Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt

• (127) The product concerned ³¹ is fabrics of woven and/or stitched continuous filament glass fibre rovings and/or yarns with or without other elements, excluding products which are impregnated or pre-impregnated (pre-preg), and excluding open mesh fabrics with cells with a size of more than 1,8 mm in both length and width and weighing more than 35 g/m² (‘GFF’), originating in the PRC and Egypt, currently falling under CN codes ex 7019 39 00, ex 7019 40 00, ex 7019 59 00 and ex 7019 90 00 (TARIC codes 7019390080, 7019400080, 7019590080 and 7019900080) (‘the product concerned’).

• (128) GFF is used in a wide range of applications, for example for the production of blades for wind turbines, in the boat, truck and sport equipment production, as well as in pipe rehabilitation systems.

2.2.   Like product

• (129) The investigation showed that the following products have the same basic physical, chemical and technical characteristics as well as the same basic uses:

• — the product concerned;

• — the product produced and sold on the domestic market of countries concerned; and

• — the product produced and sold in the Union by the Union industry.

• (130) The Commission decided that those products are therefore like products within the meaning of Article 2(c) of the basic Regulation.

2.3.   Claims regarding the product scope

• (131) One exporting producer and the Ministry of Trade of the Arab Republic of Egypt claimed that pre-cut GFF kits should not be covered by the scope of the investigation. They argued that pre-cut GFF kits would be a downstream product requiring additional production steps and with differences in physical characteristics, having a much smaller size. It would come in different forms and packaging, consisting of several smaller pieces of fabrics quilted together. It was further argued that there would be no circumvention risk by excluding kits as the process of cutting would be irreversible and that the product is not interchangeable with the uncut GFF.

• (132) The complainant argued that pre-cut GFF kits and non-cut GFF have the same basic characteristics and end uses. As GFF are reinforcement materials, the cutting to shape is necessary to fit the form of the product that needs to be reinforced, but does not change its basic characteristics as such. The cutting process can be carried out by the GFF producer, an independent industrial cutter or the customer itself. It is a very simple and low-cost operation. The complainant further argued that users do not perceive pre-cut GFF differently from other GFF, as GFF are generally produced to user specifications. If the cutting process would change the characteristics of the GFF, that would render them unusable for the specific customer.

• (133) The investigation showed that pre-cutting and kitting processes do not change the basic physical, technical or chemical characteristics of GFF or their basic end uses. Customers of both products are largely the same and both are sold via the same distribution channels.

• (134) The investigation also confirmed that for most applications GFF are produced to order according to customers’ specifications. Pre-cut GFF kits constitute merely an additional specification in the customer order. That pre-cut GFF kits receive a different packaging does also not change the characteristics. Since GFF is ordered increasingly in the form of pre-cut GFF kits and the services of external kitters are used increasingly, there would be a high circumvention risk, if pre-cut GFF would be excluded from the scope of the investigation. Therefore, the Commission concluded that it would not be appropriate to exclude pre-cut GFF from the scope of the investigation.

• (135) Another exporting producer argued that glass fibre yarns should be deemed to be excluded from the scope of the investigation. This exporting producer argued that glass fibre yarn was not to be mentioned explicitly in the questionnaire, the complaint or in the Notice of Initiation, which would indicate that they are not covered by the product scope. It further argued that GFF from yarn could not be classified under the characteristics of the product control number (‘PCN’), that GFF from yarn would be imported under different CN codes than the ones mentioned in the complaint and that glass fibre yarns would also not be covered by the measures against glass fibre rovings in other proceedings.

• (136) The complainant and another Union producer (not party to the complaint) argued that only GFF from non-twisted or zero-twisted glass fibre yarns should be covered by the investigation, whereas twisted yarns could be excluded from the scope of the investigation. The complainant argued that non-twisted or zero-twisted glass fibre yarns share the characteristics of glass fibre rovings to consist of a bundle of untwisted filaments or strands and are also used for the same purposes as rovings and are typically 13-24 micrometres in diameter and are 300-4 800 tex.

• (137) Regarding the inclusion of GFF from glass fibre yarns, the Notice of Initiation defined the product under investigation as “fabrics of woven, and/or stitched continuous filament glass fibre rovings and/or yarn, […]” ³². The investigation has shown that non-twisted or zero-twisted glass fibre yarns share the same basic characteristics as glass fibre rovings, i.e. to consist of a bundle of untwisted filaments or strands, and are also used for the same purposes. Both are typically 13-24 micrometres in diameter and are 300-4 800 tex. Thus, it would not be appropriate to exclude these product types from the scope of the investigation.

• (138) In relation to GFF made mainly from twisted glass fibre yarn, the Commission notes that this product, which has different basic characteristics and is also subject to different end uses, e.g. printed circuit boards, was never part of the product concerned. The Commission explicitly clarified this point in the Clarification Notice.

3. SUBSIDISATION: PEOPLE’S REPUBLIC OF CHINA

3.1.   Introduction: Presentation of Government plans, projects and other documents

• (139) Before analysing the alleged subsidisation in the form of subsidies or subsidy programmes, the Commission assessed government plans, projects and other documents, which were relevant for more than one of the subsidies or subsidy programmes. It found that all subsidies or subsidy programmes under assessment form part of the implementation of the GOC's central planning to encourage the GFF industry for the following reasons.

• (140) The 12th Five-Year Plan for National Economic and Social Development of the PRC (‘the 12th Five-Year Plan’) highlighted the importance of the new materials industry, which includes GFF, as a “strategic emerging industry” and stipulates that it should be developed into a “leading pillar industry” through comprehensive policy support and guidance ³³. Furthermore, the 13th Five-Year Plan for National Economic and Social Development of the PRC (‘the 13th Five-Year Plan’), which covers the period 2016-2020, aims to develop further new materials industries by strengthening research and development and enhancing the innovation capability of the manufacturing industry ³⁴.

• (141) The 13th Five-Year Plan highlights the strategic vision of the GOC for improvement and promotion of key industries. It emphasizes the role of technological innovation in the economic development of the PRC, as well as the continued importance of “green” development principles. According to its Chapter 5, one of the main development lines is to promote the upgrading of the traditional industrial structure, as was already the case in the 12th Five-Year Plan. Chapter 22 further elaborates this idea explaining the strategy to modernize the traditional industry in the PRC by promoting its technological conversion. In this respect, the 13th Five-Year Plan states that companies will be supported to “comprehensively improve in areas such as product technology, industrial equipment, environmental protection and energy efficiency”.

• (142) The 13th Five-Year Plan mentions the new materials in a couple of instances: “we will move faster to make breakthroughs in core technologies in fields such as next generation information and communications, new energy, new materials […]” ³⁵. The plan furthermore envisages that there will be projects carried out related to key new materials research, development and application ³⁶.

• (143) Following definitive disclosure, the GOC reiterated its basic position on China's Five Year Plans, claiming that they are not mandatory or legally binding but are simply guidance documents because they do not contain actual legal provisions, sanctions or any rules on applicability. The GOC further stated that the 12th Five-Year Plan is not applicable anymore and even if the 13th Five-Year Plan would be legally binding, quod non, it does not mention GFF. Additionally, while the plan refers to “new materials”, it does not define this term. Finally, the 13th Five-Year Plan is not specific to the GFF industry or to the “new materials industry” but covers nearly the entire economy

• (144) The Commission disagreed with this position. Chapter 17 of the 13th Five-Year Plan states: “the national development strategy and plan will come into play with a leading and constraining role.” Thus, rather than making only general statements of encouragement, this plan uses language which points to its binding nature.

• (145) Even if the 12th Five-Year Plan is not applicable anymore, it is the predecessor that highlighted the importance of the new materials industry as a “strategic emerging industry” that the 13th Five-Year Plan further developed. As demonstrated in recitals (148) and (149), the new materials industry includes the GFF industry. As mentioned in recital (141), the 13th Five-Year Plan highlights the strategic vision of the GOC for improvement and promotion of key industries; therefore, it prioritise certain sectors and technologies, including GFF.

• (146) Therefore, the claims of the GOC in this respect were rejected.

• (147) The new materials industry is also an encouraged industry under the Made in China 2025 initiative ³⁷, and thereby eligible to benefit from considerable State funding. A number of funds had been created to support the Made in China 2025 initiative and hence indirectly the GFF industry such as the National Integrated Circuit fund, the Advanced Manufacturing Fund and the Emerging Industries Investment Fund ³⁸.

• (148) Furthermore, GFF is often referred to under the umbrella of ‘new materials’. The Made in China 2025 Roadmap ³⁹ 10 strategic sectors, which are the key industries for the GOC. It describes in Sector 9 ‘new materials’ and its subcategories, including advanced fundamental materials (point 9.1), key strategic materials (point 9.2) including high performance fibres and composite materials, new energy materials ⁴⁰. New materials thus benefit from the advantages stemming from the support mechanisms listed in the document, including, among others, Financial Support Policies, Fiscal & Taxation Policy, State Council Oversight and Support ⁴¹.

• (149) Additionally, further to the Made in China 2025 Roadmap, in November 2016, the list of 10 strategic sectors was refined into a Catalogue of Four Essentials published by the National Manufacturing Strategy Advisory Committee (NMSAC), an advisory group to the National Leading Small Group on Building a National Manufacturing Power. In this catalogue, each of the 10 strategic sectors is split into four chapters: (i) core essential spare parts, (ii) key essential materials, (iii) advanced essential processes/technologies and (iv) industry technology platforms. Glass fibre can be found in sector 7: electrical equipment, point II key essential material: subpoint 16 glass fibre insulation boards and sector 9: new materials, point II key essential materials, subpoints 10. High-performance fibre, monomer and composite materials and 24. Glass-based materials.

• (150) Following definitive disclosure, the GOC claimed that GFF is not mentioned in the Made in China 2025 initiative which is broadly available throughout the economy and that Made in China 2025 is not mandatory but is a mere guideline.

• (151) In this respect, the Commission reiterates that the Made in China 2025 initiative clearly targets the new material industries, which include the GFF industry as already demonstrated. It provides for strategic support and guarantee through, inter alia, improved financial support policy and increased support of fiscal taxation policy. For instance, it clearly provides to “increase the support to the new generation of information technology, high-end equipment, new materials, etc.”

• (152) The Made in China 2025 initiative states that it is “the program of actions in the first ten years of implementing the strategy of manufacturing power” and it sets clear strategic policies and targets. The Made in China 2025 initiative also provides that “various regions shall work out specific implementation program and refine the policy measures to ensure various tasks to be implemented” and further states that “the Ministry of Industry and Information shall strengthen the tracking analysis, supervision and direction jointly with relevant departments, and report major events to the State Council in a timely manner”. Furthermore, the Made in China 2025 initiative is supported by implementing measures such as the Made in China 2025 Roadmap and the ‘Notice of the General Office of the Ministry of Industry and Information Technology on the release of the 2017 Industrial Transformation and Upgrade (Made in China 2025) Funding Guide’ ⁴², which provided for funds that benefitted certain cooperating GFF exporting producers. In addition, the Building Materials Industry Development Plan (2016-2020) mentioned in recital (153) “is prepared based on the Outline of the 13th Five-Year Plan for National Economy and Social Development of the People’s Republic of China and the Made in China 2025 Strategy”. Considering the above-mentioned, the Made in China 2025 initiative does not appear to be a mere guideline; on the contrary, it appears to have a de facto mandatory effect and is largely implemented. Therefore, the claims of the GOC were rejected.

• (153) Furthermore, the Building Materials Industry Development Plan (2016-2020) also promotes the GFF industry. This plan calls for optimizing industrial structure by, inter alia, expanding emerging industries such as glass-based materials, industrial ceramics, intraocular lens, high-performance fibres and composites, and graphene and modified materials. This is to be achieved through government funding, taxation, financial, pricing, energy, and environmental protection policies, and support for capital to participate in the mergers, acquisitions and restructuring of building materials enterprises through various means including lending ⁴³.

• (154) Following definitive disclosure, the GOC claimed that the Building Materials Industry Development Plan applies to all building materials and is thus also broadly available throughout the economy. Furthermore, this plan only concerns general information about government policy.

• (155) The Building Materials Industry Development Plan provides for specific measures targeting the building materials industry, to which the GFF industry belongs as explained in recital (166). Therefore, the Commission disagrees with the GOC’s statement that it is available through the economy.

• (156) Although the Building Materials Industry Development Plan might appear merely as a guidance document, as mentioned in recital (152), it is an implementation of the 13th Five-Year Plan and the Made in China 2025 Strategy. It aims at “promoting transformation and upgrading of the building materials industry, facilitating the transition of the building materials industry from a large industry to a powerful one and achieving the sustainable development during the “13th Five-Year Plan” period” and sets clear tasks and projects in order to achieve the fixed objectives during a defined concrete five-year period ⁴⁴. Therefore, its purely guidance character is disputable, and more so when examining in its broader context.

• (157) The GFF industry is also covered by the Intelligent Manufacturing Development Plan (2016-2020) published by the Chinese Ministry of Industry and Information Technology (the ‘MIIT’), which sets up 10 key tasks that aim at shortening the product development cycle, improving production efficiency, product quality, reducing operating cost, resources and energy consumption, and accelerating the development of intelligent manufacturing. In 2018, the State Council announced China’s plans to expand its program for smart manufacturing by adding about 100 pilot projects that same year, and according to publicly available information, one of the cooperating exporting producers, Taishan Fiberglass, Inc. was listed in 2015 among ‘The Intelligent Manufacturing Plants’ by the MIIT ⁴⁵.

• (158) According to the GOC, the Intelligent Manufacturing Development Plan (2016-2020) is irrelevant, since this is not specific to the GFF industry but concerns the entire manufacturing industry. Additionally, the GOC claimed that the plan is not a mandatory document but a mere guideline.

• (159) The Intelligent Manufacturing Development Plan (2016-2020) is “prepared in accordance with the Outline of the 13th Five-Year Plan for National Economy and Social Development of the People’s Republic of China, the Made in China 2025 Strategy” ⁴⁶. Therefore, it implements the strategy laid down in these documents. As already explained before, the 13^th Five-Year Plan and the Made in China 2025 Strategy target specifically certain industries, among which is the GFF industry as part of the new materials industries. In addition, at many instances, the Intelligent Manufacturing Development Plan refers to the ten key fields of Made in China 2025 Strategy. In particular, the ‘Special Column 6 Intelligent transformation emphasis of key field’ provides that “for the new generation of information technologies, (…) new material, (…) building material (…), the deep application of intelligent and digital technologies in the research and development and design, manufacturing, logistics and warehousing, operation and management, after-sales service and other key links of enterprises is promoted”. Therefore, the Intelligent Manufacturing Development Plan (2016-2020) is specific to the key industries laid down by the Made in China 2025 Strategy and covers, inter alia, the new materials and the building materials sectors to which the GFF industry belongs.

• (160) The Commission also notes that the language used in the Intelligent Manufacturing Development Plan (2016-2020) suggests a mandatory character of the document. In particular, Section II (III) ‘Development objectives’ provides that “Before 2025, “Two-Step” strategy shall be implemented to promote intelligent manufacturing development: Step one, by 2020, the intelligent manufacturing development foundation and supporting capacity will be obviously enhanced, the digital manufacturing will be basically realized in the key field of traditional manufacturing industry, and the intelligent transformation of key industry with conditions and foundation will make obvious progress; Step two, by 2025, the intelligent manufacturing support system is basically established, and the intelligent transformation is initially realized in the key industry”. Furthermore, Section V ‘Organization and implementation’ provides that “the Ministry of Industry and Information Technology and Ministry of Finance are responsible for organizing and implementing the Plan, strengthening the leadership, carefully organizing, timely solving the problems met in the implementation process of the Plan, and promoting the implementation of various tasks and measures” and that “the competent departments of industry and information technology and of finance in various regions shall quickly formulate the implementation scheme connected with the Plan, implement relevant supporting policies, and complete the information feedback work according to the assignment of responsibility”. Therefore, the Commission concluded that the Intelligent Manufacturing Development Plan has clearly defined objectives that are mandatory for the companies involved.

• (161) In light of the above findings, the claims of the GOC were rejected.

• (162) Moreover, the China High-Tech Export Products Catalogue issued by the Ministry of Science and Technology, the Ministry of Foreign Trade and the General Administration of customs lists 1900 high-tech products in 8 categories, which are targeted for preferential export policies by the GOC. One of the categories is the ‘New Materials’ category, which includes GFF ⁴⁷. In addition, the China High-Tech Products Catalogue issued by the Ministry of Science and Technology, the Ministry of Finance and State Administration of Taxation refers to 11 areas, among which the ‘new materials category’. Furthermore, according to the Law of the PRC on Science and Technology Progress, the high-tech enterprises established in High-tech Development Zones can benefit from a list of preferential policies, which include: (i) an Enterprise Income Tax rate of 15 %, instead of the normal rate of 25 %; (ii) if the output value of export products reaches 70 % of the total value for that year, the EIT rate is further reduced to 10 %; (iii) newly-established high-tech enterprises are exempt from EIT tax for the first two years from the date production begins; (iv) newly-established high-tech enterprises are exempt from construction tax; (v) for new technology development and production and operation houses, R&D land is tax-free; (vi) equipment used by high-tech enterprises for high-tech production and development is subject to accelerated depreciation; (vii) export products produced by high-tech enterprises are exempt from export tariffs except those restricted by the State or concerning specific products, etc ⁴⁸.

• (163) Following definitive disclosure, the GOC claimed that the China High-Tech Products Catalogue, read in conjunction with the Law of the PRC on Science and Technology Progress is not specific to a certain industries because these documents set out objective criteria for eligibility, which are applied automatically.

• (164) In this respect, as already mentioned in recital (162), the China High-Tech Export Products Catalogue high-tech products in 8 categories, including ‘new materials’. The Commission further notes that the China High-Tech Products Catalogue refers to 11 areas, among which “6. New material”. Considering that both catalogues are limited to a certain number of areas, it cannot be concluded that they applies to all industries. Therefore, the claim of the GOC is rejected.

• (165) The Temporary Provisions on Promoting Industrial Structure Adjustment (Decision No. 40 2005 of the State Council) (‘Decision No 40’), Chapter III refers to ‘The Guiding Catalogue for Industry Restructuring’ which is composed of three kinds of contents, namely encouraged project contents, limited projects content and eliminated projects content. According to Article XVII of the Decision, if “the investment project belongs to the encouragement content shall be examined and approved and put on records according to the relevant national regulations on investment; all financial institutions shall provide credit support according to the credit principles; the self-using equipment imported in the total amount of investment, with the exception of commodities in the Non-exempt Imported Commodities Content of Domestic Invested Projects (amended in 2000) issued by the Ministry of Finance, can be exempt from import duty and import links value-added tax, unless there are new regulations on the non-exempt investment projects content. Other favorite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations ”.

• (166) The Guiding Catalogue for Industry Restructuring (2011 Version) (2013 Amendment) ⁴⁹ lists under ‘Category I Encouragement’

“XII.   Building Materials:

[…]

6. Technology development and production of alkali free glass fiber tank kiln wire drawing and high-performance glass fiber and products with an annual yield of 50 000 ton”

• (167) According to the GOC, Decision No. 40 is not specific to an enterprise or industry, as required by Article 2.1 of the SCM Agreement but to certain encouraged projects. Moreover, Decision No. 40 is not mandatory. The GOC affirmed that the Guiding Catalogue for Industry Restructuring referred to by the Commission is irrelevant because the Commission refers to the 2011 version of this catalogue, which has already expired. According to the GOC, the new version of this catalogue does not mention GFF.

• (168) First, the Commission points out that it referred to ‘The Guiding Catalogue for Industry Restructuring (2011 Version) (2013 Amendment)’; therefore, it did not refer to the 2011 version but to the 2013 amended version. To the Commission’s knowledge, the latest amendment of the Catalogue was approved by Decree of the National Development and Reform Commission of the People's Republic of China No. 29 of 27 August 2019 and entered into force on 1 January 2020 ⁵⁰. This new ‘Guiding Catalogue for Industry Restructuring (2019 Version)’ indeed abolished the ‘Guiding Catalogue for Industry Restructuring (2011 Version) (Amendment)’. However, it was adopted and entered into effect after the investigation period. Therefore, ‘The Guiding Catalogue for Industry Restructuring (2011 Version) (2013 Amendment) was applicable during the investigation period. In any event, contrary to the GOC’s statement, the 2019 version of the ‘Guiding Catalogue for Industry Restructuring’ refers to GFF under ‘Section I Encouraged industries’ as follows:

“XII.   Building materials

[…]

6. […] Technology development and production of high-performance glass fiber and glass fiber products such as degraded and irregular cross-section”.

• (169) Second, the Commission disagrees that Decision No. 40 has no mandatory effect. Indeed, Decision No. 40 lays down the temporary regulations promoting the industrial restructuring and it refers to ‘The Guiding Catalogue for Industry Restructuring’, which defines three kinds of content: encouraged projects content, limited projects content and eliminated projects content. However, Article XVII of Decision No. 40 establishes the treatment of investment projects belonging to the encouraged content in a mandatory manner, e.g. ‘all financial institutions shall provide credit support according to the credit principles’, ‘other favourite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations’. Furthermore, Article XXI sets that ‘the relevant preferential policies implemented according to The Content of Industries, Products and Technologies Currently Especially Encouraged by the State (amended in 2000) shall be adjusted to be implemented according to the encouragement content of The Guiding Catalogue for Industry Restructuring’. Therefore, Decision No. 40 has a mandatory effect in this respect. The Guiding Catalogue for Industry Restructuring, ‘Category I Encouragement’ lists a certain number of projects under a certain number of industries. As explained in recital (166), it includes the building materials industry and specific projects related to the GFF industry. Consequently, Decision No. 40 read together with The Guiding Catalogue for Industry Restructuring provides for specific treatment of certain projects within certain encouraged industries. Therefore, although these documents refer to specific projects, they first establish the specific industries that are encouraged and then certain projects in these industries that could benefit from the preferential treatment provided for in Decision No. 40. Therefore, the Commission rejected the claims of the GOC.

• (170) Furthermore, GFF is covered by the Building Materials Industry Development Plan 2016-2020 ⁵¹, which envisages, among others, the transition of the construction material industry from a large industry to a strong industry. It also envisages an optimisation of the construction sector's structures, improvement of the security of supply of key materials, increase in the level of concentration in the industry as well as enhancement of the international competitiveness. The plan provides for quantitative development targets, governmental control over production capacity, detailed production targets, geographical distribution of industries among provinces in the PRC, security of supply, development of specific industries, government control and influence over enterprises and industry support measures ⁵². This demonstrates the strong presence and intervention of the State in the fibreglass industry.

• (171) The 13^th Five-Year Plan for Fibre and Composite Materials Industry ⁵³ is a plan targeting specifically the fibre material industry. It clearly guides the development of the sector, for example Section III.3 sets the goal to:

• (172) ‘Actively integrate and upgrade the upstream and downstream ends of the industry chain to maintain the healthy and stable development of the fibre and composite materials industry: Encourage large-scale pond and kiln enterprises to steadily implement the “go global” development strategy, implement global production capacity patterns. On this basis: - keep the control over the domestic glass fibre production volume growth rate at a relatively low level; - at the same time, reduce the export ratio of domestic glass fibre and products; -actively adjust product structures; […] - actively adjust product structure and guide enterprises to implement differentiated development, vigorously develop deep processing of glass fibre products, expand the market size of fibre and composite materials products in mid-to-high-end application fields, and improve product quality and added value. Ensure that the annual growth rate of the main business revenue of the fibre and composite materials industry is higher than the national GDP growth rate by about 5 to 6 percentage points, that is, as of 2020, the total revenue of enterprises above designated size will reach 500 billion yuan, i.e. doubling compared to the situation prevailing at the end of the 12th Five-Year Plan.’ ⁵⁴

• (173) Furthermore, Section IV.3.4 of that plan sets basis for governmental guidance of the enterprises and the entire industry:

• (174) ‘Guide various types of enterprises to get involved in differentiated operations taking into account their individual advantages and specific market segments. In particular, it is necessary to guide small and medium-sized enterprises to follow the growth path consisting in filling up specific gaps, in having small enterprises being complementary to big ones, in considering specialisation as the way to success. Thanks to differentiated operations, scale-competition between large enterprises is avoided, and the competition between similar enterprises is avoided, thus eliminating the low-cost competition market. At the same time, with specialized production, small and medium-sized enterprises can also win the respect and attention of large enterprises, establish close cooperative relationships with large enterprises, and effectively support and promote the development of large enterprises.’

• (175) The industry associations are closely interlinked with the State, mostly through the importance of CCP building in those associations ⁵⁵. The provisions of Section IV.3.6 of the same plan also point to a State intervention into the fibre production, including the GFF sector:

‘ [The Association shall]

— assist the government in duly designing and implementing industry policy, to ensure the sound development of the sector;

— ensure the effective implementation of the glass fiber sector entry and management system and at the same time explore and implement and entry and management system applicable to the composite material sector;

— set out and implement sector and entry management systems in order to

— effectively curb low level duplications,

— strengthen enterprises’ self-discipline awareness as well as the sector’s perspectives,

— foster the elimination of obsolete production capacities and the transformation and upgrade of the sector,

— maintain a sound and orderly competition and orderly development of the sector;

— take account of the sector’s development needs, strive to set out incentive policies and measures, guide the sector’s sound development;

— actively strive to obtain export tax refund on glass fiber deeply processed products and guide the sound development of the glass fiber deep processing industry;

— actively strive to obtain the introduction and improvement of import and export tax rates for fibers and composite materials so as to offer incentives to the growth of high value-added composite material products exports; ’

• (176) The PRC has actively promoted the GFF industries on different government levels, an example of a local initiative covering one of the sampled companies can be found in the Jiujiang City 13th Five-Year Plan for the economic and social development:

Section III 2.2 Effectively implement a development plan for strategic and emerging industries

• — New materials:

• — […]

• — Extend and support the new materials industry chain, foster the development of new materials industry clusters;

• — Rely on Jiujiang economic development zone, Jiujiang Chihu district industry park, Yongxiu Xinghuo Industry park and the Lushan fiber production base, and focus on the development of organic silicone new materials, glass fiber composite materials, bio-fiber new materials, metal new materials, and graphene new materials;

• — […]

• — Actively foster the JUSHI GROUP, Shengxiang Electronics, Cabot Chemical Industry and other leading enterprises’ innovation-driven development, active connexion to the market, exploration and development of new fields of application for glass fiber and composite new materials so as to speed up the transformation and upgrade of the glass fiber industry ⁵⁶.

• (177) Following definitive disclosure, the GOC claimed that the 13th Five-Year Plan for Fiber and Composite Materials Industry and the Jiujiang City 13th Five-Year Plan both only concerns general information about government policy, with no direct connection to any of the alleged subsidy programs at issue and are thus not “sufficient evidence” of specificity.

• (178) The Commission disagreed with this claim. As explained in recitals (171) and (172), the 13th Five-Year Plan for Fibre and Composite Materials Industry targets specifically the fibre material industry and it clearly guides the development of the sector. Even if this document might have no direct connection to the alleged subsidy programs as claimed by the GOC, it points to specific measures encouraging the fibre and composite materials industry. Furthermore, as mentioned in recital (176), the Jiujiang City 13th Five-Year Plan for the economic and social development specifically targets Jushi Group, which is one of the cooperating exporting producers. Therefore, these documents demonstrate that the Chinese authorities target specifically a given industry, which includes the GFF industry, and certain companies in this industry. Consequently, the claims of the GOC were rejected.

• (179) Considering the above-mentioned, the GFF industry is thus regarded as a key/strategic industry, whose development is actively pursued by the GOC as a policy objective.

• (180) Following definitive disclosure, the GOC objected to the Commission’s assessment that the GFF industry is an encouraged industry and that the Commission's allegation that the GFF industry is encouraged in China does not show that the measures at issue are specific within the meaning of Article 2 of the SCM Agreement.

• (181) The Commission disagreed with the COG’s statement. The findings demonstrated in recitals (140) to (178) show that the GFF industry, as part of the ‘building materials’ and the ‘new materials’ industries, is particularly targeted and encouraged through various policy and regulatory tools and listed in catalogues of encouraged industries. The fact that these documents provide for specific measures with respect to certain industries, including the GFF industry, is sufficient to demonstrate that they are specific within the meaning of Article 2 of the SCM Agreement.

3.2.   Partial non-cooperation and use of facts available

3.2.1.   The application of the provisions of Article 28(1) of the basic Regulation in relation to preferential lending and export credit insurance

• (182) For administrative convenience, the Commission requested the GOC to forward specific questionnaires to the two specific state-owned banks mentioned in the complaint, to Sinosure, as well as to any other financial institution that provided loans or export credits to the sampled companies.

3.2.1.1.   Preferential lending

• (183) The GOC indeed forwarded the specific questionnaires to the banks. 15 bank branches confirmed their outstanding loans with the sampled companies during the IP, but without providing a reply to the questionnaire as such. Only the in-house bank of one of the exporting producers (CNBM Finance) and one state-owned bank (Export-Import Bank of China) actually responded to the questions in the questionnaire. Furthermore, the CDB did not respond to the questionnaire, but was available for questions during the verification visit.

• (184) According to the GOC, it had no authority to demand information from the state-owned banks that did not reply to the questionnaire, as they operate independently from the GOC.

• (185) The Commission disagreed with this view. First, it is the Commission's understanding that the information requested from state-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder. Indeed, according to the Law of the People's Republic of China on State-Owned Assets of Enterprises ⁵⁷, State-owned assets supervision and administration agencies established by the State-owned Assets Supervision and Administration Commission of the State Council and local people's governments perform the duties and responsibilities of the capital contributor of a State-invested enterprise on behalf of the government. Such agencies are thus entitled to receive returns on assets, to participate in major decision-making and to select managerial personnel of State-invested enterprises. Furthermore, according to Article 17 of the above-mentioned Law on State-owned Assets, State-invested enterprises shall accept administration and supervision by governments and relevant governmental departments and agencies, accept public supervision, and be responsible to capital contributors.

• (186) In addition, the GOC also has the necessary authority to interact with the financial institutions even when they are not State-owned, since they all fall under the jurisdiction of the Chinese banking regulatory authority. For example, according to Articles 33 and 36 of the Banking Supervision Law ⁵⁸, the China Banking and Insurance Regulatory Commission (‘CBIRC’) has the authority to require all financial institutions established in the PRC to submit information, such as financial statements, statistical reports and information concerning business operations and management. The CBIRC can also instruct financial institutions to disclose information to the public.

• (187) Furthermore, although the sole cooperating State-owned bank provided some general explanations on the functioning of their loan approval and risk management systems, it did not provide specific information concerning loans provided to the sampled companies. It argued that it was bound by statutory and regulatory requirements and contractual clauses with respect to the confidentiality of the information related to the sampled companies.

• (188) Therefore, the Commission asked the sampled groups of exporting producers to grant access to company-specific information held by all banks, State-owned and private, from which they received loans. Although the sampled companies gave their agreement to provide access to the bank data pertaining to them, the cooperating bank refused to provide the required detailed information.

• (189) In the end, the Commission only received information on corporate structure and ownership from the cooperating State-owned bank but not from any of the other financial institutions, which had provided loans to the sampled companies. Moreover, none of the financial institutions provided any information specific to the risk assessment of the loans granted to the sampled groups of exporting producers.

• (190) Since it had no information in relation to most of the State-owned banks that provided loans to the sampled companies, and no company-specific information on the loans provided by the cooperating banks, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

• (191) Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

• (192) In the reply to the Commission's letter, the GOC objected to the application of Article 28(1) of the basic Regulation. In general, it argued that the specific information requested was not necessary to begin with because the proceeding was based on a complaint that failed to provide sufficient evidentiary requirements of the SCM Agreement and the basic Regulation. The Commission considered that the sufficiency of evidence of the complaint was already addressed in Section 1.1.1 above and thus maintained its conclusion that there was sufficient evidence provided in the complaint tending to show the existence of the alleged subsidisation by the GOC.

• (193) The GOC also objected more specifically to the application of Article 28(1) of the basic Regulation regarding preferential lending. The GOC reiterated that it had no authority over the banks. The GOC also considered that it had cooperated to the best of its abilities, that the Commission had imposed an unreasonable extra burden on it, and that the missing information was not “necessary” in the sense of Article 28 of the basic Regulation, since it was already available through the responses to the questionnaires. The GOC reiterated these claims after the definitive disclosure.

• (194) The Commission maintained its position that the GOC has the authority to request information from the banks for the reasons explained in recitals (185) and (186) above. It acknowledged that the GOC forwarded the relevant questionnaires to the banks, and that it received a meaningful reply from one State-owned bank. The Commission used the information so provided, and complemented it with facts available only for those parts that were missing.

• (195) This missing information mainly concerns two aspects. First, information on the ownership and governance structure of the non-cooperating banks, which was necessary for the Commission to determine whether these banks are public bodies or not. Second, company-specific information from the cooperating bank, such as the internal loan approval process of the bank and the creditworthiness assessment of the bank for the loans provided to the sampled companies, which was necessary, in the sense of Article 28 of the Basic Regulation, in order to determine whether loans were provided at preferential rates to the sampled companies. Furthermore, such internal documents can only be provided by the banks, and could thus not be supplied through the questionnaire replies of the sampled companies.

• (196) The GOC also claimed that company-specific information could not be provided for regulatory reasons. Even if the Commission had a general written consent from the sampled companies waiving their confidentiality rights, the GOC maintained that the relevant banks or financial institutions would be required to ask the parties for their express permission with respect to each particular loan transaction and that these permissions would have to be verified by the relevant financial institutions.

• (197) However, the Commission noted that consent was requested separately from each company for the loan transactions of each specific bank. The Commission considered that such a specific consent should be sufficient as such to grant access to the records related to the sampled companies. In addition, some of the banks actually provided an overview of their outstanding loans with the companies, thus showing that they were not restricted in providing information as such on specific transactions. However, none of these banks provided any information related to their own internal assessment of the transactions that had been disclosed.

• (198) Finally, the Commission did not consider that it had imposed an unreasonable burden on the GOC. From the start, the Commission limited its investigation to those financial institutions that had provided loans to the sampled companies. The Commission also did not burden the GOC with the identification of these financial institutions, as the list with names and addresses of the banks, as well as the request to forward the questionnaires, was provided to the GOC at the very beginning of the investigation, in June 2019. This provided ample time for the GOC to comply with the Commission's request. The Commission thus considered that it had done its utmost to facilitate the tasks requested from the GOC.

• (199) The Commission thus maintained that it had to rely partially on facts available when examining the existence and the extent of the alleged subsidisation granted through preferential lending.

3.2.1.2.   Export credit insurance

• (200) Sinosure responded partially to the specific questionnaire concerning export credit insurance provided to the sampled companies. In particular, Sinosure did not give specific information about the export credit insurance provided to the GFF industry, the level of its premiums or detailed figures relating to the profitability of its export credit insurance business.

• (201) Furthermore, Sinosure failed to provide the requested supporting documentation concerning its corporate governance, such as its Articles of Association, arguing that this was confidential information.

• (202) In the absence of such information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

• (203) It is the Commission's understanding that the information requested from State-owned entities (be it companies or public/financial institutions) is available to the GOC for all entities where the GOC is the main or major shareholder. This is also the case for Sinosure, which is a fully State-owned entity. Therefore, the Commission informed the GOC that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted through export credit insurance.

• (204) In the reply to the Commission's letter, the GOC objected to the application of Article 28(1) of the basic Regulation regarding export credit insurance, by pointing to the fact that Sinosure had provided a questionnaire reply, and had answered to the Commission's questions during the on-spot verification.

• (205) Sinosure indeed provided a questionnaire reply and representatives from Sinosure were present at the verification at the GOC's premises. However, as mentioned in recitals (200) and (201) above, the information provided was incomplete. For example, Sinsoure provided global figures on its profitability, but not on the profitability of its short-term export credit insurance business as such. The information provided thus did not allow the Commission to draw conclusions on crucial parts of the investigation regarding export credit insurance, that is whether Sinosure is a public body and whether the premiums charged to the sampled companies were market conform.

• (206) The Commission thus concluded that it had to rely partially on facts available for its findings concerning export credit insurance.

3.2.2.   The application of the provisions of Article 28(1) of the basic Regulation to the China National Building Materials Group

• (207) According to the subsidy questionnaire sent to exporting producers, holding companies are required to provide a reply to sections A & E of the questionnaire. However, China National Building Materials Co. Ltd. (‘CNBM’), the ultimate owner of the exporting producers Jushi, Hengshi and Taishan, failed to provide such a reply.

• (208) CNBM considered that it was not involved in the glass fibre fabrics business, and that it did not have any direct transactions with the exporting producers. However, the Commission found that there had been significant capital increases funded by CNBM relating to one of the exporting producers. Furthermore, the Commission found evidence that grants provided to some entities in the group had transited through the bank accounts of CNBM, and that some grants had been allocated between various entities in the group via the capital reserves accounts.

• (209) The Commission considers that in the absence of a questionnaire reply from the parent company CNBM, it is impossible to determine the full extent of the subsidies received by the CNBM Group. Under these circumstances, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

• (210) Therefore, the Commission informed the CNBM Group that it might have to resort to the use of facts available under Article 28(1) of the basic Regulation when examining the existence and the extent of the alleged subsidisation granted to CNBM, the parent company of the CNBM Group.

• (211) In the reply to the Commission's letter, Jushi objected to the application of Article 28(1) of the basic Regulation regarding CNBM. Jushi reiterated that CNBM plays the role of equity investor, rather than the role of an actual controller of China Jushi, that it was not involved in the glass fibre fabrics business, and that it did not have any direct transactions with the exporting producers. Furthermore, although CNBM is the top 1 shareholder of China Jushi, its shareholding accounts for only 26,97 %.

• (212) Concerning the capital increases, Jushi stated that the proportion of CNBM’s shareholding in China Jushi decreased from 60,25 % in 1998 to 26,97 % at the end of the IP. In the last three years, the registered capital of China Jushi was only increased via its own capital reserves, so the shareholding of CNBM remained stable at 26,97 %.

• (213) First, the Commission considered under all circumstances that holding companies should provide a questionnaire reply in order to ascertain whether any subsidies have been provided at the level of the parent company that may relate to the exporting producer. Without a questionnaire reply, it is impossible to determine the full extent of the subsidies relating to the exporting producers.

• (214) Second, for the claims relating to the actual control of CNBM over Jushi, the Commission referred to the reasoning developed in recitals (93) to (96) above concerning the relationship between Jushi and Taishan. On this basis, these claims were rejected.

• (215) Third, in terms of capital increases, although it is true that the shareholding of CNBM has decreased in relative terms over time, it has actually increased in absolute terms over the period 2010 to 2018.

• (216) Finally, the items mentioned in recital (208) above relate not only to Jushi and Hengshi, but also to Taishan. As a result, even if the Commission were to accept Jushi’s comments, this would not alter the Commission’s findings for the CNBM Group as such.

• (217) The Commission thus concluded that it had to rely partially on facts available for its findings concerning CNBM, the parent company of the CNBM Group.

3.2.3.   The application of the provisions of Article 28(1) of the basic Regulation to one exporting producer in relation to preferential financing

• (218) Yunnan Yuntianhua Group Co., Ltd. failed to provide complete information in time about funds received via other equity instruments by certain shareholders of the company.

• (219) Despite repetitive requests from the Commission, during and after the on-spot verification, the company failed to provide the solicited information. Therefore, the Commission notified the company in question that it would consider basing its findings partially on facts available pursuant to Article 28(1) of the basic Regulation (i.e. as far as the information related to other equity instruments was concerned). In the reply to the Commission, the company indicated that due to the official shutdown in China during the last week of January and the first week of February, it was not in the position to respond to the Commission’s request of information within the set deadline.

• (220) Absent any additional evidence concerning the funds received via other equity instruments mentioned in recital (218) at this stage, the Commission continued to rely partly on facts available for its findings concerning these funds received via other equity instruments by certain shareholders of the company as detailed in Section 3.4.3.4 below.

3.3.   Subsidies and subsidy programmes within the scope of the current investigation

• (221) On the basis of the information contained in the complaint, the Notice of Initiation and the replies to the Commission's questionnaires, the alleged subsidisation through the following subsidies by the GOC were investigated:

• (i) Preferential financing (e.g. policy loans, credit lines, bank acceptance drafts, export financing)

• (ii) Preferential Export credit insurance

• (iii) Government provision of goods and services for less than adequate remuneration (LTAR)

• — Government provision of land and land-use rights for less than adequate remuneration;

• — Government provision of raw materials for less than adequate remuneration.

• (iv) Revenue foregone through provision of power at reduced rates and Tax Exemption and Reduction programmes

• — Provision of electricity at reduced rate

• — Enterprise Income Tax (‘EIT’) reduction for High and New Technology Enterprises;

• — EIT offset for research and development;

• — Dividend exemption between qualified resident enterprises;

• — Exemption or waiving of real estate and land use taxes;

• — Accelerated depreciation of equipment used by High-Tech enterprises

• (v) Grant Programmes

• — Grants related to technological upgrading or transformation, such as e.g. promotion of R&D tasks under Science and Technology Support Plans, Promotion of Key Industry Adjustment, Revitalisation and Technology Renovation, Industrial Transformation and Upgrade of Made in China 2025 Funds, grants related to Intelligent Manufacturing;

• — Environmental Protection grants, such as e.g. Special fund for energy-saving technology reform, the clean production technology fund, incentives for Environmental Protection and Resource Conservation;

• — Corporate development grants;

• — Famous Brand Programmes;

• — Ad-hoc subsidies provided by the municipal/provincial authorities;

3.4.   Preferential financing

3.4.1.   Financial institutions providing preferential financing

• (222) According to the information provided by the two sampled groups of exporting producers, 36 financial institutions located within the PRC had provided financing to them. Of these 36 financial institutions, 29 were State-owned banks ⁵⁹. The remaining financial institutions were either privately owned (four institutions), or the Commission was not able to determine whether they were State-owned or privately owned (three institutions). However, only one State-owned bank filled in the specific questionnaire, despite a request to the GOC that covered all financial institutions, which had provided loans to the sampled companies.

• (223) EXIM provides export-contingent loans at preferential rates to Chinese companies that produce new- and hi-tech products, products with indigenous intellectual rights, self-owned brands, high value-added products and software products that are registered with the authorities for industry and commerce ⁶⁰. According to the information available to the Commission, Chinese GFF producers qualify for export-oriented loans as new- and hi-tech products and/or as self-owned brands, given that several producers are recognized as ‘National High-Tech Enterprises’ or have been awarded famous brand, top brand, etc. status.

• (224) Furthermore, EXIM also assists exporters through export buyers’ credits. Export buyers’ credits are provided to foreign companies to finance their import of Chinese products, technologies and services ⁶¹.

3.4.1.1.   State-owned banks acting as public bodies

• (225) The Commission ascertained whether the State-owned banks were acting as public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. In this respect, the applicable test to establish that a State-owned undertaking is a public body is as follows [^ntr62-L_2020189EN.01000101-E0062]: ‘What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice. It follows, in our view, that evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. We stress, however, that, apart from an express delegation of authority in a legal instrument, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish the necessary possession of governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.’

• (226) The Commission sought information about State ownership as well as formal indicia of government control in the State-owned banks. It also analysed whether control had been exercised in a meaningful way. For this purpose, the Commission had to partially rely on facts available due to the refusal of the GOC and the State-owned banks to provide evidence on the decision making process that had led to the preferential lending.

• (227) In order to carry out this analysis, the Commission first examined information from the State-owned banks that had filled in the specific questionnaire and allowed for verification.

3.4.1.2.   Cooperating State-owned banks

• (228) Only one State-owned bank, namely EXIM, provided a questionnaire reply, which was verified on site.

(a) Ownership and formal indicia of control by the GOC

• (229) Based on the information received in the questionnaire reply and during the verification visit, the Commission established that the GOC held, either directly or indirectly, more than 50 % of the shares in this financial institution.

• (230) Concerning the formal indicia of government control of the cooperating State-owned bank, the Commission qualified it as ‘key State-owned financial institution’. In particular, the notice ‘Interim Regulations on the Board of Supervisors in Key State-owned Financial Institutions’ states that: “The key State-owned financial institutions mentioned in these Regulations refer to State-owned policy banks, commercial banks, financial assets management companies, securities companies, insurance companies, etc. (hereinafter referred to as State-owned financial institutions), to which the State Council dispatches boards of supervisors”.

• (231) The Board of Supervisors of the key State-owned financial institutions is appointed according to the ‘Interim Regulations of Board of Supervisors of Key State-owned Financial Institutions’ (State Council Decree No. 282). Based on Articles 3 and 5 of these Interim Regulations, the Commission established that Members of the Board of Supervisors are dispatched by and accountable to the State Council, thus illustrating the institutional control of the State on the cooperating State-owned bank’s business activities. In addition to these generally applicable indicia, the Commission found the following with respect to EXIM:

• (232) EXIM was formed and operates in accordance with ‘The Notice of Establishing Export-Import Bank of China’ issued by the State Council, as well as the Articles of Association of EXIM. According to its Articles of Association, the State directly nominates the management of EXIM. The Board of Supervisors is appointed by the State Council in accordance with the ‘Interim Regulations on the Boards of Supervisors in Key State-owned Financial Institutions’ and other laws and regulations, and it is responsible to the State Council.

• (233) The Articles of Association also mention that the Party Committee of EXIM plays a leading and political core role to ensure that policies and major deployment of the Party and the State are implemented by EXIM. The Party's leadership is integrated into all aspects of corporate governance.

• (234) The Articles of Association further state that EXIM is dedicated to supporting the development of foreign trade and economic cooperation, cross-border investment, the One Belt One Road Initiative, cooperation in international capacity and equipment manufacturing. Its scope of business includes short-term, medium-term and long-term loans as approved and in line with the State's foreign trade and “going out” policies, such as export credit, import credit, foreign contracted engineering loans, overseas investment loans, Chinese government foreign aid loans and export buyer loans.

• (235) The Commission also found that State-owned financial institutions have changed their Articles of Associations in 2017 to increase the role of the China Communist Party (‘CCP’) at the highest decision-making level of the banks.

• (236) These new Articles of Association stipulate that:

• — the Chairman of the Board of Directors shall be the same person as the Secretary of the Party Committee;

• — the CCP's role is to ensure and supervise the Bank’s implementation of policies and guidelines of the CCP and the State; as well as to play a leadership and gate keeping role in the appointment of personnel (including senior management); and

• — the opinions of the Party Committee shall be heard by the Board of Directors for any major decisions to be taken.

• (237) This evidence shows that the Government exercised meaningful control over the conduct of this institution

• (238) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of the cooperating State-owned bank with respect to its lending policies and assessment of risk, where they provided loans to the GFF industry. The following regulatory documents have been taken into account in this respect:

• — Article 34 of the Law of the PRC on Commercial Banks (‘Bank law’);

• — Article 15 of the General Rules on Loans (implemented by the People’s Bank of China)

• — Decision No 40;

• — Implementing Measures of the CBIRC for Administrative Licensing Matters for Chinese-funded Commercial Banks (Order of the CBIRC [2017] No. 1)

• — Implementing Measures of the CBIRC for Administrative Licensing Matters relating to Foreign-funded Banks (Order of the CBIRC [2015] No. 4)

• — Administrative Measures for the Qualifications of Directors and Senior Officers of Financial Institutions in the Banking Sector (CBIRC [2013] No. 3).

• (239) Reviewing these regulatory documents, the Commission found that financial institutions in the PRC are operating in a general legal environment that directs them to align themselves with the GOC's industrial policy objectives when taking financial decisions, for the following reasons.

• (240) With respect to EXIM, its public policy mandate is established in the notice of establishing EXIM as well as in its Articles of Association.

• (241) At the general level, Article 34 of the Bank law, which applies to all financial institutions operating in China, provides that ‘Commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State’. Although Article 4 of the Bank Law states that, ‘Commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual. Commercial banks shall independently assume civil liability with their entire legal person property’, the investigation showed that Article 4 of the Bank law is applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions.

• (242) In addition, Article 15 of the General Rules on Loans provides that ‘In accordance with the State's policy, relevant departments may subsidize interests on loans, with a view to promoting the growth of certain industries and economic development in some areas.’

• (243) Similarly, Decision No. 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. As already explained in Section 3.1 and more specifically in recital (166), projects of the GFF industry belong to the ‘encouraged’ category. Decision No. 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations. The Commission also found that the CBIRC has far-reaching approval authority over all aspects of the management of all financial institutions established in the PRC (including privately owned and foreign owned financial institutions), such as [^ntr63-L_2020189EN.01000101-E0063]:

• — approval of the appointment of all managers of the financial institutions, both at the level of headquarters and at the level of local branches. Approval of the CBIRC is required for the recruitment of all levels of management, from the most senior positions down to branch managers, and even includes managers appointed in overseas branches as well as managers responsible for support functions (e.g. the IT managers); and

• — a very long list of administrative approvals, including approvals for setting up branches, for starting new business lines or selling new products, for changing the Articles of Association of the bank, for selling more than 5 % of their shares, for capital increases, for changes of domicile, for changes of organizational form, etc.

• (244) The Bank law is legally binding. The mandatory nature of the Five Year Plans and of Decision No. 40 has been established above in Section 3.1. The mandatory nature of the CBIRC regulatory documents derives from its powers as the banking regulatory authority. The mandatory nature of other documents is demonstrated by the supervision and evaluation clauses, which they contain.