Non-Tariff Barriers on Imports

Existing Barriers/Regulations

Future Market Access Conditions

• Import quotas and licenses are applied to 33 categories (covering 383 tariff items) of import products.
  
  
• Tendering requirements are applied to 62 categories (covering 107 tariff items) of non-government imports of machinery and electrical products
  

• Import license requirements and tendering requirements will be eliminated by 2005.
  
  
• All import quotas will be phased out by 2005
  

Existing Barriers/Regulations

Future Market Access Conditions

• Average import tariffs for all industrial products at 14.8%.
  
  
• Average import tariffs for all agricultural products at 18.9%.
  
  
• Average import tariffs for all products at 15.3%.
  
  
• Import Tariff Rate Quota (TRQ) applicable to 16 products
  

• Average tariffs for industrial products will be cut to 8.9%. The tariff rates will range from 0 to 47%, with the highest rates applied to photographic film, automobiles and related products.
  
  
• Average tariff for agricultural products will be cut to 15%.
  
  
• China will implement a new Tariff Rate Quota (TRQ) system for some of the sensitive agricultural products currently subject to quantitative import restrictions, such as sugar and cotton.
  
  
• China will eliminate its existing TRQ system on imports of the following products and subject them only to tariffs: barley, soybeans, rape seed, peanut oil, sunflower seed oil, corn oil and cottonseed oil.
  
  
• Upon accession, China will join the Information Technology Agreement whereby tariffs on information technology products will be eliminated by 2005 at the latest

Existing Barriers/Regulations

Future Market Access Conditions

• Foreign investors establishing joint ventures or wholly-owned companies used to be required to include provisions on foreign-exchange balance, local content and export share in their investment contracts as a condition for government approval.
  
  
• Such requirements have been abolished following recent changes to relevant laws and implementation regulations.

• Bring laws, regulations or measures relating to foreign investments into conformity with relevant WTO Agreements including the Agreement on Trade-Related Investment Measures (TRIMs).
  
  
• Eliminate and cease to enforce trade and foreign exchange balancing requirements, local content requirements and export performance requirements.

Existing Barriers/Regulations

Future Market Access Conditions

• Foreign manufacturing enterprises can only export their own products and import equipment for their own use in addition to goods and materials necessary for approved production purposes.
  
  
• Only those foreign manufacturing enterprises with annual export turnover over US$10 million can purchase goods from other enterprises for exports.
  
  
• Pilot JV retail enterprises have import-export rights for their own operation, but cannot act as agents for other enterprises.
  
  
• Pilot JV trading companies in Shanghai Pudong and Shenzhen have import-export rights to act as agents for other enterprises.
  
  
• Foreign investment companies can only purchase products produced by enterprises in which they have investment and sell them to overseas markets.
  
  
• Foreign R&D centres can import and sell small quantities of hi-tech products manufactured by their parent companies to test the market.

• China will provide trading rights to foreign companies, to be progressively phased in over 3 years.
  
  
• Beginning one year after accession, full rights to import and export will be granted to JVs with minority foreign share, which will be further extended to JVs with majority foreign share beginning two years after accession. All enterprises in China would be granted the right to trade three years after accession.

Existing Barriers/Regulations

Future Market Access Conditions

Commission agents'services
Wholesale trade services

• Except for the pilot JV trading companies, JV retailing companies, JV wholesaling companies, and foreign R&D centres, foreign companies are not allowed to distribute products produced by other enterprises or overseas.
  
  
• Except for dealing in the wholesale distribution of their own products produced in China, foreign manufacturing enterprises are prohibited from being involved in the wholesaling of other products.
  
  
• Except for JV wholesaling companies, foreign firms are prohibited from being involved in wholesale businesses.
  
  
• JV wholesaling companies are only allowed in the centrally administered municipalities (Beijing, Chongqing, Shanghai and Tianjin), and foreign investors can only have minority ownership.

Commission agents' services
Wholesale trade services^*

• Majority ownership in JVs allowed within 2 years, with no geographic or quantitative restriction by then. There will also be no restriction on equity/form of establishment within 3 years.
  
  
• JVs can distribute all imported and domestically produced products within 1 year except that distribution of books, newspapers, magazines, pharmaceuticals, pesticides & mulching film to be allowed in 3 years; and chemical fertilizers, processed oil & crude oil to be allowed in 5 years.
  
  
• Foreign-invested enterprises can distribute their products manufactured in China and to provide full range of related subordinate services, including after sales services, for the products they distribute.
  

*The market access conditions above do not apply to the distribution of salt and tobacco.

Retail services

• JVs are only allowed in the capital cities of provinces and autonomous regions, centrally administered municipalities, independent planning cities with provincial status and Special Economic Zones.
  
  
• For JV retail enterprises with less than 3 outlets, the foreign partner can own up to 65% of the share. Except specifically exempted by the State Council, those with more than 3 outlets should be majority owned by the Chinese partner.
  
  
• Approved JV retail enterprises may expand into the wholesale business.

Retail services^**

• JVs are allowed in 5 Special Economic Zones and Beijing, Shanghai, Tianjin, Guangzhou, Dalian, Qingdao, Zhengzhou & Wuhan upon accession, with majority foreign ownership permitted in 2 years.
  
  
• In Beijing and Shanghai, no more than 4 JVs are allowed. 2 JVs in Beijing can set up branches within Beijing. No more than 2 JVs are allowed in other localities.
  
  
• All provincial capitals, Chongqing and Ningbo will also be open to JVs in 2 years.
  
  
• No geographic, quantitative restriction, equity/form of establishment restriction within 3 years.
  
  
• However, chain stores with more than 30 outlets selling different types and brands of motor vehicles and products subject to state trading from multiple suppliers will be limited to minority-owned JVs only, with the limitation for motor vehicles to be eliminated in 5 years.
  
  
• Retailing of all products (excluding books, newspapers and magazines) within 1 year after accession except that retailing of pharmaceuticals, pesticides, mulching films and processed petroleum to be allowed in 3 years while retailing of chemical fertilizers to be allowed in 5 years.
  

** The market access conditions above do not apply to the retailing of tobacco

Franchising
Wholesale/retail away from a fixed location

• Independent legal entities with registered trademarks, company names, products and patents, as well as no less than one year good operation performance are allowed to act as franchisors.
  
  
• Foreign retail chain stores are not allowed to expand their networks by franchising.
  
  
• There has been a ban on all direct sales activities since Apr 1998. All direct sales enterprises funded by both foreign and domestic capital were shut down or transformed into in-shop sales.

Franchising
Wholesale/retail away from a fixed location

• No restriction on establishment in 3 years.
  
  
• China will consult with WTO members when developing regulations on sales away from a fixed location.

Existing Barriers/Regulations

Future Market Access Conditions

Freight transport by rail and road (in trucks or cars)

• Only Chinese nationals and Chinese-owned companies are permitted to conduct surface transportation.
  
  
• Foreign participation for cross-boundary operations with Hong Kong requires JV partnership.

Freight transport by rail and road (in trucks or cars)

• Operate only as minority ownership JVs upon accession.
  
  
• For road transport, majority ownership JVs and wholly-owned subsidiaries will be allowed in 1 year and 3 years respectively.
  
  
• For rail transport, majority ownership JVs and wholly-owned subsidiaries will be allowed in 3 year and 6 years respectively.

Storage & warehousing

• Foreign firms are permitted to own warehouses only in foreign trade zones (FTZs), provided that such warehouses are used to store materials necessary to their own production and service activities in China.
  
  
• Outside the FTZs, foreign firms are not permitted to own or manage warehouses.

Storage & warehousing

• Operate only as minority ownership JVs upon accession.
  
  
• Majority ownership JVs and wholly-owned subsidiaries will be allowed in 1 year and 3 years respectively.

Freight forwarding

• Foreign companies may operate only as minority ownership JVs.
  
  
• Wholly foreign-owned freight forwarders exist but are exceptions.
  
  
• The business of JVs is limited to certain geographical areas.
  
  
• Very few JVs are allowed to handle domestic freight forwarding.

Freight forwarding

• Majority ownership JVs and wholly-owned subsidiaries will be allowed in 1 year and 4 years respectively.
  
  
• JV can set up branches after 1 year of operation (requiring US$ 120,000 in additional registered capital per branch).
  
  
• A foreign freight forwarder can set up another JV after its first JV has been in operation for 5 years. Within two years after accession, the requirement will be reduced to 2 years.

Aircraft repair and maintenance

• Foreign companies can invest, through minority share in JVs, in aircraft maintenance.

Aircraft repair and maintenance

• The Chinese side in a JV must hold controlling shares or be in a dominant position.
  
  
• Granting of licenses is subject to economic needs test.
  
  
• Unlike domestic firms, JVs have the obligation to undertake business in the international market.

Maritime transport

• Operation of international shipping of freight and passengers (e.g. liner, bulk and tramp) is allowed. JVs with minority ownership is also permitted to register for operation under Chinese flag.

Courier services

• Foreign express operators are allowed to set up JVs in China and required to invest no less than US$ 1 million in an entity whose term may not exceed 20 years. The Chinese partner should hold at least a 50% stake in the JV. JVs are generally not allowed to do domestic express business.
  
  
• A waiting period of 1 year for establishing branches and 5 years for forming a second JV.

Courier services

• Covers courier services using one or more transport modes except services reserved to the postal authorities.
  
  
• Majority ownership JVs and wholly-owned subsidiaries will be allowed in 1 year and 4 years respectively.

Existing Barriers/Regulations

Future Market Access Conditions

Overall

• Foreign investment (ownership and/or management) in any form of telecommunications services is not allowed.

Overall

• China undertakes the obligations contained in the WTO Reference Paper on pro-competitive regulatory principles.
  

Value-added services (such as Internet services) and Paging services.

• Minority-owned ( 30%) JVs allowed upon accession in/and between Shanghai, Guangzhou and Beijing.
  
  
• Expand to Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzhen, Xiamen, Xian, Taiyuan and Wuhan (referred to as "other cities" thereafter) within 1 year after accession. Ownership can rise to 49%.
  
  
• No geographic restriction within 2 year after accession. Ownership can rise to 50%.
  
  
• (Internet services are subsumed under value-added services).

Mobile voice & data services

• Minority-owned (25%) JVs allowed upon accession to provide service in and between Shanghai, Guangzhou and Beijing.
  
  
• Expand to "other cities" 1 year after accession. Ownership can rise to 35%.
  
  
• 3 years after accession, ownership can rise to 49%.
  
  
• No geographic restriction 5 years after accession.
  

Domestic and international services

• Minority-owned (25%) JVs allowed within 3 years after accession to provide service in and between Shanghai, Guangzhou and Beijing.
  
  
• Expand to "other cities" within 5 years after accession. Ownership can rise to 35%.
  
  
• No geographic restriction within 6 years after accession. Ownership can rise to 49%.
  

Satellite services

• China has attached and signed "Notes for Scheduling Basic Telecom Services" which provides that unless explicitly excluded, any basic services may be provided through any means of technology, incl. satellites.

Existing Barriers/Regulations

Future Market Access Conditions

Overall

• Wholly foreign-owned banks and joint-ventures are allowed.
  
  
• Foreign banks are allowed to open one branch in each of all major cities.
  
  
• Local firms and individuals are off-limits to foreign banks. Domestic banks are thus effectively shielded from foreign competition.

Overall

• All geographic and client restrictions will be removed within 5 years after accession.
  
  
• Licensing to be based on prudential criteria only. Within 5 years after accession, any existing non-prudential measures restricting ownership, operation and juridical form of foreign banks, including on internal branching and licenses, shall be eliminated.
  
  
• Financial leasing will be allowed for foreign banks when allowed for domestic banks.
  
  
• Non-bank financial institutions can give credit facilities for the purchase of motor vehicles upon accession.
  
  
• To establish a subsidiary in China, a foreign bank needs to have total assets of over US$ 10 billion.
  
  
• To establish a branch in China, a foreign bank needs to have total assets of over US$ 20 billion.

Foreign currency business

• Most foreign banks can only conduct business in foreign currencies with foreign firms and individuals.

Foreign currency business

• No geographical and client restriction on foreign currency business upon accession.

RMB business

• 32 foreign banks have been licensed to conduct limited RMB business in Shanghai (24) and Shenzhen (8) with foreign firms and individuals.
  
  
• Those in Shanghai can also serve clients in Jiangsu and Zhejiang, while those in Shenzhen can also serve Guangdong, Guangxi and Hunan.

RMB business

• Renminbi(RMB) business will be restricted to Shanghai, Shenzhen, Dalian, Tianjin upon accession; expand to Guangzhou, Zhuhai, Qingdao, Nanjing and Wuhan within 1 year; to Jinan, Fuzhou, Chengdu and Chongqing within 2 years; to Kunming, Beijing and Xiamen within 3 years; to Shantou, Ningbo, Shenyang and Xian within 4 years. No geographic restriction within 5 years after accession.
  
  
• Foreign banks can conduct RMB business with local firms within 2 years after accession.
  
  
• Foreign banks can conduct RMB business with local individuals within 5 years after accession.
  
  
• Foreign banks licensed for RMB business in one region may service clients in other regions that have been opened for such business.
  
  
• To qualify for RMB business, a foreign bank needs to have at least 3 years business operation in China and has been profit-making for the previous 2 years.

Existing Barriers/Regulations

Future Market Access Conditions

Overall

• Less than 20 foreign insurers have been allowed to operate in China. Strict geographic and scope of business restrictions.
  
  
• Foreign insurance companies are allowed to operate only in Shanghai and Guangzhou, though AIG has branches in Shenzhen and Foshan.
  
  
• One branch is allowed in each city.

Overall

• Prudential criteria for licensing. Foreign insurers are qualified for a license if they have more than 30 years of experience in a WTO member country; a representative office established in China for 2 consecutive years; and global assets of over US$ 5 billion. Asset requirements for brokers will be set at US$500 million upon accession and be gradually reduced to US$200 million in 4 years.
  
  
• Upon accession, foreign insurers and insurance brokers can provide services in Shanghai, Guangzhou, Dalian, Shenzhen and Foshan. Within 2 years, areas will be expanded to Beijing, Chengdu, Chongqing, Fuzhou, Suzhou, Xiamen, Ningbo, Shenyang, Wuhan and Tianjin. All geographic restrictions will be eliminated within 3 years.
  
  
• Internal branching will be permitted consistent with the phase out of geographic restrictions.

Non-life insurance

• Foreign non-life insurers are allowed to establish branches, but their clients are restricted to organizations involving foreign investment. Moreover, foreign insurers cannot underwrite vehicle insurance.

Non-life insurance

• Branch or JVs with 51% foreign ownership will be allowed upon accession. Wholly-owned subsidiaries will be allowed in 2 years.
  
  
• Upon accession, foreign insurers can provide master policy and/or large scale commercial risk insurance, which has no geographic restriction. The can also provide insurance of enterprises abroad, property insurance, related liability insurance and credit insurance of foreign-invested companies consistent with geographical restrictions as outlined in the Overall section.
  
  
• Consistent with the geographical restrictions as outlined in the Overall section, foreign insurers can provide the full range of non-life insurance services to both foreign and local clients in 2 years.

Life insurance

• Wholly foreign-owned insurance companies exist but are the exceptions for life insurers. Since 1997, only JVs have been approved for life insurers. Foreign life insurers are restricted to write individual life products.

Life insurance

• JVs with 50% foreign ownership will be allowed upon accession.
  
  
• Consistent with geographical restrictions as outlined in the Overall section, foreign insurers can provide individual insurance to foreign and Chinese citizens upon accession and provide health, group and pension/annuities insurance in 3 years.

Reinsurance

• Overseas reinsurers are not allowed to write local currency business.
  
  
• Property/casualty insurers are obliged to have 20% of their business reinsured by China Reinsurance Company.

Reinsurance

• Upon accession, foreign insurers will be permitted to provide reinsurance services for life and non-life insurance as a branch, JV or wholly foreign-owned subsidiary without geographic or quantitative restrictions.
  
  
• The 20% obligatory reinsurance cession to China Reinsurance Company to be phased out four years after accession.

Existing Barriers/Regulations

Future Market Access Conditions

Overall

• Prudential criteria for authorization.

Securities

• Foreign securities firms can only trade B-shares (issues that can only be bought and sold by foreign investors) via shared commission.
  
  
• Foreign securities firms can access the B-share market for underwriting business.
  
  
• Foreign securities firms may underwrite international offerings of debt and equity.

Securities

• Foreign securities firms can establish JVs (with ownership 1/3) to engage (without Chinese intermediary) in underwriting A-shares and in underwriting and trading B- and H-shares as well as government and corporate debt, launching of funds within 3 years after accession.
  
  
• Foreign securities institutions can also engage in direct cross-border trading in B shares (without Chinese intermediary) upon accession.

Asset management

• No foreign access for asset management.
  
  
• Foreign fund management companies can act as advisors for domestic fund companies.

Asset management

• Minority ownership (33%) in JVs will be allowed to engage in domestic securities investment fund management business upon accession; ownership ceiling to rise to 49% within 3 years after accession.

Existing Barriers/Regulations

Future Market Access Conditions

Legal

• Foreign law firms cannot engage in Chinese law practice.
  
  
• Foreign law firms can set up profit-making representative offices in Beijing, Shanghai, Guangzhou, Shenzhen, Haikou, Dalian, Qingdao, Ningbo, Yantai, Tianjin, Suzhou, Xiamen, Zhuhai, Hangzhou, Fuzhou, Wuhan, Chengdu, Shenyang and Kunming.
  
  
• A foreign law firm can have only 1 office in China.

Legal

• Representative office, while can neither practice Chinese law nor employ Chinese national registered lawyers, can enter into long-term "entrustment" contracts providing for close working relationships with firms practicing Chinese law.
  
  
• Geographic and quantitative restrictions to be eliminated within 1 year after accession.
  
  
• The representative shall be practitioner lawyers in a WTO member and have practiced for no less than 2 years outside China. The chief representative shall be a partner or equivalent and have practiced for at least 3 years outside China.
  
  
• All representatives shall be resident in China no less than 6 months each year

Accounting

• JVs exist, but approvals for new JVs unlikely in the future. Foreign accounting firms can accept Chinese accounting firms as member firms.
  
  
• Foreign accounting firms can provide consulting services to foreign companies, Chinese firms listed overseas and on B-share market.
  
  
• Foreigners are allowed to sit for Chinese CPA examination. Qualified foreign accountants can only provide consulting services.

Accounting

• Partnership or incorporated accounting firms are limited to CPAs licensed by Chinese authorities.
  
  
• Foreign accounting firms can affiliate with Chinese firms and enter into contractual agreement with their affiliated firms in other WTO members.
  
  
• Foreigners who have passed the Chinese CPA examination will receive national treatment upon accession (i.e. they can form partnership or incorporated accounting firms).
  
  
• Existing JVs are not limited only to CPAs licensed by Chinese authorities.
  
  
• Accounting firms providing taxation and management consulting services will not be subject to JV restriction.
  
  
• No mandatory localization requirement.

Medical and dental services

• JV hospitals or clinics allowed. Such JVs must operate as a "profit-making" entity. No religious activities are allowed.
  
  
• Foreign doctors can provide medical services in China only after obtaining approval from Ministry of Health.

Medical and dental services

• JV hospitals or clinics with foreign majority ownership permitted.
  
  
• Quantitative limitations in line with China's needs.
  
  
• The majority of doctors and medical personnel shall be of Chinese nationality.
  
  
• Foreign doctors can provide short-term medical services in China after they obtain licenses from Ministry of Health.

Existing Barriers/Regulations

Future Market Access Conditions

Management consulting
Taxation services

• JVs allowed.

Management consulting
Taxation services

• Majority ownership in JVs will continue to be allowed upon accession. Wholly-owned subsidiaries allowed within 6 years.

Advertising

• Foreign companies may operate only as minority ownership JVs.

Advertising

• Only in the form of JV. Majority ownership and wholly-owned subsidiary permitted in 2 and 4 years respectively.

Computer services

• Foreign service suppliers who are certified engineers or who hold a bachelor's degree and have had 3 years experience can provide services in China.
  
  
• For software implementation and data processing services, commercial presence is limited to JV only.

Technical testing & analysis services and 
freight inspection

• Exclude statutory inspection services for freight inspection services.
  
  
• Foreign partner in a JV should have over 3 years operating history. Registered capital of the JV should be no less than US$350,000. Majority ownership and wholly owned subsidiary permitted in 2 and 4 years respectively.

Others

• JV with foreign majority ownership is also allowed for other business services such as photographing, convention, translation and interpretation.

Existing Barriers/Regulations

Future Market Access Conditions

Architecture services

• Although minority-owned JV is allowed, foreign architectural firms are unlikely to obtain an architect business license and establish a wholly-owned presence in China.
  
  
• The government has strict requirements on qualified employees for different categories of design institutes.
  
  
• Most foreign architectural firms are operating under license of individual projects in China. Such license only allows the architectural firm to work on a single project.
  

Engineering services

• Wholly or majority foreign-owned engineering firms are only allowed in Shanghai. Otherwise, minority-owned JV is the norm for foreign participation.

Architectural services
Engineering services
Integrated engineering services
Urban planning

• Majority-owned JVs allowed.
  
  
• For cross-border supply of services, can only take place through cooperation with Chinese professional organizations except scheme design.

Construction & related engineering services

• JVs with majority foreign ownership allowed upon accession. Wholly foreign-owned enterprises permitted within 3 years for undertaking foreign-funded projects as well as certain Chinese invested projects.
  
  
• Registered capital requirements for domestic and JV construction enterprises are slightly different.
  
  
• JV construction enterprises have the obligation to undertake foreign-invested construction projects.

Real estate services

• It is difficult for a wholly or majority foreign-owned real estate services provider to obtain a business licence in China. Most of them have to form joint venture with a Chinese partner in order to enter the market.
  
  
• Various practitioner licences are required to provide different kinds of property services. Foreigners are not eligible to obtain those licences issued by the municipal construction commission.

Real estate services

• Wholly owned firms are permitted for own or leased properties except for high standard real estate projects.
  
  
• For services on a fee/contract basis, JVs with foreign majority ownership permitted.

Maintenance & repair services
Rental & leasing services

• Only in the form of JV. Majority ownership and wholly owned subsidiary permitted in 1 year and 3 years respectively.

Existing Barriers/Regulations

Future Market Access Conditions

Films

• Imports of 10 foreign films per year on a revenue-sharing basis.

Films

• Imports of 20 foreign films per year on a revenue-sharing basis.

Audio-visual products

• Foreign participation in distribution is prohibited.

Audio-visual products

• Distribution of audio-visual products (excl. films) in the form of contractual JV permitted.

Cinema Theatre

• Foreign investors are allowed to build cinemas in China in the form of minority-owned JV.

Cinema Theatre

• JV with foreign ownership up to 49% will continue to be allowed.

Existing Barriers/Regulations

Future Market Access Conditions

Hotel

• JVs allowed.

Hotel

• Allow unrestricted access and wholly owned hotels within 4 years after accession, with majority ownership allowed upon accession.
  
  
• Foreign managers and specialists with contracts with JV hotels and restaurants in China shall be permitted to provide services in China.

Travel agency and tour operator

• Minority ownership in JV travel agencies.
  
  
• Foreign partner in a JV should have annual turnover of over US$ 50 million. Registered capital of the JV should be no less than RMB 5 million.

Travel agency and tour operator

• Allowed to operate in government designated holiday resorts as well as Beijing, Shanghai, Guangzhou and Xian.
  
  
• Majority ownership allowed within 3 years after accession. Wholly owned enterprises within 6 years after accession with geographic restriction removed.
  
  
• Eliminate restriction on branching within 6 years after accession.

Existing Barriers/Regulations

Future Market Access Conditions

Environmental

• JVs allowed.

Environmental

• JVs with majority foreign ownership will continue to be allowed upon accession.

Education

• JVs allowed in non-profit-making educational activities, but restricted to those areas that do not compete with China's compulsory education.

Education

• Joint schools with majority ownership permitted for delivering primary, secondary, higher, adult and other education services.
  
  
• Individuals with Bachelor's degree or above and appropriate professional titles/certificate with two years professional experiences can also be employed to provide service.