VI. POLICIES AFFECTING TRADE IN SERVICES
306. Some members of the Working Party welcomed the broad-ranging and comprehensive commitments that China was undertaking to increase transparency and to provide information to governments and service providers on any matter relating to the GATS including China's Schedule of Specific Commitments. These members nonetheless expressed concerns regarding the lack of transparency in China's current services regime, in particular with respect to obtaining, extending, renewing, denying and terminating licences and other approvals required to provide services in China's market and appeals of such actions (hereafter referred to as "China's licensing procedures and conditions"). To be consistent with the provisions of the WTO Agreement, including the Draft Protocol and China's Schedule of Specific Commitments, members of the Working Party noted that China's licensing procedures and conditions should not in themselves act as a barrier to market access and should not be more trade restrictive than necessary. Those members also expressed the view that upon its accession, China should publish (1) a list of authorities responsible for authorizing, approving or regulating those service sectors in which China made specific commitments and (2) China's licensing procedures and conditions.
307. The representative of China confirmed that paragraph 332 regarding publication of a list of all organizations that were responsible for authorizing, approving or regulating service activities for each service sector, including those organizations delegated such authority from the central government authorities, would apply. The representative of China also confirmed that China would publish in the official journal all of China's licensing procedures and conditions upon accession. The Working Party took note of these commitments.
308. The representative of China also confirmed that upon accession China would ensure that China's licensing procedures and conditions would not act as barriers to market access and would not be more trade restrictive than necessary. In accordance with China's commitments under the WTO Agreement, the Draft Protocol and its Schedule of Specific Commitments, the representative of China confirmed that for those services included in China's Schedule of Specific Commitments, China would ensure that:
(a) China's licensing procedures and conditions were published prior to becoming effective;
(b) In that publication, China would specify reasonable time frames for review and decision by all relevant authorities in China's licensing procedures and conditions;
(c) Applicants would be able to request licensing without individual invitation;
(d) Any fees charged, which were not deemed to include fees determined through auction or a tendering process, would be commensurate with the administrative cost of processing an application;
(e) The competent authorities of China would, after receipt of an application, inform the applicant whether the application was considered complete under China's domestic laws and regulations and in the case of incomplete applications, identify the additional information that was required to complete the application and provide the opportunity to cure deficiencies;
(f) Decisions would be taken promptly on all applications;
(g) If an application was terminated or denied, the applicant would be informed in writing and without delay the reasons for such action. The applicant would have the possibility of resubmitting, at its discretion, a new application that addressed the reasons for termination or denial;
(h) If an application was approved, the applicant would be informed in writing and without delay. The licence or approval would enable the applicant to start the commercial operations upon registration of the company with SAIC for fiscal and other similar administrative purposes. This registration would be completed within 2 months of the submission of a complete file, as required by public SAIC regulations, and in accordance with China's Schedule of Specific Commitments;
(i) Where China required an examination to licence professionals, such examinations would be scheduled at reasonable intervals.
The Working Party took note of these commitments.
309. Some members of the Working Party also expressed concern about maintaining the independence of regulators from those they regulated. The representative of China confirmed that for the services included in China's Schedule of Specific Commitments, relevant regulatory authorities would be separate from, and not accountable to, any service suppliers they regulated, except for courier and railway transportation services. For these excepted sectors, China would comply with other relevant provisions of the WTO Agreement and the Draft Protocol. The Working Party took note of these commitments.
310. The representative of China stated that China would consult with WTO Members and develop regulations, consistent with China's Schedule of Specific Commitments and its obligations under GATS, on sales away from a fixed location. The Working Party took note of this commitment.
311. Some members of the Working Party noted that the World Code of Conduct provided a strong ethical basis for regulating sales away from a fixed location.
312. In response to questions from members of the Working Party regarding certain terms in China's Schedule of Specific Commitments, the representative of China confirmed the following:
(a) A "master policy" was a policy that provided blanket coverage for the same legal person's property and liabilities located in different places. A master policy could only be issued by the business department of an insurer's head office or that of its authorized province-level branch offices. Other branches were not allowed to issue master policies.
(i) For master policy business with the state key construction projects as its subject-matter insured.
If investors on the state key construction projects (i.e., projects that were so listed and annually announced by the State Development and Planning Commission) met either of the following requirements, they could purchase a master policy from insurers that were located in the same place as the investors' legal persons were located.
1. The investment on the subject-matter insured were all from China (including the reinvestment from the foreign-invested enterprises in China) and the sum of investment of the investor accounted for over 15 per cent of the total investment.
2. The investment was partially from abroad, and partially from China (including the reinvestment from the foreign-invested enterprises in China) and the sum of investment of the Chinese investor accounted for over 15 per cent of the total domestic investment.
For those projects that drew all investment from abroad, every insurer could provide coverage in the form of a master policy.
(ii) A Master policy covering different subject-matters insured of the same legal person.
For those subject-matters insured located in different places and owned by the same legal person (excluding financial, railway, and post and telecommunications industries and enterprises), a master policy could be issued on the basis of either of the following conditions.
1. For the sake of payment of the premium tax, insurance companies incorporated where the legal person or accounting unit of the insurance applicant was located, were allowed to issue a master policy.
2. If over 50 per cent of the insurance amount of the subject-matter insured was from a larger or medium sized city, then insurers in that city were allowed to issue a master policy, no matter whether the insurance applicant's legal person or accounting unit was located in the city.
(b) Large scale commercial risk meant an insurance risk written on any large scale commercial enterprise if, upon accession, the aggregate annual premium exceeded 800 thousand RMB and the investment was more than 200 million RMB; one year after accession, if the aggregate annual premium exceeded 600 thousand RMB and the investment was more than 180 million RMB; two years after accession, if the aggregate annual premium exceeded 400 thousand RMB and the investment was more than 150 million RMB.
(c) Statutory insurance in China's Schedule of Specific Commitments were limited to the following specific categories, and no additional lines or products would be added: third party auto liability insurance, and driver and operator liability for buses and other commercial vehicles.
(d) The representative of China confirmed that any changes to the definition of master policy and large scale commercial risk would be consistent with China's Specific Schedule of Commitments and obligations under GATS so as to progressively liberalize access to this services sector.
The Working Party took note of these commitments.
313. Members of the Working Party welcomed China's commitment to permit internal branching for insurance firms consistent with the phase-out of geographic restrictions. Some members noted that China had scheduled certain qualifications as limitations under GATS Articles XVI and XVII that foreign insurers had to meet to apply for a licence to provide services in China. These qualifications related to a minimum period of establishment in a WTO member, total assets and maintenance of a representative office in China. These qualifications should not apply to those foreign insurance companies established in China seeking authorisation to establish a branch or sub-branch. The representative of China confirmed that the qualifications for foreign insurers applying for a licence to enter China's market would not apply to foreign insurers already established in China that were seeking authorization to establish branches or sub-branches. He also confirmed that a branch and a sub-branch were an extension of the parent enterprise and not a separate legal entity and that China would permit internal branching accordingly on that basis, and in compliance with China's Schedule of Specific Commitments, including provisions on MFN treatment. The Working Party took note of these commitments.
2. Choice of Partner
314. Some members of the Working Party expressed concern regarding the existing practice of imposing conditions on the Chinese companies that were allowed to partner with foreign service suppliers. These members indicated that this could amount to de facto quotas, as the number of potential partners meeting those conditions might be limited. The representative of China confirmed that a foreign service supplier would be able to partner with any Chinese entity of its choice, including outside the sector of operation of the joint venture, as long as the Chinese partner was legally established in China. The joint venture as such should meet the prudential and specific sectoral requirements, on the same basis as those for domestic enterprises and which must be publicly available. The Working Party took note of these commitments.
3. Modification of the Equity Interest
315. The representative of China confirmed that the Chinese and foreign partners in an established joint venture would be able to discuss the modification of their respective equity participation levels in the joint venture and implement such modification if agreement was reached by both sides and also approved by the authorities. The representative of China confirmed that such an agreement would be approved if consistent with the relevant equity commitments in China's Schedule of Specific Commitments. The Working Party took note of this commitment.
4. Prior Experience Requirement for Establishment in Insurance Sector
316. The representative of China confirmed that the merging, division, restructuring or other change of legal form of an insurance company would not impact the prior experience requirements included in China's Schedule of Specific Commitments if the new entity continued to supply insurance services. The Working Party took note of this commitment.
5. Inspection Services
317. In response to questions from members of the Working Party, the representative of China confirmed that China would not maintain requirements which had the effect of acting as barriers to the operation of foreign and joint-venture commodity inspection agencies, unless otherwise specified in China's Schedule of Specific Commitments. The Working Party took note of this commitment.
6. Market Research
318. Some members of the Working Party expressed concern regarding market research activities. In response to questions from members in this respect, the representative of China confirmed that, upon accession, China would remove the prior approval requirement for market research services, defined as investigation services designed to secure information on the prospects and performance of an organization's products in the market, including market analysis (of the size and other characteristics of a market) and analysis of consumer attitudes and preferences. Market research firms registered in China, which were engaged in such services, would only be required to file the survey plan and the questionnaire form on record in the statistical agencies of government at or above the provincial level. The Working Party took note of these commitments.
7. Legal Services
319. In response to questions from members of the Working Party, the representative of China clarified that "Chinese national registered lawyers", as indicated in China's Schedule of Specific Commitments, were those Chinese nationals who had obtained a lawyer's certificate and were holding a Chinese practising permit and were registered to practice in a Chinese law firm.
8. Minority Shareholder Rights
320. With respect to its Schedule of Specific Commitments, the representative of China confirmed that, while China had limited its market access commitments in some sectors to permit foreigners to hold only a minority equity interest, a minority shareholder could enforce rights in the investment under China's laws, regulations and measures. Moreover, WTO Members would have recourse to WTO dispute settlement to ensure implementation of all commitments in China's GATS schedule. The Working Party took note of these commitments.
9. Schedule of Specific Commitments
321. China's Schedule of Specific Commitments, reproduced in Annex 9 to the Draft Protocol, contained the market access commitments of China in respect of Services.
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