Legal Issues Of Subsidies To State-owned Enterprises Under The Framework Of WTO

In November,2001, China became a member of World Trade Organization. Since WTO is a multilateral trade system founded on market economies, China, as a non-market economy member in the process of transformation, is enjoying the benefits and opportunities brought by WTO whilst it has to be subject to the general WTO disciplines as well as some special rules related to China which are based on the Interface Theory. There are many adverse factors in those special rules, for instance, the Surrogate Country System for the determination of subsidy and subsidy amount and the absence of its additional time. It is very significant for China to develop international trades by understanding these special rules and reacting to the challenges they have brought to China’s economic development. Therefore, this paper, on the basis of rules analysis, tries to explore the domestic issues under the perspective of international law and discuss legal issues of subsidies to China’s SOEs together with the reasonable utilization of WTO subsidy disciplines for purpose of presenting a guide for China’s new trade war. This paper includes four chapters besides the preface and conclusion.Chapter One primarily introduces some basic conceptions, for instance, the definition of subsidy under WTO system and its classification, which can be divided into red light subsidies, yellow light subsidies and green light subsidies. With the introduction to the basic conceptions, it lays the theoretical foundation for the further discussion to that issue.Chapter Two turns the view back to the issues of China’s SOE subsidies by analyzing the types and nature of SOE subsidies by thick discussion. There are mainly four types of subsidies in China, including funds for special purposes, policy-related subsidies to cover enterprise losses, preferential loans, and tax preference. Through the analysis to the main types mentioned above, we can find the possibility of specific subsidies and actionable subsidies to China’s SOEs, which may incur excessive countervailing investigations. They may further affect the application of subsidies as well as the expansion of international trade in China. Chapter Three can be divided into two parts. The first part introduces the general WTO disciplines with respect to SOE subsidies. Since the general rules are universally applicable to all members, they are not the emphasis of this chapter. The second part mainly refers to special rules particularly relating to China’s SOE subsidies, so the Interface Theory will be introduced as the theoretical basis. After the interpretation of the Interface Theory, it comes to the types of special rules as well as each rule’s influence on China’s SOEs. At the end of this chapter, the author provides a brief summary of this chapter.Chapter Four mainly discusses how to manage the challenges presented by those special rules to the development of China’s SOEs. This chapter puts forwards effective strategies for SOE subsidies in government’s view that Chinese government must take the chance for the new trade war. On the one hand, China should learn to take advantage of WTO regulations of subsidies as well as the Uruguay Round Negotiations to change its unfavorable situation. On the other hand, the external cause provides the condition for the change of a thing, whereas the internal cause plays the decisive role. Therefore, Chinese government should improve its subsidies to SOEs. For instance, the government should keep integrating the existing types of subsidies, rationalizing the relationship between SOEs and the government, and further strengthening the reform to SOEs on the basis of commercialization.