In December 2001, China acceded to the WTO on terms, which, unlike any other WTO accession concluded thus far, included special rules expanding from the existing provisions of the WTO Agreement. These rules, which are set out in the text of the Protocol,1 as well as in the Report of the Working Party on the Accession of China,2 contain specific references to SOEs. When acceding to the WTO in January 2007, Viet Nam also made specific commitments with respect to SOEs.3
Annex 5B to the Protocol of Accession of China provides that budgetary funding from the central government in the form of grants or tax concessions to certain loss making SOEs had to be phased out by 2000.
Furthermore, Paragraph 10.2 of the section on subsidies specifies that subsidies provided to SOEs will be deemed specific within the meaning of Article 2 of the SCM Agreement if inter alia SOEs are the predominant recipients of such subsidies or SOEs receive disproportionately large amounts of such subsidies. The provision aims to address instances where a general government support programme would fall outside the scope of the WTO subsidy discipline even though the recipients are predominantly SOEs or a disproportionately large amount of the support is bestowed on SOEs.
In addition, both China and Viet Nam confirmed that all SOEs and state-invested firms would make purchases and sales in accordance with commercial considerations and would not be subject to the direct or indirect influence of the government in their commercial decisions.4 The representatives of China and Viet Nam also confirmed that procurement by SOEs and state-invested enterprises of goods and services would not be considered as government procurement and thus any laws, regulations, or measures relating to the procurement of goods and services by these enterprises should be subject to the WTO national treatment obligation.5
In another paragraph incorporated in the Protocol for China dealing with SOEs, the representative of China pointed out that the objective of the China’s central government was that SOEs, including banks, “should be run on a commercial basis and be responsible for their own profits and losses.”6 The Working Party Report does not, however, set out a timetable for the introduction of such reforms.