, autos, telecommunications equipment,
Internet protocols, wireless local area networks,
radio frequency identification tag technology, audio
and video coding and fertilizer as well as software
encryption and mobile phone batteries. This
strategy has the potential to create significant
barriers to entry into China’s market, as the cost of
compliance will be high for foreign companies, while
China will also be placing its own companies at a
disadvantage in its export markets, where
international standards prevail.
WWii--FFii SSttaannddaarrddss
Since shortly after its accession to the WTO, China
has pursued unique standards for encryption over
Wireless Local Area Networks (WLANs), applicable to
domestic and imported equipment containing WLAN
(also known as Wi-Fi) technologies, despite the
existence of well-established international
standards. These efforts appear designed to protect
Chinese companies from competing foreign
standards and technologies.
As previously reported, China’s initial focus was on
the WLAN Authentication and Privacy Infrastructure
(WAPI) encryption technique for secure

66
communications. China eventually moved forward
with plans to mandate the use of the WAPI standard
in mobile handsets, despite the growing commercial
success of computer products in China complying
with the internationally recognized ISO/IEC 8802-11
WLAN standard, otherwise known as “Wi-Fi,” and
despites serious concerns raised by the United
States, both through the JCCT process and in
meetings of the TBT Committee.
A new issue related to Wi-Fi standards arose in 2011,
after China published a proposed voluntary wireless
LAN industry standard known as the “UHT/EUHT
standard.” China’s UHT/EUHT standard appears to
be an alternative to the international standard IEEE
802.11n, which is the wireless LAN industry standard
currently used throughout the world in Wi-Fi
networks. The Chinese UHT/EUHT standard was
released for only a 15-day public comment period on
September 20, 2011. U.S. industry groups submitted
comments, arguing, among other things, that there
are technical compatibility concerns regarding the
interoperability of the UHT/EUHT standard with the
existing Chinese national standard (WAPI) and with
the most widely used and recognized WLAN industry
standard (IEEE 802.11). Separately, the United
States expressed concerns to China that, if China
integrates standards such as the UHT/EUHT standard
into its certification or accreditation schemes, these
standards would become de facto mandatory and
therefore would raise questions in light of China’s
obligations under the WTO TBT Agreement. In
February 2012, MIIT approved the UHT/EUHT
standard as a voluntary standard, but U.S. industry
has expressed concern that the unusual approval
process for UHT/EUHT may reflect a desire within
the Chinese government to promote this indigenous
standard, despite technical concerns raised by
industry participants in the technical committee
relating to its compatibility and co-existence with
802.11 products. Since then, the United States has
raised its concerns about the de facto mandating of
voluntary standards like UHT/EUHT via certification
or accreditation schemes, and the United States will
33GG TTeelleeccoommmmuunniiccaattiioonnss SSttaannddaarrddss
The United States elevated another standards issue
to the JCCT level beginning in 2004. The U.S.
telecommunications industry was very concerned
about increasing interference from Chinese
regulators, both with regard to the selection of 3G
telecommunications standards and in the
negotiation of contracts between foreign
telecommunications service providers and their
Chinese counterparts. The United States urged
China to take a market-based and technology
neutral approach to the development of next
generation wireless standards for computers and
mobile telephones. At the April 2004 JCCT meeting,
China announced that it would support technology
neutrality with regard to the adoption of 3G
telecommunications standards and that
telecommunications service providers in China
would be allowed to make their own choices about
which standard to adopt, depending on their
individual needs. China also announced that Chinese
regulators would not be involved in negotiating
royalty payment terms with relevant intellectual
property rights holders.
By the end of 2004, it had become evident that there
was still pressure from within the Chinese
government to ensure a place for China’s home-
grown 3G telecommunications standard, known as
TD-SCDMA. In 2005, China continued to take steps
to promote the TD-SCDMA standard. It also became
evident that they had not ceased their attempts to
influence negotiations on royalty payments. Then, in
February 2006, China declared TD-SCDMA to be a
“national standard” for 3G telecommunications,
heightening concerns among U.S. and other foreign
telecommunications service providers that Chinese
mobile telecommunications operators would face
Chinese government pressure when deciding what
technology to employ in their networks.
The United States again raised the issue of
technology neutrality in connection with the April
2006 JCCT meeting. At that meeting, China restated

67
its April 2004 JCCT commitment to technology
neutrality for 3G telecommunications standards,
agreeing to ensure that mobile telecommunications
operators would be allowed to make their own
choices as to which standard to adopt. China also
agreed to issue licenses for all 3G
telecommunications standards in a technologically
neutral manner that does not advantage one
standard over others.
Throughout 2008, China’s test market for its TD-
SCDMA standard continued to grow, and widespread
test networks were put in place in time for the
August 2008 Summer Olympics in Beijing. In January
2009, China’s MIIT issued 3G licenses based on the
three different technologies, with a TD-SCDMA
license for China Mobile, a W-CDMA license for
China Unicom and a CDMA2000 EV-DO license for
China Telecom. However, despite the issuance of
licenses for all three standards, the Chinese
government continued to heavily promote, support
and favor the TD-SCDMA standard. For example,
China’s economic stimulus-related support plan for
Information Technology and Electronics, approved
by the State Council and published in April 2009,
specifically identifies government support for TD-
SCDMA as a priority.
In March 2010, U.S. concerns over China’s
preferential treatment of TD-SCDMA were
exacerbated by the inclusion of products based on
this technology in the Opinions on Advancing Third-
Generation Communications Network Construction,
issued by MIIT, NDRC, the Ministry of Science and
Technology (MOST), MOF, the Ministry of Land and
Resources, the Ministry of Housing and Urban-Rural
Development and SAT. Specifically, the United
States was concerned that this measure would lead
to these products being entitled to government
procurement preferences.
Meanwhile, China’s insistence on promoting TD-
SCDMA discouraged further innovation. For
example, China was reluctant to permit operators to
deploy alternative technologies, including 4G
technologies.
Throughout 2010, the United States continued to
press China to reaffirm the principle of technology
neutrality for current and future services and
technologies. In an important development at the
December 2010 JCCT meeting, China agreed to
technology neutrality for 3G networks and future
networks based on new technologies, allowing
operators to choose freely among those
technologies and without the Chinese government
providing any preferential treatment based on the
standard or technology used by an operator.
Since then, the United States has carefully
monitored developments in this area, stressing to
China in bilateral meetings the importance of a
continuing commitment to technology neutrality in
line with China’s JCCT commitments, both for 3G
standards and for emerging 4G standards issues. In
November 2013, however, China licensed 4G
spectrum in a manner that is not technology neutral,
as it licensed only the domestically favored Long-
Term Evolution (LTE) standard known as LTE-TDD
and not the other common standard known as LTE-
FDD. In July 2014 the U.S. government, under the
framework of the JCCT Information Industry Group,
organized a U.S.-China Spectrum Roundtable to
discuss spectrum allocation issues. The Spectrum
Roundtable included participants from U.S. and
Chinese industry as well as government
representatives. The United States will continue to
press China in 2015 to ensure that its regulators
adhere to China’s JCCT commitments in this area.
ZZUUCC EEnnccrryyppttiioonn AAllggoorriitthhmm SSttaannddaarrdd
Beginning in late 2011, China moved ahead with the
rollout of a Chinese government-developed 4G LTE
encryption algorithm known as the ZUC standard.
The European Telecommunication Standards
Institute (ETSI) 3rd Generation Partnership Project
(3GPP) had approved ZUC as a voluntary standard in
September 2011. According to U.S. industry reports,
MIIT, in concert with the State Encryption
Management Bureau (SEMB), informally announced
in early 2012 that only domestically developed
encryption algorithms, such as ZUC, would be

68
allowed for 4G TD-LTE networks in China, and it
appeared that burdensome and invasive testing
procedures threatening companies’ sensitive
intellectual property could be required.
In response to U.S. industry concerns, the United
States urged China not to mandate any particular
encryption standard for 4G LTE telecommunications
equipment, in line with its bilateral commitments
and the global practice of allowing commercial
telecommunications services providers to work with
equipment vendors to determine which security
standards to incorporate into their networks. Any
mandate of a particular encryption standard such as
ZUC would contravene a commitment that China
made to its trading partners in 2000, which clarified
that foreign encryption standards were permitted in
the broad commercial marketplace and that strict
“Chinese-only” encryption requirements would only
be imposed on specialized IT products whose “core
function” is encryption. Additionally, a ZUC mandate
would contravene China’s 2010 JCCT commitment
on technology neutrality, in which China had agreed
to take an open and transparent approach with
regard to operators’ choices and not to provide
preferential treatment based on the standard or
technology used in 3G or successor networks, so that
operators could choose freely among whatever
existing or new technologies might emerge to
provide upgraded or advanced services.
The United States pressed China on this issue
throughout the run-up to the December 2012 JCCT
meeting. At that meeting, China agreed that it will
not mandate any particular encryption standard for
commercial 4G LTE telecommunications equipment.
In 2013, the United States worked to ensure that
MIIT’s voluntary testing and approval process for the
ZUC 4G telecom equipment standard fully protects
applicants’ intellectual property by not requiring
source code or other sensitive business confidential
information to be provided during the approval
process. At the December 2013 JCCT meeting, China
committed that it will not require applicants to
divulge source code or other sensitive business
information in order to comply with the ZUC
provisions in the MIIT application process for 4G
devices. In 2014, the United States closely
monitored developments in this area to ensure
China followed through on this JCCT commitment,
and will continue to do so in 2015.
MMoobbiillee SSmmaarrtt DDeevviiccee RReegguullaattiioonnss
In 2012, MIIT began to develop a new draft
regulatory framework for the mobile smart device
market. MIIT’s stated objective is to help protect
consumer interests relating to the privacy of users
and the security of their personal information in
connection with the operation of their mobile smart
devices.
In April 2012, MIIT shared a draft Notice Regarding
Strengthening Management of the Network Access
for Mobile Smart Devices with select foreign
companies for informal comments. It appears that
the draft measure would impose numerous new
obligations and technical mandates on information
technology and telecommunications hardware,
operating systems, applications, application stores
and other related services. The draft measure also
may impose, by reference, mandatory technical
regulations and testing requirements on these same
goods and services, as well as on the mobile smart
devices themselves. In addition, the China
Communications Standardization Association is in
the process developing numerous “industry
standards” relating to smart terminal requirements,
which appear to be linked to the development of the
draft measure.
The United States expressed its concerns to MIIT and
requested that China notify the measure to the WTO
TBT Committee. The United States also offered to
work with MIIT on best practices for addressing
privacy and security associated with mobile smart
devices. In response, in June 2012, MIIT published
the draft measure on the MIIT website and asked for
public comments within 30 days. In addition, in
November 2012, China notified the draft measure to

69
the WTO TBT Committee and indicated that it would
accept comments for a 60-day period.
The United States and U.S. industry were concerned
because the far-reaching regulatory approach
embodied in the draft measure – which is exclusively
oriented toward government mandates rather than
voluntary private sector-developed global standards
and public-private cooperation – is unprecedented
among the leading markets for mobile smart devices
and could create significant trade barriers.
Furthermore, the potential inclusion of numerous
voluntary standards relating to smart terminal
requirements could create further trade barriers, as
it could readily lead to these voluntary standards
becoming mandatory standards within MIIT’s testing
and certification process. Unfortunately, in
November 2013, MIIT finalized and began
implementing this measure, along with two
associated voluntary standards. In 2015, the United
States will closely monitor developments in this
area.
PPaatteennttss UUsseedd iinn CChhiinneessee NNaattiioonnaall SSttaannddaarrddss
China has prioritized the development of Chinese
national standards in documents such as the Outline
for the National Medium to Long-Term Science and
Technology Development Plan (2006-2020), issued
by the State Council in February 2006, and amplified
shortly thereafter in the 11th Five Year Plan (2006-
2010) for Standardization Development, issued by
the Standardization Administration of China. More
recently, China has also publicly expressed its
resolve to rely on either non-patented technology or
patented technology made available at prices lower
than those that patent owners would otherwise seek
to charge when developing standards. As a result,
China’s treatment of patents in the standard setting
process has garnered increasing attention and
concern around the world, including in the United
States.
The United States has engaged repeatedly with
China on issues relating to the use of national
standards, including through the submission of
extensive comments on draft measures. For
example, in November 2009, SAC circulated a draft
of the Provisional Rules regarding Administration of
the Establishment and Revision of National
Standards Involving Patents for public comment.
This draft measure would implement China’s vision
for a standards development process that uses
government power to deny or lower the royalty
rates owed to owners of patents incorporated into
Chinese national standards. The draft measure
would establish the general principle that mandatory
national standards should not incorporate patented
technologies. However, when they do incorporate
patented technologies, the draft measure provides
for the possibility of a compulsory license if a patent
holder does not grant a royalty-free license. In
2004, SAC circulated a similar draft measure – the
Interim Regulations for National Standards Relating
to Patents – for public comment, although it was
never finalized. SAC’s 2009 draft measure appears
to incorporate many of the problematic aspects of
the 2004 draft measure.
The United States provided comments to SAC on the
2009 draft measure in December 2009, requesting
that SAC not move forward with it and instead
consult with stakeholders. SAC reportedly received
comments from 300 other interested parties as well.
A draft measure with similar provisions was issued
by the China National Institute for Standards (CNIS)
in February 2010, and the United States provided
comments to CNIS in March 2010. Throughout 2010,
the United States also raised its concerns in
meetings with China’s regulators, and as of
December 2010 neither SAC nor CNIS had moved
forward to finalize their draft measures.
At the December 2010 JCCT meeting, the United
States and China agreed that patent issues related to
standards raise complex issues that require standard
setting organizations to take into account the
appropriate balance among the interests of
patentees, standard users and the public when
developing and adopting their rules on patent issues.
The two sides also agreed to have further
discussions on patent issues related to standards,

70
including in the JCCT IPR Working Group, involving
participants from all relevant U.S. and Chinese
agencies. Going forward, the United States
continued to emphasize that, in contrast to China’s
proposed approach, standards organizations around
the world normally require enterprises that
contribute patented technology to a standard to
license their patents on “reasonable and non-
discriminatory” terms, which entitles them to set
reasonable limits on the use of their technology and
to receive reasonable compensation.
In late 2012, SAC published for public comment a
revised draft of the draft measure originally
published in 2009. In written comments submitted
in January 2013, the United States commended SAC
for addressing various concerns raised in the United
States’ prior written comments, but also urged SAC
to address important outstanding concerns. SAC,
jointly with the State Intellectual Property Office
(SIPO), subsequently issued final rules that took
effect on January 1, 2014.
China’s State Administration for Industry and
Commerce (SAIC) also has published draft rules
regarding the application of the Anti-monopoly Law
to intellectual property-related conduct that have
drawn U.S. comments and engagement. In July
2014, the United States provided written comments
on the eighth draft of the Rules of the Administration
for Industry and Commerce on the Prohibition of
Abuses of Intellectual Property Rights for the
Purposes of Eliminating or Restricting Competition.
Article 13 of the draft rules would prohibit a
dominant firm from either refusing to disclose
information on its standard-essential patent to a
standards-setting organization or asserting its patent
rights after its standard has been incorporated into a
compulsory standard if it previously had waived
those rights.
The United States also has engaged with China’s
Supreme People’s Court (SPC) regarding a series of
draft judicial interpretations relating to standards. In
June 2009, the SPC published a draft Interpretation
on Several Issues Regarding Legal Application in the
Adjudication of Patent Infringement Cases for public
comment. The United States subsequently met with
the SPC to discuss this draft measure and
recommended modifications to clarify that a
Chinese court could find a patent holder to be a
participant in the group developing a standard
incorporating patented technology only if the patent
holder had consented to the inclusion of its patented
technology in that standard. The United States also
emphasized that if the patent holder had consented
to the inclusion of its patent on the condition that it
be licensed on specified terms, then the draft
measure should make clear that a Chinese court
should enforce those licensing terms. When the SPC
issued the final measure in January 2010, it did not
include the provisions of concern.
In September 2014, the United States provided
comments on the draft Interpretations of the
Supreme People’s Court on Certain Issues Concerning
the Application of Law in the Trial of Patent
Infringement Cases II. Article 27 of this draft
measure addressed disputes between patent
holders and potential licensees relating to non-
compulsory national, industrial or local standards.
The United States recommended that Article 27 be
modified in several ways, including to clarify that
Article 27 should apply only to patents that the
patent holder has committed voluntarily, and
without coercion by government or quasi-
government entities, to license on FRAND terms as
part of its participation in a standards-setting
process. The United States also recommended that
Article 27 be modified to clarify the circumstances
under which a patent holder may be found to have
violated FRAND principles by negotiating in bad faith
and also make clear that an alleged infringer should
have an opportunity to assert non-infringement and
that patent holders are entitled to FRAND
compensation where infringers are permitted to
continue to use a patented invention. The United
States further recommended that, where courts
must determine an appropriate FRAND royalty, they
should take into account that patent holders in
China face challenges in enforcing their patents and
securing appropriate compensation for the use of

71
their patents and, in addition, take steps to avoid
outcomes that under-compensate patent holders or
undermine incentives to innovate.
IInnffoorrmmaattiioonn SSeeccuurriittyy SSttaannddaarrddss
In August 2007, China notified to the TBT Committee
a series of 13 proposed technical regulations relating
to information security for various information
technology products, including routers, smart cards
and secure databases and operating systems. China
requested that comments be provided within 60
days, but did not specify implementation dates for
the proposed regulations. Subsequently, in March
2008, CNCA issued an announcement indicating that
the final regulations would be published in May
2008, and would become mandatory one year later.
In part because of past actions that China has taken
in this area, including China’s issuance of mandatory
encryption standards for Wi-Fi technologies in 2003
and regulations that China had issued in 1999
requiring the registration of a wide range of
hardware and software products containing
encryption technology, these proposed regulations
generated immediate concerns for the United States
and U.S. industry. In particular, the proposed
regulations go substantially beyond global norms by
mandating testing and certification of information
security in commercial information technology
products, not just products for government use in
national security applications. In other countries,
mandatory testing and certification for information
security is only required for products used in
sensitive government and national security
applications.
The United States and other WTO members
expressed serious concerns to China about these
proposed regulations in numerous bilateral
meetings, including during the run-up to the
September 2008 JCCT meeting, as well as at
meetings of the TBT Committee in 2008 and during
China’s second Trade Policy Review, held in May
2008. At the September 2008 JCCT meeting, China
announced that it would delay publication of final
regulations while Chinese and foreign experts
continue to discuss the best ways to ensure
information security in China.
In April 2009, CNCA, AQSIQ and MOF announced
that the implementation of compulsory certification
for thirteen types of information security products
would be delayed until May 2010, and would only be
applied when products are sold to the government,
representing a significant reduction in the scope of
the requirements from China’s original plan. In
September 2009, during the run-up to the October
2009 JCCT meeting, China confirmed that the
compulsory certification requirement only applies
when products are sold to government agencies, and
not to state-owned enterprises or other sectors of
China’s economy.
In 2010, the United States continued to meet with
China’s regulators to discuss their regulation of
information security products. China’s State
Encryption Management Commission, in bilateral
meetings, confirmed that it was considering
revisions to its 1999 encryption regulations. The
United States noted the earlier widespread concerns
about these regulations and asked China to ensure
that any revisions to these regulations would be
published in draft form with opportunity for
comment by interested parties.
Additionally, beginning in 2010 and continuing
through 2012, both bilaterally and during meetings
of the WTO’s TBT Committee, the United States
raised its concerns with China about framework
regulations for information security in critical
infrastructure known as the Multi-Level Protection
Scheme (MLPS), first issued in June 2007 by the
Ministry of Public Security and MIIT. The MLPS
regulations put in place guidelines to categorize
information systems according to the extent of
damage a breach in the system could pose to social
order, public interest and national security. The
MLPS regulations also appear to require, by
reference, purchasers’ compliance with certain
information security technical regulations and

72
encryption regulations that are referenced within
the MLPS regulations.
Among other things, the MLPS regulations bar
foreign products from information systems graded
level 3 and above, because all products deployed
must be developed by Chinese information security
companies and must bear Chinese intellectual
property in their key components. Additional
troubling product testing provisions for level 3 and
above require companies to disclose product source
code, encryption keys and other confidential
business information. To date, hundreds of request
for proposals (RFPs) incorporating MLPS
requirements have come from government agencies,
the financial sector, telecommunications companies,
the power grid, educational institutions and
hospitals in China. These RFPs cover a wide range of
information security software and hardware, and
many of them exclude the purchase of foreign
products by incorporating level-3 requirements.
If implementing rules for the MLPS regulations are
issued and apply broadly to commercial sector
networks and IT infrastructure, they could have a
significant impact on sales by U.S. information
security technology providers in China. The United
States therefore has urged China to notify any MLPS
implementing rules laying down equipment-related
requirements in accordance with China’s obligations
under the TBT Agreement.
indicated that it would begin the process of revising
the MLPS regulations. It also agreed that, during
that process, it would enter into discussions with the
United States regarding U.S. concerns. Throughout
2013 and 2014, using the JCCT process, the United
States pressed China to fully and quickly implement
its JCCT commitment to revise the MLPS regulations.
To date, however, China has not yet revised those
regulations.
The United States has also grown increasingly
concerned that China may finalize several proposed
voluntary standards related to information security
and integrate them into certification or accreditation
schemes, making the voluntary standards de facto
mandatory. These proposed voluntary standards
include the UHT/EUHT standard discussed above as
well as a series of six information security voluntary
standards released for public comment in July 2011
by the China National Information Security Technical
Standards Committee. Another one, relating to
information security requirements for office
equipment, was released in September 2011 for a
public comment period of 30 days by a
standardization institute under MIIT’s jurisdiction,
known as the China Electronics Standardization
Institute, in conjunction with the China National
Information Security Technical Standards
Committee. It appears to be an office equipment
information security standard designed as an
alternative to IEEE 2600, an international
information security standard. As in the case of the
UHT/EUHT standard, the United States has made
clear to China that, if voluntary standards such as its
proposed office equipment standard are integrated
into its certification or accreditation schemes, these
standards would become de facto mandatory and
therefore would raise questions in light of China’s
obligations under the WTO TBT Agreement.
CCOONNFFOORRMMIITTYY AASSSSEESSSSMMEENNTT PPRROOCCEEDDUURREESS
China appears to be turning more and more to in-
country testing for a broader range of products,
which does not conform with international practices
that generally accept foreign test results and
conformity assessment certifications.
China’s regulatory authorities appear to be turning
more and more to in-country testing for a broader
range of products. This policy direction is troubling,
as it is inconsistent with common international
conformity assessment practices, which favor
processes that accept test results from
internationally recognized laboratories, the concept
of a “supplier’s declaration of conformity” and other
similar trade-facilitating conformity assessment
mechanisms.

73
The United States is unaware of any meaningful
efforts by China to move toward a system that
recognizes test results or conformity assessment
certifications from bodies other than Chinese
government-run testing, certification, or
accreditation entities. Instead, China has developed
plans to expand the CCC Mark scheme and its
mandatory testing requirements to information
security, an area in which most countries do not
engage in government certification. China also
continues to prepare to implement in-country
government testing for compliance with its new
regulations on hazardous substances in electronic
information products. In addition, China issued a
measure, which it subsequently suspended,
establishing a burdensome new regime for
government inspection of imported medical devices
that have already satisfied applicable Chinese
certification requirements before being exported to
China. Working with U.S. industry, the United States
will continue to urge China in 2015 to reverse this
trend and move in the direction of more globally
recognized conformity assessment practices.
TTeelleeccoommmmuunniiccaattiioonnss EEqquuiippmmeenntt
In the past, the product testing and certification
processes in China for mobile phones have been
significantly more burdensome and time-consuming
than in other markets, which increases the costs of
exporting products to China. With the rollout of 3G
licenses in China in 2009, U.S. industry has expressed
concern that there will be growing problems
because a surge in new handset models will be
running through the approval process. In addition,
as U.S. industry has reported, testing fees may
increase as smartphones and other devices evolve
with new functionalities, given that these fees are
dependent on the number of functions on a
particular device.
China’s three main type approval certification
processes for mobile phones are the Network Access
License (NAL), the Radio Type Approval (RTA), and
the China Compulsory Certification Mark (CCC Mark).
While each one represents a different certification
process, there are overlapping testing requirements
among them, particularly between the NAL and the
RTA with regard to radio telecommunications testing
requirements for electromagnetic interference and
between the NAL and the CCC Mark with regard to
electromagnetic compatibility and product safety. In
addition to redundancy, China’s testing
requirements are often unclear and subject to
change without written notification and adequate
time for companies to adjust. Companies must
often determine what testing requirements are
applicable by communicating directly with the
relevant regulatory body, rather than by having
access to a comprehensive, published list of testing
requirements. The WAPI mandate in MIIT’s approval
certification process for mobile phones represents a
clear example of unpublished requirements.
Companies have also reported that, in some cases,
testing requirements for products can change on an
almost monthly basis.
In bilateral meetings in 2010, the United States and
China discussed testing and certification
redundancies in the area of telecommunications
equipment. As a result of these meetings, China’s
MIIT and U.S. regulatory officials, together with
global industry stakeholders, conducted a one-day
workshop in May 2010 to discuss prevalent concerns
about telecommunications testing and certification
requirements from a technical perspective. China
also committed, at the December 2010 JCCT
meeting, that it would develop a one-stop shopping
mechanism for telecommunications network access
license and radio type approval. At the November
2011 JCCT meeting, China agreed to publish the
procedures for this new mechanism by the end of
2011. In December 2011, MIIT announced the
implementation of its December 2010 JCCT
commitment through the establishment of a single
application window for both RTA and NAL testing
and certification. In February 2012, a one-stop-
shopping mechanism became operational on MIIT’s
website, with MIIT’s Telecommunications Equipment
Certification Center being appointed to process
applications for both testing and certification
processes.

74
Based on industry’s experience to date, it does not
appear that MIIT’s new approach is meaningful in
terms of streamlining the MIIT processes. The
United States remains concerned that it does not
actually eliminate any redundancies or unnecessary
elements of the testing and certification processes.
It also does not appear to address a fundamental
concern that unnecessary functionality testing is a
major cause of the burdensome nature of these
processes. In addition, the lack of transparency in
the NAL testing and certification process remains a
concern, as NAL requirements are not readily
available to the public.
In 2015, the United States will monitor
developments in this area closely and will continue
to pursue progress in enhancing transparency and
streamlining China’s telecommunications testing and
certification requirements.
CCCCCC MMaarrkk SSyysstteemm
As previously reported, CNCA regulations
establishing a new Compulsory Product Certification
System, issued in December 2001, took full effect in
August 2003. Under this system, there is now one
safety mark – the CCC Mark – issued to both Chinese
and foreign products. Under the old system,
domestic products were only required to obtain the
“Great Wall” mark, while imported products needed
both the “Great Wall” mark and the “CCIB” mark.
Despite the changes made by the regulations, U.S.
companies in some sectors continued to express
concerns in 2014 about duplication in certification
requirements, particularly for radio and
telecommunications equipment, medical equipment
and automobiles.
Meanwhile, to date, China has granted more than
150 Chinese enterprises accreditation to test and at
least 14 Chinese enterprises accreditation to certify
for purposes of the CCC Mark. Despite China’s
commitment that qualifying majority foreign-owned
joint venture conformity assessment bodies would
be eligible for accreditation and would be accorded
national treatment, China so far has only accredited
six foreign-invested conformity assessment bodies.
It is not clear whether these six foreign-invested
conformity assessment bodies play a sizeable role in
accrediting products sold in China. China has also
not developed any alternative, less trade-restrictive
approaches to third-party certification, such as
recognition of a supplier’s declaration of conformity.
As a result, U.S. exporters to China are often
required to submit their products to Chinese
laboratories for tests that may be unwarranted or
have already been performed abroad, resulting in
greater expense and a longer time to market. One
U.S.-based conformity assessment body has entered
into an MOU with China allowing it to conduct
follow-up inspections (but not primary inspections)
of manufacturing facilities that make products for
export to China requiring the CCC Mark. However,
China has not been willing to grant similar rights to
other U.S.-based conformity assessment bodies,
explaining that it is only allowing one MOU per
country. Reportedly, Japan has MOUs allowing two
conformity assessment bodies to conduct follow-up
inspections, as does Germany.
In 2012, as in prior years, the United States raised its
concerns about the CCC Mark system and China’s
limitations on foreign-invested conformity
assessment bodies with China both bilaterally and
during meetings of the WTO’s TBT Committee. At
the December 2012 JCCT meeting, China confirmed
that eligible foreign-invested testing and certification
entities registered in China can participate in CCC
Mark-related work and that China’s review of
applications from foreign-invested entities will use
the same conditions as those applicable to Chinese
domestic entities.
In 2013, the United States pressed China to move
ahead to seek new testing and certification entities
for CCC Mark-related work in order to produce
practical results from its 2012 announcement that
foreign-invested entities are permitted in this sector.
committed that, beginning in Spring 2014, it would
use the same conditions that are applicable to
domestic entities when reviewing applications from

75
foreign-invested entities registered in China to be
designated as CCC Mark testing and certification
organizations. Subsequently, in June 2014, CNCA
issued a Notice calling for applications for new
designated certification bodies to be submitted by
July 25, 2014, and it accepted applications from
foreign certification companies. As of December
2014, no details of CNCA’s application decisions
were available. In 2015, the United States will
monitor developments in this area and work to
further expand the scope of testing and certification
activities available to U.S. providers in China.
MMeeddiiccaall DDeevviicceess
Since the creation of China’s CCC Mark system, one
of the more significant problem areas has been
duplicative certification requirements for imported
medical equipment. At the April 2006 JCCT meeting,
as previously reported, the United States was able to
obtain China’s commitment to eliminate the
redundancies to which imported medical equipment
has been subjected. However, China only took steps
to address duplicative product testing. China did not
address the more burdensome duplicative factory
inspection, certification and registration
requirements applicable to imported electro-medical
equipment or additional product-specific concerns,
such as redundancies on border inspections for
imported pacemakers.
The United States raised its continuing concerns in
this area through various bilateral meetings in 2006,
2007 and 2008, including the JCCT meetings held in
December 2007 and September 2008, as well as
during the transitional reviews before the TBT
Committee in November 2006 and November 2007.
In September 2008, CNCA and China’s State Food
and Drug Administration (SFDA) jointly issued an
announcement eliminating redundant testing, fees
and factory inspections.
Following further U.S. engagement, in May 2013,
China removed eight categories of medical devices
from the list of products requiring CCC Mark
registration. Since then, the United States has
continued to encourage China to take further steps
to address duplicative or onerous testing and
certification requirements applicable to medical
devices.
In April 2009, SFDA circulated for public comment a
draft measure intended to supersede the
Administrative Measures on Medical Device
Registration, originally issued in 2004, but did not
notify the draft measure, entitled Regulations on
Supervision and Administration of Medical Devices,
to the WTO. The United States subsequently
expressed concerns about this draft measure in
bilateral discussions with SFDA and during the
October 2009 JCCT meeting as well as at the
transitional review before the WTO’s TBT Committee
later that year. At the October 2009 JCCT meeting,
China committed to accept a prior approval
document of a medical device issued by a foreign
country regardless of its exporting origin, country of
manufacture or legal manufacture to satisfy any
prior approval registration requirement.
In 2012, China issued the third draft of the
Regulations on Supervision and Administration of
Medical Devices. Despite apparent agreement at the
October 2009 JCCT meeting that China would
reconsider its requirement that a medical device be
registered in the country of export before it can
obtain approval in China, the draft continued to
require prior marketing approval by the country of
origin or country of legal manufacture.
In March 2014, China’s State Council finalized and
published Order No. 650, the Regulations for the
Supervision and Administration of Medical Devices.
The Order expected to result in the creation and
update of numerous rules and requirements
pertaining to clinical trials, testing, inspections,
evaluations, re-registration and post-market
surveillance. While China has notified many of the
draft implementing rules to the WTO and has
solicited public comments on them, the Order itself
has not yet been notified to the WTO.

76
The United States and U.S. industry have raised
concerns relating to Order No. 650 and the various
implementing rules with the relevant Chinese
government authorities, using the JCCT process and
meetings of the WTO TBT Committee, among other
fora. Particular provisions of concern include U.S.
the requirement that a medical device be registered
in the country of export before it can obtain
approval in China, and new local clinical trial
requirements. The lack of necessary transition
periods to avoid serious market disruptions is also
troubling.
The requirement that a medical device must be
registered in the registrant’s country of domicile
before it can be accepted for registration in China
appears to be more stringent than prior policy
allowing registrants to submit marketing
authorization in the manufacturer’s country of
origin. In consultations through the JCCT process,
SFDA’s successor, the China Food and Drug
Administration (CFDA), assured the United States
that implementation would be effectively the same
as the prior requirement and that certification from
the country of origin would satisfy the requirement
under Order No. 650. However, the United States
remains concerned about this requirement, as it
places unnecessary market entry delays on imported
medical devices, while offering no further assurance
regarding the safety and efficacy of the medical
devices in question. The lack of registration in the
manufacturer’s home country or country of export
would not necessarily be an indication that a medical
device is unsafe.
The United States is also concerned about new
clinical trial requirements and CFDA’s proposed
catalogues of exempted Class II and Class III devices,
which do not capture the full range of products that
meet the exemption criteria as laid out in Order No.
650. In addition, the ways through which foreign
manufacturers can demonstrate safety and
effectiveness to obtain an exemption are severely
limited. The United States has urged CFDA to
expand the ways that foreign companies can
demonstrate eligibilities for these exemptions.
Separately, in April 2009, AQSIQ circulated draft
Regulations on the Recall of Defective Products,
which would apply to medical devices. Given that
the Ministry of Health and SFDA began a process in
2008 to develop a recall system that would also
cover medical devices, the United States became
concerned about the possibility of redundant recall
procedures. In bilateral discussions with China
during the run-up to the October 2009 JCCT meeting,
as well as at the transitional review before the TBT
Committee, held in early October 2009, the United
States raised its concerns. At the October 2009 JCCT
meeting, China indicated that it would ensure that
its product recall procedures for medical devices
would not be redundant and that the Ministry of
Health and SFDA would be the relevant regulatory
authorities for medical device recalls. Since 2010,
U.S. industry has not reported problems with the
medical device recall system. In 2015, the United
States will continue to monitor developments in this
area to ensure that China’s regulatory approach is
consistent with China’s JCCT commitment.
CCoossmmeettiiccss
In December 2013, CFDA issued a notice requiring
foreign cosmetics manufacturers to submit a
certificate of free sale establishing that an imported
product is also being sold in the country of origin. As
many cosmetics products are manufactured globally
and designed specifically for particular destination
markets, this new requirement amounted to an
effective ban on many imported cosmetics normally
sold in China and contributed to severe time-to-
market delays. The United States has raised
concerns with China about this new requirement in
both bilateral meetings and before the WTO TBT
Committee.
In November 2014, CFDA released a draft measure,
the Regulations on the Supervision and
Administration of Cosmetics, for public comment.
U.S. industry is concerned about several provisions
in this draft measure, including provisions that
appear to contain unfair requirements for foreign
products. The draft measure also contains the

77
certificate of free sale requirement of imported
cosmetics, as well as pre-approval requirements for
new cosmetics ingredients.
Later that same month, CFDA issued another draft
measure, the Administrative Measures on Cosmetic
Labeling, for public comment. This draft measure
poses many concerns for the U.S. industry, including
a blanket ban of over-labels on cosmetics packages,
which would require foreign manufacturers to re-
design packages specifically for the Chinese market.
This requirement could result in high production
costs and lengthy time-to-market delays, as well as a
loss of brand equity.
In coordination with U.S. industry, the United States
has begun engaging with CFDA in order to highlight
U.S. industry’s concerns regarding the two
November 2014 draft measures. The United States
will closely monitor developments in this area in
2015.
CChhiinnaa RRooHHSS
The United States continues to be concerned by
China’s Administrative Measures for Controlling
Pollution Caused by Electronic Information Products,
issued by MIIT and several other Chinese agencies
effective March 2007. This measure is modeled
after existing EU regulations that restrict hazardous
substances in electronic products and is known as
“China RoHS.” While both the EU regulations and
China’s regulations seek to ban lead and other
hazardous substances from a wide range of
electronic products, there are significant differences
between the two regulatory approaches.
Throughout the process of developing the China
RoHS regulations, there was no formal process for
interested parties to provide comments or consult
with MIIT, and as a result foreign stakeholders had
only limited opportunity to comment on proposals
or to clarify MIIT’s implementation intentions. China
did eventually notify the regulations to the TBT
Committee, but the regulations did not provide basic
information such as the specific products for which
mandatory testing will be required or any details on
the applicable testing and certification protocols,
generating concern among U.S. and other foreign
companies that they would have insufficient time to
adapt their products to China’s requirements and
that in-country testing requirements would be
burdensome and costly.
In October 2009, China issued for public comment its
first draft catalogue, covering electronic information
products that will be subject to hazardous substance
restrictions and mandatory testing and conformity
assessment under the China RoHS regulations. The
draft catalogue, which was subsequently finalized
and issued in final form, included mobile phones,
other phone handsets and computer printers and
was supposed to come into force ten months after
its adoption. However, information on the
applicable testing, certification and conformity
assessment regime was not included in either the
draft or final catalogue.
China subsequently proposed revisions to the
original China RoHS regulations. Specifically, in
October 2010, China notified the draft Measures for
the Administration of the Pollution Control of
Electronic or Electrical Products to the WTO’s TBT
Committee and also solicited public comment on it.
China has not yet finalized this measure.
In May 2010, MIIT and CNCA jointly issued the
Opinions on the Implementation of the National
Voluntary Certification Program for Electronic
Information Products Subject to Pollution Control,
which announced a voluntary program to certify
electronic information products to the China RoHS
limits established for six substances. More recently,
MIIT and CNCA indicated that they intend to
encourage electronic information product
manufacturers, sellers and importers to take
advantage of the program’s financial and tax
incentives and priority in government procurement.
MIIT and CNCA began implementing this voluntary
program in November 2011.

78
In July 2012, MIIT posted on its website another
draft revision of the China RoHS regulations for
public comment, and U.S. industry submitted
comments on it. To date, MIIT has not finalized this
draft revision.
The United States will carefully monitor
developments in this area in 2015.
TTRRAANNSSPPAARREENNCCYY
China has made progress but still does not appear to
notify all new or revised standards, technical
regulations and conformity assessment procedures
as required by WTO rules.
In the area of transparency, AQSIQ’s TBT inquiry
point, established shortly after China acceded to the
WTO, has continued to be helpful to U.S. companies
as they try to navigate China’s system of standards,
procedures. In addition, China’s designated
notification authority, MOFCOM, has been notifying
proposed technical regulations and conformity
assessment procedures to the TBT Committee so
that interested parties in WTO members are able to
comment on them, as required by the TBT
Agreement.
However, in 2014, as in prior years, almost all of the
notified measures have emanated from AQSIQ, SAC
or CNCA and have rarely included measures from
other agencies that appear to require notification,
such as MOH, MIIT, the Ministry of Environmental
Protection and CFDA. Several years ago, in part to
address this problem, China had reportedly formed a
new inter-agency committee, with representatives
from approximately 20 ministries and agencies and
chaired by AQSIQ, to achieve better coordination on
TBT (and SPS) matters, but progress has been
inconsistent in this area.
As a result, some of China’s TBT measures continue
to enter into force without having first been notified
to the TBT Committee, and without foreign
companies having had the opportunity to comment
on them or even being given a transition period
during which they could make necessary
adjustments. In addition, as the United States has
consistently highlighted during regular meetings and
the annual transitional reviews before the TBT
Committee, the comment periods established by
China for the TBT measures that have been actually
notified continue to be unacceptably brief in some
cases. In other cases, some U.S. companies have
reported that even when sufficient time was
provided, written comments submitted by U.S. and
other foreign interested parties seemed to be wholly
disregarded. In still other cases, insufficient time
was provided for Chinese regulatory authorities to
consider interested parties’ comments before a
regulation was adopted.
OOtthheerr IInntteerrnnaall PPoolliicciieess
SSTTAATTEE--OOWWNNEEDD AANNDD SSTTAATTEE--IINNVVEESSTTEEDD EENNTTEERRPPRRIISSEESS
The Chinese government has heavily intervened in
investment and other strategic decisions made by
state-owned and state-invested enterprises in certain
sectors.
While many provisions in China’s WTO accession
agreement indirectly discipline the activities of state-
owned and state-invested enterprises, China also
agreed to some specific disciplines. In particular, it
agreed that laws, regulations and other measures
relating to the purchase of goods or services for
commercial sale by state-owned and state-invested
enterprises, or relating to the production of goods or
supply of services for commercial sale or for non-
governmental purposes by state-owned and state-
invested enterprises, would be subject to WTO rules.
China also affirmatively agreed that state-owned and
state-invested enterprises would have to make
purchases and sales based solely on commercial
considerations, such as price, quality, marketability
and availability, and that the government would not
influence the commercial decisions of state-owned
and state-invested enterprises.

79
In the first few years after China’s accession to the
WTO, U.S. officials did not hear many complaints
from U.S. companies regarding WTO compliance
problems in this area, although a lack of available
information made it a difficult area to assess.
However, after China’s establishment of SASAC in
2003, it became evident that the Chinese
government was intent on heavily intervening in a
broad range of decisions related to the strategies,
management and investments of state-owned
enterprises. SASAC was specifically created to
represent the state’s shareholder interests in state-
owned enterprises, and its basic functions include
guiding the reform of state-owned enterprises,
taking daily charge of supervisory panels assigned to
large state-owned enterprises, appointing and
removing chief executives and other top
management officials of state-owned enterprises,
supervising the preservation and appreciation of
value of state-owned assets, reinvesting profits and
drafting laws, regulations and departmental rules
relating to the management of state-owned assets.
In December 2006, the State Council issued the
Guiding Opinions on Promoting the Adjustment of
State-owned Assets and the Restructuring of State-
owned Enterprises, which calls on SASAC to
“enhance the state-owned economy’s controlling
power,” “prevent the loss of state-owned assets,”
encourage “state-owned capital to concentrate in
major industries and key fields relating to national
security and national economic lifelines” and
“accelerate the formation of a batch of predominant
enterprises with independent intellectual property
rights, famous brands, and strong international
competitiveness.” The decree then specifically
identifies seven “strategic” industries, where state
capital must play a leading role in every enterprise.
These industries include civil aviation, coal, defense,
electric power and grid, oil and petrochemicals,
shipping and telecommunications. The decree also
provides that key enterprises in “pillar” industries
must remain under state control. These industries
include automotive, chemical, construction,
equipment manufacturing, information technology,
iron and steel, nonferrous metals, and surveying and
design, among others.
Particularly since the start of the global economic
downturn in late 2008, state-owned enterprises at
the central government level have been aggressively
acquiring and merging with other central state-
owned enterprises as well as provincial and local
state-owned enterprises and private enterprises.
According to one recent Chinese government
statement, 82 percent of central state-owned
enterprises’ assets are concentrated in the petro-
chemicals, electric power and grid, defense,
telecommunications, transport, mining, metallurgy
and machinery sectors. Central state-owned
enterprises also supply almost all of the crude oil,
natural gas, ethylene and basic telecommunication
services for China’s economy.
In October 2008, China’s National People’s Congress
passed the Law on State-owned Assets of
Enterprises, which became effective in May 2009.
The objectives of this law are to safeguard the basic
economic system of China, consolidate and develop
China’s state-owned enterprise assets, enable state-
owned enterprises to play a dominant role in the
national economy, especially in “key” sectors, and
promote the development of China’s “socialist
market economy.” The law calls for the adoption of
policies to promote these objectives and to improve
the management system for state-owned assets. It
also addresses SASAC’s role, the rights and
obligations of state-owned enterprises, corporate
governance and major matters such as mergers, the
issuance of bonds, enterprise restructuring and asset
transfers. The law further stipulates that the
transfer of state assets to foreigners should follow
relevant government policies and shall not harm
national security or the public interest.
In March 2010, SASAC issued a potentially far-
reaching measure, the Interim Provisions on
Guarding Central State-Owned Enterprises’
Commercial Secrets, effective as of the date of its
issuance. This measure appears to implement the

80
Law on Guarding State Secrets, which the National
People’s Congress amended in 2009. It is unclear
why the commercial secrets of state-owned
enterprises need to be protected through a measure
applicable only to state-owned enterprises, when
the commercial secrets of all enterprises in China are
already subject to protection.
In July 2010, the Central Committee of the
Communist Party and the State Council issued the
Opinions on Further Promoting the Implementation
of the “Three-Major One-Large” Decision-making
System. This measure requires state-owned
enterprises to establish a collective decision-making
system in which the Communist Party plays a
significant role in major business decisions, major
personnel changes and major project arrangements
(known as the “three majors”). It also requires the
movement of large amounts of funds (the “one
large”) to be decided collectively by the leadership
team, which includes representatives from the
Communist Party.
Separately, the Chinese government also has issued
a number of measures that restrict the ability of
state-owned and state-invested enterprises to
accept foreign investment, particularly in key
sectors. Some of these measures are discussed
below in the Investment section, and include
restrictions on foreign investment not only in the
public sector but also in China’s private sector.
Particularly in recent years, the United States has
sought to engage China on these and a variety of
other issues related to state-owned enterprises. The
United States has used bilateral avenues such as the
Economic Track of the S&ED and the JCCT process as
well as meetings at the WTO, principally through the
Subsidies Committee and the Committee on
Government Procurement.
At the May 2012 S&ED meeting, the United States
obtained commitments from China designed to help
create a more level playing field for U.S. enterprises
competing against China’s state-owned enterprises.
China committed to providing non-discriminatory
treatment to all enterprises, regardless of type of
ownership, in terms of credit, taxation, and
regulatory policies. China also agreed to increase
the number of state-owned enterprises that pay
dividends as well as to increase the amount of
dividends actually paid. In addition, China agreed
that it would encourage listed state-owned
enterprises – which include China’s largest and most
profitable state-owned enterprises – to increase the
portion of profits that they pay out in dividends so as
to be in line with market levels.
Throughout 2013, using the S&ED and JCCT
processes, the United States pressed China to
eliminate subsidies primarily benefitting state-
owned enterprises engaged in commercial activities.
The United States also pressed China to take steps to
improve corporate governance, including by
ensuring that there is no government or political
involvement in the management of these
enterprises or in their employment decisions.
According to 2013 Chinese government statistics,
the assets of state-owned enterprises account for 41
percent of the total assets of Chinese industrial
enterprises, representing a significant decrease from
the 1978 figure of 92 percent. Nevertheless, the
continuing concentration of state-owned enterprises
in key sectors has meant that their economic
influence has not decreased correspondingly.
In November 2013, as previously reported, the Third
Plenum Decision endorsed a number of far-reaching
economic reform pronouncements, which called for
making the market ”decisive” in allocating resources,
reducing Chinese government intervention in the
economy, accelerating China’s opening up to foreign
goods and services, and improving transparency and
the rule of law to allow fair competition in China’s
market. It also called for reforming China’s state-
owned enterprises. While these pronouncements
do signal a high-level determination to accelerate
needed economic reforms, they do not appear
designed to reduce the presence of state-owned
enterprises in China’s economy. Rather, in the case
of state-owned enterprises, the reform objectives

81
are to consolidate and to strengthen those
enterprises and to place them on a more
competitive footing, both in China and globally.
At the July 2014 S&ED meeting, China did agree to
incremental reforms for state-owned enterprises.
Specifically, it committed to further deepen the
reform of state-owned enterprises by improving and
standardizing modern corporate governance
structure and by reasonably increasing the
proportion of market-based recruitment of
management personnel for state-owned enterprises.
China also pledged to increase significantly the
dividends that state-owned enterprises pay to the
government for social spending, reaching 30 percent
by 2020.
Nevertheless, by December 2014, the Third Plenum
Decision had not yet led to significant reform of
state-owned enterprises, as new policies were still
being formulated. In 2015, the United States will
continue to address the growing number of issues
relating to state-owned enterprises in China in order
to ensure that China fully adheres to its WTO
obligations and that the actions of the Communist
Party, the Chinese government and China’s state-
owned enterprises do not impede the ability of U.S.
firms to compete and invest in China. The United
States also will work to promote positive reforms
called for by the Third Plenum Decision.
SSTTAATTEE TTRRAADDIINNGG EENNTTEERRPPRRIISSEESS
It is difficult to assess the activities of China’s state
trading enterprises, given inadequate transparency
and China’s failure to meet the WTO’s reporting
requirements for state trading enterprises.
disciplines on the importing and exporting activities
of state trading enterprises. China committed to
provide full information on the pricing mechanisms
of state trading enterprises and to ensure that their
import purchasing procedures are transparent and
fully in compliance with WTO rules. China also
agreed that state trading enterprises would limit the
mark-up on goods that they import in order to avoid
trade distortions.
Since China’s WTO accession, the United States and
other WTO members repeatedly have sought
information from China on the pricing and
purchasing practices of state trading enterprises,
principally through the transitional reviews at the
WTO. However, China has only provided general
information, which does not allow a meaningful
assessment of China’s compliance efforts.
In addition, it appears that China has not been
fulfilling its obligation under Article XVII:4(a) of the
GATT 1994, and paragraph 1 of the Understanding
on the Interpretation of Article XVII of the GATT
1994, which requires China to notify its state trading
enterprises. China has not submitted a notification
since 2003, despite the emergence of new state
trade enterprises in subsequent years.
In September 2014, after failing to persuade China to
submit an up-to-date notification of its state trading
enterprises, the United States submitted a counter
notification to the Working Party on State Trading
Enterprises pursuant to paragraph 4 of the
Understanding on the Interpretation of Article XVII
of the GATT 1994. In this counter notification, the
United States identified 153 state trading
enterprises, including 44 state trading enterprises
not previously notified by China, and provided
detailed information on the establishment and
operations of these enterprises for the benefit of
other WTO members and the public.
GGOOVVEERRNNMMEENNTT PPRROOCCUURREEMMEENNTT
While China is moving slowly toward fulfilling its
commitment to accede to the GPA, it is maintaining
and adopting government procurement measures
that give domestic preferences.
The WTO Agreement on Government Procurement
or GPA, is a plurilateral agreement that currently
covers the United States and 42 other WTO
members. The GPA applies to the procurement of

82
goods and services by central and sub-central
government agencies and government enterprises
specified by each party, subject to specified
thresholds and certain exceptions. It requires GPA
parties to provide MFN and national treatment to
the goods, services and suppliers of other GPA
parties and to conduct their procurement in
accordance with procedures designed to ensure
transparency, fairness and predictability in the
procurement process.
China is not yet a party to the GPA. It committed, in
its WTO accession agreement, to initiate
negotiations for accession to the GPA “as soon as
possible.” Until it completes its accession to the
GPA, China has committed in its WTO accession
agreement that all of its central and local
government entities will conduct their procurements
in a transparent manner. China also agreed that,
where it opens a procurement to foreign suppliers, it
will provide MFN treatment by allowing all foreign
suppliers an equal opportunity to participate in the
bidding process.
GGPPAA AAcccceessssiioonn
U.S. firms have made clear that China’s timely GPA
accession is a top priority for them. As a result,
shortly after China became an observer to the WTO
Committee on Government Procurement in
February 2002, the United States began pressing
China both bilaterally and in WTO meetings to move
as quickly as possible toward GPA accession.
At the April 2006 JCCT meeting, China agreed to
initiate GPA negotiations no later than December
2007. China subsequently initiated negotiations on
its accession to the GPA in December 2007 with the
submission of its application for accession and its
initial offer of coverage, known as its Appendix I
Offer. In May 2008, the United States submitted its
Initial Request for improvements in China’s Initial
Appendix I Offer, and other GPA parties submitted
similar requests. In September 2008, China
submitted its responses to the Checklist of Lists for
Provision of Information Relating to Accession.
In 2009, the United States held three rounds of
negotiations with China on the terms and conditions
of China’s GPA accession. In addition, at the July
2009 S&ED meeting, China agreed to submit a report
to the WTO’s Government Procurement Committee,
before its October 2009 meeting, setting out the
improvements that China would make in its revised
offer. In October 2009, China submitted the report,
which indicated that improvements to its offer
would provide for the coverage of more entities,
goods and services and lower thresholds.
Subsequently, following further bilateral
engagement by the United States, China committed
during the October 2009 JCCT meeting to submit a
revised offer as early as possible in 2010.
In 2010, the United States held three more rounds of
negotiations with China on the terms and conditions
of China’s GPA accession and the development of its
government procurement system. In addition, the
United States submitted questions to China on its
responses to the Checklist of Lists for Provision of
Information Relating to Accession. At the May 2010
S&ED meeting, China committed to submit its first
Revised Offer in July 2010, as it later did. The United
States then submitted its Second Request for
improvements in China’s proposed coverage of
government procurement in September 2010.
States obtained China’s commitment to accelerate
its accession to the GPA, as China agreed to work
with provincial and local governments and to submit
a robust revised offer of coverage in 2011. During
President Hu’s January 2011 visit to Washington,
China expressly committed that its next revised offer
would include sub-central entities. Subsequently,
China reiterated that it would submit a second
revised offer in 2011, which it did in November 2011.
In 2011, the United States held three rounds of
negotiations with China on its accession to the GPA.
The negotiations included U.S. experts who
explained the U.S. government procurement system
and the implementation of U.S. commitments under
the GPA. The negotiations also focused on the

83
coverage of government enterprises under the GPA,
with the United States requesting that China add
state-owned enterprises to its GPA coverage.
At the May 2012 S&ED meeting, China committed to
submit “a new comprehensive revised offer that
responds to the requests of the GPA parties . . .
before the [GPA] committee’s final meeting in
2012.” China subsequently submitted its third
revised offer in November 2012. This revised offer
falls short of the coverage provided by the United
States and other GPA parties, as China responded to
few requests made by GPA parties. These requests
had sought to extend coverage to state-owned
enterprises, include additional services coverage,
eliminate broad exclusions and significantly expand
coverage of sub-central entities. The United States,
the EU and other GPA parties described the revised
offer as highly disappointing, both in terms of scope
and coverage. At the December 2012 JCCT meeting,
China agreed to engage seriously with the United
States on outstanding core issues relating to the
scope of projects that qualify as government
procurement and the extent to which state-owned
enterprises in China engage in government
procurement activities.
In 2013, using a new mechanism for technical
discussions with China established through the S&ED
process, the United States secured two
commitments from China in an effort to expedite
China’s accession to the GPA while continuing to
push for robust terms that are comparable to the
coverage of the United States and other GPA parties.
At the July 2013 S&ED meeting, China agreed to
submit by the end of 2013 a new revised offer to join
the GPA. China followed through by submitting its
fourth revised offer, which amongst other
improvements contained lower thresholds and
expanded sub-central coverage, among other
improvements. However, even with these
improvements, China’s offer remains short of the
coverage provided by other GPA parties.
At the December 2013 JCCT meeting, China agreed
to accelerate its GPA accession negotiations and
submit in 2014 an additional revised offer that is on
the whole commensurate with the coverage of GPA
parties. China submitted a revised offer near the
end of December 2014.
In 2015, the United States will continue to use the
new mechanism for technical discussions established
by the S&ED process to work with China, and it also
will continue to consult and coordinate with other
interested GPA parties. The United States’ goal is to
bring about China’s accession to the GPA as
expeditiously as possible and on robust terms that
are comparable to the coverage of the United States
and other GPA parties.
CChhiinnaa’’ss GGoovveerrnnmmeenntt PPrrooccuurreemmeenntt RReeggiimmee
In January 2003, China implemented its Government
Procurement Law, which generally reflects the GPA
and incorporates provisions from the United Nations
Model Law on Procurement of Goods. However,
China’s Government Procurement Law also directs
central and sub-central government entities to give
priority to “local” goods and services, with limited
exceptions, as China is permitted to do, because it is
not yet a party to the GPA. China envisioned that its
Government Procurement Law would improve
transparency, reduce corruption and lower
government costs. This law was also seen as a
necessary step toward reforming China’s
government procurement system in preparation for
China’s accession to the GPA. Since the adoption of
the Government Procurement Law, MOF has issued
various implementing measures, including
regulations that set out detailed procedures for the
solicitation, submission and evaluation of bids for
government procurement of goods and services and
help to clarify the scope and coverage of the
Government Procurement Law. MOF also issued
measures relating to the announcement of
government procurements and the handling of
complaints by suppliers relating to government
procurement.
It is notable, however, that the Government
Procurement Law does not cover most public works

84
projects, which represent at least one-half of China’s
government procurement market. Those projects
are subject to a different regulatory regime,
established by China’s Tendering and Bidding Law,
which entered into force in January 2000. In
September 2009, the State Council circulated NDRC’s
draft regulations implementing the Tendering and
Bidding Law for public comment. In October 2009,
the United States submitted written comments on
these draft regulations in which it emphasized,
among other things, the need for greater
clarification of the relationship between the
Tendering and Bidding Law and China’s Government
Procurement Law, and the need to define “domestic
products.” In December 2011, the State Council
issued the final implementing regulations for the
Tendering and Bidding Law, which entered into force
in February 2012.
As previously reported, beginning in 2003, the
United States expressed concerns about policies that
China was developing with regard to government
procurement of software. In 2003, the United States
specifically raised concerns about MOF
implementing rules on software procurement, which
reportedly contained guidelines mandating that
central and local governments – the largest
purchasers of software in China – purchase only
software developed in China to the extent possible.
The United States was concerned not only about the
continuing access of U.S. software exporters to
China’s large and growing market for packaged and
custom software – $7.5 billion when the MOF rules
went into effect – but also about the precedent that
could be established for other sectors if China
proceeded with MOF’s proposed restrictions on the
purchase of foreign software by central and local
governments. At the July 2005 JCCT meeting, China
indicated that it would indefinitely suspend its
drafting of implementing rules on government
software procurement.
Subsequently, in 2007 and 2008, the United States
grew concerned with statements and
announcements being made by some Chinese
government officials indicating that state-owned
enterprises should give priority to the purchase of
domestic software. In response, at the September
2008 JCCT meeting, China clarified that its formal
and informal policies relating to software purchases
by Chinese enterprises, whether state-owned or
private, will be based solely on market terms
without government direction.
Meanwhile, in December 2007, one day before
China tabled its Initial Appendix I Offer in connection
with its GPA accession, MOF issued two measures
that would substantially restrict the Chinese
government’s purchase of foreign goods and
services. The first measure, the Administrative
Measures for Government Procurement on Initial
Procurement and Ordering of Indigenous Innovative
Products, was directed at restricting government
procurement of “indigenous innovative” products to
“Chinese” products manufactured within China. The
central government and provincial governments
followed up by creating catalogues of qualifying
“indigenous innovation products.” The second
measure, the Administrative Measures for
Government Procurement of Imported Products,
severely restricted government procurement of
imported foreign products and technologies. While
China may maintain these measures until it
completes its GPA accession, the United States has
raised strong concerns about them, as they run
counter to the liberalization path expected of a WTO
member seeking to accede to the GPA.
In 2009, China reinforced its existing “Buy China”
measures at the central, provincial and local
government levels. For example, in May 2009, MIIT
issued a circular entitled Government Procurement
Administration Measures, which applies to MIIT and
its direct subsidiaries. The measure required entities
engaging in government procurement to give
priority to domestic products, projects and services
as well as to indigenous innovation products, except
where the products or services cannot be produced
or provided in China or are for use outside of China.
Similarly, in May 2009, nine central government

85
ministries and agencies jointly issued the Opinions
on Further Strengthening Supervision of Tendering
and Bidding Activities in Construction Projects, which
included a “Buy China” directive for all projects
under China’s stimulus package. This directive
specifically requires that priority be given to
“domestic products” for all government-invested
projects, unless the products are not available in
China, cannot be purchased on reasonable
commercial terms in China or are for use abroad.
Using the S&ED and JCCT processes in 2009, the
United States obtained important commitments
from China that, if implemented, should lead to a
government procurement regime that is more
favorable to foreign-invested enterprises. First,
during the July 2009 S&ED meeting, China
committed to treat products produced in China by
foreign-invested enterprises the same as products
produced in China by Chinese enterprises for
purposes of its Government Procurement Law.
China later reaffirmed this commitment and further
committed during the October 2009 JCCT meeting to
issues rules implementing it. In addition, the United
States and China agreed to establish a multi-agency
working group to conduct regular discussions
addressing issues raised by government
procurement and by the purchases of state-affiliated
enterprises and organizations and private entities
pursuing national strategic objectives.
In 2010, China circulated two draft measures
intended to implement its Government Procurement
Law. The first draft measure, the Regulations to
Implement the Government Procurement Law, was
issued by MOF in January 2010. The United States
submitted comments in February, in which, among
other things, it expressed concern that the draft
measure did not provide a GPA-consistent regime.
The United States also expressed concern that the
draft measure did not provide more specificity about
the conduct of government procurement. The
second draft measure, the Administrative Measures
for Government Procurement of Domestic Products,
was issued for public comment in May 2010 by MOF,
MOFCOM, NDRC and the General Administration of
Customs. In accordance with China’s October 2009
JCCT commitment, this draft measure set out the
requirements for a product to qualify as a “domestic
product.” The United States submitted comments
on this draft measure in June, in which it expressed
concerns about the lack of details regarding how the
draft measure would be implemented as well as its
broad application. As of December 2012, neither
one of the draft measures had been issued in final
form.
Separately, in November 2009, MOST, NDRC and
MOF issued the Circular on Launching the 2009
National Indigenous Innovation Product
Accreditation Work, requiring companies to file
applications by December 2009 for their products to
be considered for accreditation as “indigenous
innovation products.” This measure provides for
preferential treatment in government procurement
to any products that are granted this accreditation.
Subsequently, the United States and U.S. industry,
along with the governments and industries of many
of China’s other trading partners, expressed serious
concerns to China about this measure, as it appears
to establish a system designed to provide
preferential treatment in government procurement
to products developed by Chinese enterprises.
In April 2010, MOST, NDRC and MOF issued a draft
measure for public comment, the Circular on
Launching 2010 National Innovation Product
Accreditation Work. The draft measure would
amend certain of the product accreditation criteria
set forth in the November 2009 measure, but would
leave other problematic criteria intact, along with
the accreditation principles, application form and
link to government procurement. In addition, the
draft measure originally was to become effective the
day after comments were due. The United States
submitted comments in May 2010, in which it asked
China to suspend the implementation of the
indigenous innovation accreditation system and to
engage in consultations with the United States to
address U.S. concerns with the system. To date, the

86
draft measure has not been finalized, and the
Chinese authorities have not requested or accepted
applications for accreditation.
At the December 2010 JCCT meeting, China took
important steps to address some of the U.S.
concerns about China’s indigenous innovation
policies. Specifically, China agreed not to maintain
any measures that provide government
procurement preferences for goods or services
based on the location where the intellectual
property is owned or was developed. One month
later, during President Hu’s visit to Washington in
January 2011, China went further by agreeing that it
would “not link its innovation policies to the
provision of government procurement preferences.”
Subsequently, at the May 2011 S&ED meeting, China
also committed to “eliminate all of its government
procurement indigenous innovation products
catalogues” when implementing the agreement
reached during President Hu’s visit. Finally, at the
November 2011 JCCT meeting, China announced
that the State Council had issued a measure
requiring provincial and local governments to
eliminate all links between China’s innovation
policies and government procurement preferences
by December 1, 2011.
At the December 2010 JCCT meeting, China also
agreed that, in 2011, it would revise a major MIIT
catalogue, which covers heavy equipment and other
industrial machinery, and that it would not use the
revised catalogue for import substitution or the
provision of export subsidies or otherwise to
discriminate against foreign suppliers. MIIT issued a
draft of the revised catalogue for public comment
shortly before the November 2011 JCCT meeting,
but it has not yet issued a final revised catalogue.
In 2014, the United States further engaged with
China on the draft Implementation Rules of the
Government Procurement Law and the draft
Administrative Measures for Government
Procurement of Domestic Products. The United
States recommended that China ensure that the
provisions contained in these measures allow
enough flexibility for Chinese government agencies
to continue to procure high-quality items with
complex international supply chains at a reasonable
price and to avoid disruptions of trade. The United
States expects the Implementation Rules of the
Government Procurement Law to be issued in final
soon. At the December 2014 JCCT meeting, China
confirmed that it will publish for public comment a
further draft of the Administrative Measures for the
Government Procurement of Domestic Goods after
revising and improving it on the basis of thorough
consideration of various opinions, including
achieving cost savings, decreasing administrative
burdens and increasing flexibilities.
In 2015, the United States will continue to work with
China to move forward on its GPA accession and to
address a range of other government procurement
issues. In addition, the United States will continue to
monitor the treatment accorded to U.S. suppliers
under China’s government procurement regime and
will continue to urge China to apply its regulations
and implementing rules in a transparent, non-
discriminatory manner. The United States also will
continue to encourage China to develop its
government procurement system in a manner that
will facilitate its expeditious accession to the GPA.
IINNVVEESSTTMMEENNTT
China has revised many laws, regulations and other
measures on foreign investment to eliminate WTO-
inconsistent requirements relating to export
performance, local content, foreign exchange
balancing and technology transfer. However, some
of the revised measures continue to “encourage”
these requirements, and it appears that Chinese
government officials at times continue to use the
foreign investment approval process to pressure
foreign companies to accept one or more of these
requirements or other conditions. China has also
issued industrial plans covering the auto and steel
sectors that include guidelines that appear to conflict
with its WTO obligations. In addition, China has
added a variety of restrictions on investment that

87
appear designed to shield inefficient or monopolistic
Chinese enterprises from foreign competition.
Upon its accession to the WTO, China assumed the
obligations of the Agreement on Trade-Related
Investment Measures (TRIMS Agreement), which
prohibits investment measures that violate GATT
Article III obligations to treat imports no less
favorably than domestic products or the GATT
Article XI obligation not to impose quantitative
restrictions on imports. The TRIMS Agreement thus
expressly requires elimination of measures such as
those that require or provide benefits for the
incorporation of local inputs (known as local content
requirements) in the manufacturing process, or
measures that restrict a firm’s imports to an amount
related to its exports or related to the amount of
foreign exchange a firm earns (known as trade
balancing requirements). In its WTO accession
agreement, China also agreed to eliminate export
performance, local content and foreign exchange
balancing requirements from its laws, regulations
and other measures, and not to enforce the terms of
any contracts imposing these requirements. In
addition, China agreed that it would no longer
condition importation or investment approvals on
these requirements or on requirements such as
technology transfer and offsets.
In the past, although China has repeatedly affirmed
its plans to further open China to foreign
investment, including recently in the November
2013 Third Plenum Decision, China has not followed
through on these promises, except in limited
instances. China also has pursued other actions that
discriminate against or otherwise disadvantage
foreign investors. For example, China’s investment
restrictions are often accompanied by other
problematic industrial policies, such as the
development of China-specific standards and the
increased use of subsidies. Many of these policies
appear to represent protectionist tools created by
the Chinese government’s industrial planners to
shield inefficient or monopolistic enterprises,
particularly those in which the Chinese government
has an ownership interest, from competition. At the
same time, foreign investors in China also continue
to voice concerns about lack of transparency,
inconsistent enforcement of laws and regulations,
weak IPR protection, corruption and a legal system
that is unreliable and fails to enforce contracts and
judgments.
In the face of these challenges, the value of the stock
of U.S. foreign direct investment in China totaled
$51.4 billion in 2012. This total makes the United
States the 15th
-largest foreign investor in China (not
including indirect foreign direct investment), and it
also represents a 7.1 percent decline from the 2011
level. As these data suggest, and as U.S. investors
report, the many serious challenges posed by
problematic Chinese government policies and
practices play a role in U.S. investors’ decisions
about potential investments in China.
As discussed below, the United States has raised its
concerns about China’s investment restrictions and
related policies in bilateral fora, such as the JCCT, the
S&ED and the U.S.-China Investment Forum, as well
as multilaterally in WTO meetings. In one positive
development, at the July 2013 S&ED meeting, China
reinvigorated ongoing U.S.-China BIT negotiations by
committing to negotiate a BIT that will provide
national treatment at all phases of investment,
including market access (i.e., the “pre-
for those explicitly excluded). Consistent with this
commitment, the Chinese Communist Party’s
November 2013 Third Plenum Decision directs the
government to broaden foreign investment access in
China and to explore the possibility of a model for
allowing foreign investment that would provide pre-
establishment national treatment and would employ
a “negative list” approach in identifying exceptions.
Subsequently, at the July 2014 S&ED meeting, the
United States and China committed to intensify their
negotiations toward a BIT with high standards,
including non-discrimination, fairness, openness, and
transparency, to narrow differences and to reach
agreement on core issues and major articles of the

88
treaty text by the end of 2014, and to initiate the
“negative list” negotiation early in 2015 based on
each side’s “negative list” offers.
AAddmmiinniissttrraattiivvee LLiicceennssiinngg
Since China’s accession to the WTO in December
2001, U.S. and other foreign companies have
expressed serious concerns about the administrative
licensing process in China, both in the context of
foreign investment approvals and in myriad other
contexts. While China took steps to improve
administrative licensing in 2004 with the issuance of
the Administrative Licensing Law, which was
designed to improve transparency, create uniformity
and streamline the approval process, significant
problems remain. U.S. industry reports that, in
practice, many Chinese government bodies at the
central, provincial and municipal government levels
do not comply with this law. U.S. industry also
reports that vague criteria and possibilities for delay
in the licensing process provide licensing officials
with tremendous discretion, thereby creating
opportunities for corruption, and sometimes lead to
foreign enterprises and products being treated less
favorably than their domestic counterparts.
China’s foreign investment approval process, which
lacks transparency and is governed by vaguely
written and apparently unpublished rules, is a
particular problem area. As set forth in an extensive
study conducted for a U.S. industry association,
confidential accounts from foreign companies
indicate that Chinese government officials at times
use the foreign investment approval process on an
ad hoc basis to restrict or unreasonably delay market
entry for foreign companies, to require the foreign
company to take on a Chinese partner, or to extract
valuable, deal-specific commercial concessions as a
price for market entry. These same accounts also
indicate that the Chinese government officials at
times tell the foreign company that it will have to
transfer technology, conduct research and
development in China or satisfy performance
requirements relating to exportation or the use of
local content if it wants its investment approved,
even though none of these requirements is set forth
in Chinese law and China committed in its WTO
accession agreement not to impose these
requirements.
This situation has been able to persist in part
because of the absence of the rule of law in China,
which fosters the use of vague and unwritten
policies and does not provide for meaningful
administrative or judicial review of Chinese
regulatory actions, thereby enabling government
officials to take unilateral actions without fear of
legal challenge. Exacerbating this situation is the
fact that foreign companies are hesitant to speak out
publicly, or to be perceived as working with their
governments to challenge China’s foreign
investment approval practices, because they fear
retaliation from Chinese government officials. The
2012 U.S. industry association study notes that
foreign companies have confidentially reported
receiving explicit or implicit threats from Chinese
government officials – typically made orally rather
than in writing – about possible retaliatory actions
that could have severe repercussions for a
company’s business prospects in China.
In many cases, it appears that Chinese government
officials are motivated by China’s industrial policy
objectives when they use their unchecked power to
dictate or influence foreign investment outcomes.
With China’s state-led economic development
model, the government issues five-year plans that
set objectives for virtually every sector of the
economy. While these plans in broad terms seek to
foster national champions, protect state-owned
enterprises, promote indigenous innovation and
guide the development of Chinese domestic industry
up the value chain, they also include specific
guidelines addressing matters such as technology
transfer and the use of local content, as well as
decisions about industry consolidation, production
capacity, product lines and similar decisions
normally made by the marketplace.
Even though China has revised a number of laws,
regulations and other measures on foreign

89
investment to eliminate requirements relating to
export performance, local content, foreign exchange
balancing and technology transfer, as China
committed to do in its accession agreement, some of
the revised measures, for example, continue to
encourage technology transfer or the use of local
content, without formally requiring it. From the
beginning, U.S. companies were concerned that this
“encouragement” in practice could amount to a
“requirement” in many cases, in light of the high
degree of discretion provided to Chinese
government officials when reviewing foreign
investment applications. Moreover, according to
U.S. companies, even without formal
encouragement, some Chinese government officials
still consider factors such as technology transfer and
the use of local content when deciding whether to
approve an investment or to take some other action,
such as recommend approval of a loan from a
Chinese policy bank, which is often essential to the
success of a project.
Over the years, the United States and other WTO
members, including the EU and Japan, have raised
concerns in this area during meetings of the WTO
TRIMS Committee. The United States and several
other WTO members also highlighted this area
during China’s Trade Policy Reviews, including the
most recent one, which took place in July 2014.
On the bilateral front, the United States has pressed
its concerns with the foreign investment approval
process through the JCCT and S&ED processes and
other avenues. During the February 2012 visit of
then-Vice President Xi to the United States, China
affirmed that technology transfer and technological
cooperation shall be decided by businesses
independently and will not be used by the Chinese
government as a pre-condition for market access. At
the December 2012 JCCT meeting, China also
confirmed that it would correct in a timely manner
any measures that were inconsistent with this
commitment.
Since the Third Plenum Decision in November 2013,
the Chinese government has made numerous
changes to a variety of administrative licensing
processes in China, including processes to secure
investment approvals. In addition, at the July 2014
S&ED meeting, China committed to treat applicants
for administrative licenses and approvals under the
process, as required by law. With regard to
investment in particular, China committed to
continue to improve procedures for foreign
investment approval and record-filing by unifying
domestic and foreign investment laws and
regulations.
U.S. companies are encouraged by the overall
reduction in license approval requirements and the
focus on decentralizing licensing approval processes.
To date, however, U.S. companies report that these
efforts have only had a marginal impact on their
licensing experiences so far.
IInnvveessttmmeenntt RReessttrriiccttiioonnss
The United States and U.S. industry have become
particularly concerned about new restrictions on
investment being proposed and implemented by
China. Often, these restrictions are accompanied by
other problematic industrial policies, such as the
increased use of subsidies, preferences for using
domestic rather than imported goods, and the
development of China-specific standards.
In August 2006, China made a further move toward a
more restrictive investment regime when it issued
new regulations on mergers and acquisitions (M&A)
involving foreign investors. These regulations
strengthened MOFCOM’s supervisory role over
foreign investment, in part by requiring MOFCOM’s
approval of M&A transactions that it believes impact

90
“national economic security” or involve traditional
Chinese brands or well-known Chinese trademarks.
Three years later, in July 2009, China issued revised
regulations addressing M&A involving foreign
investors, without having provided a notice-and-
comment period. The revised regulations retain the
review criteria from the 2006 regulations.
In December 2006, as discussed above in the State-
owned and State-Invested Enterprises section,
SASAC, the government entity charged with
overseeing China’s interests in state-owned
enterprises, published a list of key sectors that it
deemed critical to the national economy. SASAC
committed to restrict foreign participation in these
sectors by limiting further foreign investment in
state-owned enterprises operating in these sectors.
In August 2007, as discussed above in the State-
owned and State-Invested Enterprises section, China
enacted its Anti-monopoly Law. Among other things,
this law calls for China to establish a review process
to screen inward investment for national security
implications. In February 2011, the State Council
issued a notice establishing a “security review
system” for mergers and acquisitions of Chinese
domestic enterprises by foreign investors. Shortly
thereafter, in March 2011, MOFCOM issued interim
implementing rules for this system. Final rules were
issued in August 2011.
The new security review system allows the central
government to review transactions where a foreign
company invests in any company involved in China’s
defense industry, or where a foreign company
invests in, and obtains actual control over, any
Chinese enterprise that is related to national security
or is involved in important agriculture products,
important energy and resource products, critical
infrastructure, critical transportation systems or key
technology or equipment. Under the rules, “national
security” could include the impact on national
defense, economic stability, social stability or the
research and development capabilities of key
national security technologies. Transactions found
to have a significant impact on national security will
be denied or approved only subject to conditions.
The United States has a broad range of concerns
about China’s security review system and how it will
be enforced. These concerns relate to China’s
application of the broad scope of review allowed for
under the system, the determination of “actual
control” under the system, the criteria for
determining risks to national security, the
relationship between this review process and other
existing reviews of foreign investment, and the
ability of non-government entities, including
competitors, to call for reviews of transactions in
which they are not directly involved.
More generally, U.S. industry has expressed serious
concerns about China’s increasing use of these and
other investment restrictions, which are often seen
as protectionist tools used by China’s economic
planners to shield selected Chinese domestic
enterprises, including inefficient or monopolistic
enterprises, from foreign competition. U.S. industry
views China’s investment restrictions – including the
restrictions on foreign acquisitions of Chinese
companies – as deeply worrisome and counter to
the market-oriented principles that have been the
basis for much of China’s economic success over the
past few decades. U.S. industry has observed that
these investment restrictions are more likely to
retard the growth and development of the Chinese
economy than to accomplish the state planners’
ultimate objective of creating internationally
competitive domestic enterprises.
In August 2012, NDRC circulated for public comment
a draft measure entitled the Administrative
Measures for the Examination and Approval of
Foreign and Overseas Investment Projects. This
draft measure seemed to consolidate many of
NDRC’s existing policies and practices relating to
foreign investment approvals, but also appeared to
introduce new ones. In December 2013, NDRC
issued this measure in final form. The final measure
only applies to investments in fixed assets, a subset

91
of the types of investment of interest to foreign
investors. In addition, other foreign investment
reviews, such as the reviews conducted by
MOFCOM, will continue to apply to this type and
other types of foreign investment.
In 2014, as in prior years, the United States raised its
concerns about China’s investment restrictions on
multiple occasions, using bilateral mechanisms such
as the JCCT process and the Economic Track of the
S&ED. The United States also raised investment-
related concerns in meetings at the WTO, including
the Trade Policy Review of China at the WTO, which
took place in July 2014.
The United States and China also continue to pursue
BIT negotiations. Successful BIT negotiations would
secure important legal protections for U.S. investors
in China, including rights to non-discriminatory
treatment and to submit investment disputes
against the Chinese government to international
arbitral tribunals. In a particularly positive
development at the July 2013 S&ED meeting, China
acknowledged that the negotiation of a high-
standard BIT would require it to embrace the
principles of openness, non-discrimination and
transparency, and China committed to provide
national treatment at all phases of investment,
including market access (i.e., the “pre-
for those explicitly excluded).
FFoorreeiiggnn IInnvveessttmmeenntt CCaattaalloogguuee
In 2002 and 2005, the State Council issued revised
versions of the Catalogue Guiding Foreign
Investment in Industry. These versions of the
Foreign Investment Catalogue generally reflected
China’s decision to adhere to its commitments to
open up certain sectors to foreign investment,
although notable exceptions involved the
importation and distribution of copyright-intensive
theatrical films, DVDs and music (see the Trading
Rights section above). In addition, while China
continued to allow foreign investment in a number
of sectors not covered by its WTO accession
agreement, one notable exception to this progress
continued to be the area of production and
development of genetically modified plant seeds,
which China continued to place in the “prohibited”
category.
In 2007, as previously reported, the State Council
issued a revised Foreign Investment Catalogue
without having provided an opportunity for public
comment. The revised Foreign Investment
Catalogue placed new restrictions on several
industries, including chemicals, auto parts, rare
earths processing, biofuel production and edible oil
processing, while the prohibitions and restrictions
facing copyright-intensive products and genetically
modified plant seeds remained in place. From a
positive standpoint, the revised Foreign Investment
Catalogue encouraged foreign investment in
highway cargo transport and modern logistics, while
it removed from the “encouraged” category projects
of foreign-invested enterprises that export all of
their production.
Using both the JCCT process and the S&ED process,
the United States pressed China to increase the
transparency of its revisions to the Catalogue. At the
May 2010 S&ED meeting, China committed to
publish proposed future revisions of the Foreign
Investment Catalogue in advance for public
comment.
This commitment was fulfilled in April 2011, when
NDRC and MOFCOM jointly issued a draft of the
newly revised Foreign Investment Catalogue for a
30-day public comment period. The United States
submitted comments on the draft revised Foreign
Investment Catalogue, noting that the proposed
revisions fail to make substantial progress in opening
China’s market to greater foreign investment, and in
some cases impose new limitations on foreign
investment in sectors that previously had been more
open. The draft revised Foreign Investment
Catalogue places new sectors into the restricted and

92
prohibited categories, including the processing of
certain types of edible oil seeds, the mining of
certain minerals, and the research and production of
genetically modified seeds, among others. Even
some sectors listed in the encouraged category are
subject to new investment limitations, including, for
example, the manufacture of new energy vehicle
components, which is now subject to a 50 percent
equity cap for foreign investment. The United States
also noted that the draft revised Foreign Investment
Catalogue fails to provide foreign investors with
clear and consistent guidance about their ability to
invest in China’s market.
In December 2011, China published the final version
of the revised Catalogue, which entered into force in
January 2012. Although the revised Foreign
Investment Catalogue makes minor improvements,
including by allowing wholly foreign-owned medical
establishments and by removing the retailing of
over-the-counter medicines from the “restricted”
category, it is generally not responsive to the
requests that the United States has made to lift
investment restrictions in particular sectors.
In 2012, the United States continued to engage
China vigorously through the S&ED process, the JCCT
process and other bilateral channels in order to
encourage China to make further on-the-ground
improvements in its investment regime. At the May
2012 S&ED meeting, China committed to implement
a more proactive opening-up strategy and to expand
the areas open to foreign investment, and the
degree of openness, during the 12th Five-year Plan
period.
In November 2013, following the Third Plenum of
the 18th
Party Congress, the Chinese Communist
Party issued a report, labeled the “Decision,” which
purports to present one of the largest and most
ambitious economic reform programs since Deng
Xiaoping’s pioneering market-oriented reforms in
1978. Among other things, the Decision directs
China to broaden foreign investment access in China,
to explore the possibility of a model for allowing
foreign investment that would provide national
treatment at all phases of investment, including
market access (i.e., the “pre-establishment” phase of
investment), and would employ a “negative list”
approach in identifying exceptions (meaning that all
investments are permitted except for those explicitly
excluded), and to set up more free trade zones like
the Shanghai Free Trade Zone, which, at the time,
was newly established and still evolving.
Although little meaningful investment liberalization
has taken place in the Shanghai Free Trade Zone to
date, China did issue a draft of a revised Catalogue
Guiding Foreign Investment in Industry for public
comment in November 2014. In its written
comments on the draft catalogue, the United States
welcomed China’s affirmation in the Third Plenum
Decision that China intends to further open up to
foreign investment as part of its domestic reforms
and that its future foreign investment regime will be
based on a “negative list.” The United States further
urged China to consider eliminating, rather than
revising, its 2011 Catalogue Guiding Foreign
Investment in Industry, given China’s plans to move
to a “negative list” to guide its foreign investment
regime. In addition, the United States noted its
concerns with the substance of the draft catalogue,
explaining that while China proposes to remove
certain investment restrictions from its 2011
Catalogue Guiding Foreign Investment in Industry,
many significant investment restrictions remain in
areas such as services, manufacturing and
agriculture.
AAuuttoo PPoolliiccyy
In a separate commitment, China agreed to revise its
Industrial Policy for the Automotive Sector to make
it compatible with WTO rules and principles by the
time of its accession. However, China missed this
deadline, and U.S. industry reported that some local
officials were continuing to enforce the WTO-
incompatible provisions of the policy. Following
repeated engagement by the United States and
other WTO members, including the EU, Japan and
Canada, China issued its new auto policy in May
2004. This policy included provisions discouraging

93
the importation of automobile parts and
encouraging the use of domestic technology. It also
required new automobile and automobile engine
plants to include substantial investment in research
and development facilities, even though China
expressly committed in its WTO accession
agreement not to condition the right of investment
on the conduct of research and development.
In 2005, as previously reported, China began to issue
measures implementing the new auto policy. One
measure that generated strong criticism from the
United States, the EU, Japan and Canada was the
Measures on the Importation of Parts for Entire
Automobiles, issued by NDRC in February 2005. This
measure imposed charges that unfairly
discriminated against imported automobile parts
and discouraged automobile manufacturers in China
from using imported automobile parts in the
assembly of vehicles. This treatment appeared to be
inconsistent with several WTO provisions, including
Article III of GATT 1994 and Article 2 of the TRIMS
Agreement, as well as the commitment in China’s
accession agreement to eliminate all local content
requirements relating to importation. In 2006, the
United States, the EU and Canada initiated WTO
cases challenging China’s treatment of automobile
parts, once it had become clear that dialogue would
not lead to a satisfactory resolution. A WTO panel
and the WTO’s Appellate Body both issued decisions
in 2008 in favor of the United States and the other
complaining parties, finding that China’s treatment
of automobile parts was WTO-inconsistent. China
repealed its discriminatory rules on automobile parts
in 2009.
Over the last few years, additional problems began
to arise after China’s economic planners decided
that the Chinese auto industry should focus on
developing expertise in manufacturing so-called new
energy vehicles, or NEVs, which include alternative
fuel vehicles such as electric, fuel cell and bio-diesel
vehicles. With that decision, China began devoting
substantial resources – and creating new policies –
to assist Chinese automobile enterprises in
developing cutting-edge NEV technologies and
building domestic brands that could succeed in
global markets.
The most significant policies pursued by China can
be traced to regulations issued by NDRC in 2007 and
by MIIT in 2009 requiring manufacturers of NEVs in
China to “demonstrate mastery” over, and hold
intellectual property rights in, core NEV
technologies. Because China only allows foreign
automobile manufacturers to operate in China
through joint ventures with Chinese enterprises, and
none of these joint ventures can be majority foreign-
owned, this requirement effectively requires foreign
automobile manufacturers to transfer their core NEV
technologies to their Chinese joint venture partners.
The NDRC and MIIT regulations also require NEV
manufacturers to establish research and
development centers in China. Reportedly, China
also was considering additional regulations that
would require all NEVs manufactured in China to be
sold under Chinese, rather than foreign, brands by
2015. These same reports indicated that China’s
regulators had already informed foreign automobile
manufacturers that their joint ventures must commit
to launch Chinese NEV brands in order to get
approval for new or expanded production facilities.
All of these requirements appeared to be
inconsistent with commitments that China made in
its WTO accession agreement, where China agreed
not to tie investment approvals to the transfer of
technology, the conduct of research or the use of
local content, and China also agreed to eliminate all
restrictions on the types of cars foreign enterprises
could produce or sell in China.
China has also pursued related policies similarly
designed to promote the development of a Chinese
NEV industry at the expense of foreign enterprises.
For example, in March 2011, NDRC issued a draft
Foreign Investment Catalogue that proposes a new
limitation on foreign ownership in NEV parts
manufacturing facilities in China to no more than 50
percent. Previously, foreign automobile parts
manufacturers could establish in China as wholly
foreign-owned enterprises. Ultimately, in the final
Foreign Investment Catalogue that went into effect

94
in January 2012, China narrowed the scope of these
proposed investment restrictions, and it applied the
50-percent investment cap only to NEV battery
manufacturing facilities.
China also has used a catalogue of approved NEV
models to determine eligibility for consumer
subsidies and other incentive programs maintained
by the Chinese government. It appears that to date
domestic but not imported NEVs are included in this
catalogue, raising national treatment concerns.
Similarly, municipal government-level restrictions
intended to reduce pollution raise national
treatment concerns. For example, in November
2013, the Beijing municipal government introduced
new license plate restrictions that reserve a
proportion of Beijing license plates for Chinese-made
NEVs, beginning in 2014.
In 2011, the United States repeatedly raised serious
concerns about China’s NEV policies during the run-
up to the November 2011 JCCT meeting, including
during the Industries and Competiveness Dialogue
held under the auspices of the JCCT. The United
States also highlighted its concerns about China’s
NEV policies during the final transitional review
before the WTO’s TRIMS Committee in October
2011. At the November 2011 JCCT meeting, China
committed that it will not require foreign
automobile manufacturers to transfer technology to
Chinese enterprises or to establish Chinese brands in
order to invest in China’s market for NEVs. China
also committed that foreign-invested enterprises
would have equal access to subsidies and other
preferential policies for NEVs and that these policies
would conform to WTO rules.
To date, it has been difficult to assess to what
degree China has been implementing its November
2011 JCCT commitments. Public announcements by
several foreign automobile manufacturers indicate
that their joint ventures with Chinese enterprises
have been approved by NDRC and MIIT to establish
new production facilities in China, and these
approvals have coincided with public commitments
by the foreign automobile manufacturers to launch
new Chinese NEV brands and to establish or expand
research and development in China. This pattern of
investment approvals is troubling, as it suggests that
Chinese regulators may be pressuring foreign
automobile manufacturers to establish Chinese
brands and to make additional research and
development investments in China as conditions for
approving new production facilities. A number of
other foreign automobile manufacturers have
announced plans to manufacture NEVs in China, and
therefore the United States will closely monitor
developments related to China’s commitment not to
require technology transfer, as these automobile
manufacturers seek regulatory approval for the
launch of their NEV models.
In October 2012, MOF, MIIT and MOST issued two
new measures establishing a fiscal support fund for
manufacturers of NEVs and NEV batteries. Because
these ministries issued the measures in final form
without having first circulated them in proposed
form for public comment, the United States and U.S.
industry did not have an opportunity to comment on
them before they were finalized. It appears that, in
order to qualify for funding under these measures,
an enterprise must demonstrate ownership of
intellectual property and “mastery” of core NEV
technologies and also meet a minimum level of
investment in China-based research and
development. As foreign automobile manufacturers
are required to form 50-percent joint ventures with
Chinese partners, these requirements could
effectively require them to transfer core NEV
technology to their Chinese joint-venture partners in
order to receive the available government funding.
These measures therefore raise serious questions in
light of China’s November 2011 JCCT commitment
not to mandate technology transfer and China’s May
2012 S&ED commitment to treat intellectual
property rights owned or developed in other
countries the same as Chinese-owned or Chinese-
developed intellectual property rights.
During the run-up to the December 2012 JCCT
meeting, the United States pressed its concerns

95
about China’s progress in implementing its
November 2011 JCCT commitments in numerous
bilateral meetings, including the JCCT Industries and
Competitiveness Dialogue. The United States also
raised concerns about the October 2012 fiscal
support measures and, in particular, the conditions
that must be satisfied to receive the funds available
to manufacturers of NEVs and NEV batteries. The
United States continued these efforts in 2014, using
the JCCT process, but China has not revised its
measures. The United States therefore will continue
to press China in this area in 2015.
SStteeeell PPoolliiccyy
In July 2005, five years into its WTO membership,
China issued a Steel and Iron Industry Development
Policy. As previously reported, this policy contains
many government mandates pertaining to the
commercial behavior of Chinese steel enterprises
and created high barriers for potential foreign
investors in China’s steel sector. The policy also
appears to discriminate against foreign equipment
and technology imports. Like other measures, this
policy encourages the use of local content by calling
for a variety of government financial support for
steel and iron projects utilizing newly developed
domestic equipment. It also calls for the use of
domestically produced steel-manufacturing
equipment and domestic technologies, apparently in
contravention of the commitment in China’s WTO
accession agreement not to condition the right of
investment or importation on whether competing
domestic suppliers exist.
China’s 2005 steel policy is also striking because of
the extent to which it attempts to dictate industry
outcomes and involve the government in making
decisions that should be made by the marketplace.
This high degree of government direction regarding
the allocation of resources into and out of China’s
steel industry raises concerns not only because of
the commitment that China made in its WTO
accession agreement that the government would
not influence, directly or indirectly, commercial
decisions on the part of state-owned or state-
invested enterprises, but also more generally
because it represents another significant example of
China reverting to a reliance on government
management of market outcomes instead of moving
toward a reliance on market mechanisms. Indeed,
this increasing tendency is at the root of many of the
WTO compliance concerns raised by U.S. industry.
In June 2010, the State Council published the
Opinions on Strengthening Energy Saving and
Emission Reduction and Accelerating Structural
Adjustment in the Iron and Steel Sector. This
measure reiterated existing steel policies, specifically
identifying a number of well-known objectives for
the sector, such as controlling steel industry growth,
strengthening efforts to eliminate outdated capacity,
promoting energy savings and emissions reduction,
technical innovation, accelerating mergers,
disciplining access to iron ore imports and promoting
domestic iron ore mining, and encouraging domestic
steel producers to explore mining and steel
investments abroad.
In July 2010, MIIT released the Regulations and
Conditions of Production and Operation of the Iron
and Steel Industry. These regulations are intended
to support the objectives laid out in the State
Council’s June 2010 measure. They also indicate
that small steel mills will be shut down, establish
operating standards for larger steelmakers and
address issues such as product quality and
environmental protection. At the time, steel
analysts viewed these regulations as a prelude to
China’s next five-year steel plan.
In October 2011, MIIT published China’s twelfth five-
year plan for the steel industry, covering the period
from 2011 to 2015. As the plan itself notes, China’s
steel production grew from 350 million MT in 2005
to 684 million MT in 2011, with the steel industry
accounting for ten percent of national industrial
output. Indeed, despite China’s goal of eliminating
inefficient steel capacity, and despite slowing growth
in domestic steel demand, stagnant demand in
export markets and significant Chinese steel
company losses, steel production in China continued

96
to grow in 2012 to 718 million MT and is expected to
exceed 785 million MT in 2013, which would account
for approximately 49 percent of global steel
production.
The steel industry’s rate of growth during this period
exceeded the growth rates of the Chinese economy
as a whole as well as the global steel industry, and
China shifted from being a net importer of steel to
being a large net exporter of steel. China’s exports
of steel products reached 47 million MT in 2011 and
53 million MT in 2012, making China the largest
exporter of steel in the world for both years. China
is on track to export 60 million MT in 2013, despite
slow steel demand in global markets. In addition,
the OECD projected Chinese steelmaking capacity to
reach 950 million MT in 2013 and to continue
growing significantly through 2014, reaching 975
million MT, even in the face of a very weak domestic
and global demand outlook. These data have led
many analysts, including the OECD Steel Committee,
to raise concerns that significant excess capacity in
China may cloud the prospects for the steel
industry’s profitability, both in China and in other
economies.
There are a number of concerns raised by China’s
twelfth five-year plan for the steel industry. In
particular, the plan continues to place the
government in the role of closely managing the
development of the steel industry. The plan
specifies where to build, close or relocate
steelmaking capacity, how much to spend on
research and development, and even what products
Chinese steel producers are to make. In addition,
the plan continues to emphasize “self-sufficiency” in
steel production and states that continued reliance
on imports of certain steel products is a problem to
be addressed. For example, the plan appears to set
specific targets for Chinese producers’ share of the
domestic market in high-grade steel products that
are currently supplied primarily by foreign
steelmakers, including U.S. steelmakers. In the case
of automotive steel and silicon steel sheets, the plan
sets a goal of Chinese producers supplying 90
percent of the domestic market by 2015. The plan
also provides no indication that China’s current
restrictions on foreign investment are to be
liberalized. At the same time, the plan lays out
objectives for overseas investment by China’s steel
producers and explains that incentives will be
provided to support investment in foreign iron ore
mines and steel plants to create groups with
“powerful international competitive strength.”
Additionally, as envisioned by the plan, China is
continuing to support the largest steel companies
through subsidies, raw materials export restrictions
and other preferential government policies.
Effective October 2012, MIIT issued the Iron and
Steel Industry Normative Conditions, which serve as
the guiding norms for the steelmaking industry in
China. These industry norms offer incentives for
compliance and disincentives for non-compliance.
Qualifying enterprises are entitled to preferential
support policies, including bank loans and
government grants for technology upgrades, while
non-qualifying enterprises may be forced to
restructure and local governments are directed to
adopt measures to restructure or phase out these
enterprises. In 2013, China announced two batches
of qualifying steelmaking enterprises that are
entitled to government support. While China has
heralded the use of industry norms as a move
toward a more “market-oriented” approach to
guiding the industry, the MIIT norms maintain a high
degree of government direction regarding the
allocation of resources toward China’s steel industry
and demonstrate China’s continued reliance on
government management of market outcomes.
In October 2013, China’s State Council issued the
Guiding Opinions on Resolving the Problem of Severe
Excess Capacity to address excess capacity in the
steel, cement, electrolytic aluminum, plate glass and
shipbuilding industries. As the measure itself notes,
China’s current steel capacity dramatically exceeds
market demand and, as of the end of 2012, China’s
steel utilization rate was only 72 percent – much
lower than the international average. While the
measure aims to rein in excess capacity, it also raises
a number of concerns. For example, it encourages

97
banks to provide financing for technology upgrades,
and it calls for policies to encourage Chinese
steelmakers with excess capacity to relocate their
excess capacity abroad, such as tax rebates for
equipment and products relocated abroad.
In November 2013, MOF issued a new subsidy
measure that provide grants for the “transformation
and upgrade” of centrally controlled state-owned
enterprises in a handful of industries, including steel.
This measure provides grants of up to RMB 500
million ($82 million) for large projects.
The United States has focused its engagement of
China on steel issues in the JCCT process, including
through the U.S.-China Steel Dialogue, a dialogue
established under the auspices of the JCCT shortly
after China issued its 2005 steel policy. The two
sides have held four Steel Dialogue meetings, which
have included participation from U.S. and Chinese
steel industry officials, and have sought to increase
mutual understanding of the challenges faced by
each industry and to discuss strategies for
addressing trade imbalances and overcapacity in the
steel industry, including the benefits of increased
reliance on market mechanisms.
At the WTO, the United States has also pressed its
concerns regarding China’s steel policy, in regular
meetings and through the transitional reviews
before the Committee on Import Licensing, the
TRIMS Committee, the Subsidies Committee and the
Council for Trade in Goods, with support from other
WTO members, including Canada, Mexico, the EU
and Japan. The United States also focused on
China’s steel policy in connection with China’s first
five Trade Policy Reviews at the WTO, held in 2006,
2008, 2010, 2012 and 2014, and in plurilateral fora
such as meetings of the Organization for Economic
Cooperation and Development (OECD) Steel
Committee.
In particular, the United States and other WTO
members, including Canada and Mexico, have called
for China to eliminate subsidies to its steel industry,
except for those designed to facilitate capacity
elimination or to address worker dislocation, to
implement steel industry stimulus policies in a
manner that encourages domestic consumption
rather than exports and does not discriminate
against imports, to eliminate the use of differential
VAT rebates and duties on steel exports as a tool of
industrial policy, to allow market forces rather than
restraints on imports and exports to determine
steelmaking raw material input supply and to
eliminate restrictions on foreign investment in
China’s steel industry. Several steel industry
associations from North and South America and
Europe have pressed similar concerns.
At the July 2014 S&ED meeting, the United States
secured a commitment from China to establish
mechanisms that strictly prevent the expansion of
crude steelmaking capacity and that are designed to
achieve, over the next five years, major progress in
addressing excess production capacity in the steel
sector. In addition, at the December 2014 JCCT
meeting, the United States and China held an
extended discussion of the root causes of excess
capacity, the significant and varied costs associated
with it and potential solutions for addressing the
type of excess capacity challenges currently
confronting China.
In 2015, the United States will continue to engage
China, through the JCCT and S&ED processes, at the
WTO and in plurilateral fora such as the OECD. The
United States also will continue to work with
Canada, Mexico and the EU to monitor and support
concrete steps by China to rein in its steelmaking
capacity.
AAGGRRIICCUULLTTUURREE
While China has timely implemented its tariff
commitments for agricultural goods, a variety of
non-tariff barriers continue to impede market access,
particularly in the areas of SPS measures and
inspection-related requirements.
Upon its accession to the WTO, China assumed the
obligations of the WTO Agreement on Agriculture,

98
which contains commitments in three main policy
areas for agricultural products: market access,
domestic support and export subsidies. In some
instances, China also made further commitments, as
specified in its accession agreement.
In the area of market access, WTO members
committed to the establishment of a tariff-only
regime, tariff reduction and the binding of all tariffs.
As a result of its accession negotiations, China
agreed to significant reductions in tariff rates on a
wide range of agricultural products. China also
agreed to eliminate quotas and implement a system
of TRQs designed to provide significant market
access for certain bulk commodities upon accession.
This TRQ system is very similar to the one governing
fertilizers (discussed above in the Import Regulation
section). China’s goods schedule sets forth detailed
rules intended to limit the discretion of the
agriculture TRQ administrator – originally the State
Development and Planning Commission (SDPC),
which is now called NDRC – and to require it to
operate with transparency and according to precise
procedures for accepting quota applications,
allocating quotas and reallocating unused quotas.
In the area of domestic support, the basic objective
is to encourage a shift in policy to the use of
measures that minimize the distortion of production
and trade. Essentially, WTO members committed to
reduce over time the types of domestic subsidies
and other support measures that distort production
and trade, while remaining free to maintain or even
increase support measures that have little or no
distorting effect, such as agricultural research or
training by the government. China committed to a
cap for trade- and production-distorting domestic
subsidies that is lower than the cap permitted for
developing countries and that includes the same
elements that developed countries use in
determining whether the cap has been reached.
In the area of export subsidies, WTO members
committed to ban the use of these subsidies unless
they fall within one of four categories of exceptions.
The principal exception allows export subsidies
subject to certain reduction commitments.
However, like many other WTO members, China
agreed to eliminate all export subsidies upon its
accession to the WTO and did not take any
exceptions.
Another important agricultural area is covered by
the WTO Agreement on the Application of Sanitary
and Phytosanitary Measures (SPS Agreement), under
which China also became obligated. The SPS
Agreement establishes rules and procedures
regarding the formulation, adoption and application
of sanitary and phytosanitary measures, i.e.,
measures taken to protect against risks associated
with plant or animal borne pests and diseases,
additives, contaminants, toxins and disease-causing
organisms in foods, beverages or feedstuffs. The
rules and procedures in the SPS Agreement require
that sanitary and phytosanitary measures address
legitimate human, animal and plant health concerns,
do not arbitrarily or unjustifiably discriminate
between WTO members’ agricultural and food
products, and are not disguised restrictions on
international trade. The SPS Agreement requires
that the measures in question be based on scientific
grounds, developed through risk assessment
procedures and adopted with transparency, while at
the same time it preserves each member’s right to
choose the level of protection it considers
appropriate with regard to sanitary and
phytosanitary risks.
Other WTO agreements also place significant
obligations on China in the area of agriculture.
Three of the most important ones are GATT 1994,
the Import Licensing Agreement and the TBT
Agreement, which are discussed above (in the
sections on Import Regulation and Internal Policies
Affecting Trade).
China also made several additional commitments
intended to rectify other problematic agricultural
policies, either upon accession or after limited
transition periods. For example, China agreed to
permit non-state trading enterprises to import
specified TRQ shares of wheat, corn, rice, cotton,

99
wool and vegetable oil, although these products had
been subject to import monopolies by state trading
enterprises.
China’s tariff reductions have encouraged imports,
and since China’s accession to the WTO China’s
imports have reached record highs for many
agricultural products, largely due to greater demand.
At the same time, a variety of non-tariff barriers
have continued to impede U.S. agricultural trade
with China, particularly in the area of sanitary and
phytosanitary measures, where China’s actions often
have not appeared to be guided by scientific
principles, and in the administration of tariff-rate
quotas for certain bulk agricultural commodities,
where low quota fill persists despite strong domestic
demand for imported products. The United States
and China have only been able to resolve some of
these issues, and those resolutions have required
protracted negotiations.
In 2014, serious problems have remained for U.S.
exporters, who are faced with non-transparent
application of sanitary and phytosanitary measures,
many of which have appeared to lack scientific bases
and have impeded market access for many U.S.
agricultural products. China’s seemingly
unnecessary and arbitrary inspection-related import
requirements also continued to impose burdens and
regulatory uncertainty on U.S. agricultural producers
exporting to China in 2014, as did the registration
requirements that China imposes on U.S. food
manufacturers. China’s duties on imports of U.S.
chicken broiler products, which the United States
continues to challenge at the WTO, also disrupted
trade. Overall, products most affected in 2014
included corn, DDGs, poultry, pork and beef.
On the positive side, U.S. agricultural products
continued to experience strong sales to China. China
is now the United States’ largest agricultural export
market, as U.S. exports to China exceeded $25 billion
in 2013, more than 12 times the level in 2002, with
U.S. exports remaining stable through the first ten
months of 2014, when compared to the same period
in 2013.
In 2015, as in prior years, the United States will
continue to pursue vigorous engagement with China
in order to obtain progress on outstanding concerns.
Using the new multi-ministerial dialogue announced
at the December 2014 JCCT meeting, the United
States will discuss science-based agricultural
innovation with China, including the benefits of
agriculture. In addition, the United States will
continue to use the high-level U.S.-China Agriculture
Working Group, created at the April 2004 JCCT
meeting, as well as JCCT plenary meetings to make
progress on the range of other issues in the
agriculture area. At the same time, the United
States will not hesitate to take further actions,
including WTO dispute settlement, if appropriate, to
address U.S. concerns.
TTaarriiffffss
China has timely implemented its tariff commitments
for agricultural goods each year.
Tariffs on agricultural goods of greatest importance
to U.S. farmers and ranchers were lowered from a
1997 average of 31 percent to 14 percent, in almost
all cases over a period of five years running from
January 1, 2002, or by January 1, 2006. China did
not have to implement any new tariff reductions in
2014, as the last few required tariff reductions on
agricultural goods took place in 2008.
The accumulated tariff reductions made by China,
coupled with increased demand, contributed to
continued healthy exports of certain U.S. exports to
China in 2014. Exports of some bulk agricultural
commodities have increased dramatically in recent
years, and continue to perform strongly, including
soybeans, as discussed below in the sections on
China’s Biotechnology Regulations and Tariff-rate
Quotas for Bulk Agricultural Commodities. Exports
of forest products totaled $2.3 billion in 2013 and
increased by 18 percent during the first ten months
of 2014, compared to the same period in 2013. Fish
and seafood exports totaled $1.1 billion in 2013, the
same level as in 2012, and remained steady during

100
the first ten months of 2014, compared to the same
period in 2013. Meanwhile, exports of consumer-
oriented agricultural products totaled $3.0 billion in
2013, but decreased by 16 percent during the first
ten months of 2014, compared to the same period in
2013.
However, the full market access potential of China’s
tariff cuts was not realized for some products. As
discussed below, a variety of non-tariff barriers
continue to impede market access for U.S.
agricultural exports to China, particularly exports of
consumer-ready and value-added products.
TTaarriiffff--rraattee QQuuoottaass oonn BBuullkk AAggrriiccuullttuurraall
CCoommmmooddiittiieess
China’s administration of TRQs on bulk agricultural
commodities does not seem to be functioning
entirely as envisioned in China’s WTO accession
agreement, due to opaque management practices
and low quota fill despite reports of unmet demand
for imported products.
Another issue of particular concern involves China’s
commitments relating to TRQs on bulk agricultural
commodities, which include several commodities of
particular importance to U.S. farmers, such as
wheat, corn and cotton. Since SDPC (and later
NDRC) began implementing these commitments
following China’s accession, a series of problems
have undermined the market access envisioned by
WTO members. Although progress has been made
on some of these issues, low fill rates and NDRC’s
lack of transparency continues to create significant
concern.
As previously reported, in 2002, the first year of this
TRQ system, it appeared that SDPC had decided to
allocate TRQs in a manner that would protect
domestic farm interests and maintain the monopoly
enjoyed by state trading enterprises. SDPC operated
with only limited transparency, refusing to provide
specific details on the amounts and the recipients of
the allocations. At the same time, SDPC reserved a
significant portion of the TRQs for the processing
and re-export trade, despite China’s commitment to
provide market access and national treatment for
imported products. SDPC also allocated a portion of
the TRQs for some commodities in smaller than
commercially viable quantities, and it employed
burdensome licensing requirements.
In 2003, NDRC issued new regulations for shipments
beginning January 2004. Key changes included the
elimination of separate allocations for general trade
and processing trade, the elimination of certain
unnecessary licensing requirements, and the
creation of a new mechanism for identifying
allocation recipients. At the same time,
transparency continued to be problematic, although
some improvement did take place for some of the
commodities subject to TRQs.
While these systemic changes were taking place,
spurred on by sustained U.S. engagement, exports of
some bulk agricultural commodities from the United
States showed substantial increases, as changes in
market conditions created import demand and the
TRQ system, at least in part, was used to facilitate
imports. For the most part, these increases have
continued for the last several years.
In particular, despite some continuing problems with
NDRC’s handling of the cotton TRQs, U.S. cotton
exports to China totaled a then-record $1.4 billion in
2004 and subsequently rose to $3.4 billion by 2012
before declining to $2.2 billion in 2013. This decline
continued in 2014, with a 52 percent drop in the first
ten months of the year, compared to the same
period in 2013. Similarly, U.S. exports of corn to
China increased in recent years, growing from $1.5
million in 2007 to $1.3 billion in 2012, before
declining to $975 million in 2013. In 2014, due to
China’s biotechnology policies, corn tumbled to $77
million in exports for the first 10 months of the year.
While U.S. exports of wheat to China totaled an
unusually high amount of $495 million in 2004, as
the TRQ allocations for wheat did not appear to act
as a limiting factor, in subsequent years they
declined dramatically. Beginning in 2011, U.S.
exports of wheat to China started to climb again,

101
reaching $1.3 billion in 2013 before dropping
precipitously in 2014 to $77 million for the first ten
months of the year.
In 2014, the United States continued to raise
transparency and other concerns about NDRC’s TRQ
administration, both bilaterally and at the WTO. In
2015, the United States will continue to work to
ensure that NDRC administers TRQs transparently
and in a manner that is consistent with China’s
commitments and that does not impede market
access or commercial decisions. The way in which
China administers its TRQ policies will be especially
critical in 2015, given China’s massive cotton
reserves – now calculated to total about one-half of
global cotton supply – and their impact on demand
for imported cotton in 2015 and beyond. In
addition, the TRQs for corn and wheat are priority
concerns because U.S. exports are price competitive
in China, but U.S. exporters have not been able to
use China’s TRQ system to market to customers on
China.
CChhiinnaa’’ss BBiiootteecchhnnoollooggyy RReegguullaattiioonnss
China’s dysfunctional biotechnology approval
process continues to affect trade.
As previously reported, one of the most contentious
agriculture trade issues that arose during China’s
first year of WTO membership involved new rules
implementing June 2001 regulations relating to
biotechnology safety, testing and labeling. The
implementing rules, issued by China’s Ministry of
Agriculture (MOA) shortly before China’s WTO
accession, did not provide adequate time for
scientific assessment and the issuance of formal
safety certificates for biotechnology products. The
U.S. products most affected were soybeans, which
had seen exports to China grow to more than $1
billion in 2001, while corn and other products, such
as consumer products made from biotech
commodities, remained at risk. Following concerted,
high-level pressure from the United States, China
agreed to issue temporary safety certificates until
formal safety certificates could be issued. China
subsequently issued a formal safety certificate for a
U.S. biotechnology soybean variety known as
Roundup Ready soybeans in February 2004. By the
time of the April 2004 JCCT meeting, China had also
issued formal safety certificates for six corn events,
seven canola events and two cotton events. China
issued a formal safety certificate for another corn
event a few months later, leaving only one corn
event still awaiting formal approval. China issued a
formal safety certificate for this last corn event at
the time of the July 2005 JCCT meeting.
With some stability added to China’s market through
the issuance of temporary safety certificates, trade
disruptions were minimized, and U.S. exports
performed strongly. In 2003, U.S. soybean exports
reached a then-record level of $2.9 billion,
representing an increase of 190 percent over 2002.
In subsequent years, U.S. soybean exports continued
to increase dramatically, as China remained the
leading export destination for U.S. soybeans. In
2013, U.S. soybean exports totaled $13.3 billion.
In November 2006, MOA issued an announcement
about the renewal requirements for existing safety
certificates covering imported biotechnology crops.
Because safety certificates for cotton, soybeans,
corn and canola expired beginning in February 2007,
it was possible that trade in these products would be
disrupted. However, U.S. intervention ensured the
timely renewal of the events that were about to
expire.
Meanwhile, other U.S. concerns with China’s
biotechnology regulations and implementing rules
remain. For example, China requires a product to be
approved in the country of origin before it can be
submitted in China for approval, and China’s
National Biosafety Committee normally reviews new
product applications only during three meetings
each year. In 2014, the United States learned that
MOA only will issue regulatory decisions on
applications once a year, and that MOA considers
factors other than science, such as public opinion,

102
when evaluating new biotechnology applications.
These practices present significant and unnecessary
delays for bringing U.S. goods into the China market.
China’s lack of clarity on the requirements applicable
to products stacked with multiple traits is a cause for
additional concern, as are China’s sometimes
duplicative and unprecedented testing
requirements.
In 2007, MOA developed, issued and implemented
some troubling new regulations without circulating
them for public comment in advance or even
consulting with relevant stakeholders such as the
United States and U.S. industry. For example, in
January 2007, MOA added a new requirement that
biotechnology seed companies turn over key
intellectual property as part of the application
process when seeking safety certificates. MOA later
dropped this requirement, although it still
unnecessarily requires the submission of other
intellectual property. In another example, in March
2007, MOA halted a pilot program, which had been
developed over two years of bilateral discussions,
aimed at allowing MOA to review products under
development in the United States prior to
completion of the U.S. approval process. As a result,
the MOA approval process can still only begin after
the completion of the U.S. approval process. Even if
the MOA approval process proceeds quickly, trade
may still be disrupted, as importers need time to
apply for vessel based safety certificates and
Quarantine Inspection Permits, both of which
require valid safety certificates for biotechnology
products and can take up to 30 working days.
In 2007, 2008 and 2009, the United States raised its
concerns about these developments in several
bilateral meetings, including JCCT working group
meetings and other bilateral meetings focused on
biotechnology issues. At the December 2007 JCCT
meeting, China addressed one of the U.S. concerns
that had arisen in 2007 when it agreed to eliminate a
requirement to submit viable biotechnology seeds
for testing during the approval process, which will
reduce the possibility of illegal copying of patented
agricultural materials.
Disruptions to trade continued to be a concern
thereafter due to China’s asynchronous approval
process, excessive data requests, duplicative
requirements, an onerous process for extension of
existing certificates and the potential for low-level
presence of an unapproved event. In late 2012,
China also re-introduced the requirement that
biotechnology seed companies must submit viable
seed with their biotechnology applications. In
addition, an apparent slow-down in issuing
approvals generated concern, as approvals were
overdue for numerous biotechnology events. At the
same time, investment restrictions continued to
constrain foreign companies’ ability to increase
product development in China and to maintain
control over important genetic resources.
In 2014, China’s regulatory system for biotechnology
products became increasingly problematic. For
example, China stalled several applications by issuing
notices temporarily not approving them, citing
public opinion and other non-scientific reasons. U.S.
exports of corn and dried distillers’ grains, or DDGs,
were particularly affected by China’s problematic
regulatory system.
China had begun rejecting shipments of imported
corn in November 2013 because of the detection of
an unapproved genetically engineered (GE) event,
MIR 162. Subsequently, some traders were able to
re-route shipments to other markets, and trade from
U.S. corn shippers to China largely ceased for the
whole of 2014, with corn shipments dropping from
$1.3 billion in 2013 to $77 million for the first ten
months of 2014.
The Chinese regulatory authorities had notified the
United States in July 2013 that U.S. DDGs must be
accompanied by a “GMO test report” with an official
U.S. government stamp certifying that the product
does not contain unapproved GE events. By the
time this new stamp requirement went into effect,
the United States had exported $1.25 billion in DDGs
to China in 2013, but since then the new stamp
requirement has disrupted some U.S. exports of
DDGs to China, because they contain MIR 162.

103
In early December 2014, during the run-up to the
JCCT meeting, China announced action on overdue
approvals for some of the outstanding biotechnology
events. Specifically, China announced that it would
be issuing import approvals for three outstanding
biotechnology products of significant importance to
U.S. farmers, including two soybean events and one
corn event, MIR 162, which should resolve the
ongoing trade disruptions facing U.S. exports of corn
and DDGs.
Throughout 2014, the United States continued to
press China on multiple fronts, using both
multilateral meetings at the WTO and bilateral
engagement, to address the serious systemic
problems with China’s regulatory system for
biotechnology products. At the November 2014
summit between President Obama and President Xi
in Beijing, the two sides agreed to intensify science-
based agricultural innovation for food security, and
to strengthen dialogue in order to enable the
agriculture. Subsequently, at the December 2014
JCCT meeting, the United States and China agreed on
a new Strategic Agricultural Innovation Dialogue,
which is intended to implement the agreement
reached between President Obama and President Xi.
This new dialogue will bring together a diverse set of
Chinese ministries and U.S. agencies at the Vice
Minister level and will focus on science-based
agricultural innovation and the increased use of
innovative technologies in agriculture.
SSaanniittaarryy aanndd PPhhyyttoossaanniittaarryy IIssssuueess
China’s regulatory authorities continue to impose
SPS measures in a non-transparent manner and
without clear scientific bases, including BSE-related
import bans on U.S. beef and beef products,
pathogen standards and residue standards for raw
meat and poultry products, and Avian Influenza-
related import suspensions on poultry products from
several states. Meanwhile, China has made progress
but still does not appear to notify all proposed SPS
measures as required by WTO rules.
In 2014, China’s SPS measures continued to pose
increasingly serious problems for U.S. agricultural
producers exporting to China. As in prior years, the
United States repeatedly engaged China on a
number of SPS issues, in high-level bilateral meetings
and technical discussions as well as during meetings
of the WTO’s SPS Committee. In addition, the
United States continued to provide extensive
training to China’s regulatory authorities while also
urging them to ensure China’s full compliance with
SPS Agreement transparency obligations.
In 2014, market access for U.S. soybeans and grain
has continued. However, little progress was made in
addressing SPS barriers for beef and poultry
products, while concerns about SPS barriers for
some pork products remain and market entry
requirements for processed foods and horticultural
products continue to be burdensome. China also
continued to maintain several state-level import
suspensions on poultry products tied to Avian
Influenza (AI).
In many instances, progress was made difficult by
China’s inability to provide relevant risk assessments
or its science-based rationale for maintaining its
import restrictions against U.S.-origin products. For
example, China has been unable to provide a
science-based rationale for import restrictions on
U.S. beef products and some U.S. poultry and pork
products, as described below. In addition, China’s
regulatory authorities continued to issue significant
new SPS measures without first notifying them to
the SPS Committee and providing WTO members
with an opportunity to comment. The United States
will continue to press for resolution of these and
other outstanding issues in 2015.
BBSSEE--rreellaatteedd IImmppoorrtt BBaannss
In December 2003, China and other countries
imposed a ban on imports of U.S. cattle, beef and
processed beef products in response to a case of BSE
found in the United States. Since that time, the
United States has repeatedly provided China with

104
extensive technical information on all aspects of its
BSE-related surveillance and mitigation measures,
internationally recognized by the World Organization
for Animal Health (known by its historical acronym
OIE) as effective and appropriate, for both food
safety and animal health. China still has not
provided any scientific justification for continuing to
maintain its ban.
At the April 2006 JCCT meeting, China agreed to
conditionally reopen the Chinese market to U.S.
beef, subject to the negotiation and finalization of a
protocol by technical experts. Jointly negotiated
protocols, and accompanying export certificates, are
normal measures necessary for the export of any
livestock products from the United States to any
trading partner. However, subsequent negotiations
made it clear that China was only contemplating a
limited market opening, still without any science-
based support. In July 2006, China’s food safety
regulators unilaterally announced a limited market
opening, restricted to the entry of U.S. deboned beef
thirty months of age or less, accompanied by 22
onerous entry conditions. Several of these
conditions were not commercially feasible, and
others did not even relate to BSE.
In May 2007, the United States received a risk
classification as a “controlled risk” country by the
OIE, indicating that all U.S. beef and beef products
are safe to trade, provided that so-called “specified
risk materials” (i.e., materials posing a BSE risk) are
removed during processing. Later that month, while
in Washington for the May 2007 SED meeting, Vice
Premier Wu offered to open China’s market to both
deboned and bone-in beef, although still with the
age restriction of 30 months or less. The United
States rejected this offer because the applicable OIE
classification has no such age restrictions.
Subsequent to May 2007, U.S. and Chinese officials
met repeatedly at all levels. However, China did not
indicate any willingness to begin accepting U.S. beef
and beef products into its market in a manner
consistent with the OIE’s classification, and
negotiations stalled.
At the same time that it banned U.S. cattle, beef and
processed beef products, China also banned bovine-
origin products (i.e., bovine semen, bovine embryos,
and protein-free tallow) that are listed in OIE
guidelines as safe to trade regardless of a country’s
BSE status. Additionally, China banned imports of
U.S.-origin non-ruminant feeds and fats (such as pet
food, rendered products and porcine proteins and
skins) even though these products were of non-
bovine-origin and presented absolutely no BSE-
related risk. As previously reported, after numerous
bilateral meetings, technical discussions and facility
certifications, China allowed the resumption of trade
in bovine semen and bovine embryos in early 2006.
In addition, by early 2006, trade in the full range
U.S.-origin non-ruminant feed and fat products had
also resumed, after negotiation and resolution of a
series of onerous, detailed and unnecessary non-BSE
related information requirements proposed by China
that appear to be inconsistent with OIE guidelines
and contrast sharply with U.S. requirements. To
date, however, U.S. and Chinese officials continue to
be unable to reach agreement on provisions of a
protocol for protein-free tallow, a product listed by
the OIE as safe to trade regardless of a country’s BSE
status. As a result, trade in protein-free tallow has
still not resumed.
States and China agreed to resume talks on U.S. beef
market access. The two sides held a series of
meetings in January 2011. The meetings did not
produce agreement on market access terms, but did
help to clarify the conditions both sides seek for
trade to resume. In October 2011 meetings of the
JCCT Agriculture and SPS Working Groups, the
United States continued to press for a science-based
beef market opening by China. Subsequently, at the
November 2011 JCCT meeting, the two sides
endorsed a commitment to increased technical
engagement on this issue. Subsequently, technical
meetings between the two sides took place in
September and December 2012. Further discussions
took place at the December 2012 JCCT meeting,
where the United States expressed disappointment
with the lack of progress on this issue.

105
In May 2013, the United States received the lowest
risk status for BSE from the OIE, i.e., negligible risk.
When the JCCT Agriculture and SPS Working Groups
convened in November 2013, the United States
again pressed for a science-based market opening by
China for U.S. beef, and both sides agreed to a round
of technical engagement in December 2013.
Subsequent technical discussions and further
engagement leading up to and during the December
2013 JCCT meeting did not lead to a resolution. The
two sides therefore agreed to continue their
discussions, with the shared goal of achieving a
resumption in market access for U.S. beef products
by July 2014.
Throughout 2014, U.S. officials at all levels pressed
China to follow through on its 2013 JCCT
commitment. In June 2014, a team of Chinese
officials visited the United States to study the BSE
issue. Further discussions were subsequently held in
October and November 2014 in an effort to reach
agreement on the terms and conditions for U.S. beef
to access China’s market, but these discussions did
not yield a positive outcome. China’s requirements
remained inconsistent with OIE guidelines and
continue to contrast sharply with U.S. requirements.
At the JCCT meeting in December 2014, the United
States continued to press China to re-consider its
approach, given the negligible risk status that U.S.
beef has obtained from the OIE, and to propose
alternative terms and conditions that are consistent
with OIE guidelines. However, China remained
unwilling to alter its approach, and U.S. beef remains
blocked from China’s market. Going forward, the
United States will continue to press China at high
levels until it agrees to an OIE-consistent market
opening for U.S. beef.
PPaatthhooggeenn SSttaannddaarrddss aanndd RReessiidduuee SSttaannddaarrddss
Since 2002, as previously reported, China has applied
SPS-related requirements on imported raw meat and
poultry that are not based on science or current
scientific testing practices. One requirement
establishes a zero tolerance limit for the presence of
Salmonella bacteria in raw meat and poultry. Similar
zero tolerance standards exist for Listeria and other
pathogens. Meanwhile, the complete elimination of
these bacteria in raw meat and poultry is generally
considered unachievable. Moreover, China
apparently does not apply this same standard to
domestic raw meat and poultry, raising national
treatment concerns.
In 2008, despite assurances from China’s regulatory
authorities that they were in the process of revising
China’s pathogen standards, little progress was seen.
At the September 2008 JCCT meeting, China did
agree to re-list several U.S. poultry plants that had
earlier been de-listed for alleged violations of zero
tolerance standards for pathogens. Although this
step did not address the important underlying need
for China to revise its pathogen standards, it did
enable some U.S. poultry plants to resume shipment
to China. Despite positive results from USDA
investigations of the plants, and extensive follow-up
efforts by USDA, these plants have not been re-listed
as approved to ship product to China.
In December 2008, the United States hosted a team
of Chinese government officials and academic
experts to observe how the U.S. government and
U.S. industry regulate the use of veterinary drugs
related to animal health. This visit was intended to
address China’s continuing ban on ractopamine
residue in pork. China maintains that it has serious
concerns about the safety of ractopamine, but to
date it has not provided any evidence that it has
conducted a risk assessment despite repeated U.S.
requests.
During several subsequent JCCT working group
meetings, the United States requested that China
adopt an interim maximum residue level (MRL) for
ractopamine in order to address the problems
presented by China’s current zero-tolerance policy,
while China awaited the results of deliberations at
the Codex Commission regarding the finalization of
international MRLs for ractopamine. However,
China would not agree to take any steps to address
its zero-tolerance policy.

106
Since July 2014, pork products have been exported
from the United States to China under the Never Fed
Beta Agonist program of the U.S. Department of
Agriculture’s Agricultural Marketing Service (AMS).
Through this program, the AMS certifies that a pork
product has been produced from pigs that have
been tested for ractopamine, and the pork product
is tracked from plant entry to issuance of an export
certificate and shipment to China. While the
program description originally discussed with China
states that ractopamine test results will not
accompany shipments, China has been insisting that
shipments include those test results. In addition, in
September 2014, China suspended 12 production
and cold storage facilities due to ractopamine
detections that predated the implementation of the
Never Fed Beta Agonist program. In November
2014, China suspended an additional establishment.
The United States has been trying to work with
China to resolve these issues, and will continue to do
so in 2015.
Meanwhile, China continues to maintain maximum
limits for certain heavy metals, MRLs for veterinary
drugs and regulatory action levels other residues
that are inconsistent with Codex Alimentarius
(Codex) guidelines and other international
standards. China also enforces a zero tolerance for
some residues, even where Codex has adopted
guidelines that many of China’s major trading
partners have adopted. U.S. regulatory officials have
encouraged their Chinese counterparts to adopt
MRLs that are scientifically based, safe and
minimally trade-disrupting. In 2015, the United
States will continue to press China to revise these
problematic standards.
AAvviiaann IInnfflluueennzzaa IImmppoorrtt SSuussppeennssiioonnss
In February 2004, as previously reported, China
imposed a nationwide import suspension on U.S.
poultry in response to cases of low-pathogenic AI
found in Delaware. Throughout 2004, the U.S.
provided technical information to China on the U.S.
AI situation, and in August a high-level Chinese
delegation conducted a review of the status of AI
eradication efforts in the United States. In
December 2004, China lifted its nationwide import
suspension on U.S. poultry, leaving in place an
import suspension only for the states of Connecticut
and Rhode Island.
In early 2005, following the announcement of low-
pathogenic AI found in the state of New York, China
did not impose a nationwide import suspension.
Instead, demonstrating progress in following OIE
guidelines, China imposed an import suspension
limited to poultry from the state of New York.
In 2006, China imposed an import suspension for
poultry and poultry products originating from the
state of Pennsylvania, based on incidents of low-
pathogenic AI. China also suspended the
importation of heat-treated and cooked poultry and
poultry products at the same time, even though the
OIE’s AI chapter makes clear that products that have
been heat-treated in a manner to inactivate the virus
should not be subject to an AI-related import
suspension. In 2007, China also suspended imports
of poultry and poultry products from West Virginia,
Virginia and Nebraska because of low-pathogenic AI.
Following the eradication of AI in Connecticut,
Rhode Island, New York, Pennsylvania, West Virginia,
Virginia and Nebraska, the United States asked China
to re-open trade in poultry and poultry products
from these states, consistent with OIE guidelines. In
response to U.S. engagement, at the September
2008 JCCT meeting, China announced the lifting of
the state-level import suspensions covering
Connecticut, Rhode Island, New York, Pennsylvania,
West Virginia and Nebraska. However, China’s state-
level import suspension on Virginia remained in
place, and China imposed new state-level import
suspensions on poultry from Arkansas in August
2008, Idaho in September 2008 and Kentucky in April
2009. China also re-imposed a state-level import
suspension on Pennsylvania and imposed a new
state-level import suspension on Texas in January
2010. The Texas import suspension was especially
egregious, given that no AI was actually detected.

107
In bilateral meetings in 2009 and 2010, including
JCCT working group meetings, the United States
pressed for removal of the current state-level import
suspensions and for China’s adoption of OIE-
consistent policies governing the import of poultry
and poultry products. At the December 2010 JCCT
meeting, China announced the lifting of the state-
level import suspensions covering Idaho and
Kentucky, but not Virginia, Arkansas, Pennsylvania or
Texas.
The Virginia import suspension, which dates from
2007, is also extremely problematic. Even though it
is based on a single detection of low-pathogenic AI,
China has been attempting to draw parallels
between this one incident and a broad outbreak of
high-pathogenic AI in Virginia more than 25 years
earlier. At the same time, China has repeatedly
refused the invitation of U.S. regulatory officials to
visit their laboratory and jointly sequence the low-
pathogenic AI virus isolated from the one Virginia
incident.
In 2011, in addition to maintaining its state-level
import suspensions covering Pennsylvania, Texas,
Arkansas and Virginia, China imposed a new import
suspension on poultry and poultry products
originating from the state of Minnesota based on
detections of low-pathogenic AI. In bilateral
meetings throughout the year, including at the
November 2011 JCCT meeting, the United States
pressed China to remove these import suspensions.
In December 2011, China lifted its AI-related import
suspensions on poultry and poultry products
originating from Pennsylvania and Texas.
Throughout 2012, the United States pressed China to
lift its remaining AI-related import suspensions,
which applied to the states of Arkansas, Minnesota
and Virginia. The United States also continued to
express its broader concerns about China’s
misinterpretation of the OIE’s guidelines on Avian
Influenza.
During the December 2012 JCCT meeting, the United
States reiterated the need for China to follow OIE
guidelines and lift the import suspensions applicable
to Arkansas, Minnesota and Virginia, but China
insisted that additional information was needed to
lift the three import suspensions. Later that month,
China lifted the Minnesota import suspension.
The United States continued to press China to follow
OIE guidelines throughout 2013 and 2014, principally
using the JCCT process. However, in February 2013,
China imposed an import suspension on poultry and
poultry products originating from New York based
on a detection of low-pathogenic AI. In June 2013,
China lifted the Arkansas import suspension, but re-
imposed it when a detection of low-pathogenic AI
was made several weeks later. Similarly, in June
2013, a detection of low-pathogenic AI in
commercial pheasants led China to impose an
import suspension on poultry from Wisconsin. In
May 2014, a detection of H5 low-pathogenic AI in a
commercial Japanese quail layer flock in California
led China to impose an import suspension on poultry
from California. In that same month, China lifted its
ban on poultry from Virginia. In September 2014,
China imposed an import suspension on poultry
from New Jersey in response to a detection of low-
pathogenic AI in a pheasant at a hunting preserve.
Even though the preserve was lifted from quarantine
shortly thereafter when follow-up tests came back
negative, and even though no poultry farms are
located within a 10-mile radius of the preserve,
China has kept the import suspension in place.
Consequently, as of December 2014, China had in
place state-level import suspensions applicable to
five states, i.e., Arkansas, New York, Wisconsin,
California and New Jersey.
In 2015, the United States will continue to urge
China to begin following the OIE’s guidelines relating
to low-pathogenic AI. The United States also will
press China to lift the state-level import suspensions
that remain in place.
HH11NN11--RReellaatteedd IImmppoorrtt BBaannss
In April 2009, China imposed import bans on U.S.
pork and pork products and live swine, ostensibly
related to its concern about the transmission of the

108
H1N1 influenza A virus. Import bans based on this
type of concern are not consistent with international
guidelines to control the spread of the H1N1
influenza A virus. International scientific bodies,
including the Food and Agricultural Organization of
the United Nations, the World Health Organization
and the OIE, have repeatedly explained that the
H1N1 influenza A virus is not transmitted by food
products. Furthermore, the OIE has stated that “the
imposition of ban measures related to the import of
pigs and pig products does not comply with
international standards published by the OIE and all
other competent standard setting international
bodies for animal health and food safety.” However,
China still banned imports of pork, pork products
and live swine from any states in which human cases
of the H1N1 influenza A virus are present, and
further imposed overly restrictive disinfection
requirements, effectively blocking all imports from
the United States because the virus is present in all
50 states.
Throughout 2009, the United States pressed China to
remove its H1N1-related bans on imports of U.S.
pork, pork products and live swine, using high-level
bilateral meetings as well as JCCT working group
meetings and the transitional review before the
WTO’s SPS Committee. At the October 2009 JCCT
meeting, China announced its intent to reopen the
China market to U.S. pork, pork products and live
swine. In December 2009, MOA and AQSIQ issued a
measure removing the bans on imports of U.S. pork
and pork products, but not live swine. However, this
measure required the negotiation of a mutually
agreed export certificate, and China insisted that
certain H1N1-related statements be included in the
export certificate. Several months later, in May
2010, China and the United States reached
agreement on export certificate language
referencing the H1N1 influenza A virus.
Nevertheless, the United States continues to believe
that specific H1N1 references in a U.S. export
certificate are unacceptable and inappropriate for
inclusion in export certificates, given the
international consensus that the H1N1 influenza A
virus is not transmitted by food products.
DDaaiirryy CCeerrttiiffiiccaattiioonn RReeqquuiirreemmeennttss
In April 2010, China’s AQSIQ notified the United
States that it would begin imposing new conditions
on the import of dairy products under a December
2009 measure, which was to become effective on
May 1, 2010. Of specific concern were requirements
that the United States certify on export certificates
for dairy shipments that they are free of many
diseases that are not of concern in pasteurized milk
products. Responding to requests from the United
States, China delayed the effective date to June 1,
2010, and subsequently allowed the United States to
continue to ship products to China after that date, so
long as technical discussions were ongoing.
However, this situation was still creating a
heightened level of uncertainty for U.S. exporters
and their potential Chinese buyers. In December
2012, the United States and China provisionally
agreed upon a bilateral certificate, and it was fully
implemented in early 2013. Since then, the United
States has been monitoring this situation, and it
appears that the finalized certificate is generally
helping to facilitate market access for exports of U.S.
dairy products to China.
As in the TBT context, some of China’s SPS measures
continue to enter into force without having first
been notified to the SPS Committee, and without
other WTO members having had the opportunity to
comment on them, even though they appear to be
the type of measures that are subject to the
notification requirements of the SPS Agreement.
Many of these unnotified measures are of key
concern to foreign traders. Indeed, since 2003, the
United States has identified more than 250 SPS
measures implementing important new registration
requirements, residue standards, inspection
requirements and quarantine requirements – none
of which China notified to the SPS Committee, even
though these measures constrain U.S. exports of
frozen meat, dairy products, grain, poultry, feed,
horticultural products, a variety of processed
products and alcoholic beverages.

109
In 2014, as in prior years, the United States urged
China’s regulatory authorities to improve the
transparency of their SPS regime by notifying more
measures. The United States also highlighted this
concern during meetings before the WTO’s SPS
Committee. The United States will continue to seek
improvements from China in this area in 2015.
IInnssppeeccttiioonn--rreellaatteedd RReeqquuiirreemmeennttss
China’s regulatory authorities continue to administer
inspection-related requirements in a seemingly
arbitrary manner.
Through two measures issued in 2002, the
Administrative Measures for the Entry-Exit Inspection
and Quarantine for Grains and Feed Stuff and the
Administrative Measures for Entry Animal and Plant
Quarantine, AQSIQ requires importers to obtain a
Quarantine Inspection Permit (QIP), prior to signing
purchase contracts for nearly all traded agricultural
commodities. QIPs are one of the most important
trade policy issues affecting the United States and
China’s other agricultural trading partners.
After AQSIQ began implementing these measures,
traders complained that AQSIQ may intentionally
slow down or even suspend issuance of QIPs at its
discretion, without notifying traders in advance or
explaining its reasons, resulting in significant
commercial uncertainty. Because of the commercial
necessity to contract for commodity shipments
when prices are low, combined with the inherent
delays in having QIPs issued, many cargoes of
products such as soybeans, meat and poultry arrive
in Chinese ports without QIPs, resulting in delays in
discharge and additional demurrage bills for Chinese
purchasers. In addition, traders report that
shipment quantities are often closely scrutinized and
are at risk for disapproval if considered too large.
Some improvements were made to the QIP system
in 2004 following repeated U.S. bilateral
engagement of China and through interventions
made by the United States and other WTO members
during the transitional reviews before the SPS
Committee and the Committee on Import Licensing
in 2002 and 2003. In June 2004, fulfilling a Chinese
commitment made in connection with the April 2004
JCCT meeting, AQSIQ issued Decree 73, the Items on
Handling the Review and Approval for Entry Animal
and Plant Quarantine, which extended the period of
validity for QIPs from three months to six months.
AQSIQ also began issuing QIPs more frequently
within the established time lines. Nevertheless, a
great deal of uncertainty remains even with the
extended period of validity, because a QIP still locks
purchasers into a very narrow period to purchase,
transport and discharge cargoes or containers before
the QIP’s expiration, and because AQSIQ continues
to administer the QIP system in a seemingly arbitrary
manner.
Traders continue to be hesitant to press AQSIQ for
change because they would risk falling out of favor.
Many traders would at least like AQSIQ to eliminate
the quantity requirements that it unofficially places
on QIPs. These quantity requirements have been
used often by AQSIQ during peak harvest periods to
limit the flow of commodity imports. In 2006,
traders reported that MOFCOM not only limited QIP
quantities, but also required some companies to use
up the majority of a QIP before being issued another
one and required other companies to use up their
QIPs or risk being “de-listed.” Eliminating these
requirements would make the QIP system more
dependent on market forecast.
Little improvement in the QIP system has taken
place since 2004, despite U.S. engagement. AQSIQ
officials continue to insist that the QIP system
ensures that an adequate number of examiners are
on duty at ports when shipments arrive to certify
and inspect them for quality and quantity, while the
United States and other WTO members argue that
there does not appear to be any scientific basis for
the QIP system and that it serves as an unjust and
overly restrictive barrier to trade. The United States
will continue to press China on this issue in 2015.
Separately, in 2009, AQSIQ began implementing a
measure, known as Decree 118, requiring all

110
overseas feed and feed ingredients manufacturers
shipping to China to undergo facility and product
registration. In 2012, AQSIQ implemented another
measure, known as Decree 145, extending this
registration process to all overseas food
manufacturers. Under Decrees 118 and 145, AQSIQ
determines the registration requirements industry-
by-industry and announces each industry’s
registration requirements separately.
This registration process has been extremely
onerous and cumbersome for U.S. agricultural
exporters. In particular, the requirement for AQSIQ
to individually inspect all or most facilities for each
product, combined with limited AQSIQ staffing, has
resulted in extensive delays. Decree 118 has already
resulted in trade disruptions in feed ingredients and
additives, and there is currently no process for new
feed additives to gain market approval in China. In
addition, Decree 145 is creating a significant backlog
in the registration of U.S. dairy products. In
response, the United States has urged AQSIQ to limit
trade disruptions under Decrees 118 and 145. The
United States also has been working closely with U.S.
agricultural exporters to facilitate their navigation of
the new requirements.
Meanwhile, MOFCOM has been administering an
additional import permit system for poultry
products. Through its issuance of Automatic
Registration Forms (ARFs) to importers, MOFCOM
has allocated a volume amount to an importer for
imports of particular commodities each year.
However, problems periodically have arisen with
MOFCOM’s ARF administration. In July 2009, for
example, U.S. poultry industry representatives
reported that MOFCOM’s issuance of ARFs to
importers of U.S. but not other foreign poultry
products slowed dramatically for a short period of
time. Subsequently, in January 2010, MOFCOM
expanded the ARF system to include imports of
soybeans, pork and dairy. The United States will
continue to urge MOFCOM to eliminate the ARF
system entirely in 2015.
DDoommeessttiicc SSuuppppoorrtt
In recent years, China has been significantly
increasing domestic subsidies and other support
measures for its agricultural sector.
As previously reported, over the past several years,
China has been significantly increasing domestic
subsidies and other support measures for its
agricultural sector. China has established a direct
payment program, instituted minimum support
prices for basic commodities and sharply increased
input subsidies. China has implemented a cotton
reserve system, based on minimum purchase prices.
China also has begun several new support schemes
for hogs and pork, along with a purchasing reserve
system for pork.
In October 2011, China submitted its overdue
notification concerning domestic support measures
for the period 2005 through 2008. Even though this
notification documents an increase in China’s
support levels, the United States is concerned that
the methodologies used by China to calculate
support levels, particularly with regard to China’s
price support policies and direct payments, result in
underestimates of those support levels. Indeed,
since China’s accession to the WTO, it appears that
China’s agriculture system has transformed from a
system focused on generating tax revenues from
agricultural producers into a system that provides
substantial net subsidies to agricultural producers,
with many of the subsidy mechanisms tied to
production incentives and resulting in increased
production of Chinese agricultural products that
compete with imports from the United States.
In 2014, the United States grew increasingly
concerned about the effects of domestic support
measures that China has pursued since 2008, such as
the cotton reserves purchasing system. This
purchasing system has led to a massive cotton
stockpile in China, totaling one-half of global cotton
supply as of December 2014. In addition, China

111
announced new cotton target price programs in
2014, which may seriously reduce future demand for
imported cotton.
China’s use of domestic subsidies and other support
measures in the agricultural sector. The United
States will also press China to provide an up-to-date
notification.
EExxppoorrtt SSuubbssiiddiieess
It is difficult to determine whether China maintains
export subsidies in the agricultural sector, in part
because China has not notified all of its subsidies to
the WTO.
Shortly after China’s WTO accession, U.S. industry
became concerned that China was providing export
subsidies on corn, despite China’s commitment to
eliminate all export subsidies upon accession. It
appeared that significant quantities of corn had been
exported from China, including corn from Chinese
government stocks, at prices that may have been 15
to 20 percent below China’s domestic prices. As a
result, U.S. corn exporters were losing market share
for corn in their traditional Asian markets, such as
South Korea and Malaysia, while China was
exporting record amounts of corn. The United
States has pressed its concerns about possible
export subsidies on corn with China in bilateral
meetings. The United States has also raised its
concerns and sought additional information about
China’s corn policies – including the use of
potentially excessive VAT export rebates – during
meetings before the Committee on Agriculture,
including the transitional reviews. Eventually,
however, China began trending toward becoming a
net importer of corn, and it appeared that China’s
exports were being made on a commercial basis,
although concern remains regarding the operation of
China’s VAT rebate system for corn.
It is difficult to determine whether or to what extent
China maintains export subsidies in the agricultural
sector, in part because China has not notified all of
its subsidies to the WTO. For example, China has not
notified subsidies provided in connection with
agricultural export bases, which appear to include
subsidies contingent upon export performance.
The United States will continue to investigate the
Chinese government’s subsidization practices in
2015, although China’s incomplete subsidy
notifications hinder those efforts. The United States
will make every effort to ensure that any use of
export subsidies is eliminated.
IINNTTEELLLLEECCTTUUAALL PPRROOPPEERRTTYY RRIIGGHHTTSS
Despite ongoing revisions of laws and regulations
relating to intellectual property rights, and greater
emphasis on rule of law and enforcement campaigns
in China, key weaknesses remain in China’s
protection and enforcement of intellectual property
rights, particularly in the area of trade secrets.
Intellectual property rights holders face not only a
complex and uncertain enforcement environment,
but also pressure to transfer intellectual property
rights to enterprises in China through a number of
government policies and practices.
With its acceptance of the TRIPS Agreement, China
agreed to adhere to generally accepted international
norms to protect and enforce the intellectual
property rights held by U.S. and other foreign
companies and individuals. Specifically, the TRIPS
Agreement sets minimum standards of protection
for copyrights and related rights, trademarks,
geographical indications, industrial designs, patents,
integrated circuit layout designs and undisclosed
information. The TRIPS Agreement also sets
minimum standards for IPR enforcement in
administrative and civil actions and, in regard to
copyright piracy and trademark counterfeiting, in
criminal actions and actions at the border. The
TRIPS Agreement requires as well that, with very
limited exceptions, WTO members provide national
and most favored nation treatment to the nationals
of other WTO members with regard to the
protection and enforcement of intellectual property
rights.

112
Since its accession to the WTO, China has
established a framework of laws, regulations and
departmental rules that largely satisfies its WTO
commitments. However, reforms are needed in key
areas, such as updating China’s laws and regulations
in the area of trade secrets, further improvement of
China’s measures for copyright protection on the
Internet following China’s accession to the WIPO
Internet treaties, addressing deficiencies in China’s
criminal IPR enforcement measures and revising
measures conditioning government procurement,
financial benefits and preferences on intellectual
property developed by, owned by or licensed to a
Chinese party.
Effective IPR enforcement remains a serious problem
throughout China. IPR enforcement is hampered by
lack of coordination among Chinese government
ministries and agencies, lack of training, resource
constraints, lack of transparency in the enforcement
process and its outcomes, procedural obstacles to
civil enforcement, and local protectionism and
corruption.
LLeeggaall FFrraammeewwoorrkk
OOvveerrvviieeww
As previously reported, at the time of its accession
to the WTO, China was in the process of modifying
the full range of IPR laws, regulations and
departmental rules, including those relating to
patents, trademarks and copyrights. Within several
months after its accession, China had completed
amendments to its Patent Law, Trademark Law and
Copyright Law, along with regulations and
departmental rules to implement them. China had
also issued regulations and departmental rules
covering specific subject areas, such as integrated
circuits, computer software and pharmaceuticals.
U.S. experts carefully reviewed these measures after
their issuance and, together with other WTO
members, participated in a comprehensive review of
them as part of the first transitional review before
the TRIPS Council in 2002.
Since then, China has periodically issued new IPR
measures. The United States has reviewed these
measures and pursued bilateral discussions and
TRIPS Council reviews to address its concerns.
Encouragingly, over time, China has become more
willing to circulate proposed measures for public
comment and to discuss proposed measures with
interested trading partners and stakeholders.
In 2011, China announced an updated Action Plan
for revising its laws and regulations in order to
better protect intellectual property rights. Among
other things, this Action Plan set out China’s
intentions for revising various laws and other
measures, including rules to implement the revised
Patent Law, revisions to the Trademark Law, the
Copyright Law and related measures. These efforts
are ongoing, and the United States and U.S. right
holders regularly have provided written comments
to China on proposed measures and have engaged
intensively with China’s regulatory authorities to
encourage the adoption of proposed U.S. revisions.
Currently, one particular area of focus in the United
States’ bilateral engagement with China involves the
outdated and ineffective laws and regulations
governing trade secrets enforcement in China, which
have gone unchanged since 1993.
In addition, the United States has repeatedly urged
China to pursue additional legislative and regulatory
changes, using both bilateral meetings and the
annual transitional reviews before the WTO’s TRIPS
Council. The focus of the United States’ efforts is to
persuade China to improve its laws and regulations
in certain critical areas, such as criminal, civil and
administrative IPR enforcement and legislative and
regulatory reform. For example, obstacles that have
been noted in the area of criminal enforcement
include China’s high criminal thresholds, the lack of
criminal liability for certain acts of copyright
infringement, the profit motive requirement in
copyright cases, the requirement of identical
trademarks in counterfeiting cases, and the absence
of minimum, proportional sentences and clear
standards for initiation of police investigations in

113
cases where there is a reasonable suspicion of
criminal activity. The United States also has been
pressing China to consider a variety of
improvements to its administrative and civil
enforcement regimes. While not all of these issues
raise specific WTO concerns, all of them will
continue to detract from China’s enforcement
efforts until addressed.
With regard to border enforcement, the United
States is encouraged by the efforts of China’s
Customs Administration to pursue enforcement
against counterfeit and pirated goods destined for
export and the Customs Administration’s agreement
in 2007 to cooperate with U.S. customs authorities
to fight exports of counterfeit and pirated goods. In
January 2013, the Customs Administration hosted
the first working group meeting under the
agreement. Following that meeting, U.S. customs
authorities and the Customs Administration
exchanged information on IPR enforcement
practices and cooperatively developed a plan to
conduct a joint IPR enforcement operation focused
on interdicting counterfeit consumer electronics.
The month-long operation was successfully
conducted in April 2013. At its conclusion, U.S.
customs authorities and the Customs Administration
committed to continued cooperation, including
another joint enforcement operation. Nevertheless,
the United States remains concerned about various
aspects of the Regulations on the Customs Protection
of Intellectual Property Rights, issued by the State
Council in December 2003, and implementing rules
issued by the Customs Administration in March
2009. Most recently, at the December 2014 JCCT
meeting, the United States secured China’s
agreement to continue the two countries’ effective
cooperation in cross-border enforcement efforts
against counterfeit and pirated goods, and to
conduct exchanges on the effectiveness of
enforcement efforts.
China has been working on other measures that can
have significant implications for the intellectual
property rights of foreign right holders. For
example, China enacted an Anti-monopoly Law that
became effective in August 2008. Since then,
China’s enforcement of this law at times has
generated concerns, particularly among foreign
companies holding patented technologies. China
also has issued various proposed regulations and
other measures relating to standards that
incorporate patents since 2009. The United States
has been carefully monitoring these efforts and has
raised concerns with particular aspects of these
measures, both in bilateral meetings and at the WTO
before the TRIPS Council and the TBT Committee.
Most recently, SAC and SIPO issued interim rules on
national standards involving patents, which became
effective in January 2014.
TTeecchhnnoollooggyy LLooccaalliizzaattiioonn
The United States is seriously concerned about a
range of Chinese policies and practices that link the
receipt of government benefits or preferences to
relevant intellectual property being owned or
developed in China. These policies and practices are
objectionable not only because of their
discriminatory treatment of foreign right holders,
but also because they are calculated to pressure
foreign companies to transfer their technologies to
enterprises in China. These policies and practices
also discourage Chinese enterprises from developing
their own innovative technologies.
As previously reported, in prior years, China has
made JCCT and S&ED commitments not to maintain
any measures that provide government
procurement preferences for goods or services
based on where the intellectual property is owned
or was developed, and to treat IPR owned or
developed in other countries the same as IPR owned
or developed in China. In addition, China has agreed
to revise or eliminate various measures that
appeared to be inconsistent with this commitment.
More recently, at the December 2013 JCCT meeting,
the United States secured China’s commitment not
to finalize or implement two problematic measures,

114
the 2011 Detailed Rules on the Administration of
Optional Official Use Vehicle Catalogue for Party and
Government Organs and the draft 2012 Party and
Government Organ Official Use Vehicle Selection
Catalogue. Through the imposition of IP-related
eligibility requirements, these measures would have
excluded vehicles manufactured by foreign
enterprises or foreign-invested enterprises from
procurement by the Chinese government and the
Chinese Communist Party.
Earlier this year, at the July 2014 S&ED meeting,
China agreed to take an affirmative step to address
U.S. concerns about Chia’s pursuit of intellectual
property localization. Specifically, China committed
that its Ministry of Science and Technology would
develop a pilot program addressing an eligibility
condition for a tax measure requiring high
technology enterprises to, as an alternative to IP
ownership, hold a global exclusive license to the
relevant technology.
Subsequently, at the December 2014 JCCT meeting,
China clarified and underscored that it will treat
intellectual property rights owned or developed in
other countries the same as domestically owned or
developed intellectual property rights. China further
committed that enterprises are free to base
technology transfer decisions on business and
market considerations, and are free to
independently negotiate and decide whether and
under what circumstances to assign or license
intellectual property rights to affiliated or
unaffiliated enterprises.
Currently, despite sustained U.S. engagement and
the bilateral commitments that China has made to
date, Chinese policies and practices discriminating
against foreign right holders and pressuring foreign
companies to transfer their technologies to
enterprises in China remain a serious concern. In
2015, the United States will closely monitor the
bilateral commitments that China made in 2014 and
will press China to take further steps to address this
problem.
OOnnlliinnee CCooppyyrriigghhtt PPrrootteeccttiioonn
Since China acceded to the WTO, a sustained focus
of U.S. engagement has involved China’s online
copyright protection, which is especially important in
light of China’s rapidly increasing number of Internet
users. This engagement has seen important but
incomplete steps forward by China.
As previously reported, one early example of a step
forward is a 2004 measure issued by the National
Copyright Administration (NCA). This measure,
entitled Measures for Administrative Protection of
Copyright on the Internet, requires Internet service
providers to take remedial actions to delete content
that infringe on copyrights upon receipt of a
complaint from the right holder, or face
administrative penalties ranging from confiscation of
illegal gains to fines of up to RMB 100,000
($16,400).The United States also made it a priority to
press China to accede to the WIPO Internet treaties
and to fully harmonize its regulations and
implementing rules with them. While compliance
with the treaties is not required under WTO rules,
they reflect important international norms for
providing copyright protection on the Internet. At
the July 2005 JCCT meeting, China committed to
begin the process of acceding to the WIPO Internet
treaties, and China acceded to these treaties a little
more than one year later.
In 2006, the State Council adopted an important
Internet-related measure, the Regulations on the
Protection of Copyright over Information Networks.
Although it does not appear to fully implement the
WIPO Internet Treaties, this measure represents a
welcome step, demonstrating China’s determination
to improve protection of the Internet-based right of
communication to the public. Several aspects of this
measure nevertheless would benefit from further
clarification.
More recently, in 2012, the United States urged
China to improve its online copyright protection by
clarifying how Chinese law treats the issue of

115
secondary liability. In December 2012, fulfilling a
commitment that China had made at the JCCT
meeting earlier that month, China’s Supreme
People’s Court issued a Judicial Interpretation
clarifying that those who facilitate the commission of
copyright infringement will be equally liable for
infringement. Since then, the United States has
pressed China to incorporate the principles
established in this Judicial Interpretation into the
Copyright Law, which China is in the process of
revising.
At the December 2014 JCCT meeting, China agreed
to strengthen its enforcement against unlawful
trademark counterfeiting and copyright piracy
activities in the online environment and to deter the
occurrence of infringement and counterfeiting
through criminal, civil and administrative remedies
and penalties. China further agreed that, in a
practical and timely fashion, it will classify products
with significant impacts on public health and safety
as priorities, and carry-out enhanced enforcement
actions.
TTrraaddeemmaarrkk LLaaww
The United States has pressed China to address a
variety of weaknesses in China’s legal framework
that do not effectively deter, and that may even
encourage, certain types of infringing activity, such
as the “squatting” of foreign company names,
designs, trademarks and domain names, the
registration of other companies’ trademarks as
design patents and vice versa, the use of falsified or
misleading license documents or company
documentation to create the appearance of
legitimacy in counterfeiting operations, and false
indications of geographic origin of products.
In August 2013, China’s National People’s Congress
enacted important amendments to China’s
Trademark Law, including provisions to combat
trademark squatting, expanding protection to sound
marks, permitting multiclass registration and
streamlining application and appeal proceedings.
The United States welcomes these long-sought
reforms, but notes that a number of important
issues were not clarified in the Trademark Law or in
implementing regulations issued in April 2014. The
United States has raised key unresolved questions
with China, such as the need to clarify the
constructive knowledge standard applied in landlord
liability proceedings.
GGrraapphhiiccaall UUsseerr IInntteerrffaacceess
In recent years, the United States has urged China to
provide design patent protection to graphical user
interfaces (GUIs) and has engaged China in a series
of technical exchanges on that subject. Effective
May 2014, SIPO began implementing revised
examination guidelines providing protection for
GUIs.
PPhhaarrmmaacceeuuttiiccaallss
In the pharmaceuticals sector, a serious concern of
the United States has been patent protection and, in
particular, SIPO examination guidelines governing
information disclosure requirements for
pharmaceutical patent applications. As a direct
result of a series of amendments making these
guidelines more restrictive, applications for
pharmaceutical patents were denied in China, even
though U.S. and other leading patenting authorities
granted patents for the same pharmaceuticals. In
addition, patents granted prior to the adoption of
the more restrictive SIPO guidelines have been
vulnerable to invalidation challenges in China based
on the retroactive application of these guidelines.
In an effort to address this problem, the United
States engaged China in technical and legal dialogues
and signaled the urgent need for SIPO to return to
an appropriate interpretation of supplemental
disclosure requirements, in harmony with the
prevailing practice in the United States and other
countries hosting innovative pharmaceutical
industries. As previously reported, during Vice
President Biden’s December 2013 visit to China,
China took an important step to strengthen the
protection of pharmaceutical innovations by

116
announcing that patent holders will be able to
submit additional data to support their patents after
filing their initial applications. At the December
2013 JCCT meeting, China reaffirmed this
commitment and further affirmed that its existing
patent requirements and procedures ensure that
pharmaceutical inventions receive patent protection
during examinations and re-examinations and before
China’s courts.
The United States also has been pressing China to
adopt comprehensive reforms to ensure that all
Chinese producers of bulk chemical and biological
substances capable of being used as active
pharmaceutical ingredients (APIs) for medicinal
products are subject to CFDA’s registration
requirements and operate in compliance with
CFDA’s Good Manufacturing Practices. In this area,
Vice President Biden’s December 2013 visit to China
resulted in China’s commitment to take steps toward
introducing a framework for registering
manufacturers of bulk chemicals that can be used as
active pharmaceutical ingredients, which would be a
critical step in combatting dangerous counterfeit and
substandard pharmaceuticals around the world.
Building on this commitment, at the July 2014 S&ED
meeting, China committed to develop and seriously
consider amendments to the Drug Administration
Law that will require regulatory control of the
manufacturers of bulk chemicals that can be used as
active pharmaceutical ingredients. China further
committed to hold a multi-ministerial meeting by
the end of 2014 for the purpose of developing a
possible framework for regulatory oversight of bulk
chemicals.
The United States also continues to be concerned
about the extent to which China provides effective
protection against unfair commercial use of, and
unauthorized disclosure of, undisclosed test or other
data generated to obtain marketing approval for
pharmaceutical products. China’s law, and a
commitment that it made in its WTO accession
agreement, require China to ensure that no
subsequent applicant may rely on the undisclosed
test or other data submitted in support of an
application for marketing approval of new
pharmaceutical products for a period of at least six
years from the date of marketing approval in China.
However, Chinese law does not include an
appropriate definition of the term “new chemical
entity” for purposes of identifying test or other data
entitled to protection. There is evidence that, as a
result of this situation, generic manufacturers of
pharmaceutical products have been granted
marketing approvals by China’s SFDA prior to the
expiration of the six-year protection period and, in
some cases, even before the originator’s product has
been approved.
At the December 2012 JCCT meeting, China took a
step toward establishing effective regulatory data
protection by agreeing to define the term “new
chemical entity” in a manner consistent with
international research and development practices in
order to ensure regulatory data of pharmaceutical
products are protected against unfair commercial
use and unauthorized disclosure. Despite extensive
subsequent engagement, China has not yet adopted
the contemplated definition of “new chemical
entity.” Going forward, the United States will be
working with CFDA and other relevant agencies as it
continues to seek resolution of this concern and
other outstanding concerns in this area.
An additional area of concern in the pharmaceuticals
sector involves the long delays in China’s review of
applications for permission to market new and
innovative pharmaceutical products in China, and for
these products to be placed on approved
reimbursement lists. These concerns, along with
analogous concerns relating to medical devices, have
been the focus of various bilateral meetings with
China. As the United States has pointed out, a
reduction in regulatory delays would speed access
by China’s public to potentially life-saving
medications and help sustain incentives for further
pharmaceutical innovation. At the December 2014
JCCT meeting, an important development took place
when China committed to take several specific steps
to streamline and speed up its regulatory review and
approval systems for new pharmaceutical products

117
and new medical devices. China also agreed to an
enhanced dialogue with expert and high-level
officials of relevant Chinese and U.S. agencies in
2015 to promote efficient pharmaceutical and
medical device regulation and market access.
GGeeooggrraapphhiiccaall IInnddiiccaattiioonnss
States reached agreement with China on how China
should handle intellectual property protection for
geographical indications, or GIs. China agreed that a
term, or its translation or transliteration, is not
eligible for protection as a GI in its territory where
the term is generic in its territory, that the
relationship between trademarks and GIs is to be
handled in accordance with relevant articles in the
TRIPS Agreement, and that legal means are available
for interested third parties on the above grounds to
object to and to cancel any registration or
recognition granted to a GI. In addition, where a
component of a compound GI is generic in its
territory, China agreed that the GI protection is not
to extend to that generic component. Among other
things, these commitments will benefit U.S.
exporters whose products use trademarks or
common names like “parmesan” and “feta” cheese.
Going forward, the United States and China also
committed to hold dialogues on geographical
indications.
EEnnffoorrcceemmeenntt
OOvveerrvviieeww
The TRIPS Agreement requires China to ensure that
enforcement procedures are available so as to
permit effective action against any act of IPR
infringement covered by the TRIPS Agreement,
including expeditious remedies to prevent
infringement and remedies that constitute a
deterrent to further infringement. Although the
central government has modified China’s IPR laws
and regulations in an effort to bring them into line
with China’s WTO commitments, effective IPR
enforcement has not been achieved, and IPR
infringement remains a serious problem throughout
China. IPR enforcement is hampered by lack of
coordination among Chinese government ministries
and agencies, lack of training, resource constraints,
lack of transparency in the enforcement process and
its outcomes, procedural obstacles to civil
enforcement, and local protectionism and
corruption.
Largely as a reflection of enforcement concerns, the
United States elevated China to the Special 301
“Priority Watch List” in April 2005, where it has
remained through 2014. Over the years, China has
taken important steps to address problems
identified in the Special 301 report, including
through legal reforms, enforcement campaigns and
cooperation with U.S. authorities. Despite laudable
steps forward, challenges have evolved over time, as
new concerns have arisen. The Special 301 Report
for 2014 notes positive developments as well as a
broad range of ongoing challenges in what remains a
complex and uncertain environment for IP right
holders.
No longer published concurrently with the Special
301 report, the Notorious Markets Report identifies
online and physical markets that exemplify key
challenges in the global struggle against piracy and
counterfeiting. As in prior years, the December 2014
Notorious Markets Report included various
notorious physical and online markets located in
China, although several markets, including Taobao
and Sogou, have been de-listed from the Notorious
Markets Report due to their work with right holders
to significantly decrease the listing of infringing
products for sale via their websites.
The United States continues to place the highest
priority on addressing IPR protection and
enforcement problems in China. A domestic Chinese
business constituency is also increasingly active in
promoting IPR protection and enforcement. In fact,
Chinese right holders own the vast majority of
design and utility model patents, trademarks and
plant varieties in China and have become the
principal filers of invention patents. In addition, the

118
vast majority of the IPR enforcement efforts in China
are now undertaken at the behest of Chinese right
holders seeking to protect their interests.
Nevertheless, it is clear that there will continue to be
a need for sustained efforts from the United States
and other WTO members and their industries, along
with the devotion of considerable resources and
political will to IPR protection and enforcement by
the Chinese government, if significant improvements
are to be achieved.
In 2014, as in prior years, the United States worked
with central, provincial and local government
officials in China in a sustained effort to improve
China’s IPR enforcement, with a particular emphasis
on the need for dramatically increased utilization of
criminal remedies as well as the need to improve the
effectiveness of civil and administrative enforcement
mechanisms. In addition, a variety of U.S. agencies
held regular bilateral discussions with their Chinese
counterparts, which have been periodically
supplemented by technical assistance programs.
The United States’ efforts have also benefited from
cooperation with other WTO members in seeking
improvements in China’s IPR enforcement, both on
the ground in China and at the WTO during meetings
of the TRIPS Council. For example, several WTO
members participated as supportive third parties in
the United States’ two IPR-related WTO cases
against China. Previously, Japan and Switzerland had
joined the United States in making coordinated
requests under Article 63.3 of the TRIPS Agreement
in order to obtain more information about IPR
infringement levels and enforcement activities in
China. In addition, since then, the United States and
the EU have increased coordination and information
sharing on a range of China IPR issues. China’s
membership in the APEC forum also brings increased
importance to APEC’s work to develop regional IPR
best practices.
Meanwhile, the United States has continued to
pursue a comprehensive initiative to combat the
enormous global trade in counterfeit and pirated
goods, including exports of infringing goods from
China to the United States and the rest of the world.
The Intellectual Property Enforcement Coordinator,
a White House position, coordinates these and other
efforts. China’s share of infringing goods seized at
the U.S. border during FY 2013 was approximately
$1.2 billion, or 68 percent of the total estimated
Manufacturer’s Suggested Retail Price of all goods
seized, according to U.S. customs data.
At the same time, China is making genuine efforts to
improve IPR enforcement, and cooperation between
the United States and China has produced some
successful enforcement actions. For example, in
October 2010, the State Council announced what
was originally to be a six-month campaign, the
Program for Special Campaign on Combating IPR
Infringement and Manufacture and Sales of
Counterfeit and Shoddy Commodities, calling for,
among other things, the investigation and
prosecution of infringements of copyrights,
trademarks, patents and new plant varieties. The
campaign’s enforcement efforts were focused on the
manufacturing and sales of counterfeit and inferior
commodities in certain key industries, including the
press and publication industry, the cultural and
recreational industry, the high-tech industry and
agriculture, and with regard to certain key products,
including books, software, audio-visual products,
seeds, bulk export commodities, automobile fittings,
mobile phones and medicines. The United States
monitored the special campaign’s implementation
and encouraged China to translate this increased
attention to IPR enforcement into permanent,
systemic improvements in the legal protections of,
and resources and capacity to enforce, IPR in a
sustained and effective manner. In 2011, China
committed to establish a State Council-level
leadership structure, headed by a Vice Premier, to
lead and coordinate IPR enforcement across China in
order to enhance China’s ability to crack down on
IPR infringement, thereby making permanent the
leadership structure under the special campaign.
Since then, the United States has been closely
monitoring the implementation and effectiveness of
this leadership structure. The United States also has

119
urged China to use it as an opportunity to tackle
emerging enforcement challenges, particularly the
sale of pirated and counterfeit goods on the
Internet, and to ensure that these efforts lead to
sustained and systemic improvements in
enforcement and deterrence of intellectual property
crimes in China.
Despite its many positive efforts to improve IPR
enforcement, China has pursued other policies that
continue to impede effective enforcement. These
policies led the United States to resort to the WTO
dispute settlement mechanism in April 2007, where
it sought needed changes to China’s legal framework
that would facilitate the utilization of criminal
remedies against piracy and counterfeiting, enhance
border enforcement against counterfeit goods and
provide copyright protection for works that have not
obtained approval from China’s censorship
authorities. These changes should be an important
objective for China, given the lack of deterrence
clearly evident in China’s current enforcement
regime. As discussed above, China did not appeal
WTO panel rulings in favor of the United States and
subsequently modified the measures at issue,
effective March 2010.
At the same time, other changes were needed on
the market access side. As the WTO ruled in 2009,
China maintains market access barriers, such as
import and distribution restrictions, which
discourage and delay the introduction of numerous
types of legitimate foreign products into China’s
market. These barriers have created additional
incentives for infringement of copyrighted products
like books, newspapers, journals, theatrical films,
DVDs and music and inevitably lead consumers to
the black market, again compounding the severe
problems already faced by China’s enforcement
authorities. The United States welcomed the steps
that China took in 2011 to comply with the WTO
rulings in this case with regard to books,
newspapers, journals, DVDs and music, as discussed
above. The United States also welcomed the U.S.-
China MOU covering theatrical films, which so far
has provided significant increases in the number of
foreign films imported and distributed in China each
year and significant additional revenue for foreign
film producers. However, China has not yet fully
regard to opening up film distribution opportunities.
As a result, the United States has been pressing
China for full implementation.
TTrraaddee SSeeccrreettss
The United States remains seriously concerned
about a growing number of cases in which important
trade secrets of U.S. companies have been stolen by,
or for the benefit of, Chinese competitors. It has
been difficult for some U.S. companies to obtain
legal relief through China’s legal system against
those who have benefitted from this theft or
misappropriation, despite apparently compelling
evidence demonstrating guilt. The United States is
also concerned that many more trade secrets cases
involving U.S. companies and Chinese competitors
go unreported, because U.S. companies want to
avoid the costs of pursuing legal relief, when
weighed against the likelihood of obtaining no
redress through Chinese legal channels and possible
commercial repercussions for shining light on the
conduct at issue.
As previously reported, the United States and China
have increased their bilateral exchanges on the
important issue of trade secrets, including in the
JCCT IPR Working Group and the S&ED process and
through direct engagement between senior-level
U.S. and Chinese government officials. Ensuring that
companies are able to protect and enforce their IPR
in China effectively, including trade secrets, is
essential to promoting successful commercial
relationships between U.S. and Chinese companies.
committed to cooperate with, and give serious
consideration to the views of, the United States in
2014 on proposals to amend China’s trade secrets
law as well as on related legislative and policy issues.
China further committed to adopt and publish an
action plan on trade secrets protection and

120
enforcement for 2014 that was expected to include
concrete enforcement actions, improvements of
public awareness about trade secrets infringement,
and requirements for strict compliance with all legal
measures providing for trade secrets protection and
enforcement by all enterprises and individuals.
China subsequently published work plans prioritizing
efforts to enhance enforcement and public
awareness efforts with regard to trade secrets, but
the United States still would like to see China’s
adoption of an ongoing, robust action plan on trade
secrets protection and enforcement.
At the July 2014 JCCT meeting, the United States
secured China’s commitment to vigorously
investigate and prosecute cases of trade secrets
theft, to publish civil and criminal judgments, and to
protect trade secrets in the context of regulatory,
administrative, and other government proceedings.
China also agreed to continue to promote awareness
of the importance of trade secrets, and to continue
to prioritize trade secrets protection and
enforcement in its enforcement agencies’ work
plans.
More recently, at the December 2014 JCCT meeting,
China confirmed that trade secrets submitted to the
government officials in connection with their official
duties and that government officials who illegally
disclose companies’ trade secrets are to be subject
to administrative or legal liability. China further
committed to study various specified ways in which
it could improve its laws, regulations and
administrative procedures governing the protection
of trade secrets in the context of administrative or
regulatory proceedings.
SSooffttwwaarree PPiirraaccyy
For several years, the United States has raised
serious concerns about software piracy in China. A
major focus of the United States’ engagement of
China in this area has focused on Chinese
government agencies and state-owned enterprises.
As previously reported, in response to U.S. concerns
about software piracy raised during the run-up to
the April 2006 JCCT meeting, China issued rules
requiring that computers be pre-installed with
licensed operating system software and that
government agencies purchase only computers
satisfying this requirement. The United States
hoped that these rules would contribute to
significant reductions in industry losses due to
software piracy by building on China’s ongoing
implementation of prior JCCT and S&ED
commitments relating to software piracy, including
ones requiring Chinese government agencies at all
levels of government and central state-owned
enterprises to purchase and use legitimate software,
and to promote the centralized procurement of
software.
According to the U.S. software industry, however,
China’s PC software piracy rate has remained
relatively flat over the past six years, only dropping
from 82 percent in 2007 to 74 percent in 2013.
During the same period, the U.S. software industry
reports that the commercial value of this unlicensed
PC software grew from $6.7 billion in 2007 to $8.8
billion in 2013. Achieving sustained reductions in
end user software piracy will require more
enforcement by China’s authorities, followed by high
profile publicity of fines and other remedies
imposed. One additional necessary tool – which has
been the subject of multiple JCCT and S&ED
commitments – is the use of Software Asset
Management audits, not only by Chinese
government agencies but also by enterprises,
including state-owned and state-invested
enterprises, to ensure that these agencies and
enterprises are not using illegal software.
Accordingly, at the May 2012 S&ED meeting and the
December 2012 JCCT meeting, the United States
sought to build on China’s past commitments to
eliminate the use of unauthorized software at all

121
levels of government and to discourage the use of
unauthorized software by enterprises, including
major state-owned and state-invested enterprises.
China committed to intensify its use of software
audits and inspections within the government and to
expand its software legalization efforts in the
enterprise sector. China also confirmed that it
requires state-owned enterprises and state-owned
banks under the supervision of the central
government to purchase and use legal software.
Most recently, at the July 2013 S&ED meeting, China
committed to strengthen supervision of central
state-owned enterprises and large state-owned
financial institutions by establishing software asset
management systems and enforcing requirements
for them to purchase and use legitimate software.
China also committed to provide budget guarantees
and to promote centralized procurement of
software.
Nevertheless, the relatively modest progress made
by China over the last several years in reducing the
rate of end-user business software piracy rates is of
increasing concern to the United States and to a
variety of software developers. The United States
looks forward to timely, meaningful and verifiable
implementation of China’s JCCT and S&ED
commitments to eliminate the use of unauthorized
software at all levels of government and to
discourage the use of unauthorized software by
enterprises, including major state-owned and state-
invested enterprises, beginning with pilot projects
encouraging automated software asset management
and increased deterrent penalties for violators.
China exacerbated the challenges facing U.S. and
other foreign suppliers of software in 2013 when the
State Council and MOF issued measures that impose
price controls and related requirements on software
purchases by government entities and possibly
state-owned enterprises that appear to promote the
purchase of domestic software over foreign
software. The United States has raised serious
concerns with China about these measures,
particularly in light of China’s JCCT and S&ED
commitments relating to intellectual property
localization.
OOtthheerr PPiirraaccyy IIssssuueess
Despite many special campaigns in China over the
years to combat piracy, repeated bilateral
commitments by China to increase enforcement and
an increase in civil IPR cases, sales of U.S. copyright-
intensive goods and services in the China market
remain substantially below levels in other markets,
measured in a variety of ways, ranging from
spending on legitimate music as a percentage of GDP
to software sales per personal computer. The
United States accordingly has urged China to
continue its efforts to improve both protection and
enforcement and to ensure that they result in an
increase of sales of legitimate goods and services
from all sources, including imports.
One problem is that television and radio tariffs for
the broadcast of musical works were not adopted in
China until January 2010, nine years after it was
obligated to do so, and are remarkably low. For
example, in 2012, collections in Hong Kong alone
were more than 65 percent greater than collections
made by the Music Copyright Society of China for all
music copyrights, both domestic and foreign, in
China. As a proportion of GDP, total collections for
public performances of music in 2012 were 46 times
greater in Hong Kong compared to all of China, and
62 times greater in Australia than in China.
In addition, piracy of movies (including during the
pre-release phase), television programming and
music remains widespread, both via hard copies and
online. China's Internet users are increasingly
turning to streaming media to watch foreign
television programming and movies. While it
appears that a number of user-generated content
sites have eliminated most of their pirated content,
streaming sites have become the preferred method
in China to watch illegal content. The United States
has urged China to focus on these streaming sites,
and to prevent illegal transmission and rebroadcast
of movies and television and sports programming.

122
Piracy associated with libraries in China has been a
particular problem. In October 2009, the NCA, the
Ministry of Education, the Ministry of Culture and
the National Anti-Pornography Office issued the
Notice on Strengthening Library Protection of
Copyright, which directs libraries to strictly adhere to
the disciplines of the Copyright Law. The United
States welcomed this directive and encouraged
China to take steps to enforce this notice, including
through unannounced spot checks of libraries and
promptly investigating and taking action against
web-based enterprises that provide pirated journal
articles. Subsequently, at the December 2010 JCCT
meeting, China committed to take steps to eradicate
piracy of online academic journals, including actions
against web-based enterprises. At the 2011 JCCT
meeting, the United States and China agreed to hold
government-industry roundtables, which they have
begun to do, for the purpose of discussing online
copyright protection and enforcement, including in
relation to libraries.
CCoouunntteerrffeeiittiinngg IIssssuueess
China’s widespread counterfeiting not only harms
the business interests of right holders, both foreign
and domestic, but also includes many products that
pose a direct threat to the health and safety of
consumers in the United States, China and
elsewhere, such as pharmaceuticals, food and
beverages, batteries, auto parts, industrial
equipment and toys, among many other products.
At the same time, the harm from counterfeiting is
not limited to right holders and consumers. China
estimated its own annual tax losses due to
counterfeiting at more than $3.2 billion back in
2002, and this figure could only have grown in the
ensuing years.
In 2014, there were continuing reports concerning
the impact that counterfeiting was having on U.S.
agricultural industries, including the fruit and
vegetable industries and the wine industry. Of
particular concern were counterfeit semiconductors
entering the supply chain, creating the risk of the
installation of fake and shoddy semiconductor
components in electronic equipment, including in
equipment used for critical functions related to
agricultural safety and security.
Some trademark rights holders are beginning to
report a noticeable reduction in the visibility of
counterfeit goods for sale in certain major retail and
wholesale markets in China. This development
appears to be the result of intensified administrative
and criminal enforcement in certain areas. It also
may be attributable to steps taken by national and
local AICs to target landlords of physical markets as
part of a wider effort to promote enforcement of
intellectual property rights, as well as court decisions
that have found landlords liable for infringement
that they knew or should have known was taking
place on their premises. However, as noted above,
greater clarity and uniformity in standards governing
landlord liability is sorely needed, as many markets
in China continue to trade in counterfeit and pirated
merchandise.
SSEERRVVIICCEESS
While China has implemented most of its services
commitments, concerns remain in some service
sectors. In addition, challenges still remain in
ensuring the benefits of many of the commitments
that China has nominally implemented are available
in practice, as China has continued to maintain or
erect restrictive or cumbersome terms of entry or
internal expansion in some sectors. These barriers,
often imposed through non-transparent and lengthy
licensing processes, prevent or discourage foreign
suppliers from gaining market access through
informal bans on entry, high capital requirements,
branching restrictions or restrictions taking away
previously acquired market access rights.
The commitments that China made in the services
area begin with the General Agreement on Trade in
Services. The GATS provides a legal framework for
addressing market access and national treatment
limitations affecting trade and investment in
services. It includes specific commitments by WTO
members to restrict their use of those limitations

123
and provides a forum for further negotiations to
open services markets around the world. These
commitments are contained in national services
schedules, similar to the national schedules for
tariffs.
In its Services Schedule, China committed to the
substantial opening of a broad range of services
sectors over time through the elimination of many
existing limitations on market access, at all levels of
government, particularly in sectors of importance to
the United States, such as banking, insurance,
telecommunications, distribution and professional
services. At the time, these commitments were
viewed as a good start toward opening up China’s
services sectors, particularly when compared to the
services commitments of many other WTO
members.
China also made certain “horizontal” commitments,
which are commitments that apply to all sectors
listed in its Services Schedule. The two most
important of these cross-cutting commitments
involve acquired rights and the licensing process.
Under the acquired rights commitment, China
agreed that the conditions of ownership, operation
and scope of activities for a foreign company, as set
out in the respective contractual or shareholder
agreement or in a license establishing or authorizing
the operation or supply of services by an existing
foreign service supplier, will not be made more
restrictive than they were on the date of China’s
accession to the WTO. In other words, if a foreign
company had pre-WTO accession rights that went
beyond the commitments made by China in its
Services Schedule, the company could continue to
operate with those rights.
In the licensing area, prior to China’s WTO accession,
foreign companies in many services sectors did not
have an unqualified right to apply for a license to
establish or otherwise provide services in China.
They could only apply for a license if they first
received an invitation from the relevant Chinese
regulatory authorities, and even then the decision-
making process lacked transparency and was subject
to inordinate delay and discretion. In its accession
agreement, China committed to licensing procedures
that were streamlined, transparent and more
predictable.
Under the terms of its Services Schedule, China was
allowed to phase in many of its services
commitments over time. The last of these
commitments was scheduled to have been phased in
by December 11, 2007.
At present, 13 years after China’s accession to the
WTO, significant challenges still seem to remain in
securing the benefits of many of China’s services
commitments. Through WTO dispute settlement,
the United States was able to fully open China’s
financial information services sector in 2009, as
China followed through on the terms of a settlement
agreement requiring China to create an independent
regulator and to remove restrictions that had been
placed on foreign financial information service
suppliers. Similarly, through WTO dispute
settlement, the United States was able to secure the
removal of importation and distribution restrictions
applicable to copyright-intensive products such as
books, newspapers, journals, DVDs and music, while
also entering into a commercially beneficial MOU
with China relating to the importation and
distribution of theatrical films. However, concerns
remain with regard to the implementation of other
important services commitments, such as in the area
of electronic payment services, where China has not
yet opened up its market to permit foreign
companies to supply electronic payment services for
domestic currency credit and debit card
transactions, even though it lost a WTO dispute on
this issue and agreed to come into compliance with
its GATS commitments by July 31, 2013.
In 2014, China also continued to maintain or erect
restrictive or cumbersome terms of entry in some
sectors that prevent or discourage foreign suppliers
from gaining market access. Many of these actions
raise questions about commitments made by China
in its Services Schedule. For example, China
maintains an informal ban on entry in the basic

124
telecommunications sector, and despite its
commitments to open this sector China has not
granted any new licenses since acceding to the WTO
on December 11, 2001. The requirement that any
joint venture partners for basic services be majority
government-owned provides a direct, non-
transparent mechanism for enforcing this ban, and
shuts off foreign suppliers from private Chinese
enterprises that may be more attractive partners. In
addition, although China announced that it was
removing registered capital requirements for many
sectors (on a nondiscriminatory basis) in 2014, the
subsequently issued implementing rules are
somewhat vague and the impact on foreign suppliers
in many sectors must still be evaluated. Moreover,
in sectors such as banking, insurance and legal
services, uneven and sometimes discriminatory
application of branching regulations limit or delay
market access for foreign suppliers. In other sectors,
particularly construction services, problematic
measures appear to be taking away previously
acquired market access rights.
In 2015, the United States will continue its efforts to
resolve the many concerns that have arisen in the
area of services.
DDIISSTTRRIIBBUUTTIIOONN SSEERRVVIICCEESS
China has made substantial progress in
implementing its distribution services commitments,
although significant concerns remain in some areas.
Prior to its WTO accession, China generally did not
permit foreign enterprises to distribute products in
China, i.e., to provide wholesaling, commission
agents’, retailing or franchising services or to provide
related services, such as repair and maintenance
services. These services were largely reserved to
Chinese enterprises, although some foreign-invested
enterprises were allowed to engage in distribution
services within China under certain circumstances.
eliminate national treatment and market access
restrictions on foreign enterprises providing these
services through a local presence within three years
of China’s accession (or by December 11, 2004),
subject to limited product exceptions. In the
meantime, China agreed to progressively liberalize
its treatment of wholesaling services, commission
agents’ services and direct retailing services (except
for sales away from a fixed location), as described
below.
Overall, China has made substantial progress in
implementing its distribution services commitments.
As discussed below, however, significant concerns
remain in some areas.
WWhhoolleessaalliinngg SSeerrvviicceess
China has issued regulations generally implementing
its commitments in the area of wholesaling and
commission agents’ services. One significant
exception involves China’s restrictions on the
distribution of imported theatrical films. In 2012,
following a successful WTO case brought by the
United States challenging these restrictions, the
United States and China entered into an MOU
providing for substantial increases in the number of
U.S. films imported and distributed in China each
year and substantial additional revenue for foreign
film producers, although China has not yet fully
implemented its MOU commitments. Meanwhile,
U.S. companies continue to have concerns about
restrictions on the distribution of other products,
such as pharmaceuticals, crude oil and processed oil.
China committed that, immediately upon its
accession to the WTO, it would begin to eliminate
national treatment and market access limitations on
foreign enterprises providing wholesaling services
and commission agents’ services through a local
presence pursuant to an agreed schedule of
liberalization. Within three years after accession (or
by December 11, 2004), almost all of the required
liberalization should have been implemented. By
this time, China agreed to permit foreign enterprises
to supply wholesaling services and commission
agents’ services within China through wholly foreign-
owned enterprises. In addition, exceptions that
China had been allowed to maintain for books,

125
newspapers, magazines, pharmaceutical products,
pesticides and mulching films were to be eliminated.
Exceptions for chemical fertilizers, processed oil and
crude oil (but not salt and tobacco) were to be
eliminated within five years after accession (or by
December 11, 2006).
As previously reported, MOFCOM issued the
Measures on the Management of Foreign Investment
in the Commercial Sector in April 2004 following
sustained engagement by the United States,
including through the JCCT process. Among other
things, these regulations lifted market access and
national treatment restrictions on wholly foreign-
owned enterprises and removed product exceptions
for books, newspapers, magazines, pesticides and
mulching films as of the scheduled phase-in date of
December 11, 2004. The regulations also required
enterprises to obtain central or provincial-level
MOFCOM approval before providing wholesale
services, and they appeared to set relatively low
qualifying requirements, as enterprises needed only
to satisfy the relatively modest capital requirements
of the Company Law rather than the high capital
requirements found in many other services sectors.
Since the issuance of the regulations, U.S. companies
have been able to improve the efficiency of their
China supply chain management. In addition, many
of them have been able to restructure their legal
entities to integrate their China operations into their
global business more fully and efficiently, although
problems remain in certain areas.
BBooookkss,, MMoovviieess aanndd MMuussiicc
As in the area of trading rights, China continued to
impose restrictions on foreign enterprises’
distribution of copyright-intensive products such as
books, newspapers, journals, theatrical films, DVDs
and music, despite its commitments to remove most
market access and national treatment restrictions
applicable to the distribution of these products by
no later than December 11, 2004. China’s
restrictions were set forth in a complex web of
measures issued by numerous agencies, including
the State Council, NDRC, MOFCOM, the Ministry of
Culture, SARFT and GAPP.
As previously reported, the United States initiated a
WTO dispute settlement case against China in April
2007 challenging the importation and distribution
restrictions applicable to copyright-intensive
theatrical films, DVDs and music. As discussed above
in the Trading Rights section, a WTO panel issued its
decision in August 2009, ruling in favor of the United
States on all significant claims, and China appealed.
The WTO’s Appellate Body rejected China’s appeal
on all counts in December 2009, and China agreed to
come into compliance with these rulings by March
2011. China subsequently issued several revised
measures, and repealed other measures, relating to
its distribution restrictions on imported books,
newspapers, journals, DVDs and music, although
these steps have not yet brought China into full
compliance with the WTO’s rulings, particularly with
regard to the online distribution of music.
With regard to theatrical films, China proposed
bilateral discussions with the United States in order
to seek an alternative solution. After months of
negotiations, which included discussions between
the two sides’ Vice Presidents, the United States and
China reached agreement in February 2012 on an
MOU providing for substantial increases in the
number of foreign films imported and distributed in
for foreign film producers. The MOU provides that it
will be reviewed after five years in order for the two
sides to discuss issues of concern, including
additional compensation for the U.S. side. To date,
while significantly more U.S. films have been
imported and distributed in China on a revenue-
sharing basis since the signing of the MOU and the
revenue received by U.S. film producers has
increased significantly, China has not yet fully
regard to a critical commitment to open up film
distribution opportunities for imported films that are
distributed in China on a flat-fee basis rather than a
revenue-sharing basis. In addition, U.S. industry

126
reports that China has been imposing an informal
quota on the total number of U.S. revenue-sharing
films and flat-fee films that can be imported each
year, which, if true, would undermine the terms of
the MOU. As a result, the United States has been
pressing China for full implementation and will
PPhhaarrmmaacceeuuttiiccaallss
China committed to allow foreign suppliers to
distribute pharmaceuticals by December 11, 2004,
and it began accepting applications from and issuing
wholesale licenses to foreign pharmaceutical
companies about six months after that deadline. At
the same time, despite overall progress in this area,
many other restrictions affecting the
pharmaceuticals sector continue to make it difficult
for foreign pharmaceutical companies to realize the
full benefits of China’s distribution commitments.
The United States is continuing to engage the
Chinese regulatory authorities in these areas as part
of a broader effort to promote comprehensive
reform and to reduce the unnecessary trade barriers
that foreign companies face.
CCrruuddee OOiill aanndd PPrroocceesssseedd OOiill
China committed to permit foreign enterprises to
engage in wholesale distribution of crude oil and
processed oil, e.g., gasoline, by December 11, 2006.
Shortly before this deadline, as previously reported,
China issued regulations that prevent U.S. and other
foreign enterprises from realizing the full benefits of
this important commitment. In particular, China’s
regulations impose high thresholds and other
potential impediments on foreign enterprises
seeking to enter the wholesale distribution sector,
such as requirements relating to levels of storage
capacity, pipelines, rail lines, docks and supply
contracts. The United States has raised concerns
about these regulations in connection with past
transitional reviews before the Council for Trade in
Services, while U.S. industry has attempted to
compete under difficult circumstances. In
consultation with U.S. industry, the United States
will continue to assess the effects of China’s
restrictive regulations in 2015 while urging China to
remove unwarranted impediments to market entry.
AAuuttoommoobbiilleess
China began to implement several measures related
to the distribution of automobiles by foreign
enterprises in 2005, including the February 2005
Implementing Rules for the Administration of Brand-
Specific Automobile Dealerships, jointly issued by
MOFCOM, NDRC and SAIC. In November 2005,
NDRC followed up with the Rules for Auto External
Marks, and in January 2006 MOFCOM issued the
Implementing Rules for the Evaluation of Eligibility of
Auto General Distributors and Brand-specific Dealers.
While U.S. industry has generally welcomed these
measures, they do contain some restrictions on
foreign enterprises that may not be applied to
domestic enterprises. The United States has been
closely monitoring how China applies these
measures in an effort to ensure that foreign
enterprises are not adversely affected by these
restrictions.
RReettaaiilliinngg SSeerrvviicceess
its commitments in the area of retailing services,
although some concerns remain with regard to
licensing discrimination. China continues to maintain
restrictions on the retailing of processed oil.
China committed that, immediately upon its
accession to the WTO, it would begin to eliminate
national treatment and market access limitations on
foreign enterprises providing retailing services
through a local presence pursuant to an agreed
schedule of liberalization. Within three years after
accession (or by December 11, 2004), almost all of
the required liberalization should have been
implemented. By this time, China agreed to permit
foreign enterprises to supply retailing services
through wholly foreign-owned enterprises. In
addition, by this time, exceptions that China had

127
been allowed to maintain for pharmaceutical
products, pesticides, mulching films and processed
oil were to be eliminated. An exception for chemical
fertilizers was to be eliminated within five years
after accession (or by December 11, 2006).
As previously reported, the April 2004 distribution
regulations issued by MOFCOM lifted market access
and national treatment limitations on wholly
foreign-owned enterprises and removed the product
exceptions for pesticides and mulching films as of
the scheduled phase-in date of December 11, 2004.
These regulations also removed the product
exception for chemical fertilizer as of the scheduled
phase-in date of December 11, 2006. In addition, in
the revised Catalogue Guiding Foreign Investment in
Industry (Foreign Investment Catalogue), issued in
December 2011, China removed the retailing of
over-the-counter medicines from the “restricted”
category of foreign investments.
PPrroocceesssseedd OOiill
China committed to allow wholly foreign-owned
enterprises to sell processed oil, e.g., gasoline, at the
retail level by December 11, 2004, without any
market access or national treatment limitations.
However, to date, China has treated retail gas
stations as falling under the chain store provision in
its Services Schedule, which permits only joint
ventures with minority foreign ownership for “those
chain stores which sell products of different types
and brands from multiple suppliers with more than
30 outlets.” This treatment has severely restricted
foreign suppliers’ access to China’s retail gas market,
a situation that has since been exacerbated by
China’s restrictions on foreign enterprises that seek
to engage in wholesale distribution of crude oil and
processed oil. As in prior years, the United States is
working with U.S. industry to assess the effects of
China’s unwarranted restrictions on wholesale and
retail distribution in this sector and will continue to
engage the Chinese government in 2015 in an effort
to ensure that U.S. industry realizes the full benefits
to which it is entitled in this sector.
FFrraanncchhiissiinngg SSeerrvviicceess
its commitments in the area of franchising services.
As part of its distribution commitments, China
committed to permit the cross-border supply of
franchising services immediately upon its accession
to the WTO. It also committed to permit foreign
enterprises to provide franchising services in China,
without any market access or national treatment
limitations, by December 11, 2004.
In December 2004, as previously reported, MOFCOM
issued new rules governing the supply of franchising
services in China, which included a requirement that
a franchiser own and operate at least two units in
China for one year before being eligible to offer
franchises in China. In 2007, following U.S.
engagement, China eased the requirement that a
franchiser own and operate at least two units in
China by allowing a franchiser to offer franchise
services in China if it owns and operates two units
anywhere in the world. The United States welcomed
this action and has been monitoring developments
in this area since then.
DDiirreecctt SSeelllliinngg SSeerrvviicceess
its commitments in the area of direct selling services,
although regulatory restrictions, including service
center requirements imposed on the operations of
direct sellers, continue to generate concern.
In its WTO accession agreement, China did not agree
to any liberalization in the area of direct selling, or
sales away from a fixed location, during the first
three years of its WTO membership. By December
11, 2004, however, China committed to lift market
access and national treatment restrictions in this
area.
As previously reported, the Chinese regulatory
authorities issued implementing measures in 2005

128
and 2006, which contained several problematic
provisions. For example, one provision requires a
direct seller to establish a service center in each
urban district in which it intends to do business –
which translates into many thousands of service
centers to carry out direct selling throughout China.
Another provision essentially outlaws multi-level
marketing practices allowed in every country in
which the U.S. industry operates – reportedly 170
countries in all – by refusing to allow direct selling
enterprises to pay compensation based on team
sales, where upstream personnel are compensated
based on downstream sales. Other problematic
provisions include a three-year experience
requirement that only applies to foreign enterprises,
not domestic enterprises, a cap on single-level
compensation, restrictions on the cross-border
supply of direct selling services and high capital
requirements that may limit smaller direct sellers’
access to the market. To date, extensive U.S.
engagement has failed to persuade China to
reconsider the various problematic provisions in
these measures.
Meanwhile, MOFCOM’s application and review
process initially proved to be opaque and slow,
although a number of companies, including several
foreign companies, obtained direct selling licenses.
However, beginning in May 2007, it appeared that
MOFCOM was not issuing any new licenses even
though several companies had applied for them. In
2009, following extensive U.S. engagement, China
issued a direct selling license to one additional U.S.
direct selling company, although no further licenses
have been issued to foreign companies. The United
States is continuing to closely monitor MOFCOM’s
progress in issuing new direct selling licenses.
FFiinnaanncciiaall SSeerrvviicceess
BBAANNKKIINNGG
China has taken a number of steps to implement its
banking services commitments, although some of
these efforts have generated concerns, and there are
some instances in which China still does not seem to
have fully implemented particular commitments,
such as with regard to Chinese-foreign joint banks
and bank branches.
Prior to its accession to the WTO, China had allowed
foreign banks to conduct foreign currency business
in selected cities. Although China had also permitted
foreign banks, on an experimental basis, to conduct
domestic currency business, the experiment was
limited to foreign customers in two cities.
a five-year phase-in for banking services by foreign
banks. Specifically, China agreed that, immediately
upon its accession, it would allow U.S. and other
foreign banks to conduct foreign currency business
without any market access or national treatment
limitations and conduct domestic currency business
with foreign-invested enterprises and foreign
individuals, subject to certain geographic
restrictions. The ability of U.S. and other foreign
banks to conduct domestic currency business with
Chinese enterprises and individuals was to be
phased in. Within two years after accession, foreign
banks were also to be able to conduct domestic
currency business with Chinese enterprises, subject
to certain geographic restrictions. Within five years
after accession, foreign banks were to be able to
conduct domestic currency business with Chinese
enterprises and individuals, and all geographic
restrictions were to be lifted. Foreign banks were
also to be permitted to provide financial leasing
services at the same time that Chinese banks are
permitted to do so.
Since its accession to the WTO, China has taken a
number of steps to implement its banking services
commitments. At times, however, China’s
implementation efforts have generated concerns,
and there are some instances in which China still
does not seem to have fully implemented particular
commitments.
As previously reported, shortly after China’s
accession to the WTO, the People’s Bank of China
(PBOC) issued regulations governing foreign-funded

129
banks, along with implementing rules, which became
effective February 2002. The PBOC also issued
several other related measures. Although these
measures appeared to keep pace with the WTO
commitments that China had made, it became clear
that the PBOC had decided to exercise significant
caution in opening up the banking sector. In
particular, it imposed working capital requirements
and other requirements that exceeded international
norms and made it more difficult for foreign banks
to establish and expand their market presence in
China. Many of these requirements, moreover, did
not apply equally to foreign and domestic banks.
For example, China appears to have fallen behind in
implementing its commitments regarding the
establishment of Chinese-foreign joint banks. In its
Services Schedule, China agreed that qualified
foreign financial institutions would be permitted to
establish Chinese-foreign joint banks immediately
after China acceded, and it did not schedule any
limitation on the percentage of foreign ownership in
these banks. To date, however, China has limited
the sale of equity stakes in existing state-owned
banks to a single foreign investor to 20 percent,
while the total equity share of all foreign investors is
limited to 25 percent. For several years, the United
States and other WTO members have urged China to
relax these limitations, although no progress has yet
been achieved.
Another problematic area involves the ability of U.S.
and other foreign banks to participate in the
domestic currency business in China, the business
that foreign banks were most eager to pursue in
China, particularly with regard to Chinese
individuals. As previously reported, despite high
capital requirements and other continuing
impediments to entry into the domestic currency
business, participation of U.S. and other foreign
banks in the domestic currency business expanded
tremendously after China acceded to the WTO on
December 11, 2001, first with regard to foreign-
invested enterprises and foreign individuals and later
with regard to Chinese enterprises, subject to
geographic restrictions allowed by China’s WTO
commitments. China had committed to allow
foreign banks to conduct domestic currency business
with Chinese individuals by December 11, 2006, but
it was only willing to do so subject to a number of
problematic restrictions.
In November 2006, the State Council issued the
Regulations for the Administration of Foreign-funded
Banks. Among other things, these regulations
mandated that only foreign-funded banks that have
had a representative office in China for two years
and that have total assets exceeding $10 billion can
apply to incorporate in China. After incorporating,
moreover, these banks only become eligible to offer
full domestic currency services to Chinese individuals
if they can demonstrate that they have operated in
China for three years and have had two consecutive
years of profits. The regulations also restricted the
scope of activities that can be conducted by foreign
banks seeking to operate in China through branches
instead of through subsidiaries. In particular, the
regulations restricted the domestic currency
business of foreign bank branches. While foreign
bank branches can continue to take deposits from
and make loans to Chinese enterprises in domestic
currency, they can only take domestic currency
deposits of RMB 1 million ($164,000) or more from
Chinese individuals and cannot make any domestic
currency loans to Chinese individuals. In addition,
unlike foreign banks incorporated in China, foreign
bank branches cannot issue domestic currency credit
and debit cards to Chinese enterprises or Chinese
individuals.
Other problems arose once the Regulations for the
Administration of Foreign-funded Banks went into
effect in December 2006. For example, Chinese
regulators did not act on the applications of foreign
banks incorporated in China to issue domestic
currency credit and debit cards, or to trade or
underwrite commercial paper or long-term listed
domestic currency bonds.
In 2007 and 2008, working closely with U.S. banks,
the United States was able to use the SED process
and meetings of the U.S.-China Joint Economic

130
Committee to improve the access of U.S. banks to
the domestic currency business. For example, China
committed to act on the applications of foreign
banks incorporated in China seeking to issue their
own domestic currency credit and debit cards.
However, the PBOC insists as a condition of its
approval that the banks move the data processing
for these credit and debit cards onshore, a costly
step that has limited foreign participation in the
market to date. In addition, China agreed to reduce
its limitations on foreign bank issuance of local
currency denominated subordinated debt in order to
be able to raise capital to expand operations. China
also agreed to allow foreign incorporated banks to
trade bonds in the interbank market on the same
basis as Chinese banks and to allow foreign banks to
increase liquidity on an exceptional basis through
guarantees or loans from affiliates abroad.
At the July 2009, May 2010 and May 2011 S&ED
meetings, China reiterated its commitment to
deepen financial system reform. In addition, China
agreed to continue to allow foreign-invested banks
incorporated in China that meet relevant prudential
requirements to enjoy the same rights as domestic
banks with regard to underwriting corporate bonds
in the interbank market. Subsequently, in April
2011, China’s interbank bond market oversight body
issued qualifying criteria for underwriters and
opened up a window for applications. Many U.S.
and other foreign institutions applied, although only
one foreign bank has been approved to underwrite.
At the May 2011 S&ED meeting, China took
additional steps to deepen financial market opening.
Specifically, China committed to allow locally
incorporated U.S. and other foreign banks in China
to distribute mutual funds, act as custodians for
mutual funds, and serve as margin depository banks
for qualified foreign institutional investors engaging
in financial futures transactions.
At the July 2013 S&ED meeting, China pledged that
locally incorporated foreign banks and securities
firms will be able to directly trade government bond
futures and to encourage investment by foreign and
domestic institutional investors in these financial
products. China also welcomed participation by
foreign firms in corporate bond underwriting and
pledged to facilitate further evaluations of
underwriters in a fair and open process. China
further agreed to give active consideration to
reducing the waiting period for a foreign bank
branch to apply for an RMB license.
In 2014, the United States continued to press China
for further liberalization. Subsequently, at the July
2014 S&ED meeting, China committed to actively
study policies concerning the further opening-up of
the banking sector. In 2015, the United States will
continue to make every effort to ensure that China
fully implements its WTO commitments and that
U.S. banks realize the full benefits to which they are
entitled.
MMOOTTOORR VVEEHHIICCLLEE FFIINNAANNCCIINNGG
China has implemented its commitments with regard
to motor vehicle financing.
open up the motor vehicle financing sector to
foreign non-bank financial institutions for the first
time, and it did so without any limitations on market
access or national treatment. These commitments
became effective immediately upon China’s
accession to the WTO. As previously reported, China
finally implemented the measures necessary to
allow foreign financial institutions to obtain licenses
and begin offering auto loans in October 2004,
nearly three years after its accession to the WTO.
At the May 2012 S&ED meeting, China committed to
approve applications by qualified auto financing
companies (AFCs), including foreign-invested
entities, to issue financial bonds in China, so that
they have regular access to financing in the
interbank bond market. In addition, China
committed that foreign-invested and Chinese-
invested AFCs would enjoy the same treatment in
issuing asset-backed securities during the trial period
of asset securitization in China.

131
IINNSSUURRAANNCCEE
China has issued measures implementing most of its
insurance commitments, but these measures have
also created market access problems and foreign
insurers’ share of China’s market remains very low.
Prior to its accession to the WTO, China allowed
selected foreign insurers to operate in China on a
limited basis and in only two cities. Three U.S.
insurers had licenses to operate, and several more
were either waiting for approval of their licenses or
were qualified to operate but had not yet been
invited to apply for a license by China’s insurance
regulator, the China Insurance Regulatory
Commission (CIRC).
phase out existing geographic restrictions on all
types of insurance operations during the first three
years after accession. It also agreed to expand the
ownership rights of foreign companies over time.
Specifically, China committed to allow foreign life
insurers to hold a 50-percent equity share in a joint
venture upon accession. China also committed to
allow foreign property, casualty and other non-life
insurers to establish as a branch or as a joint venture
with a 51-percent equity share upon accession and
to establish as a wholly foreign-owned subsidiary
two years after accession. In addition, foreign
insurers handling large scale commercial risks,
marine, aviation and transport insurance, and
reinsurance were to be permitted to establish as a
wholly foreign-owned subsidiary five years after
accession. China further agreed to permit all foreign
insurers to expand the scope of their activities to
include health, group and pension/annuities lines of
insurance within three years after accession.
China also made additional significant commitments
relating specifically to branching. China committed
to allow non-life insurance firms to establish as a
branch in China upon accession and to permit
internal branching in accordance with the lifting of
China’s geographic restrictions. China further
agreed that foreign insurers already established in
China that were seeking authorization to establish
branches or sub-branches would not have to satisfy
the requirements applicable to foreign insurers
seeking a license to enter China’s market.
As previously reported, CIRC issued several new
insurance regulations and implementing rules after
China acceded to the WTO. These measures
implemented many of China’s commitments, but
they also created problems in the critical areas of
capitalization requirements, branching and
transparency, and foreign insurers have often faced
restrictions or obstacles that hinder them from
expanding their presence in China’s market.
Since China’s accession to the WTO, the United
States has used all available opportunities to engage
China and its insurance regulator, CIRC, on needed
improvements to China’s insurance regime. On the
bilateral front, this engagement has included the
JCCT process, the S&ED process and an Insurance
Dialogue with CIRC, while multilateral engagement
has included transitional review meetings before the
WTO’s Committee on Trade in Financial Services and
the Trade Policy Reviews for China.
As previously reported, U.S. engagement has led to
improvements with regard to capital requirements
and licensing, although many other needed
improvements remain. For example, China
continues to use formal and informal policies and
practices to maintain market access barriers that
limit the market share of foreign-invested insurance
companies in China following China’s accession to
the WTO. At present, in the life insurance sector,
where China only permits foreign companies to
participate in Chinese-foreign joint ventures, with
foreign equity capped at 50 percent, the market
share of these foreign-invested companies is less
than four percent. The market share of foreign-
invested companies in the non-life (i.e., property and
casualty) insurance sector is only one percent. In
addition, China limits foreign insurance brokers from
providing a full scope of services, while China has
entirely closed its market for political risk insurance
to foreign participation. In May 2012, as discussed

132
below, China did open up its mandatory third-party
liability auto insurance market to foreign
participation, which was a welcome shift.
In addition, the United States has continued to press
China regarding the need for CIRC to follow non-
discriminatory procedures to approve U.S.
companies for internal branches and sub-branches,
following established regulatory time frames and
recognizing the right to obtain approval for multiple,
concurrent branches. The United States has also
addressed measures that could further restrict
branching, such as the Administrative Measures on
Insurance Companies, a draft measure circulated by
CIRC in August 2009 that included new application
procedures for branches and sub-branches. The
United States used an Insurance Dialogue meeting in
September 2009 and additional engagement during
the run-up to the October 2009 JCCT meeting to
persuade CIRC to modify the draft measure to avoid
over-penalizing companies for minor violations of
regulations, which would have inordinately delayed
them from seeking new branches. The United States
is continuing to work with CIRC to advocate for non-
discrimination in its application of the final measure,
which entered into force in October 2009.
Meanwhile, using annual U.S.-China Insurance
Dialogue meetings and related bilateral meetings,
including the JCCT and S&ED processes, the United
States has continued to press CIRC to further open
up the life insurance, insurance brokerage and other
insurance sectors, and to follow non-discriminatory
procedures when approving new licensing requests
and internal branching requests. At the July 2013
S&ED meeting, China announced that it plans to
expand its pilot projects for tax-deferred insurance
pension products to additional regions and that it
will treat domestic enterprises and foreign-invested
enterprises equally with regard to participation and
any future expansion. This year, at the July 2014
S&ED meeting, China announced that it welcomes
foreign companies to submit applications for internal
branches and that it will follow the timeframes set
forth in its own regulations in reviewing and
approving those applications.
Despite continuing challenges, a number of U.S. and
other foreign insurers are currently operating in
China, and they are continuing to work to broaden
their presence in China. In 2015, as in prior years,
the United States will continue to use both bilateral
and multilateral engagement to address issues of
concern to these and other U.S. insurers. The United
States is committed to seeking market access for
U.S. insurers on a transparent, fair and equitable
basis.
EEnntteerrpprriissee AAnnnnuuiittiieess
China maintains a complex approval process for the
licensing of suppliers of enterprise annuities
services, and China’s regulatory authorities – which
include the Ministry of Human Resources and Social
Security as well as the China Banking Regulatory
Commission, the China Securities Regulatory
Commission and CIRC – have not granted any new
licenses in more than five years. Even under
previous licensing windows, China licensed very few
foreign suppliers, and only for limited elements of
enterprise annuities services. The United States has
been urging China to re-open its licensing process for
suppliers of enterprise annuities services and to
ensure that its licensing procedures are transparent
and do not discriminate against qualified foreign
suppliers. In 2015, the United States will continue to
press China to re-open this sector on a transparent
and non-discriminatory basis.
MMaannddaattoorryy TThhiirrdd PPaarrttyy LLiiaabbiilliittyy AAuuttoo IInnssuurraannccee
For years, the United States had sought the opening
of China’s mandatory third party liability auto
insurance services sector to foreign-invested
insurance companies. During the May 2011 S&ED
meeting, China pledged to “actively study and push
forward the opening of” mandatory third party
liability auto insurance in China to foreign-invested
insurance companies, even though China was not
required to open this services sector by its GATS
commitments. At the May 2012 S&ED meeting,
China noted that it had amended its regulations to
allow foreign-invested insurance companies to sell

133
mandatory third party liability auto insurance in
China. U.S. and other foreign insurers have strongly
welcomed the opening of this market, and many of
them are now selling mandatory third party liability
auto insurance in China.
FFIINNAANNCCIIAALL IINNFFOORRMMAATTIIOONN
In response to a WTO case brought by the United
States, China has established an independent
regulator for the financial information sector and has
removed restrictions that had placed foreign
suppliers at a serious competitive disadvantage.
In its WTO accession agreement, as noted above,
China committed that, for the services included in its
Services Schedule, the relevant regulatory
authorities would be separate from, and not
accountable to, any service suppliers they regulated,
with two specified exceptions. One of the services
included in China’s Services Schedule – and not listed
as an exception – is the “provision and transfer of
financial information, and financial data processing
and related software by suppliers of other financial
services.”
As previously reported, following its accession to the
WTO, China did not establish an independent
regulator in the financial information services sector.
Xinhua, the Chinese state news agency, remained
the regulator of, and became a major market
competitor of, foreign financial information service
providers in China. In addition, in 2006, a major
problem developed when Xinhua issued a measure
that precluded foreign providers of financial
information services from contracting directly with
or providing financial information services directly to
domestic Chinese clients. Instead, foreign financial
information service providers were required to
operate through a Xinhua-designated agent, and the
only agent designated was a Xinhua affiliate. These
new restrictions did not apply to domestic financial
information service providers and, in addition,
contrasted with the rights previously enjoyed by
foreign information service providers since the
issuance of the 1996 rules, well before China’s
accession to the WTO in December 2001.
In March 2008, after it had become clear that
sustained bilateral engagement of China would not
resolve the serious WTO concerns generated by
Xinhua’s restrictions, the United States and the EU
initiated WTO dispute settlement proceedings
against China. Canada later joined in as a co-
complainant in September 2008. In November 2008,
an MOU was signed in which China addressed all of
the concerns that had been raised by the United
States, the EU and Canada. Among other things,
China agreed to establish an independent regulator,
to eliminate the agency requirement for foreign
suppliers and to permit foreign suppliers to establish
local operations in China, with all necessary
implementing measures issued by April 2009,
effective no later than June 2009. Subsequently,
China timely issued the measures necessary to
comply with the terms of the MOU.
EELLEECCTTRROONNIICC PPAAYYMMEENNTT SSEERRVVIICCEESS
China has not yet implemented electronic payment
services commitments that were scheduled to have
been phased in no later than December 11, 2006.
China agreed to implement these commitments by
July 2013 in order to comply with the rulings in a
WTO case brought by the United States, but it has
not yet done so.
In the Services Schedule accompanying its Protocol
of Accession, China committed to remove market
access limitations and provide national treatment for
foreign suppliers providing payment and money
transmission services, including credit, charge, and
debit cards. This commitment was to be
implemented by no later than December 11, 2006.
In the years leading up to 2006, China’s regulator,
the PBOC, placed severe restrictions on foreign
suppliers of electronic payment services, like the
major U.S. credit card companies, which typically
provide electronic payment services in connection

134
with the operation of electronic networks that
process payment transactions involving credit, debit,
prepaid and other payment cards. Through these
services, they enable, facilitate and manage the flow
of information and the transfer of funds from
cardholders’ banks to merchants’ banks. However,
the PBOC prohibited foreign suppliers from handling
the typical payment card transaction in China, in
which a Chinese consumer makes a payment in
China’s domestic currency, known as the renminbi,
or RMB. Instead, through a variety of measures, the
PBOC created a national champion, allowing only
one domestic entity, CUP, an entity created by the
PBOC and owned by participating Chinese banks, to
provide these services.
Beginning in 2006, as the deadline for
implementation of China’s commitments
approached, a number of troubling proposals were
attributed to CUP and apparently supported by the
PBOC. The common theme of these proposals was
that CUP would continue to be designated as a
monopoly provider of electronic payment processing
services for Chinese consumers for RMB processing,
and that no other providers would be able to enter
this market. Through a series of bilateral meetings
beginning in September 2006, the United States
cautioned China that none of the proposals being
attributed to CUP seemed to satisfy the
commitments that China had made to open up its
market to foreign providers of electronic payment
services. The United States reinforced this message
during the transitional reviews before the
Committee on Trade in Financial Services, held in
November 2006. The United States also raised this
issue on the margins of the first SED meeting, held in
December 2006.
After China’s deadline of December 11, 2006, which
passed without any action having been taken by
China, the United States again pressed China. The
United States raised its concerns in connection with
SED meetings and other bilateral meetings in 2007
and 2008 as well as at the WTO during the
transitional reviews before the Committee for Trade
in Financial Services in 2007, 2008 and 2009 and
China’s second and third Trade Policy Reviews, held
in 2008 and 2010, without making progress.
In September 2010, the United States brought a
WTO case challenging China’s various restrictions on
foreign suppliers of electronic payment services in
an effort to ensure that U.S. suppliers would enjoy
the full benefits of the market-opening
commitments that China made in its Services
Schedule. Consultations were held in October 2010.
At the United States’ request, a WTO panel was
established to hear this case in March 2011, and six
other WTO members joined the case as third parties.
Hearings before the panel took place in October and
July 2012. The panel found the challenged
restrictions to be inconsistent with China’s
commitments under the GATS. China decided not to
appeal the panel’s decision and subsequently agreed
July 2013. China did take some steps toward
complying with the WTO’s rulings. China repealed
certain challenged measures, but imposed a new
licensing requirement for foreign suppliers to be able
to provide these services, without also taking the
critical step of establishing a process for foreign
suppliers actually to obtain the needed licenses. In
rulings.
LLeeggaall SSeerrvviicceess
China has issued measures intended to implement its
legal services commitments, although these
measures give rise to WTO compliance concerns
because they impose an economic needs test,
restrictions on the types of legal services that can be

135
provided and lengthy delays for the establishment of
new offices.
Prior to its WTO accession, the Chinese government
had imposed various restrictions in the area of legal
services. The Chinese government maintained a
prohibition against representative offices of foreign
law firms practicing Chinese law or engaging in
profit-making activities of any kind. It also imposed
restrictions on foreign law firms’ formal affiliation
with Chinese law firms, limited foreign law firms to
one representative office and maintained geographic
restrictions.
China’s WTO accession agreement provides that,
upon China’s accession to the WTO, foreign law
firms may provide legal services through one profit-
making representative office, which must be located
in one of several designated cities in China. The
foreign representative offices may act as “foreign
legal consultants” who advise clients on foreign legal
matters and may provide information on the impact
of the Chinese legal environment, among other
things. They may also maintain long-term
“entrustment” relationships with Chinese law firms
and instruct lawyers in the Chinese law firm as
agreed between the two law firms. In addition, all
quantitative and geographic limitations on
representative offices were to have been phased out
within one year of China’s accession to the WTO,
which means that foreign law firms should have
been able to open more than one office anywhere in
China beginning on December 11, 2002.
As previously reported, the State Council issued the
Regulations on the Administration of Foreign Law
Firm Representative Offices in December 2001, and
the Ministry of Justice issued implementing rules in
July 2002. While these measures removed some
market access barriers, they also generated concern
among foreign law firms doing business in China. In
many areas, these measures were ambiguous.
Among other things, these measures could be
interpreted as imposing an economic needs test for
foreign law firms that want to establish offices in
China, which raises WTO concerns. In addition, the
procedures for establishing a new office or an
additional office seem unnecessarily time-
consuming. For example, a foreign law firm may not
establish an additional representative office until its
most recently established representative office has
been in practice for three consecutive years.
Furthermore, new foreign attorneys must go
through a lengthy approval process that can take
more than one year.
These measures also include other restrictions that
make it difficult for foreign law firms to take
advantage of the market access rights granted by
China’s WTO accession agreement. For example,
foreign attorneys may not take China’s bar
examination, and foreign law firms may not hire
registered members of the Chinese bar as attorneys
to provide advice on Chinese law, nor may foreign
attorneys working in China otherwise provide advice
on Chinese law to clients. Foreign law firms have
also reported that they are not given the uniform
right to attend or provide consultancy services to
clients during regulatory proceedings administered
by Chinese government agencies and that at times
they are barred from accompanying their clients to
certain government meetings, raising concerns in
light of China’s GATS commitments. In addition,
foreign law firms are subject to taxes at both the
firm and individual levels, while domestic law firms
are only taxed as partnerships.
The United States has raised its concerns in this area
both bilaterally through the JCCT process and at the
WTO during meetings before the Council for Trade in
Services and China’s Trade Policy Reviews, with
support from other WTO members. To date,
although a number of U.S. and other foreign law
firms have been able to open additional offices in
China, little progress has been made on the other
issues affecting access to China’s legal services
market. The United States will continue to engage
China in 2015 in an attempt to resolve these
outstanding concerns, including through the
exchange of ideas as contemplated by a
commitment that China made at the December 2014
JCCT meeting.

136
TTeelleeccoommmmuunniiccaattiioonnss
It appears that China has nominally kept to the
agreed schedule for phasing in its WTO
commitments in the telecommunications sector.
However, restrictions maintained by China on value-
added services have created serious barriers to
market entry for foreign suppliers seeking to provide
value-added services. In addition, China’s
restrictions on basic services, such as informal bans
on new entry, a requirement that foreign suppliers
can only enter into joint ventures with state-owned
enterprises and exceedingly high capital
requirements, have totally blocked foreign suppliers
from accessing China’s basic services market.
In the Services Schedule accompanying its WTO
accession agreement, China committed to permit
foreign suppliers to provide a broad range of
telecommunications services through joint ventures
with Chinese companies, including domestic and
international wired services, mobile voice and data
services, value-added services (such as electronic
mail, voice mail and on-line information and
database retrieval) and paging services. The foreign
equity stake permitted in the joint ventures was to
increase over time, reaching a maximum of 49
percent for basic telecommunications services and
50 percent for value-added services. In addition, all
geographical restrictions were to be eliminated
within two to six years after China’s WTO accession,
depending on the particular services sector.
Importantly, China also accepted key principles from
the WTO Reference Paper on regulatory principles.
As a result, China became obligated to separate the
regulatory and operating functions of the
telecommunications regulatory agency in China
(now known as MIIT), which was the operator of
China Telecom at the time of China’s accession to
the WTO. China also became obligated to adopt
pro-competitive regulatory principles, such as cost-
based pricing and the right of interconnection, which
are necessary for foreign-invested joint ventures to
compete with incumbent suppliers such as China
Telecom, China Unicom and China Mobile.
Even though China appears to have nominally
implemented its WTO commitments on schedule, no
meaningful market-opening progress has taken place
in the telecommunications services sector through
2013. As previously reported, with regard to basic
services, MIIT’s imposition of informal bans on new
entry, limitations on foreign suppliers’ selection of
Chinese joint venture partners and high capital
requirements, have continued to present formidable
barriers to market entry for foreign suppliers. In
addition, the approach that China has taken to
regulating value-added services, including its
insistence on classifying certain value-added services
as basic services when provided by foreign suppliers,
and other uncertainties presented by China’s
classification of value-added services, have
presented similarly formidable barriers to foreign
entry. In May 2013, China released a draft revision
of its Catalogue of Telecommunications Services that
seeks to expand the scope of value-added services to
include a range of Internet-related services, even
though these services are not telecommunications
services, as discussed below in the Internet-related
Services section below.
As China nears the end of its thirteenth year of WTO
membership, the United States is unaware of any
domestic or foreign application for a new stand-
alone license to provide basic telecommunications
services that has completed the MIIT licensing
process, even in commercially attractive areas such
as the re-sale of basic telecommunications services,
leased line services or corporate data services. In
fact, at present, the number of suppliers of basic
telecommunications services appears to be frozen at
three Chinese state-owned enterprises, limiting the
opportunities for new joint ventures and reflecting a
level of competition that is extraordinarily low given
the size of China’s market. Meanwhile, with regard
to value-added services, the Chinese regulator –
MIIT – had licensed more than 29,000 domestic
suppliers as of November 2013, but only 41 foreign
suppliers.
In May 2013, China introduced rules establishing a
pilot program for the resale of mobile services,

137
which can increase competitive opportunities in
China’s heavily concentrated market. The United
States is very concerned that foreign firms are
currently excluded from the pilot program, while
China has issued licenses to approximately two
dozen Chinese suppliers. To date, the United States
has raised its concerns with China through the JCCT
process, without success.
With regard to satellite services, such as video
transport services for Chinese broadcasters or cable
companies, U.S. satellite operators remain severely
hampered by Chinese policies that prohibit foreign
satellite operators from obtaining licenses to provide
these services in China and that instead only allow a
foreign satellite operator to use a licensed Chinese
satellite operator as an agent to provide these
services. These policies have made it difficult for
foreign satellite operators to develop their own
customer base in China, as Chinese satellite
operators essentially have a “first right of refusal”
with regard to potential customers.
Many of the difficulties faced by foreign suppliers in
accessing China’s telecommunications market seem
directly attributable to the actions of China’s
telecommunications regulator. While the regulator,
MIIT, is nominally separate from China’s
telecommunications firms, it maintains extensive
influence and control over their operations and
continues to use its regulatory authority to
disadvantage foreign firms.
If China takes the initiative, its planned new
Telecommunications Law could be a vehicle for
addressing some of the key existing market access
barriers and other problematic aspects of China’s
current telecommunications regime. A draft of this
long-awaited law has been under consideration for
at least 12 years, although, to date, the Chinese
government has not made a draft available for public
comment, despite repeated requests from the
United States and other WTO members.
Information obtained through informal channels
indicates that although some proposed provisions
are helpful, others, including a possible codification
of China’s foreign equity caps for basic and value-
added telecommunications services, appear to
conflict with China’s commitment in its GATS
Schedule to negotiate further liberalization.
Over the years, the United States has raised its many
telecommunications concerns with China, using
bilateral engagement, particularly the JCCT process,
and WTO meetings, including the annual transitional
reviews before the Council for Trade in Services and
China’s Trade Policy Reviews, where the United
States has received support from other WTO
members. These efforts, however, achieved little
progress.
Throughout 2014, principally using the JCCT process,
the United States again vigorously engaged China on
the range of telecommunications services issues,
including priority issues such as providing market
access for foreign suppliers in connection with
China’s planned pilot projects on the resale of
mobile telecommunications services and, as
discussed above, not moving forward with a
codification of foreign equity caps for basic and
value-added telecommunications services that
would be inconsistent with China’s GATS
commitments or with a Catalogue of
Telecommunications Services that imposes new
restrictions on Internet-enabled services, as
discussed above. By the time of the December 2014
JCCT meeting, however, the United States had been
unable to persuade China to make any significant
changes. In 2015, the United States will continue to
engage China vigorously on these and other issues
that contribute to the absence of meaningful
market-opening in China’s telecommunications
services sector.
AAuuddiioo--vviissuuaall aanndd RReellaatteedd SSeerrvviicceess
China has taken steps to comply with the rulings in a
WTO case brought by the United States with regard
to the distribution of DVDs and sound recordings,
although more steps are needed. Meanwhile,
China’s restrictions in the area of theatre services
have wholly discouraged investment by foreign

138
suppliers, and China’s restrictions on services
associated with television and radio greatly limit
As discussed in the Distribution Services section
above, in 2011, China removed various importation
and distribution restrictions affecting books,
newspapers, journals, sound recordings and DVDs in
response to a successful WTO case brought by the
United States. China also entered into an MOU with
the United States in 2012 providing increased and
improved market access for imported theatrical
films. At the same time, China’s regulation of other
audiovisual and related services, including services
associated with theatres (where China made a WTO
commitment to allow 49 percent foreign ownership)
as well as television and radio stations, production
and programming (for which China made no
commitments), has remained highly restricted.
With regard to theatres, China’s ownership
restrictions have made it unattractive for foreign
companies to enter into Chinese-foreign joint
ventures. Currently, no U.S. company is involved in
the ownership or operation of a Chinese theatre.
The restrictions applicable to China’s television and
radio sectors are myriad. China does not permit
private capital, whether domestic or foreign, to be
used to establish or operate a television station or a
radio station. It similarly closes private capital out of
radio and television signal broadcasting and relay
stations, satellite networks and backbone networks.
For television production, Chinese-foreign joint
ventures must have a minimum capital requirement
of RMB 2 million (approximately $330,000), foreign
ownership is capped at 49 percent, and two-thirds of
the programs of the joint venture must have Chinese
themes. In addition, with regard to television
programming generally, China imposes highly
restrictive quotas. The Administrative Measures on
the Import and Broadcast of Extraterritorial
Television Programs, effective since 2004, restricts
foreign television drama and film programming to no
more than 25 percent of total air time, and other
foreign programming to no more than 15 percent of
total air time. Foreign programming, including
animated programs, is banned between 7:00 p.m.
and 10:00 p.m. on terrestrial stations. In addition,
the Interim Regulation on Digital Cable TV Pay
Channels, a 2003 measure, restricts foreign
programming to a maximum of 30 percent of total
air time on pay television channels. A newer
measure, issued in October 2013, limits satellite
stations to the licensing of one foreign program per
year, and it prohibits it from being aired during
prime time.
IInntteerrnneett--rreellaatteedd SSeerrvviicceess
non-transparent and impacts a broad range of
Internet. In addition, China’s treatment of foreign
companies seeking to participate in the development
of cloud computing, including computer data and
storage services provided over the Internet, raises
concerns in light of China’s GATS commitments.
non-transparent and impacts a broad range of
Internet. While China is experiencing rapid
development in online businesses such as retail
websites, search engines, network education, online
advertisements, audio-video services, paid electronic
mail, short messages, online job searches, Internet
consulting, mapping services, applications, web
domain registration, electronic trading and online
gaming, Chinese companies dominate the China
market, due primarily to restrictions imposed on
foreign companies by the Chinese government.
Foreign companies seeking to participate in the
development of cloud computing, including
computer data and storage services provided over
the Internet, are not permitted to obtain Internet
service provider (ISP) or Internet Data Center (IDC)
licenses in China. Instead, a foreign company can
only partner with a Chinese company holding an ISP
or IDC license. In addition, China has generated
WTO concerns by seeking to impose value-added

139
telecommunications licensing requirements on this
sector, including a 50 percent equity cap on
investments by foreign companies, even though the
services at issue are not telecommunications
services. Throughout 2013 and 2014, using the JCCT
process, the United States pressed China to cease
requiring value-added telecommunications services
licenses for companies that use the Internet as a
platform for providing these and other services to
Chinese businesses or consumers, where the
supplier neither owns nor controls the
telecommunications transmission capacity used to
supply the services. The United States also pressed
China to allow wholly foreign-owned enterprises to
supply these services. To date, however, the United
States has been unable to persuade China to make
any significant changes in this area. In 2015, the
United States will continue to engage China
vigorously on these issues.
In a development of concern relative to China’s GATS
commitments, China issued draft Network Publishing
Service Management Regulations in December 2012.
This draft measure would prohibit Chinese-foreign
contractual joint ventures, Chinese-foreign
cooperative joint ventures and wholly foreign-
owned enterprises from engaging in “network
publishing services,” which China appears to have
defined broadly to cover a wide range of Internet-
based distribution services. The United States
submitted written comments on the draft measure
in January 2013, and to date China has not issued a
final measure.
While the Chinese government recognizes the
potential of electronic commerce to promote
exports and increase competitiveness, a variety of
Chinese government policies and practices impede
progress toward establishing a viable commercial
environment, adversely affecting both Chinese
companies and foreign companies. For example,
several Chinese ministries have jurisdiction over
electronic commerce and impose a range of
burdensome restrictions on Internet use (such as
registration requirements for web pages and
arbitrary and nontransparent content controls),
stifling the free flow of information and the
consumer privacy needed for electronic commerce
to flourish. Encryption is also regulated, and the
frequent blocking of websites (including those of a
commercial nature) inhibits the predictability and
reliability of using electronic networks as a medium
of commerce. Other impediments to businesses and
consumers conducting online transactions in China
include the paucity of credit card payment
processing systems (exacerbated by state-owned
CUP’s monopoly over the processing of domestic
currency transactions), consumer reluctance to trust
online merchants, lack of secure online payment
systems, and inefficient delivery systems.
China also has yet to develop a legal framework
conducive to the rapid growth of electronic
commerce. Laws recognizing the validity of
“electronic contracting” tools and stressing the
importance of online privacy and security have been
proposed but not yet issued. A number of technical
problems also inhibit the growth of electronic
commerce in China, such as the rates charged by
Chinese government-approved ISPs, slow connection
speeds and relatively low Internet penetration in
China.
With regard to content control, Chinese government
officials from as many as 12 separate agencies, led
by the State Internet Information Office, closely
monitor and routinely filter Internet traffic entering
China, focusing primarily on the content that they
deem objectionable on political, social, religious or
other grounds. During politically sensitive periods,
such as surrounding meetings of the National Party
Congress or the National People’s Congress, the
restrictions typically increase significantly; specific
foreign websites can be completely blocked, while
overall Internet access can be extremely limited, and
Virtual Private Networks, on which many foreign
firms rely to conduct their online functions, can be
largely blocked. While the purpose of the Internet
restrictions purportedly is to address public interest
concerns enumerated in Chinese law, China’s
regulatory authorities frequently take actions that
appear to be arbitrary, rarely issue lists of banned

140
search terms or banned sites and provide little or no
justification or means of appeal when they block
access to all or part of a website, putting providers
of Internet-enabled services in a precarious position,
as they attempt to comply with Chinese law that can
seem arbitrary.
This extensive regulatory regime for content control
directly or indirectly affects the range of foreign
suppliers seeking to deliver online services. It also
squarely affects foreign news agencies, which
operate in a services sector in which China made no
GATS commitments. China actively restricts who
may report news and places limits on what exactly
may constitute reportable news. In addition to
interfering with news reporting in the traditional
sense, these restrictions in some circumstances can
interfere with the normal business reporting
operations of non-news organizations, such as
multinational corporations, if they use the Internet
to keep clients, members, their headquarters or
others informed about events in China.
In 2011, following up on concerns that China’s
arbitrary blocking of commercial websites may
undercut U.S. rights under the GATS, the United
States invoked procedures available pursuant to the
GATS to pose a series of questions to China
regarding China’s regulation of the Internet. In
2012, after China had provided an initial response to
those questions, the United States met with China to
obtain more details. Since then, the United States
has continued its outreach to China to discuss these
issues in more detail and to seek more transparency
and predictability in China’s regulatory regime.
CCoonnssttrruuccttiioonn aanndd RReellaatteedd EEnnggiinneeeerriinngg
SSeerrvviicceess
China has issued measures intended to implement its
construction and related engineering services
commitments, although these measures are
problematic because they also impose high capital
requirements and other constraints that limit market
access.
Upon its WTO accession, China committed to permit
foreign enterprises to supply construction and
related engineering services through joint ventures
with foreign majority ownership, subject to the
requirement that those services only be undertaken
in connection with foreign-invested construction
projects and subject to registered capital
requirements that were slightly different from those
of Chinese enterprises. China agreed to remove
those conditions within three years of accession, and
it also agreed to allow wholly foreign-owned
enterprises to supply construction and related
engineering services for four specified types of
construction projects, including construction
projects wholly financed by foreign investment.
As previously reported, in 2002, the Ministry of
Construction (MOC), re-named the Ministry of
Housing and Urban-Rural Development in 2008, and
MOFTEC jointly issued the Rules on the
Administration of Foreign-invested Construction
Enterprises (known as Decree 113) and the Rules on
the Administration of Foreign-invested Construction
Engineering Design Enterprises (known as Decree
114). These decrees provide schedules for the
opening up of construction services and related
construction engineering design services to joint
ventures with majority foreign ownership and wholly
foreign-owned enterprises. Implementing rules for
Decree 113 were issued in 2003, but Decree 114
implementing rules were delayed until 2007.
Decrees 113 and 114 created concerns for U.S. firms
by imposing new and more restrictive conditions
than existed prior to China’s accession to the WTO,
when U.S. firms were permitted to work in China on
a project-by-project basis pursuant to MOC rules. In
particular, these decrees for the first time require
foreign firms to obtain qualification certificates. In
addition, the decrees for the first time require
foreign-invested enterprises to incorporate in China.
The decrees also impose high minimum registered
capital requirements as well as technical personnel
staff requirements that are difficult for many
foreign-invested enterprises to satisfy.

141
With regard to the Decree 113 regulatory regime for
construction enterprises, the United States has
actively engaged China, both bilaterally and at the
annual transitional reviews before the Council for
Trade in Services, in an effort to obtain needed
improvements. In particular, the United States has
urged China to maintain non-discriminatory
procedures under Decree 113 to enable foreign-
invested enterprises to carry out the same kinds of
projects that domestic companies can provide. The
United States also has sought a reduction in the
registered minimum capital requirements under
Decree 113 or the use of other arrangements, such
as bonds or guarantees in lieu of the capital
requirements.
With regard to the Decree 114 regulatory regime for
construction engineering design enterprises, the
United States generally welcomed the implementing
rules issued by MOC in 2007, as they temporarily
lifted foreign personnel residency and staffing
requirements imposed by Decree 114, and
recognized the foreign qualifications of technical
experts when considering initial licensing. The
United States has since continued to press China to
make these improvements permanent, using both
the March 2008 U.S.-China Best Practices Exchange
on Architecture, Construction and Engineering and
the transitional reviews before the Council for Trade
in Services in 2007, 2008 and 2009. Separately, the
United States has also urged China to give foreign
construction engineering design companies the right
to immediately apply for a comprehensive, “Grade
A” license, like domestic design companies can do.
Under existing rules, set forth in Circular 202, the
Implementation of the Administrative Provisions on
the Qualification of Construction and Engineering
Supervision and Design, issued by MOC in August
2007, foreign companies are subjected to more
restrictive licensing procedures than domestic
companies, although foreign companies have begun
to have more success with regard to their licensing
requests in 2009.
Meanwhile, in the area of project management
services, inconsistent regulations have allowed
market entry barriers for foreign-invested
enterprises to persist. In 2004, MOC issued the
Provisional Measures for Construction Project
Management. Known as Decree 200, this measure
requires, among other things, local establishment
and the possession of separate qualifications in the
area of construction, engineering or design. In
contrast, a measure issued by MOC and MOFCOM in
2007 – the Regulations on the Administration of
Foreign-invested Construction and Engineering
Service Enterprises – appears to allow foreign-
invested enterprises to provide project management
services without possessing separate construction,
engineering or design qualifications, but the absence
of implementing rules has resulted in inconsistent
interpretations of this measure. The United States
and U.S. industry has been urging China to clarify
this situation and ease the entry barriers currently
facing foreign-invested enterprises.
In 2015, as in prior years, the United States will
continue to engage China through bilateral channels
in an attempt to achieve improved market access for
U.S. firms.
EEdduuccaattiioonnaall SSeerrvviicceess
China made only limited GATS commitments in the
educational services sector, and it has not sought to
go beyond those commitments.
In its accession agreement, China made limited GATS
commitments relating to educational services and
specifically excluded educational services provided in
connection with national compulsory education
from the scope of those commitments. Currently,
China only permits foreign educators and trainers to
engage in nonprofit educational activities that do
not compete with the Ministry of Education-
supervised nine years of compulsory education,
thereby inhibiting much-needed foreign investment
in this part of the education sector. Foreign
universities may set up nonprofit operations, but
must have a Chinese university host and partner to
ensure that programs bar subversive content and

142
that imported informational material is adapted to
suit local conditions. In addition, China bans foreign
organizations and companies from offering
educational services via satellite networks.
EExxpprreessss DDeelliivveerryy SSeerrvviicceess
China has allowed foreign express delivery
companies to operate in the express delivery sector
and has implemented its commitment to allow
wholly foreign-owned subsidiaries by December 11,
2004. However, China has blocked foreign
companies’ access to the document segment of
China’s domestic express delivery market, and it has
threatened restrictions on foreign companies’ access
to the package segment of China’s domestic express
delivery market, which raises questions in light of
China’s WTO obligations.
The specific commitments that China made in the
area of express delivery services did not require
China to take implementation action upon its
accession to the WTO. Basically, China agreed to
increase the stake allowed by foreign express
delivery companies in joint ventures over a period of
years, with wholly foreign-owned subsidiaries
allowed within four years of accession.
Since its WTO accession, foreign express delivery
companies have continued to operate in China’s
express delivery sector, and China has implemented
its commitment to allow wholly foreign-owned
subsidiaries. Nevertheless, over the years, China has
also issued a variety of measures that have appeared
to undermine market access for foreign companies
and have raised questions in light of China’s WTO
obligations. As previously reported, through
sustained and high-level engagement, the United
States was able to persuade China to forego a series
of restrictive measures.
In August 2006, the State Council finalized its Postal
Reform Plan, which called for the separation of
China’s postal operations from the administrative
function of regulating China’s postal system, with
the State Postal Bureau (SPB) to serve as the
regulator and a new state-owned enterprise – the
China Post Group Corporation – to be set up to
conduct postal business. China promptly put this
plan into effect, and since then the United States has
been monitoring how SPB has been exercising its
new authority to license and regulate the express
delivery sector.
In August 2008, the draft of a problematic new
Postal Law went before the National People’s
Congress. This draft excluded foreign suppliers from
the document segment of China’s domestic express
delivery market and also contained other troubling
provisions. Despite extensive engagement by the
United States, the National People’s Congress
approved this law, effective October 2009, without
significant changes.
For the past three years, the United States has
worked intensively with China to alleviate problems
that foreign companies have encountered when
trying to obtain permits under a new permitting
system that SPB imposed for all suppliers of
domestic express package delivery services in China.
In May 2012, China committed that it would take
specific steps to provide fair access to its market for
foreign suppliers of these services and that it would
protect existing operations as that process unfolded.
Implementation of these commitments has proved
challenging. Although the Chinese regulator, SPB,
has moved forward with the issuance of more
permits, it has done so on a slower pace than had
been agreed. The United States has been pressing
SPB to quickly review and approve any new permits
that U.S. companies request, and it will continue to
do so for as long as is needed.
At the same time, in other ways, SPB’s regulation of
the express delivery sector in China has been overly
burdensome and restrictive. China’s new Postal
Law, along with related regulatory measures, such as
express business permitting measures and various
standards that China has developed and imposed

143
relating to services, labor and packaging, seem to
impose undue burdens on a sector that normally
would not be subject to this type of intrusive
regulation. As in 2014, the United States will
continue to engage China vigorously on these issues
going forward.
LLooggiissttiiccss SSeerrvviicceess
China has generally allowed foreign companies to
supply logistics services, but foreign companies can
face restrictions that are not applied to domestic
companies.
Logistics services include a number of the services
sectors listed in China’s GATS Schedule, including
road transport services, rail transport services and
freight forwarding agency services, among others.
Generally, at this time, foreign suppliers should be
permitted to supply these services in China without
geographic limitations or restrictions on the
percentage of foreign ownership.
Over the years, the Ministry of Transport has been
slow to approve applications by foreign companies
seeking to supply road transport and related logistics
services and has been unwilling to issue nationwide
trucking licenses, which has limited the ability of
foreign companies to build economies of scale. In
addition, while regulations issued by almost all major
Chinese cities restrict daytime access by trucks,
enforcement of these restrictions is often
discriminatory. Local regulatory authorities often
target their enforcement efforts at foreign
companies, while permitting local companies to
operate freely.
Separately, the Chinese government has directed
that support be provided to the domestic logistics
industry as part of various industry revitalization
plans. Foreign companies invested in China have
raised concerns about inadequate transparency with
regard to implementing measures, inequitable
treatment of foreign companies and unnecessary
industry standardization efforts.
AAvviiaattiioonn SSeerrvviicceess
China has provided additional market access to U.S.
providers of air transport services through a bilateral
agreement with the United States.
As previously reported, China took a significant step
in July 2004 to increase market access for U.S.
providers of air transport services. At that time,
China signed a landmark bilateral aviation
agreement with the United States that would more
than double the number of U.S. airlines allowed to
serve points in China and increase by five times the
number of flights allowed for passenger and cargo
services between the two countries over a six-year
period. The agreement also expanded opportunities
for code sharing and charter operations, granted
cargo carriers the right to provide surface
transportation in connection with international air
services and eliminated government regulation of
pricing as of 2008. U.S. passenger and cargo carriers
have since obtained additional routes and increased
flight frequencies, as envisioned by the agreement.
Bilateral engagement with China to improve the
existing aviation agreement resumed in April 2006
and yielded an amended agreement in May 2007,
which allows for significantly expanded passenger
and all-cargo air services and has further facilitated
trade, investment, tourism and cultural exchanges
between the United States and China. Among other
things, the agreement added ten new daily
passenger flights that U.S. carriers could operate to
the Chinese gateway cities of Beijing, Shanghai and
Guangzhou by 2012, allowed unlimited U.S. cargo
flights to any point in China and an unlimited
number of U.S. cargo carriers to serve the China
market as of 2011, increased from six to nine the
number of U.S. passenger carriers that could serve
the China market by 2011, and expanded

144
opportunities for U.S. carriers to code-share on
other U.S. carriers’ flights to China. The agreement
also committed the United States and China to
launch Open Skies negotiations in 2010, which they
did.
Nevertheless, negotiations have not been held since
2011 due to a lack of interest from the Chinese side.
In addition, China’s interpretation of cargo hub
provisions in the agreement has resulted in U.S.
cargo carriers experiencing difficulties in getting
their operating schedules approved by the General
Administration of Civil Aviation in China. U.S. and
Chinese negotiators are currently involved in a series
of technical discussions to resolve this issue.
MMaarriittiimmee SSeerrvviicceess
Even though China made only limited WTO
commitments relating to its maritime services sector,
it has increased market access for U.S. service
providers through a bilateral agreement.
As previously reported, even though China made
only limited WTO commitments relating to its
maritime services sector, it took a significant step in
December 2003 to increase market access for U.S.
service providers. The United States and China
signed a far-reaching, five-year bilateral agreement,
with automatic one-year extensions, which gives
U.S.-registered companies the legal flexibility to
perform an extensive range of additional shipping
and logistics activities in China. U.S. shipping and
container transport services companies, along with
their subsidiaries, affiliates and joint ventures, are
also able to establish branch offices in China without
geographic limitation.
TToouurriissmm aanndd TTrraavveell--rreellaatteedd SSeerrvviicceess
China treats foreign travel agencies less favorably
than domestic travel agencies in some respects,
while China’s regulation of foreign suppliers of global
distribution system services has generated concerns
in light of China’s GATS commitments.
In order to obtain a license, foreign travel agencies
doing business in China must register with the China
National Travel Administration (CNTA) and must
submit an initial feasibility study and annual reports
on future investment and possible expansion to
CNTA and MOFCOM. In addition, China continues to
impose an annual sales requirement on foreign
travel agencies, even though it does not impose the
same requirement on domestic travel agencies.
In December 2007, the United States and China
signed an MOU to facilitate Chinese group leisure
travel to the United States. The MOU permitted
marketing and sales activities in a limited number of
Chinese provinces to promote U.S. destinations and
U.S. travel-related businesses. Subsequent
engagement, including at the December 2010 JCCT
meeting and the November 2011 JCCT meeting, led
to China’s agreement to expand the MOU to cover
27 of China’s 31 provinces. Most recently, at the
December 2013 JCCT meeting, China announced that
it is broadening the scope of access under the MOU
to include two of the four remaining provinces.
Meanwhile, U.S. and European companies have
expressed GATS and other concerns regarding
China’s regulation of foreign suppliers of global
distribution system services. Although China issued
new regulations addressing global distribution
system services dated August 2012, these
regulations provide only a modest opening to
foreign suppliers, as they allow foreign suppliers to
handle domestic segments of an international flight
but not the most lucrative part of China’s market,
which is purely domestic travel within China.
LLEEGGAALL FFRRAAMMEEWWOORRKK
In order to address major concerns raised by WTO
members during its lengthy WTO accession
negotiations, China committed to broad legal
reforms in the areas of transparency, uniform
application of laws and judicial review. Each of these
reforms, if fully implemented, will strengthen the

145
rule of law in China’s economy and help to address
pre-WTO accession practices that made it difficult
for U.S. and other foreign companies to do business
and invest in China.
OOFFFFIICCIIAALL JJOOUURRNNAALL
China has re-confirmed its commitment to use a
single official journal for the publication of all trade-
related laws, regulations and other measures. To
date, it appears that some but not all central
government entities publish their trade-related
measures in this journal, although they take a
narrow view of the types of trade-related measures
that need to be published.
establish or designate an official journal dedicated to
the publication of all laws, regulations and other
measures pertaining to or affecting trade in goods,
services, TRIPS or the control of foreign exchange.
China also agreed to publish the journal regularly
and to make copies of all issues of the journal readily
available to enterprises and individuals.
Following its accession to the WTO, China did not
establish or designate an official journal. Rather,
China relied on multiple channels, including ministry
websites, newspapers and a variety of journals, to
provide information on trade-related measures.
As previously reported, following sustained U.S.
engagement, the State Council issued a notice in
March 2006 directing all central, provincial and local
government entities to begin sending copies of all of
their trade-related measures to MOFCOM for
immediate publication in the MOFCOM Gazette. The
United States subsequently monitored the
effectiveness of this notice, both to assess whether
all government entities regularly publish their trade-
related measures in the MOFCOM Gazette and
whether all types of measures are being published.
It appeared that adherence to the State Council’s
notice was far from complete. As a result, the
United States continued to engage China bilaterally
on the need for a fully compliant single official
journal, and at the December 2007 SED meeting
China re-confirmed its WTO commitment to publish
all final trade-related measures in a designated
official journal before implementation.
The United States has been closely monitoring the
effectiveness of China’s official journal commitment
since the December 2007 SED meeting. To date, it
appears that some but not all central government
entities publish trade-related measures in this
journal. At the same time, these government
entities tend to take a narrow view of the types of
trade-related measures that need to be published in
the official journal. As a result, while trade-related
regulations and departmental rules are often
published in the journal, it is less common for other
central government measures such as opinions,
circulars, orders, directives and notices to be
published, even though they are all binding legal
measures. Meanwhile, sub-central government
measures are rarely published in the official journal.
In the September 2012 WTO case challenging
numerous subsidies provided by the central
government and various sub-central governments in
China to automobile and automobile-parts
enterprises located in regions in China known as
“export bases,” the United States included claims
alleging that China had failed to abide by various
WTO transparency obligations, including China’s
obligation to publish the measures at issue in an
official journal. Consultations in this case took place
in November 2012. Since then, the two sides have
been engaging in further discussions exploring the
steps that China could take to address U.S. concerns.
In 2014, the United States continued to use the
S&ED process, including meetings of the U.S.-China
Transparency Dialogue, to press China for further
progress in implementing the official journal
agreement. The United States will continue to
pursue these efforts in 2015.

146
TTRRAANNSSLLAATTIIOONNSS
China has not yet established an appropriate
infrastructure to undertake the agreed upon
translations of its trade-related measures into one or
more of the WTO languages.
Another important transparency commitment that
China made in its WTO accession agreement involves
translations. China agreed to make available
translations of all of its laws, regulations and other
measures affecting trade in goods, services, TRIPS or
the control of foreign exchange into one or more of
the WTO languages (English, French and Spanish).
China further agreed that, to the maximum extent
possible, it would make translations of these laws,
regulations and other measures available before
implementation or enforcement, but in no case later
than 90 days afterwards.
China has a poor record of compliance with its
translation commitment. Indeed, after 13 years of
WTO membership, China still has not established an
appropriate infrastructure to undertake the agreed-
upon translations of its trade-related measures.
Although China has complained that it is too difficult
for it to live up to this commitment, this excuse lacks
credulity. As the United States has pointed out,
other WTO members translate all of their legal
measures, and one of these members – the EU –
translates its measures into 23 official languages.
The United States has raised this issue at the WTO
during the annual transitional reviews, including
during final transitional reviews before several
committees and councils that took place in 2011. In
addition, in the December 2010 WTO case
challenging what appeared to be prohibited import
substitution subsidies being provided by the Chinese
government to support the production of wind
turbine systems in China, the United States included
a claim alleging that China had violated its WTO
accession agreement by not translating the
measures at issue into a WTO language. China
repealed those measures following consultations.
More recently, in the September 2012 WTO case
challenging export base subsidies, discussed in the
Official Journal section above, the United States
included a claim alleging that China had failed to
make available translations of the measures at issue
into one or more WTO languages.
In 2014, the United States used the S&ED process to
press China to begin implementing its translations
commitment. At the July 2014 S&ED meeting, China
confirmed that it will publish English translations of
trade-related laws, regulations and departmental
rules. The United States urged China to ensure that
it provides the translation of a measure before the
measure’s implementation.
In 2015, the United States will closely monitor the
implementation of China’s July 2014 S&ED
commitment. The United States also will continue to
press China for timely translations and for further
progress in implementing the broader translations
agreement.
PPUUBBLLIICC CCOOMMMMEENNTT
China has adopted notice-and-comment procedures
for proposed laws and committed to use notice-and-
comment procedures for proposed trade- and
economic-related regulations and departmental
rules, subject to specified exceptions. However, in
practice, many of these types of measures are not
made public prior to implementation.
One of the most important of the transparency
commitments that China made in its WTO accession
agreement concerned the procedures for adopting
or revising laws, regulations and other measures
affecting trade in goods, services, TRIPS or the
control of foreign exchange. China agreed to
provide a reasonable period for public comment on
these new or modified laws, regulations and other
measures before implementing them, except in
certain specific instances, enumerated in China’s
accession agreement.

147
As previously reported, in the first few years after
China acceded to the WTO, China’s ministries and
agencies had a poor record of providing an
opportunity for public comment before new or
modified laws, regulations and other measures were
implemented. Although the State Council issued
regulations in December 2001 addressing the
procedures for the formulation of administrative
regulations and rules and expressly allowing public
comment, many of China’s ministries and agencies in
2002 continued to follow the practice prior to
China’s WTO accession, and no notable progress
took place in 2003. Typically, the ministry or agency
drafting a new or revised measure consulted with
and submitted drafts to other ministries and
agencies, as well as Chinese experts and affected
Chinese companies. At times, it also consulted with
select foreign companies, although it would not
necessarily share drafts with them. As a result, only
a small proportion of new or revised measures were
issued after a period for public comment, and even
in those cases the amount of time provided for
public comment was generally too short.
In 2004, some improvements took place, particularly
on the part of MOFCOM, which began following the
rules set forth in its Provisional Regulations on
Administrative Transparency, issued in November
2003. Nevertheless, basic compliance with China’s
notice-and-comment commitment continued to be
uneven in the ensuing years, as numerous major
trade-related laws and regulations were finalized
and implemented without the NPC or the
responsible ministry circulating advance drafts for
public comment.
In numerous bilateral meetings with the State
Council, MOFCOM and other Chinese ministries
since China’s WTO accession, including high-level
meetings such as JCCT meetings and SED meetings,
the United States emphasized the importance of
China’s adherence to the notice-and-comment
commitment in China’s accession agreement, both in
terms of fairness to WTO members and the benefits
that would accrue to China. Together with other
WTO members, the United States also raised this
issue repeatedly during regular WTO meetings and
as part of the annual transitional reviews conducted
before various WTO councils and committees.
At the SED meeting in December 2006, the United
States and China agreed to make transparency,
including notice-and-comment procedures and other
rulemaking issues, a topic for discussion in future
SED meetings. These discussions began at the May
2007 SED meeting, while the United States
continued to provide technical assistance to
facilitate Chinese government officials’
understanding of the workings, and benefits, of an
open and transparent rulemaking process. At the
December 2007 SED meeting, China specifically
committed to publish, when possible, proposed
trade-related measures and provide interested
parties a reasonable opportunity for comment.
China also agreed that it would publish these
proposed measures either in its designated official
journal or on an official website. At the June 2008
SED meeting, China then committed to publish all
proposed trade- and economic-related regulations
and departmental rules for public comment, subject
to specified exceptions, and to provide a comment
period of no less than 30 days. China indicated that
it would publish these proposed measures on the
Legislative Information Website maintained by the
SCLAO.
Two months earlier, in April 2008, the NPC’s
Standing Committee had instituted notice-and-
comment procedures for draft laws. Comments on
the draft laws are to be submitted to the NPC’s
Legislative Affairs Commission, and a new dedicated
website provides information about the comments
that have been submitted.
The United States monitored the effectiveness of
these changes. While the NPC began regularly
publishing draft laws for public comment, and the
State Council began regularly publishing draft
regulations for public comment, it appeared that
China was having more difficulty implementing
China’s new policy regarding trade- and economic-
related departmental rules. After 2008, China did

148
increase the number of proposed departmental rules
published for public comment on the SCLAO
website. However, a significant number of
departmental rules were still issued without first
having been published for public comment on the
SCLAO website. While some ministries published
departmental rules on their own websites, they
often allowed less than 30 days for public comment,
making it difficult for foreign interested parties to
submit timely and complete comments.
In October 2010, the State Council issued the
Opinions on Strengthening the Building of a
Government Ruling by Law. This measure directs
ministries and agencies at the central and provincial
levels of government to solicit public comment when
developing their rules, subject to certain exceptions.
However, the measure does not dictate the
procedures or time periods to be used.
At the May 2011 S&ED meeting, the United States
was able to persuade China to commit that it would
issue a measure in 2011 to implement the
requirement to publish all proposed trade- and
economic-related administrative regulations and
departmental rules on the SCLAO website for a
public comment period of not less than 30 days from
the date of publication, subject to certain
exceptions. In April 2012, shortly before the May
2012 S&ED meeting, the SCLAO published two
measures, the Interim Measures on Solicitation of
Public Comment on Draft Laws and Regulations and
the Notice on Related Issues Regarding Solicitation of
Public Comments on Draft Departmental Rules, on its
website. These two measures provide that
have to be posted on the Legislative Information
Website of the SCLAO.
Since the issuance of the two SCLAO measures in
2012, no noticeable improvement in the publishing
of departmental rules for public comment appears
to have taken place. At the July 2014 S&ED meeting,
China confirmed that these two measures are
binding on central government ministries, but it is
clear that the United States will need to continue to
press China for progress in this area.
EENNQQUUIIRRYY PPOOIINNTTSS
China has complied with its obligation to establish
enquiry points.
Another important transparency commitment in its
WTO accession agreement requires China to
establish enquiry points, where any WTO member or
foreign company or individual may obtain
information. As previously reported, China complied
with this obligation by establishing a WTO Enquiry
and Notification Center, now operated by
MOFCOM’s Department of WTO Affairs, in January
2002. Other ministries and agencies have also
established formal or informal, subject-specific
enquiry points. Since the creation of these various
enquiry points, U.S. companies have generally found
these various enquiry points to be responsive and
helpful, and they have generally received timely
replies. In addition, some ministries and agencies
have created websites to provide answers to
frequently asked questions, as well as further
guidance and information.
UUnniiffoorrmm AApppplliiccaattiioonn ooff LLaawwss
Some problems with the uniform application of
China’s laws and regulations persist.
In its WTO accession agreement, China committed,
at all levels of government, to apply, implement and
administer its laws, regulations and other measures
relating to trade in goods and services in a uniform
and impartial manner throughout China, including in
special economic areas. In support of this
commitment, China further committed to establish
an internal review mechanism to investigate and
address cases of non-uniform application of laws
based on information provided by companies or
individuals.

149
As previously reported, in China’s first year of WTO
membership, the central government launched an
extensive campaign to inform and educate both
central and local government officials and state-
owned enterprise managers about WTO rules and
their benefits. In addition, several provinces and
municipalities established their own WTO centers,
designed to supplement the central government’s
efforts and to position themselves so that they
would be able to take full advantage of the benefits
of China’s WTO membership. In 2002, China also
established an internal review mechanism, now
overseen by MOFCOM’s Department of WTO Affairs,
to handle cases of non-uniform application of laws,
although the actual workings of this mechanism
remain unclear.
During 2014, as in prior years, some problems with
uniformity persisted. These problems are discussed
above in the sections on Customs and Trade
Administration, Taxation, Investment and
Intellectual Property Rights.
JJuuddiicciiaall RReevviieeww
China has established courts to review administrative
actions involving trade-related matters, but few U.S.
or other foreign companies have had experience with
these courts.
establish tribunals for the review of all
administrative actions relating to the
implementation of laws, regulations, judicial
decisions and administrative rulings on trade-related
matters. These tribunals must be impartial and
independent of the government authorities
entrusted with the administrative enforcement in
question, and their review procedures must include
the right of appeal.
Beginning before China’s accession to the WTO,
China had taken steps to improve the quality of its
judges. For example, in 1999, the Supreme People’s
Court began requiring judges to be appointed based
on merit, educational background and experience,
rather than as a result of politics or favoritism.
However, existing judges, many of whom had no
legal training, were grandfathered in. In part
because of this situation, many U.S. companies in
2014 continued to express serious concern about
the independence of China’s judiciary. In their
experience and observation, Chinese judges
continue to be influenced by political, government
or business pressures, particularly outside of China’s
big cities.
Meanwhile, in 2014, the United States continued to
monitor how the courts designated by the Supreme
People’s Court’s Rules on Certain Issues Related to
Hearings of International Trade Administrative
Cases, which went into effect in October 2002, have
handled cases involving administrative agency
decisions relating to trade in goods or services. So
far, however, there continues to be little data, as
few U.S. or other foreign companies have had
experience with these courts.
OOtthheerr LLeeggaall FFrraammeewwoorrkk IIssssuueess
Various other areas of China’s legal framework can
adversely affect the ability of the United States and
U.S. exporters and investors to enjoy fully the rights
to which they are entitled under the WTO
agreements.
Other areas of China’s legal framework can adversely
affect the ability of the United States and U.S.
exporters and investors to enjoy fully the rights to
which they are entitled under the WTO agreements.
Key areas include administrative licensing,
competition policy, commercial dispute resolution,
labor laws and laws governing land use. Corruption
among Chinese government officials, enabled in part
by China’s incomplete adoption of the rule of law, is
also a key concern.
AADDMMIINNIISSTTRRAATTIIVVEE LLIICCEENNSSIINNGG
As discussed above in the Investment section, since
China’s WTO accession in December 2001, U.S. and
other foreign companies have expressed serious

150
concerns about the administrative licensing process
in China, both in the context of foreign investment
approvals and in myriad other contexts. According to
U.S. industry, many Chinese government bodies at
the central, provincial and municipal government
levels do not comply with the procedures mandated
by the Administrative Licensing Law for acceptance
review and approval of administrative licenses. This
situation creates opportunities for corruption, and
sometimes leads to foreign enterprises and foreign
products being treated less favorably than their
domestic counterparts.
In response to a 2013 directive from Premier Li to
streamline administrative licensing processes,
central government authorities eliminated, or
delegated to lower levels of government, more than
300 administrative approval requirements in 2013.
Additional streamlining took place in 2014. China
also announced reductions in administrative
approval requirements in the Shanghai Free Trade
Zone in 2014. In addition, at the July 2014 S&ED
meeting, China committed to treat applicants for
process, as required by law.
Nevertheless, despite these changes, U.S. companies
continue to encounter significant problems with a
variety of administrative licensing processes in
China, including processes to secure product
approvals, investment approvals, business expansion
approvals, business license renewals and even
approvals for routine business activities. While U.S.
companies are encouraged by the overall reduction
in license approval requirements and the focus on
decentralizing licensing approval processes, U.S.
companies report that these efforts have only had a
marginal impact on their licensing experiences so
far. According to U.S. companies, problems continue
to be most prevalent at the central government level
and generally involve foreign companies
encountering more significant delays and receiving
less favorable treatment vis-à-vis domestic
companies, raising concerns in light of the WTO rules
relating to national treatment.
CCOOMMPPEETTIITTIIOONN PPOOLLIICCYY
In August 2007, after several years of development,
China enacted its Anti-monopoly Law, which became
effective in August 2008. Under this law, an Anti-
monopoly Commission with oversight and
coordinating responsibilities has been established,
drawing its members from several Chinese ministries
and agencies. Enforcement responsibilities have
been divided among three agencies. MOFCOM has
assumed responsibility for reviewing mergers. NDRC
has assumed responsibility for reviewing monopoly
activities, abuse of dominance and abuse of
administrative power when they involve pricing,
while SAIC reviews these same types of activities
when they are not price-related.
After the Anti-monopoly Law was issued, MOFCOM,
NDRC, SAIC and other Chinese government
ministries and agencies began to formulate
implementing regulations, departmental rules and
other measures. Throughout this process, the
United States has urged China to implement the
Anti-monopoly Law in a manner consistent with
global best practices and with a focus on consumer
welfare and the protection of the competitive
process, rather than consideration of industrial
policy or other non-competition objectives. The
United States has also specifically pressed China to
ensure that its implementation of the Anti-monopoly
Law does not create disguised or unreasonable
barriers to trade and does not provide less favorable
treatment to foreign goods and services or foreign
investors and their investments.
The United States also launched an Anti-monopoly
Law technical assistance program in 2008, funded by
the U.S. Trade and Development Agency and led by a

151
multi-agency team of U.S. experts. Since then,
numerous workshops have taken place under this
program in China on important substantive issues,
such as merger review, unilateral conduct by firms
with a dominant market position, cartel
enforcement, non-discrimination in interstate
commerce, merger remedies, competition law and
policy as it relates to the Internet, and the interface
between intellectual property, antitrust and trade
laws and policies. Chinese government officials from
MOFCOM, SAIC, NDRC, SCLAO and the NPC have also
traveled to Washington as part of this program.
The Chinese government’s interventionist economic
policies and practices and the large role of state-
owned enterprises in China’s economy have created
some possible tensions with the Anti-monopoly Law.
One provision in the Anti-monopoly Law protects the
lawful operations of state-owned enterprises and
government monopolies in industries deemed
nationally important. At the same time, China has
enforced the Anti-monopoly Law against state-
owned enterprises. For example, MOFCOM has
imposed conditions on at least one state-owned
company forming a joint venture, NDRC has
conducted an investigation into anti-competitive
price discrimination by two large state-owned
telecommunications companies and has imposed
fines for Anti-monopoly Law violations on two state-
owned liquor companies, and SAIC has undertaken
enforcement against provincial state-owned
enterprises. However, concerns remain that
enforcement against state-owned enterprises will be
more limited. The inclusion of provisions on the
abuse of administrative (i.e., government) power in
the Anti-monopoly Law, which also appear in NDRC’s
and SAIC’s implementing regulations, could be
important instruments for reducing the
government’s role in markets and promoting the
establishment and maintenance of increasingly
competitive markets in China, and both NDRC and
SAIC recently have stated that these abuses are
among their enforcement priorities. In addition,
because trade associations in China frequently
appear to have strong government ties, the United
States has encouraged the Chinese agencies charged
with enforcing the Anti-monopoly Law to work with
Chinese regulatory agencies with sectoral
responsibilities to emphasize the importance of
trade associations refraining from engaging in
conduct that would violate the Anti-monopoly Law.
Since the Anti-monopoly Law went into effect in
2008, China’s administrative enforcement of it has
been active in the merger area overseen by
MOFCOM, largely due to the requirement to pre-
notify merger transactions. Some U.S. enterprises
have expressed concern about delays by MOFCOM,
for example, in accepting merger filings and the
overall length of review of transactions without
anticompetitive effect. In a positive development, in
2014, MOFCOM introduced rules on “simple
transactions,” which allow transactions meeting
certain criteria to be reviewed and cleared within 30
days from acceptance of the merger notification.
Some U.S. companies also have raised concerns with
the remedies that MOFCOM has adopted in granting
conditional merger approvals. While initially
MOFCOM’s merger decisions were quite brief,
MOFCOM now releases more detailed explanations
of its merger decisions. However, U.S. industry
observers have criticized certain decisions for lack of
adequate bases to find that a merger has or may
have the effect of eliminating or restricting
competition.
In addition, MOFCOM’s enforcement seems to have
focused more on mergers involving foreign
enterprises than those involving China’s enterprises.
Reportedly, approximately 90 percent of the
transactions notified to MOFCOM since the Anti-
monopoly Law went into effect in 2008 have
involved at least one multinational corporation, and
none of the 24 transactions that MOFCOM approved
with conditions has been between Chinese
enterprises. MOFCOM has imposed conditions in
several transactions in which one party was a
Chinese enterprise, including one instance involving
a state-owned enterprise. In addition, MOFCOM has

152
formally blocked only two transactions that involved
a foreign enterprise’s attempt to acquire a well-
known Chinese enterprise.
Starting in 2013, NDRC increased its Anti-monopoly
Law enforcement activity noticeably. While both
domestic companies and foreign companies have
been targets of these NDRC investigations, U.S.
industry asserts that foreign companies appear to
have come under increasing scrutiny by China’s
enforcement agencies in recent months. In addition,
U.S. industry has expressed serious concerns about
insufficient predictability, fairness and transparency
in NDRC’s investigative processes, including NDRC
pressure to “cooperate” in the face of unspecified
allegations or face steep fines. U.S. companies also
have reported pressure from NDRC against seeking
outside counsel, particularly international counsel,
or having any counsel present at meetings.
In 2013 and 2014, the United States raised serious
concerns with China regarding its enforcement of
the Anti-monopoly Law. While this engagement is
ongoing, the United States did secure some progress
regarding its concerns in this area in 2014.
Specifically, at the July 2014 S&ED meeting, the
United States obtained China’s recognition that the
objective of competition policy is to promote
consumer welfare and economic efficiency, rather
than promote individual competitors or industries,
and that enforcement of China’s competition laws
should be fair, objective, transparent and non-
discriminatory. The United States also obtained
China’s express commitment to provide any party
under an Anti-monopoly Law investigation with
information about the enforcement agency’s
concerns and an effective opportunity for the party
to present evidence in its defense. In addition,
through engagement at the December 2014 JCCT
meeting, China committed that the Chinese
authorities would treat domestic and foreign
companies equally in Anti-Monopoly Law
enforcement proceedings. China further committed
that the Chinese authorities’ normal practice would
be to permit an investigated foreign company to
have foreign counsel present, to advise it and to
provide information on its behalf during the
proceedings.
CCOOMMMMEERRCCIIAALL DDIISSPPUUTTEE RREESSOOLLUUTTIIOONN
Both domestic and foreign companies often avoid
seeking resolution of commercial disputes through
the Chinese courts, due to deep skepticism about
the independence and professionalism of China’s
court system and the enforceability of court
judgments and awards. There is a widespread
perception that judges, particularly outside big cities,
are subject to influence by local political or business
interests. In addition, many judges are not trained in
the law or lack higher education, although this
problem decreases at the higher levels of the
judiciary. At the same time, the Chinese government
is moving to establish consistent and reliable
mechanisms for dispute resolution through the
adoption of improved codes of ethics for judges and
lawyers and increased emphasis on the consistent
and predictable application of laws. For example,
Supreme People’s Court rules provide that when
there is more than one reasonable interpretation of
a law or regulation, the courts should choose an
interpretation that is consistent with the provisions
of international agreements to which China has
committed, such as the WTO rules.
Despite initial enthusiasm, there is increasing
skepticism of the China International Economic and
Trade Arbitration Commission (CIETAC) as a forum
for the arbitration of commercial disputes. Some
foreign companies have obtained satisfactory rulings
from CIETAC, but others have raised concerns about
restrictions on the selection of arbitrators and
inadequacies in procedural rules necessary to ensure
thorough, orderly and fair management of cases.
A further problem for commercial dispute resolution
in China is that obtaining enforcement has often
been difficult in cases where the courts or
arbitration panels have issued judgments in favor of
foreign-invested enterprises. Chinese government
officials responsible for enforcement are often
beholden to local interests and unwilling to enforce

153
judgments against locally powerful companies or
individuals.
LLAABBOORR LLAAWWSS
China does not effectively enforce its labor laws and
regulations concerning issues such as minimum
wages, hours of work, occupational safety and
health, bans on child labor, forced prison labor, and
participation in social insurance programs. Many
foreign-invested enterprises have expressed
concerns about their domestic competitors’ lack of
compliance with labor and social welfare laws due to
lax enforcement, which allows the domestic
enterprises to avoid the costs associated with
compliance.
In addition, skilled workers are in relatively short
supply in China. Restrictions on labor mobility
continue to distort labor costs. China is gradually
easing restrictions under the country’s household
registration system, which has traditionally limited
the movement of workers within the country, in part
due to the recognition that labor mobility is essential
to the continued growth of the economy.
At present, registered subsidiaries of foreign
corporations have two options when hiring workers
in China. They can either hire full-time employees
directly, or they can hire employees indirectly on
contract from temporary placement agencies. These
temporary workers are known as “dispatch
workers.” In the past, these companies often hired
dispatch workers as a means to lower labor costs.
However, amendments to the Labor Contract Law
that went into effect in July 2013 add restrictions
intended to discourage these companies from using
dispatch workers instead of hiring long-term
employees. The Labor Contract Law amendments
limit the use of dispatch workers to periods of less
than six months in auxiliary, or non-core, business
operations or for the purpose of replacing a
permanent employee away on leave. In response to
concerns raised by the foreign business community,
the Ministry of Human Resources and Social Security
agreed to allow dispatch workers under contract
prior to December 28, 2012, to continue working
until the expiration of their contracts. Further
clarifications and final implementation details for the
Labor Contract Law amendments are expected to be
released soon.
China does not adhere to certain internationally
recognized labor standards, including the freedom of
association and the right to bargain collectively.
Chinese law provides for the right to associate and
form a union, but does not allow workers to form or
join an independent union of their own choosing.
Unions must affiliate with the official All-China
Federation of Trade Unions (ACFTU), which is under
the direction of the Communist Party of China. The
workers at enterprises in China are required to
accept the ACFTU as their representative; they
cannot instead select another union or decide not to
have any union representation.
Once an ACFTU union chapter is established at an
enterprise in China, the enterprise is required to pay
fees to the ACFTU, often through the local tax
bureau, equaling two percent of total payroll,
regardless of the number of union members in the
enterprise. While China’s laws on union formation
apply equally to domestic enterprises and foreign-
invested enterprises, the ACFTU has engaged in a
campaign since 2006 to organize ACFTU chapters in
foreign-invested enterprises, particularly large
multinational corporations. In 2008, an ACFTU
official publicly stated that ACFTU would continue to
push multinational corporations, including Fortune
500 companies, to set up trade unions in China, and
affirmed ACFTU’s goal of unionizing all foreign-
invested enterprises in 2009. By the end of 2009,
ACFTU statistics indicated that 79 percent of foreign-
invested enterprises had set up trade unions. In
2010, the ACFTU announced a new goal of
establishing trade unions in 90 percent of foreign-
invested enterprises by 2012.
The ACFTU campaign may be discriminatory, both
because it does not appear to be directed at private
Chinese companies and because it appears to
specifically target Fortune 500 companies, to the

154
disproportionate impact of U.S.-invested companies.
The United States continues to monitor this situation
and is attempting to assess its effects on U.S.-
invested companies and their workers.
LLAANNDD LLAAWWSS
China’s Constitution specifies that all land is owned
in common by all the people. In practice, provincial
and municipal governments distribute state-owned
urban land for industrial and residential use under a
variety of terms depending on the type of land, its
intended use and the status of the land-use rights
“purchaser,” while agricultural collectives, under the
control of local Communist Party chairmen,
distribute collectively owned agricultural land to
rural residents in the form of 30-year renewable
contracts. Governments and agricultural collectives
can transfer or lease land-use rights to enterprises in
return for the payment of fees, or other forms of
compensation, such as profit-sharing. A major
problem for foreign investors is the array of
regulations that govern their ability to acquire land-
use rights, which are limited to 50 years for
industrial purposes in the case of foreign investors.
Local implementation of these regulations may vary
from central government standards, and prohibited
practices may be tolerated in one locality while the
regulations are enforced in another. Most wholly
foreign-owned enterprises seek land-use rights to
state-owned urban land as the most reliable
protection for their operations. Chinese-foreign
joint ventures usually attempt to acquire land-use
rights through lease or contribution arrangements
with the Chinese partner.
Chinese law does not currently define standards for
compensation when eminent domain supersedes
land-use rights. This situation creates considerable
uncertainty when foreign-invested enterprises are
ordered to vacate premises in the public interest.
Moreover, the absence of public hearings on
planned public projects can give affected parties,
including foreign-invested enterprises, little advance
warning. China is aware of this problem, however,
and is reportedly revising its laws to address it, but it
remains unclear how extensive or effective the
revisions will be.
Given the scarcity of land resources in China, the
price of land-use rights and land allocation are
important considerations for purposes of
investment, production and trade. It is therefore of
some concern to the United States that the Chinese
government continues to exercise a strong hand in
land-use markets in China, with the objective, in
part, to ensure that land use-rights are allocated in
accordance with a compulsory national land-use
plan aimed at boosting grain production, and state
industrial development policies aimed at sustaining
urbanization and growth.
CCOORRRRUUPPTTIIOONN
While WTO membership has increased China’s
exposure to international best practices and resulted
in some overall improvements in transparency,
corruption remains prevalent. Chinese officials
admit that corruption is one of the most serious
problems the country faces, stating that corruption
poses a threat to the survival of the Communist
Party and the state. China’s leadership has called for
an acceleration of the country’s anti-corruption
drive, with a focus on closer monitoring of
provincial-level officials.
In the area of government procurement, China has
pledged in recent years to begin awarding contracts
solely on the basis of commercial criteria. However,
it is unclear how quickly, and to what extent, the
Chinese government will be able to follow through
on this commitment. U.S. companies complain that
the widespread existence of unfair bidding practices
in China puts them at a competitive disadvantage. It
also undermines the long-term competitiveness of
both domestic and foreign enterprises operating in
China.
China criminalized the payment of bribes to officials
of foreign governments and international public
organizations, effective in 2011, as required by the
United Nations Convention against Corruption,

155
which China ratified in 2006. Although criminalizing
foreign bribery represents an important milestone,
China has provided little information about how the
law is being interpreted and enforced. Accordingly,
the United States will continue to monitor China’s
anti-corruption efforts and encourage China to
vigorously enforce its laws.

APPENDICES
Appendix 1 List of Written Submissions Commenting on China’s WTO Compliance
September 17, 2014
Appendix 2 List of Witnesses Testifying at Hearing on China’s WTO Compliance
October 1, 2014
Appendix 3 U.S. Fact Sheet for 25th U.S.-China Joint Commission on Commerce and Trade Meeting
December 18, 2014
Appendix 4 Excerpts from Joint Fact Sheet for 6th U.S.-China Strategic and Economic Dialogue
July 11, 2014

Appendix 1
List of Written Submissions Commenting on China’s WTO Compliance
September 17, 2014
1. U.S.-China Business Council
2. U.S. Chamber of Commerce
3. International Intellectual Property Alliance
4. National Cotton Council
5. American Iron and Steel Institute
6. Property Casualty Insurers Association of America
7. United States Information Technology Office
8. U.S. Council for International Business
9. American Wire Producers Association
10. National Milk Producers Federation
11. U.S. Dairy Export Council
12. U.S. Grains Council
13. Pharmaceutical Research and Manufacturers of America
14. American Chemistry Council
15. Taiwan-U.S. Democracy Association
16. American Insurance Association
17. Brazilian Textile and Apparel Industry Association
18. U.S. Wheat Associates
19. Coalition of Services Industries

Appendix 2
List of Witnesses Testifying at Public Hearing on China’s WTO Compliance
October 1, 2014
1. Erin Ennis
U.S.-China Business Council
2. Jeremie Waterman
U.S. Chamber of Commerce
3. Michael Schlesinger
International Intellectual Property Alliance
4. Wally Darneille
National Cotton Council
5. Kevin Dempsey
American Iron and Steel Institute
6. David Snyder
Property Casualty Insurers Association of America
7. Matt Roberts
United States Information Technology Office
8. Brian Toohey
Semiconductor Industry Association
9. Jimmy Goodrich
Information Technology Industry Council
10. Carl Schonander
Software & Information Industry Association
11. Eric Holloway
Telecommunications Industry Association

Appendix 3
25th U.S.-China Joint Commission on Commerce and Trade Meeting
December 18, 2014
U.S. Fact Sheet
The following outcomes were achieved:
AGRICULTURAL BIOTECHNOLOGY
China is the largest export market for U.S. soybeans ($14 billion in 2013) and a major export market for U.S. corn
and corn products ($3.5 billion in 2013). Agricultural biotechnology is important to U.S. farmers of these products,
with acreage for biotechnology varieties of soybeans and corn totaling over 90 percent of all varieties of soybeans
and corn in 2014, enabling these farmers to increase yield while reducing their environmental footprint. China’s
announcement of pending import approvals for three new events will lead to further increases in U.S. exports to
China. In addition, China’s commitment to an intensified, multi-ministerial dialogue at the Vice Ministerial level on
science-based innovation in agriculture will provide a forum for the two sides to discuss needed improvements in
China’s regulatory framework for the review and approval of technology used for agriculture, to the benefit of both
the United States and China.
Strategic Agricultural Innovation Dialogue
To implement the consensus reached by the Presidents of both countries at their bilateral meeting in November
2014, where China and the United States reached consensus to intensify science-based agricultural innovation for
food security and China and the United States committed to strengthen dialogue to enable increased use of
innovative technologies in agriculture, both sides agree to conduct an annual Strategic Agricultural Innovation
Dialogue at a Vice-Ministerial level under the leadership of the Agriculture Working Group within the framework of
JCCT, including officials from MOA, MOFCOM, USTR, USDA and officials from other relevant authorities of both
countries. This dialogue is intended to create a favorable environment where both sides could carry out balanced,
mutually beneficial exchange and cooperation on agricultural innovation. Relevant work plans and issues on the
agenda will be put forward by the Agriculture Working Group, and this Vice-Ministerial dialogue will hold its first
meeting in early 2015.
Biotechnology Approvals
In early December 2014, China announced that it would be issuing import approvals for three outstanding
biotechnology products of significant importance to U.S. farmers, including two soybean events and one corn
event.
TECHNOLOGY LOCALIZATION
Too often, U.S. and other foreign companies operating in China face pressure to transfer valuable intellectual
property rights to enterprises in China and to re-locate their research and development activities to China. Foreign
companies operating in China must be free to make business decisions without government interference and must
be able to compete on a level playing field. China’s commitments below should help to promote a more level
playing field, although more needs to be done.

Appendix 3 (cont’d)
December 18, 2014
U.S. Fact Sheet
The United States and China commit to ensure that both countries treat intellectual property rights owned or
developed in other countries the same as domestically owned or developed intellectual property rights.
Enterprises are free to base technology transfer decisions on business and market considerations, and are free to
independently negotiate and decide whether and under what circumstances to assign or license intellectual
property rights to affiliated or unaffiliated enterprises. Both China and the United States confirm that the
government is entitled to take measures to encourage enterprises to engage in research and development and the
creation and protection of intellectual property rights.
MEDICAL DEVICES AND PHARMACEUTICALS MARKET ACCESS
Exports of U.S. pharmaceutical products to China exceeded $1.2 billion in 2013. According to industry data, the U.S.
pharmaceuticals industry directly employs more than 810,000 workers, supports a total of 3.4 million jobs in the
United States, and provides annual compensation to its workers at approximately twice the average for all U.S.
workers. China’s commitment below to devote more resources to and streamline China’s regulatory processes for
pharmaceuticals will speed patient access to new medicines in China and thereby lead to increased U.S. exports to
what is now the second largest market for pharmaceuticals in the world.
Exports of U.S. medical devices to China reached $2.7 billion in 2013. According to industry data, the U.S. medical
device industry includes over 7,000 companies, most with less than 100 employees, and supports 1.9 million U.S.
jobs overall. Cutting red tape in China’s medical device approval process, as China has committed to do below, will
allow better patient outcomes in, and more exports to, China, which is the industry’s largest growth market.
China and the United States affirm that significantly reducing the time-to-market for innovative pharmaceutical
products and medical devices will benefit patients by allowing them to receive better treatment earlier. The
United States and China have reached the following consensus:
1. China will accelerate the studying and pushing forward of the reform of the medical device and
pharmaceutical regulatory review and approval system, and will make great efforts to eliminate the drug
application backlog within 2-3 years. China’s efforts will include adding personnel, funds, streamlining
relevant mechanisms, and increasing the speed of review.
2. Applicants who use Multi-Regional Clinical Trial data that includes data from China in order to apply for
clinical trial waivers, and whose applications comply with the technical review requirements, can receive
clinical trial waivers in China, in order to prevent duplicative testing.
3. China will implement measures that allow a drug not marketed in foreign countries to conduct clinical
trials in China at the same time it is conducting clinical trials in another country. Applicants can submit
evidence of marketing approval of a pharmaceutical product in another country (i.e. certificate of
pharmaceutical product) when applying for the drug license after completing clinical trials.

December 18, 2014
U.S. Fact Sheet
China and the United States agree that for all draft pharmaceutical and medical device rules and regulations where
notifications are required under the relevant WTO rules, a comment period will be provided that will be no less
than 60 days.
In accordance with the Regulations on Supervisory Management of Medical Devices, China will, to facilitate
practical regulatory needs, further accelerate the expansion and adjustment of clinical trial product exemption
catalogues; expand the scope of medical devices that can be exempted from conducting clinical trials in China;
reduce the number of medical device clinical trials and improve the efficiency of bringing imported medical devices
to the Chinese market.
China and the United States agree to engage in enhanced dialogue with expert and high-level officials of relevant
Chinese and U.S. agencies in 2015 to promote efficient pharmaceutical and medical device regulation and market
access.
INTELLECTUAL PROPERTY RIGHTS
Protection of Trade Secrets in Government Proceedings and Trade Secrets Legislative Developments
Businesses and other entities in a wide variety of industry sectors rely on the ability to protect their trade secrets
and their rights in other proprietary information. This information is often among a company’s core assets, and a
company’s competitiveness may depend on its capacity to protect these assets. Trade secret theft threatens to
diminish U.S. competitiveness around the globe, and puts American jobs at risk. This theft may arise in a variety of
circumstances, including through the misuse of information submitted to government entities for purposes of
complying with regulatory obligations. Through the commitments described below, which build on prior bilateral
commitments made by China, China confirms the importance of protecting companies’ trade secrets, and agrees to
study and exchange information on how to improve its protections, and to take enforcement actions when
violations occur.
The United States and China confirm that trade secrets submitted to the government in administrative or
regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to
government officials in connection with their official duties in accordance with law. Each side will further study
how to optimize its respective relevant administrative and regulatory procedures within its legal system, where
appropriate, including by strengthening confidentiality protection measures, limiting the scope of government
personnel having access to trade secrets, limiting the information required from companies to include only
information reasonably necessary for satisfying regulatory purposes, and stipulating that any requirements on
government agencies to publicly disclose information appropriately allow for the withholding of trade secrets.
Government officials who illegally disclose companies’ trade secrets are to be subject to administrative or legal
liability according to law. The United States and China agree to exchange information on the scope of protection
of trade secrets and confidential business information under their respective legal systems. China acknowledges
that it is to conduct a legislative study of a revised law on trade secrets. The United States acknowledges that draft

December 18, 2014
U.S. Fact Sheet
legislation proposing a Federal civil cause of action for trade secrets misappropriation has been introduced in the
U.S. Congress.
Geographical Indications
The United States has engaged extensively with its trading partners to promote and secure access to foreign
markets for U.S. exporters whose products use trademarks or common names like “parmesan” and “feta” cheese.
The Chinese commitments described below ensure that China’s growing market remains open to exports of these
U.S. products, which are substantial and increasing. For example, exports of U.S. cheeses to China increased by 600
percent between 2009 and 2013.
China and the United States acknowledge the importance of providing strong intellectual property protections and
understand the following:
 That a term, or its translation or transliteration, is not eligible for protection as a GI in its territory where
the term is generic in its territory;
 That the relationship between trademarks and GIs is to be handled in accordance with relevant articles in
the TRIPS Agreement;
 That legal means are available for interested third parties on the above grounds to object to and to cancel
any registration or recognition granted to a GI; and
 Where a component of a compound GI is generic in its territory, the GI protection is not to extend to that
generic component. In the event a relevant agency does not have a disclaimer practice, the agency may
adopt such practice noting that the compound GI registered or recognized is to be protected only in
compound form.
China and the United States are to hold dialogues on geographical indications.
Inventor Remuneration
Promoting predictability in the protection and enforcement of intellectual property rights, including by affirming
freedom of contract in inventor employment agreements, promotes critical innovation and research, areas in which
the United States excels. China’s commitment below recognizes the importance of predictability for inventors in
respect of their inventions and creations and should help to achieve that objective for inventors who are subject to
China’s domestic laws.
The United States and China commit to protect the legal rights of inventors in respect of their inventions and
creations, in accordance with their respective domestic laws and regulations, and in line with their domestic laws,

December 18, 2014
U.S. Fact Sheet
commit to respect the legitimate rules and regulations developed by employers and legitimate contracts between
employers and inventors concerning inventor remuneration and awards.
Data Supplementation
Achieving greater consistency in the evaluation of patent application data is critical to ensure that pharmaceutical
inventions protected elsewhere in the world are also recognized in China. China’s fast-growing pharmaceuticals
market is already the world’s second-largest, and it represents a major growth opportunity for U.S. exports.
Through the continuing engagement with China described below, the United States will strive to ensure that China’s
patent authorities operate with the consistency found in other markets around the world.
The U.S. and China have been maintaining a useful and informative discussion on the supplementation of data,
since the 24th JCCT in 2013, and China has made improvements on the practice pursuant to Chinese laws and
regulations. Both sides affirm that continued exchanges and engagement on specific cases are beneficial.
Sales of IP-Intensive Goods and Services
Effective enforcement of intellectual property rights creates an environment in which sales of legitimate intellectual
property-intensive goods and services can flourish. China’s commitment below will bring new focus to the United
States’ and China’s work together to determine how best to foster a better environment for facilitating increased
sales of legitimate intellectual property-intensive goods and services in China.
The United States and China reaffirm their commitments to foster a better environment to facilitate increased
sales of legitimate IP intensive goods and services (“legitimate sales”). The United States and China agree to study
and exchange information on how to accomplish this objective. Areas of study and exchange are to include, as
appropriate: metrics to show the levels of legitimate sales; information on how to analyze the economic impact of
IP in each economy, sharing data on IP-intensive imports and exports if available; information on effective IP
enforcement actions as well as relevant IP-related legal and regulatory reforms, and information on civil damages.
The status of the discussion is to be reflected in the annual report of the U.S.-China Joint Commission on
Commerce and Trade IPR working group.
Online Infringement
A rapidly growing share of sales in China occurs in the online environment, making it critical to focus enforcement
attention there to combat sales of pirated and counterfeit goods. Through the commitments described below,
China has agreed to work together with the United States and to take steps to prioritize its enforcement in this
area.
China and the United States are to strengthen enforcement against unlawful trademark counterfeiting and
copyright piracy activities in the online environment and to deter the occurrence of infringement and
counterfeiting through criminal, civil and administrative remedies and penalties, according to law. Building on the

December 18, 2014
U.S. Fact Sheet
foundation of the June 18, 2014 Leading Group’s Work Plan for Fighting Infringement in the Online Environment,
China will, in a practical and timely fashion, classify products with significant impacts on public health and safety as
priorities, and carry-out enhanced enforcement actions. Both China and the United States are to continue their
effective cooperation in cross-border enforcement efforts against counterfeit and pirated goods, and conduct
exchanges on the effectiveness of enforcement efforts.
COMPETITION LAW
U.S. industry has asserted that China’s competition policy enforcement authorities seem to be targeting foreign
companies and at times use Anti-monopoly Law investigations as a tool to protect and promote domestic national
champions and domestic industries. U.S. industry also has expressed concern about insufficient predictability,
fairness and transparency in China’s investigative processes, as well as pressure from the Chinese authorities not to
seek outside counsel or have counsel present at meetings. China’s commitments below help to address several of
these concerns.
1. In order to build on the recognition of the United States and China in the Sixth Meeting of the U.S.-China
Strategic and Economic Dialogue that the objective of competition policy is to promote consumer welfare and
economic efficiency, rather than promote individual competitors or industries, and that the enforcement of
their respective competition laws should be fair, transparent, objective, and non-discriminatory, and China’s
commitment that its three Antimonopoly Enforcement Agencies (AMEAs) are to provide to any party under
investigation information about the AMEA’s competition concerns with the conduct or transaction, as well as
an effective opportunity for the party to present evidence in its defense:
a) China clarifies that in enforcing the AML, all business operators shall be treated equally.
b) Where AML violations are found, China clarifies that it is to impose enforcement measures that address
the harm to competition, and not to impose enforcement measures designed to promote individual
competitors or industries.
2. China clarifies that its AMEAs will, (1) when undertaking administrative actions, strictly follow statutory limits
on their authority, procedures, and requirements as laid out in China’s relevant laws, regulations and rules;
and (2) before imposing penalties, notify the parties of the facts, grounds, and basis according to which the
administrative penalties are to be decided, notify the parties of the rights that they enjoy in accordance with
the law, and provide the parties with the right to state their cases and to defend themselves.
3. China clarifies that all administrative decisions that impose liability on a party under the AML will be provided
in writing to the party and include the facts, reasons, and evidence on which the decision is based. China
clarifies that it will publish the final version of administrative decisions that impose liability on a party under
the AML in a timely manner. Administrative decisions made public in accordance with law should not include
contents involving what are legally commercial secrets.

December 18, 2014
U.S. Fact Sheet
4. China will ensure that, upon request from a party involved, the three AMEAs are to allow Chinese practicing
lawyers to attend and participate in meetings with any of the three AMEAs. China will ensure that, upon
request from the party involved, and after obtaining approval from the AMEA, which shall be granted as
normal practice, the following persons may attend the meetings with any of the three AMEAs: (1)
representatives of foreign law firm representative offices established in China, who are permitted to attend
and advise on international law and practice and provide information on the impact of the Chinese legal
environment, but not permitted to conduct activities that encompass Chinese legal affairs, and (2) foreign
legal counsel practicing in other legal jurisdictions, who are permitted to attend and provide information on
the subject transaction or conduct and information on the laws or international practices of the legal
jurisdiction where they practice.
GOVERNMENT PROCUREMENT REGULATIONS
Chinese government agencies spent almost $230 billion on purchases of goods and services in 2012. China's
commitments below represent a step in the right direction to help ensure that the goods of U.S. companies invested
in China and goods imported from the United States can access this important government procurement market,
while China and other WTO members continue to negotiate the terms of China's accession to the WTO Government
Procurement Agreement.
China confirms that it will publish for public comment the draft Interim Administrative Measures for the
Government Procurement of Domestic Goods after revising and improving it on the basis of thorough
consideration of various opinions, including achieving cost savings, decreasing administrative burdens, and
increasing flexibilities.
TREATMENT OF INTELLECTUAL PROPERTY IN STANDARDS SETTING
The United States has agreed to conduct a dialogue with China to reduce uncertainties regarding protections for
companies contributing patented technology during standards-setting processes in China. Voluntary, consensus-
based technological standards promote innovation, competition and consumer welfare and have helped spur
investment and advances in a wide range of industries. Companies contributing patented technology during a
standards-setting process typically agree to license their patents under certain terms. These terms need to be
agreed voluntarily and free of government coercion or involvement.
China and the United States recognize that standards setting can promote innovation, competition and consumer
welfare. They also reaffirm that IPR protection and enforcement is critical to promote innovation, including when
companies voluntarily agree to incorporate patents protecting technologies into a standard. Both sides recognize
that specific concerns may exist relating to the licensing of standard essential patents that are subject to licensing
agreements. China and the United States commit to continue engaging in discussion of these issues.

December 18, 2014
U.S. Fact Sheet
FISHERIES
Illegal, unreported or unregulated (IUU) fishing is detrimental to fish stocks and unfair to fisherman catching fish
legally, depressing prices and damaging trade. Information sharing to combat IUU fishing is an important step in
stopping IUU-caught fish from entering commerce. Current U.S. trade in fisheries products, valued at $1.2 billion in
U.S. exports and $2.8 billion in U.S. imports, is expected to increase due to increased volumes to be traded as well
as increased product value. Increased transparency in trade statistics, to which the United States and China have
committed below, will ultimately contribute to the sustainability of fisheries resources and increase the value of
legally harvested products.
The United States and China agree to work together to combat illegal, unreported, or unregulated (IUU) fishing,
including by developing and sharing improved data on trade in fish and fish products. As a first step, both sides
agree to meet in the first half of 2015 to begin sharing information about methodologies on trade statistics for fish
and fish products, including greater specificity in the harmonized system, species of interest, and best practices for
tracking product.
LEGAL SERVICES
China agrees to conduct research and discussion at an appropriate time in 2015 to introduce the status and
process of opening the Chinese legal services market, and to invite advice and suggestions from the foreign legal
community. In the pilot work of exploring ways and mechanisms for strengthening business cooperation between
Chinese and foreign, Hong Kong, and Macau law firms in the Shanghai Pilot Free Trade Zone, Chinese relevant
authorities are in the process of drafting implementation rules. Both sides agree to continue to exchange ideas on
this work.

Appendix 4
6th U.S.-China Strategic and Economic Dialogue
July 11, 2014
Excerpts from Joint Fact Sheet
The United States and China welcomed the growth in the breadth and depth of bilateral economic relations since
the establishment of official diplomatic relations 35 years ago. The two countries further recognized that there is
significant potential for continued progress in U.S.-China economic relations, especially as China fully implements
the comprehensive economic agenda announced at the Third Plenum of the 18th CPC Central Committee, and as
the U.S. economy continues to strengthen, creating jobs, improving fiscal sustainability, and making investments to
support future productivity and growth. These developments are to provide new impetus for economic
cooperation between the two countries. As such, the participants discussed new strategies for practical
cooperation and for continuing to deliver concrete progress that is to benefit the citizens of both countries, our
neighbors, and the world.
During the sixth meeting, the United States and China emphasized the importance of promoting a comprehensive
U.S.‑ China economic relationship based on mutual respect and mutually beneficial cooperation. The two
countries reaffirmed the commitments pledged by both countries in previous Dialogues and the importance of full
implementation of these outcomes. The United States and China announced further concrete measures to
support strong domestic and global growth, promote open trade and investment, enhance international rules and
global economic governance, and foster financial market stability and reform. The two countries reached
consensus to work expeditiously to implement the new commitments made and, as the Special Representatives of
the Economic Track, Secretary Lew and Vice Premier Wang directed their respective economic teams to take
concrete action before the next S&ED.
I. Strengthening Economic Policy Cooperation
Since the fifth meeting of the S&ED in July 2013, the United States and China have taken significant actions to
strengthen growth and promote job creation in both countries, to continue to support a durable global recovery,
and to ensure that their domestic growth supports strong, sustainable, and balanced global growth. The United
States and China pledged to make further progress as well as committed to make new progress on the following:
. . .
 China is to deepen economic system reform by allowing the market to play a decisive role in the allocation of
resources. China commits that economic entities under all forms of ownership have equal access to factors of
production in accordance with the law and are able to compete on a level playing field. China is to accelerate
the process of market-based price reforms in petroleum, electricity, and natural gas, to promote competition
in energy markets, and to realize market-based prices in competitive sectors as soon as possible. The United
States is to provide technical assistance to China to support China’s efforts to promote energy reform.
. . .

July 11, 2014
II. Promoting Open Trade and Investment
The United States and China underscored the importance of fostering an open, transparent, and non-
discriminatory environment for trade and investment, recognizing that doing so is critical to economic growth and
job creation in both countries and in the global economy. The United States and China committed to take the
following measures to further enhance our bilateral trade and investment relationship, support an open and fair
environment, and create greater opportunities for U.S. and Chinese companies and workers.
 United States and China held constructive discussions regarding the expansion of the Information Technology
Agreement. Both sides commit to continue the discussion within the next few weeks, to create conditions to
restart plurilateral negotiations.
 The United States and China welcome the progress made to date in the Bilateral Investment Treaty (BIT)
negotiations, and affirm their commitment to intensify these negotiations toward a BIT with high standards,
including non-discrimination, fairness, openness, and transparency. The two sides are working to narrow
differences and to reach agreement on core issues and major articles of the treaty text by the end of 2014,
and commit to initiate the “negative list” negotiation early in 2015 based on each other’s “negative list” offers.
Recognizing the positive role of investment in creating jobs and boosting economies, and the mutual benefit
of open investment environments, the two sides support the expansion of two-way investment and commit,
through the BIT negotiation, to ensure that foreign and domestic investors benefit from equal access to and
treatment in the market, subject only to negotiated and transparent exceptions.
 China is to further deepen the reform of State Owned Enterprises (SOEs) (including State-Invested
Enterprises), improve and standardize modern corporate governance structure, and reasonably increase the
proportion of market-based recruitment of management personnel for SOEs. In mixed ownership enterprises,
China is to improve the process for nominating and selecting personnel to serve on Boards of Directors in
accordance with the Company Law and corporate governance principles. The United States and China commit
to establish an exchange mechanism with regard to improving the modern corporate system and corporate
governance structure of SOEs.
 The United States and China recognize that the objective of competition policy is to promote consumer
welfare and economic efficiency rather than promote individual competitors or industries, and that
enforcement of their respective competition laws should be fair, objective, transparent, and non-
discriminatory. China commits that its three Anti-Monopoly Enforcement Agencies (AMEAs) are to provide to
any party under investigation information about the AMEA’s competition concerns with the conduct or
transaction, as well as effective opportunity for the party to present evidence in its defense.
. . .

July 11, 2014
 The United States and China affirm that they do not approve of trade secret theft for commercial advantage
and that the protection and enforcement of trade secrets is essential to maintain fair competition and to
develop an innovative economy. Both sides are to pursue criminal and other actions to deter the
misappropriation of trade secrets, and make information available to the public about their actions, to the
extent permitted by law. China has incorporated the protection and enforcement of trade secrets into its 2014
Priorities of the Nationwide Crack Down on Intellectual Property Infringement and Production of Counterfeit
and Shoddy Products, published by the State Council on April 14, 2014. As its next step, China is to vigorously
investigate and prosecute trade secret theft cases; ensure that civil and criminal cases are tried and the
judgments are published according to law; and protect trade secrets contained in materials submitted by
companies as part of regulatory, administrative, and other proceedings according to Chinese law. China is also
to undertake publicity and education activities to improve the awareness of companies and the general public
regarding the protection of trade secrets; to undertake studies and research on trade secrets law and related
legislative and policy issues; and is to continue engaging in technical exchanges with the United States on
these issues. China affirms that it is to continue prioritizing trade secrets protection and enforcement and is
to take positive actions that are to be included in upcoming work plans.
 Building on the prior successful exchanges between the United States and China at the Joint Commission on
Commerce and Trade (JCCT) Intellectual Property Rights Working Group and at meetings among relevant
agencies, the United States and China are to continue to promote exchanges between respective Intellectual
Property (IP) agencies, including judicial and administrative bodies, on topics of mutual interest, such as
enforcement, transparency, and specialized IP courts. These discussions and any recommendations are to be
reported to the JCCT and other bilateral meetings.
 China confirms that the Deployment Standards for the Assets of the Office of General Software of Government
Agencies is a measure designed to strengthen the administration of spending and implement the CPC Central
Committee’s call for frugality. This measure was drafted with the intention to not have any purpose or effect
of creating obstacles to international trade. The United States and China are to continue to engage on ways to
address any obstacles to trade facing companies.
. . .
 In support of China’s commitment to strong, sustainable, and balanced economic growth and the
transformation of China’s economic development pattern, and in recognition of the importance of fostering a
more streamlined, efficient, and market-based business environment in which the market plays a decisive role
in allocating resources, China commits to improve its Value Added Tax rebate system, including actively
studying international best practices, and to deepen communication with the United States on this matter,
including regarding its impact on trade.

July 11, 2014
 In support of China’s efforts to rein in excess production capacity in key manufacturing sectors and to foster a
business environment in which the market can play a decisive role in allocating resources, China is to establish
mechanisms that strictly prevent the expansion of crude steelmaking capacity and that are designed to
achieve, over the next five years, major progress in addressing excess production capacity in the steel sector.
 To advance the shared goal of ensuring access to safe and high-quality medicines for patients and protect
supply chain integrity, to affirm the responsibilities of the manufacturers and regulators over the life-cycle of
the drug to ensure product quality, and to fight against illegal actions to manufacture, distribute, and export
counterfeit and substandard active pharmaceutical ingredients (APIs) and APIs used for counterfeit and
substandard products, China commits, during the process of revising the Drug Administration Law (DAL), to
develop and seriously consider amendments to the DAL requiring regulatory control of the manufacturers of
bulk chemicals that can be used as APIs (“bulk chemicals”), including “export only” producers and distributors.
To this end, China commits to hold a multi-ministerial work mechanism on a potential regulatory and
enforcement framework to develop the oversight of bulk chemicals, and a roadmap for implementation, by
the end of this year. The United States commits to continue to review its authority to exclude from
consideration the import of bulk chemicals from firms that are not registered with China Food and Drug
Administration (CFDA). In addition, the United States and China commit to deepen technical exchanges,
trainings, and regulatory cooperation to enhance the safety of bulk chemicals traded between the United
States and China, and to exchange views on the user fee programs at the upcoming pharmaceutical working
group meeting of the JCCT.
 In order to foster the development of the services sector, China is to follow the guidance provided at the Third
Plenum of the 18th CPC Central Committee, which is to promote the orderly opening-up of the finance,
education, cultural, medical sectors, and other service areas, and to remove foreign investment access
restrictions in child and old-age care, architectural design, accounting and auditing, commerce and logistics,
electronic commerce, and other such service sectors, including accelerating the revision of the Catalogue
Guiding Foreign Investment in Industries to further open up to foreign investment. China is to revise the
related regulations on the administration of foreign-invested construction and engineering design enterprises
to open these sectors to foreign providers of such services.
. . .
 In any area open to foreign investment, consistent with Chinese law, China is to continue to improve
procedures for foreign investment approval and record-filing by unifying domestic and foreign investment
laws and regulations. To make it easier to invest, China is shifting from an approach of approval or verification
to one based on record filing. The United States welcomes China’s further efforts to improve the investment
environment and maintain stability, transparency, and predictability of foreign investment policies and
procedures. China has authorized the Shanghai Free Trade Pilot Zone to undertake trial work regarding pre-
establishment national treatment plus negative list in order to accumulate replicable and expandable
experiences for deepening reform.

July 11, 2014
 The United States welcomes China’s efforts to improve the efficiency and transparency of its administrative
licensing and approval processes and China’s commitment to strictly implement its Administrative Licensing
Law. The United States and China commit to treat applicants for administrative licenses and approvals under
the same rules and standards of each side, with regard to the resources available to accept and process
applications, and the number of applications permitted at one time from an applicant. Further, the United
States and China commit to strictly implement existing laws and regulations to adequately protect any trade
secret or sensitive commercial information provided by the applicant during the administrative licensing or
approval process, consistent with laws.
 . . . The United States welcomes China’s actions to provide legal review of regulatory documents with a direct
influence on the rights and obligations of citizens, legal persons, or other organizations, and to limit and
reduce the number of regulatory documents in effect at both the central and sub-central levels of
government. In support of these actions, the United States and China commit to hold seminars to discuss the
types and effect of those documents existing in both countries.
 The United States and China reaffirm their past bilateral commitments on publication of trade- and economic-
related administrative regulations and departmental rules. China confirms that the relevant State Council
Legislative Affairs Office documents published on April 27, 2012 are legally binding.
 The Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the
People’s Republic of China periodically publishes translations into English of The Laws of the People’s Republic
of China. The Legislative Affairs Office of the State Council periodically publishes translations into English of
The Laws and Regulations of the People's Republic of China Governing Foreign-Related Matters. China is to
require all departments of the State Council to make available in a reasonable time, via a website or other
cost-effective means, translations into English of trade-related departmental rules.
 The United States and China support efforts to promote infrastructure investment, including by increasing
commercial investment in infrastructure through Public-Private Partnerships with domestic and foreign
investors, and incorporating best practices and lessons learned from other countries. The United States and
China recognize the potential value of having their respective enterprises play a positive role in infrastructure
development in each country and commit to explore opportunities for deepening cooperation in this area.
III. Enhancing Global Cooperation and International Rules
The United States and China committed to enhance multilateral cooperation, including under the G-20, Asia Pacific
Economic Cooperation (APEC), and other multilateral frameworks. The two sides recognized the importance of
international rules governing trade and finance that reflect the evolving global economic system and committed to
take the following concrete steps to deepen their cooperation in this area.
. . .

July 11, 2014
 The United States and China are committed to strengthening communication and cooperation in the
preparation of the “post-Bali” work-program so as to send a positive signal to advance Doha Round
negotiations.
 The United States and China welcome the progress that has been made by the International Working Group
on Export Credits (IWG) in negotiating new international guidelines for official export credit support, including
at the fifth meeting of the IWG in May in Washington, D.C. Based on the progress made, the United States
and China support the IWG actively pursuing and completing its work on guidelines for the two sectors as soon
as possible. The United States and China reaffirm their shared commitment to develop a set of new horizontal
international guidelines on official export credit support that promote international trade, and that, taking into account varying national
interests and situations, are consistent with international best practices.
. . .
IV. Fostering Financial Stability and Reform
Both sides recognized the importance of strong, stable financial systems to achieve sustainable and balanced
growth. Both sides committed to undertake the following measures to support further reforms and enhance
supervision in their respective financial sectors, promote bilateral cooperation, and enhance cooperation under
the G-20, Financial Stability Board, and other multilateral frameworks, so as to support global financial stability.
 China intends to continue the opening-up of the securities and futures sectors, and to actively study policies
concerning the further expansion of the business scope of newly established securities joint ventures. China is
actively studying further opening up of the banking sector (including equity participation by foreign investors)
and securities sector, based on ongoing assessment and improvement of the prudential regulatory framework.

2014 Report to Congress on China's WTO Compliance

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2014 Report to Congress on China's WTO Compliance