The Application of WTO Rules in China and the Implications for Foreign Direct Investment

in The Journal of World Investment & Trade
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The Application of WTO Rules in China and the Implications for Foreign Direct Investment

in The Journal of World Investment & Trade

References

At the same time, the General Agreement on Trade in Services (GATS) also regulates some relevant issues in this field, further supporting the importance of investment in the WTO regulatory system. 2 More than 200 laws and regulations promulgated by the National People's Congress (the Npc, China's national legislature) or the State Council (the highest governing body) and more than 1,000 sets of regulations or rules promulgated by Ministries or commissions under the State Council as well as by local government, see Li Wei, Imparts of WTO Accession on China's Laws on Foreign-funded Enterprises, China Law, 62-62, April 2000.

3 For general information on China's economic growth since the "open door" policy, see Y. Wu and Q. Ye, China's Economic Reform and Economic Grouth: Problems and Prospects, Asia Pacific Press, Canberra, 1998; J.A. Dorn, J.Y. Lin, F. Cai, and Z. Li, The China Miracle: Development Strategy and Economic Re/orm, Chinese University Press, Hong Kong, 1996; C. Howe, Y.Y. Kueh, and R. Ash, China's Economic Reform: A Study with Domme1lts, Curzon, Richmond, Surrey, U.K., 2000. 1 X. Zhang, Distribution Rights in Chill"-Regulatory Barriers and Reform in the WTO Context, 35 J.W.T. 6, December 2001, pp. 1247-1291. e Derived from combining information contained at the Website of the World Trade Organization at: <>.

7 The Implementing Rules for Wholly Foreign-Owned Enterprises Law, originally promulgated on 12 December 1990 were amended on 12 April 2001 as the Implementing Rules for Wholly Foreign-Owned Enterprises Law 2001. Hereinafter, the old version is referred to as the Implementing Rules for Wholly Foreign- Owned Enterprises Law 1990.

8 The Implementing Rules for Equity Joint Ventures Law, promulgated on 20 September 1983, was first amended on 15 January 1986, with a second amendment on 21 December 1987. A third amendment followed on 22 July 2001 as the Implementing Rules for Equity Joint Ventures Law 200 Hereinafter, the old version is referred to as the Implementing Rules for Equity Joint Ventures Law 1987. `' See Jianfu Chen, An F,merQinA New Legal Framework on Forc(�1l Trade, CCH'S China Law Update, April 2002, p. 9.

"' Available at: «http://\v\vw.chinawto-gov.cn/article/articleview/555�; last visited 19 March 2003. z United Nations Conference on Trade and Development, An Introduction to the Wio Agreeltlellts, Law Press, Beijing, China, p. 15. 12 The Protocol, Article 3(a). 13 Ibid., Article 3(b). 14 Regulation of the State Council on the Encouragement of Foreign Investment, Article 5. l!1 Implementing Rules for Equity Joint Ventures Law 2001, Article 56.

'r� See 7,9R: Wlwt is Market Access, at the WTO Website: ,http://www.wto.org/eiiglisli/thewto_e/wliatis_e/ col/e/wto02/wto2 45.htni#iiote 1 �,, last visited 19 March 2003. the Protocol, Article 7(3). 18 The Industrial Catalogue for Guidance of Foreign Investment was first promulgated on 20 June 1995 and amended on 31 March 2002. It became effective as of 1 April 2002. These are hereinafter referred to as Catalogue 1995 and Catalogue 2002, respectively. 19 Catalogue 1995, Restricted Classification, Article 8, Item 1. 21' Equity Joint Ventures Law 1990, Article 9; Implementing Rules for Equity Joint Ventures Law 1987, Article 57; Wholly Foreign-Owned Enterprises Law 1986, Article 15. 21 Illustrative List of Trade-Related Investment Measures, Article 1 (a).

zz Equity Joint Ventures Law 2001, Article 10; Wholly Foreign-Owned Enterprises Law 2000, Article 15; Contractual Joint Ventures Law 2000, Article 19. z3 Wholly Foreign-Owned Enterprises Law 1986, Article 18; Contractual Joint Ventures Law 1988, Article 20; Implementing Rules for Equity Joint Ventures Law 1987, Article 75. za Regulations on Administration of Foreign Exchange, Article 5. 25 Illustrative List of Trade-Related Investment Measures, Article 2(c).

20 Wholly Foreign-Owned Enterprises Law 1986, Article 3. 27 Implementing Rules for Equity Joint Ventures Law 1987, Articles 60 and 61. 2" Under the old rules, some internal affairs of an enterprise were the responsibility of the State; for example. production plans and the business operations of a foreign-invested enterprise had to be filed for the record with the department in charge and implemented accordingly. All such restrictions have been abolished in the new versions of these laws and the decision-making powers of forcign-invested enterprises have been enlarged. zy Wholly Foreign-Owned Enterprises Law 2000, Article 43; Equity Joint Ventures Law 2001, Article 10. 30 This is inconsistent with the Illustrative List ofTradc-Rclated Investment Measures, Article 1(a), where it is stated that each WTO Member shall not restrict the importation by an enterprise of products used in or related to its local production, generally or to an amount related to the volume or value oflocal production that it exports. 31 This is regulated by the Measures on Substituting Production for Importation on the Products of Equity Joint Ventures and Contractual Joint Ventures and by the Measures on Substituting Production for Importation on the Machinery Products of Equity Joint Ventures and Contractual Joint Ventures.

See the China Economic Times Website (in Chinese) at: ��http://news.fm365.com/caijing/caijinga/ 20010525/268885.shtml», last visited on 12 September 2002. 33 See, for example, General Agreement on Tariffs and Trade, Article X; General Agreement on Trade in Services, Article 3; and Agreement on Trade-Related Investment Measures, Article 6. 31 The Protocol, Article 2(C). 35 The Legislation Law, Articles 51 and 52. The act of approval by signature is referred to as "subscription". .1h Regulations on Procedures for Enacting Administrative Statutes, Article 31, 32; Regulations on the Procedure for Enacting Rules, Articles 28 and 29. One exception to this requirement on the implementing date is where the regulations and measures relate to matters affecting national security, foreign exchange rates and currency policy and, in these cases, measures shall be deemed effective as of the date of publication. Such exceptions are in accordance with the relevant WTO regulation.

11 Interim Rules on Establishment of Printing Enterprises by Foreign Investment, Article 8. Similar provisions can be found in many other regulations. 3H For the full text, see the Website of China.com.cn (in Chinese): <WTo.5 Impact on the Rule of Law in China, available at: «http://www.mcpa.or�/rol/ 08hu.pdf», last visited 19 March 2002.

411 The Protocol, Article 2(D). Thc Administrative Procedure Law of the PRC, Article 12 states that matters which are not suitable are as follows: (a) acts of the State in areas such as national defense and foreign affairs; (b) administrative rules and regulations ... with general binding force formulated and announced by administrative organs; (c) decisions of an administrative authority on awards or punishments for its personnel or on the appointment or relief of duties of its personnel; and (d) specific administrative acts that shall, as provided for by law, be finally decided by an administrative authority. ^= The Administrative Reconsideration Law of the PRC, Article 2. 43 Ibid., Article 5. ^a The Administrative Procedure Law of the PRC, Article 71; The Administrative Reconsideration Law of the PRC, Article 41.

15 See the Website of the Supreme Court of the People's Republic of China (in Chinese): «http://www.court.gov.cn/main.htm», last visited 30 September 2002. 4�� For general information on trade and invcstment barriers in China, see United States Trade Representative, Foreign Trade Barriers Report-China (especially from 1997 to 2002) at: ((http://www.ustr.gov/reports>>: United States, China-U.S. Trade Agreements: Compliance Issues, Congressional Research Service RL30555, updated 1 September 2000 by Wayne M. Morrison; European Union, China-Gerreral Features of Trade Policy, available at the Market Access Sectoral and Trade Barriers Database at: «http://mkaccdb.eu.int»; Will Martin and Greg Mastel, Operation of the W1'o Agreements in the Conte.xt of liarying I'ypes (?fnational Regulatory Systems: Clrina and the World Trade Organization: Movirrg Forward without Sliding Backward, 31 Law & Policy Int'l Bus. 981, 2000; Raj t3hala, Enter the Dragon: An Essay on China's WTO Accession Saga, 15 Am. U. Int'l L. Rev. 1469, 2000. 47 The term "trade-related invcstmcnt measures" also refers to investments measures related to trade in goods; see The TRIMS Agreement, Article 1.

a" The Guidance of Foreign Investment Orientation was first promulgated on 20 June 1995 and amended on 11 February 2000 and became effective 1 April 2002 (these are hereinafter referred to as the Guidance 1995 and the Guidance 20()0, respectively). 4'' See supra, footnote 18. 50 The Catalogue 2002, Articles 6-8. 51 Guidance 1995, Article 6, Item 1. To some extent, this kind of regulation was an administrative tool for a planned economy. S2 Ibid., Article 6, Item 2. Although China does not have any anti-monopoly laws, many regulations relating to the maintenance of State monopoly have been abolished following its accession to the WTO.

5' Income Tax Law for Enterprises with Foreign Investment, Article 5. 5; See the AHIC of China Website (in Chinese) at: <

ox See the State Administration of Taxation of China Wcbsite at: «http://www.chinatax.gov.cn», last visited 11 September 2002. 5'' Guidance 1995, Article 4, Itcm 3. hll See the Protocol, Annex 9, Schedule of Specific Commitments on Services List of Article u MFN Exemptions, available at: ,Iittp://www.inoftec.gov.cn/table/wto/03.doc�,, last visited 19 March 2003. 61 ld.

62 See Regulations of the Supreme People's Court on Several Problems on the Judgment of Administrative Cases in International Trade, Article 9.

h3 Ibid., Article 10. This is the so-called "reciprocity principle", which had been adopted by the Chinese government in its foreign policy and legislation even before entry into the WTO. 61 Interim Rules on Domestic Investment Made by Foreign-invested Enterprises, Article 13.

'■' Id.

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