Commission Implementing Regulation (EU) 2020/870 of 24 June 2020 imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of continuous filament glass fibre products originating in Egypt, and levying the definitive countervailing duty on the registered imports of continuous filament glass fibre products originating in Egypt

• (127) 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.

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

• (129) 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.

• (130) 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.’

• (131) Similarly, Decision No 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. Decision No 40 Chapter III refers to ‘The Guiding Catalogue of the Industrial 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’.

• (132) The Catalogue for Guiding Industry Restructuring (2011 Version) (2013 Amendment) ⁴⁸ 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’.

• (133) Projects relating to the production of GFR are therefore part of the ‘encouraged’ category.

• (134) 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 China Banking and Insurance Regulatory Commission (‘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 [^ntr49-L_2020201EN.01001001-E0049]:

• — 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.

• (135) On that basis, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the GFR industry.

• (136) In addition to the general legal framework, the following legal context applied to the loans provided by EXIM and CDB to Jushi Egypt.

• (137) China-Africa TEDA and EXIM signed a strategic cooperation MOU on 6 November 2009, putting forward a package plan with a total amount of up to 6 billion CNY to carry out overall strategic cooperation in overseas trade and economic cooperation zones.

• (138) On 7 November 2009, six African cooperation zones of economy and trade, among which the SETC-Zone, signed the Joint Meeting Pact between the Chinese Overseas (African) Economy and Trade Cooperation Zones and the China Africa Development Fund (‘CADF’), a subsidiary of CDB.

• (139) Furthermore, in 2013, MOFCOM issued a ‘Notice on Aspects related to the China Development Bank support to the establishment and development of overseas economic and trade cooperation zones’. According to this Notice, MOFCOM and CDB will ‘provide policy support for investment and financing for enterprises and enterprises entering the zone in eligible cooperation zones’. CDB will ‘clarify the basic conditions for priority financing in the cooperation zone in accordance with the requirements of the Ministry of Commerce and the Ministry of Finance’, and CDB will ‘selectively support the projects under construction and cooperation projects that MOFCOM has paid close attention to with the host governments of the cooperation zone.’

• (140) Article 4 of the Cooperation Agreement between China and Egypt 2016 states that ‘the Chinese Government identifies the Cooperation Zone as China’s overseas economic and trade cooperation zone. The Cooperation Zone … is entitled to relevant policy support and facilitation provide by the Chinese Government for overseas economic and trade cooperation zones’. In addition, according to article 5, the Chinese Government shall also support the Cooperation Zone by ‘encouraging relevant financial institutions to provide financing facility for …investment projects located within the Cooperation Zone, provided that the lending conditions and the loan use requirements are met’.

• (141) Article 2(IV) of the ‘Cooperation Agreement on the Establishment of a Management Committee for China-Egypt Suez Economic and Trade Cooperation Zone’ implementing the above-mentioned agreement, further specifies that the Management Committee established between the relevant functional departments of Tianjin People’s Government and the General Authority for Suez Canal Economic Zone shall ‘try the utmost efforts to implement all incentive policies of the Chinese and Egyptian laws and regulations in a smooth manner’ and article 2(V) adds that it shall ‘coordinate and facilitate relevant financial institutions, including but not limited to banking institutions, insurance institutions and various funds which provide credit support for the Cooperation Zone and residential enterprises, and help the Cooperation Zone and residential enterprises to explore more financing channels’.

• (142) The Commission established that all State-owned Chinese financial institutions, including EXIM and CDB, implemented the legal framework set out above in the exercise of governmental functions with respect to the GFR sector. Therefore, they were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

3.3.1.3.   State-owned banks acting as public bodies

• (143) In line with the conclusions reached in recitals above, the Commission decided to use facts available to determine whether those State-owned banks qualify as public bodies.

• (144) In previous anti-subsidy investigations ⁵⁰, the Commission established that the following banks, which had provided loans to the sampled groups of exporting producers in the investigations at hand, were partially or fully owned by the State itself or by State-held legal persons: China Development Bank, China Construction Bank, Industrial and Commercial Bank of China, Bank of Communications, China Everbright Bank, Postal Savings Bank, China Merchants Bank, Shanghai Pudong Development Bank, China Industrial Bank, Shenyang Rural Commercial Bank, Bank of Shanghai, Ningbo Bank, China CITIC Bank, China Guangfa Bank, China Bohai Bank, Huaxia Bank. Hankou Bank, Hubei Bank, Huishang Bank, Dongying Bank, Bank of Tianjin, Bank of Kunlun, Shanghai Rural Commercial Bank, China Industrial International Trust Limited, Daye Trust Co., Ltd., Sinotruk Finance Co., Ltd. Since no information has been provided indicating otherwise, the Commission maintained the same conclusion in the present investigation.

• (145) The Commission further established, absent specific information from the financial institutions at issue indicating otherwise, GOC ownership and control based on formal indicia for the same reasons as set out in Section 3.3.1.2 above. In particular, based on facts available, managers and supervisors in State-owned banks would appear to be appointed by the GOC and be accountable to the GOC in the same manner as in EXIM.

• (146) With regard to the exercise of control in a meaningful manner, the Commission considered the normative framework analysed in Section 3.3.1.2 above applies to them in an identical manner. Absent any indication to the contrary, based on facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner, so that the analysis on the concrete application of the normative framework in Section 3.3.1.2 above applies to them in an identical manner.

• (147) On that basis, the Commission concluded that the other State-owned banks, which provide loans to the sampled companies, are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

3.3.1.4.   Conclusion on State owned financial institutions

• (148) In light of the above considerations, the Commission established that all State-owned Chinese financial institutions that provided loans or financial leasing to the exporting producer or to its group are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

• (149) In addition, even if the State-owned financial institutions were not to be considered as public bodies, the Commission established that they would be considered entrusted and directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation for the same reasons, as set out in recitals 131 to 133 below. Thus, their conduct would be attributed to the GOC in any event.

3.3.1.5.   Entrustment or direction of private financial institutions

• (150) The Commission then turned to the remaining financial institutions. The following financial institutions were considered to be privately owned, based on the findings established in previous anti-subsidy investigations ⁵¹, and complemented by publicly available information: China Minsheng Bank, Sumitomo Mitsui Banking (China) Co., Ltd, Standard Chartered Bank, Ping An Bank. The Commission analysed whether these financial institutions had been entrusted or directed by the Government of China to grant subsidies to the GFR sector within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

• (151) According to the WTO Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body ⁵². In both cases, the government uses a private body as a proxy to make the financial contribution, and ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’ ⁵³. At the same time, paragraph (iv) does not allow Members to impose countervailing measures to products ‘whenever the government is merely exercising its general regulatory powers’ ⁵⁴ or where government intervention ‘may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market’ ⁵⁵. Rather, entrustment or direction implies ‘a more active role of the government than mere acts of encouragement’ ⁵⁶.

• (152) The Commission noted that the normative framework concerning the industry mentioned in Section 3.3.1.2 above applies to all financial institutions in the PRC, including privately owned financial institutions. To illustrate this, the Bank Law and the various orders of the CBIRC cover all Chinese-funded and foreign-invested banks under the management of the CBIRC.

• (153) In the absence of any divergent information received from the private financial institutions, the Commission concluded that, in so far as the GFR industry is concerned, all financial institutions (including private financial institutions) operating in China under the supervision of the CBIRC have been entrusted or directed by the State in the sense of Article 3(1)(a)(iv), first indent of the basic Regulation to pursue governmental policies and provide loans at preferential rates to the GFR industry.

• (154) In addition, the normative framework applying to all banks in China is much wider than only the two regulations governing the CBIRC, as shown in recital 106 above.

• (155) With regard to the exercise of control in a meaningful manner, the Commission considered that the normative framework analysed in Section 3.3.1.2 above applies to them in an identical manner. Absent any indication to the contrary, based on facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner as for the cooperating State-owned bank, so that the analysis on the concrete application of the normative framework in Section 3.3.1.2 above applies to them in an identical manner.

• (156) On that basis, the Commission concluded that the other State-owned banks, which provide loans to Jushi Egypt, are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

3.3.1.6.   Credit ratings

• (157) In previous anti-subsidy investigations ⁵⁷, the Commission already determined that domestic credit ratings awarded to Chinese companies were not reliable, based on a study published by the International Monetary Fund ⁵⁸, showing a discrepancy between international and Chinese credit ratings, combined with the findings of the investigation concerning the sampled companies. Indeed, according to the IMF, over 90 % of Chinese bonds are rated AA to AAA by local rating agencies. This is not comparable to other markets, such as the EU or the US. For example, less than 2 % of firms enjoy such top-notch ratings in the US market. Chinese credit rating agencies are thus heavily skewed towards the highest end of the rating scale. They have very broad rating scales and tend to pool bonds with significantly different default risks into one broad rating category ⁵⁹.

• (158) In addition, foreign rating agencies, such as Standard and Poor’s and Moody’s, typically apply an uplift over the issuer’s baseline credit rating based on an estimate of the firm’s strategic importance to the Chinese Government and the strength of any implicit guarantee when they rate Chinese bonds issued overseas ⁶⁰. Fitch for example clearly indicates, where applicable, that such guarantees are a key driver underlying its credit ratings of Chinese companies ⁶¹.

• (159) On the basis of publicly available information, the Commission first determined that the State can exercise a certain influence over the credit rating market. According to two studies published in 2016, there were around 12 credit rating agencies active on the Chinese market, a majority of which are State-owned. In total, 60 % of all rated corporate bonds in China had been rated by a State-owned ratings agency ⁶².

• (160) In previous investigations ⁶³, the GOC confirmed that there were 12 credit rating agencies active on China’s bond market, among which 10 domestic rating agencies, including Global Credit Rating Co. Ltd, Shanghai Brilliance Credit Rating & Investors Service Co. Ltd, Golden Credit Rating International Co. Ltd, China Chengxin Securities Rating Co. Ltd, Pengyuan Credit Rating Co. Ltd, Shanghai Fareast Credit Rating Co., Ltd, China Bond Rating Co. Ltd, China Securities Index Co. Ltd, Shanghai Credit Information Services Co. Ltd There were also 2 Sino-foreign joint venture credit rating agencies, namely China Lianhe Credit Rating Co. Ltd, and China Chengxin International Credit Rating Co., Ltd. in the absence of information to the contrary, the Commission considered that the situation has not changed.

• (161) Second, there is no free entrance on the Chinese credit rating market. It is essentially a closed market, since rating agencies need to be approved by the China Securities Regulatory Commission (‘CSRC’) or the PBOC before they can start operations ⁶⁴. The PBOC announced mid-2017 that overseas credit rating agencies would be allowed to carry out credit ratings on part of the domestic bond market, under certain conditions. However, during the investigation period, no foreign credit rating agency had been admitted yet ⁶⁵. Nevertheless, in the meantime, foreign agencies did establish joint ventures with some local credit rating agencies, which provide credit ratings for domestic bond issues. However, these ratings follow Chinese rating scales and are thus not exactly comparable with international ratings, as explained above.

• (162) Finally, a recent study performed by the PBOC itself confirms the Commission’s findings, stating in its conclusions that ‘if the investment level of foreign bonds is set to international rating BBB-and above, then the domestic bond investment grade may be rated at AA-level and above, taking into account the difference between the average domestic rating and the international rating of 6 or more notches’ ⁶⁶.

• (163) In view of the situation described in recitals 137 to 142 above, the Commission concluded that Chinese credit ratings do not provide a reliable estimation of the credit risk of the underlying asset. On this basis, even the company of the exporting producer or its group were awarded a good credit rating by a Chinese rating agency, the Commission concluded that such ratings are not reliable. Those ratings were also distorted by the policy objectives to encourage key strategic industries, like GFR.

3.3.1.7.   Benefit and calculation of the subsidy amount

• (164) As noted in recital 85, the Commission considered that, in principle, for the beneficiary located in Egypt, it would be appropriate to inquire whether these recipients of the loans received better terms than they would have received on the Egyptian financial market. The Commission verified this point and confirmed that the amount of subsidisation would be higher when using comparable borrowing rates in Egypt (17,8 %) ⁶⁷. However, in view of the exceptional circumstances mentioned in recital 86 above, the Commission calculated the amount of the countervailable subsidy taking into account the fact that the recipients obtained the preferential financing in China. For this calculation, the Commission assessed the benefit conferred on the recipients during the investigation period. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is the difference between the amount of interest that the company pays on the preferential loan and the amount that the company would pay for a comparable commercial loan obtainable on the market.

• (165) The Commission decided to establish the market rates for the preferential loans of EXIM and CDB with respect to hypothetical benchmarks for Chinese market investors in accordance with Article 6(b) of the basic Regulation. Because of lack of cooperation, no further details were provided by this bank(s). Therefore, the Commission decided to use the same calculation methodology as for other loans denominated in foreign currencies, and issued by Chinese financial institutions in the PRC, and added the risk premium linked to the investment in Egypt as follows.

• (166) The Commission thus first established the credit rating of Jushi Egypt, reflecting the financial situation of the company. The Commission noted that the various companies in the CNBM Group were awarded ratings ranging between AA- and AA+ by a Chinese credit rating agency. In light of the overall distortions of Chinese credit ratings mentioned in recitals 137 to 143, the Commission concluded that this rating is not reliable.

• (167) Thus, the Commission considered that the overall financial situation of the Jushi Group corresponds to a BB rating, which is the highest rating that does no longer qualify as ‘investment grade’. In view of the existence of revolving loans, the Commission concluded that the use of US B (instead of BB) corporate bonds would be more appropriate to determine the market-based benchmark.

• (168) In line with other loans denominated in foreign currencies and issued by Chinese financial institutions in the PRC, B rated corporate bonds issued in USD were thus used to determine an appropriate benchmark. Jushi Egypt is located in a country which was subject to civil and political unrest, as well as various terrorist attacks at the time when the loans were granted, and thus has a credit risk different from Chinese companies related to the external conditions prevailing in the country itself. As a result, the Commission added a mark-up to the benchmark rate in order to integrate the country risk into the market rate.

• (169) The premium related to country risk was determined based on the OECD classification of country risk for export credits, as well as the corresponding minimum premium rate set by the OECD ⁶⁸. The country risk for loans provided by EXIM bank was established at 2,37 % and 2,44 % for loans provided by CDB.

• (170) Following final disclosure, Jushi Egypt claimed that the Commission should have used two offers provided by an Egyptian bank in 2013 and 2016 to the company as a benchmark for calculating the benefit on loans. The Commission reviewed those offers, but decided that they were not representative of a comparable commercial loan, which the firm could actually obtain on the market.

• (171) The Commission found that the offers do not provide any description of the actual financial product offered to the company, but refer to an interest rate for the provision of ‘credit facilities’ in general. As such, it is impossible for the Commission to determine whether the offer actually refers to a loan as such or to other financial products, such as e.g. the opening of a credit line, trade financing (letters of credit, bills of exchange, factoring, etc. …). Even if the offer were considered to relate to a loan, other crucial information is missing, such as the duration of the alleged loan offered by the bank, and the extent of the credit facilities offered (i.e. the maximum amount that the bank would be willing to extend to the company). In this respect, the Commission noted that the loans provided by CDB and EXIM were long-term loans for major fixed assets projects, amounting to several hundreds of million USD. Therefore, the Commission considered that it could not use the proxy provided by Jushi Egypt.

• (172) Finally, the Commission observed that even if the Commission would take into account the benchmark provided by the company, it would not result in any significant change in the benefit calculation, since the proposed rate of the Egyptian bank was in line with the base rate established by the Commission for the benchmark, corresponding to a USD loan provided by a Chinese bank to a domestic (Chinese) BB-rated customer. Thus, if anything, those loans confirmed that Jushi Egypt indeed benefit from lower interest rates compared to market benchmarks. Therefore, the company’s claim was rejected.

3.3.2.   Loans from policy banks to Jushi Egypt via the parent company Jushi in China

• (173) Over the period 2014 – end of investigation period, Jushi (China) provided a series of inter-company loans to Jushi Egypt for a total amount of around 281.5 million USD.

• (174) The Commission found, however, that Jushi (China) had itself financed these intercompany loans via external financing from Chinese financial institutions. In other words, rather than Jushi Egypt getting the loans directly from the Chinese banks, Jushi (China) obtained the preferential financing from these institutions and then allocated the benefit of those loans to its manufacturing activities in Egypt (Jushi Egypt). The loans provided directly by EXIM and CDB, are not in themselves sufficient to provide the total amount of external financing needed to develop the manufacturing activities in the SETC-Zone. Thus, the additional indirect financing through inter-company loans was needed. The Commission could not find a specific bank loan directly linked to the project in Egypt. However, in 2014, Jushi (China) issued a bond to replace various bank loans in order to improve its debt structure. This bond, which makes various references to the capital needs for the project in Egypt, confirms that Jushi (China) was in need of external financial assistance to assist its manufacturing activities in Egypt. Therefore, the Commission considered that the underlying preferential loans channelled through Jushi (China) are also attributable to the GOE in the same way as the direct loans provided to Jushi Egypt by the Chinese financial institutions.

• (175) Since all of these loans can in essence be assimilated to loans provided by the GOC to a Chinese company, which then allocates the benefits to its manufacturing activities elsewhere, the Commission decided to treat these loans as any other domestic Chinese loan to a Chinese GFR producer. In this context, as mentioned in recital 128 above, the Commission found that all State-owned Chinese financial institutions that provided loans to Jushi (China) and Jushi Egypt were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

• (176) The Commission then calculated the amount of the countervailable subsidy. In this respect, the Commission noted that the nominal interest rate charged by Jushi (China) to Jushi Egypt was 7,5 %. However, none of the financing provided to Jushi (China) had such a high interest rate. In fact, the average interest rate charged to Jushi (China) during the investigation period amounted to around 4 %. The Commission thus compared the average interest rate that Jushi (China) pays on the outstanding amount of the intercompany loan during the investigation period with the amount that the company would have to pay for a comparable commercial loan obtainable on the market.

• (177) In order to take into account the increased risk exposure of the banks highlighted by the existence of revolving loans, the Commission thus decided to move down one notch in the risk rating scale and to use US B (instead of BB) corporate bonds to determine the market–based benchmark.

• (178) All the elements concerning this financing described above in this section clearly show that Jushi (China) allocated all the benefits from the preferential financing received from the Chinese financial institutions to Jushi Egypt. For all these reasons the benefit thus calculated was attributed to Jushi Egypt.

• (179) Following final disclosure, Jushi Egypt argued that the Commission should not have downgraded Jushi Egypt’s credit rating from AA to B based on the fact that Jushi Egypt did not honour its repayment schedule to its parent company or that, in some instances, Jushi Egypt’s parent company repaid loans on its behalf. The fact that Jushi Egypt’s corporate group decided that it was better for another entity in the group to bear the costs so as to preserve cash flow in another entity does not indicate that this other entity would not have honoured its obligation had this obligation been towards a banking institution.

• (180) First, the Commission noted that it did not find any credit rating awarded by any external party to Jushi Egypt, and that Jushi Egypt did not provide any evidence to this end either. Jushi Egypt therefore never had an ‘AA’ credit rating as a starting point. The Commission thus had to determine Jushi Egypt’s credit rating using the facts available in the case. In view of the significant amount of the intercompany loans from the parent company, as well as the fact that Jushi Group had operated as a guarantor for the loans from CDB and EXIM, the Commission determined that Jushi Egypt’s credit rating was closely linked to the rating of its parent company, which had been set at ‘BB’, as mentioned in recital 168 above. This BB credit rating was thus the starting point for the Commission.

• (181) Second, as explained in recital 178 above, the Commission decided to move down one notch in the rating scale, i.e. from BB to B, in view of the lack of repayment of its liabilities over the years. Indeed, the Commission noted that although the loans to CDB and EXIM were repaid according to schedule, the total liabilities of the company actually increased over the years. As such, Jushi Egypt replaced external debt by intragroup debt, but did not actually honour its liabilities towards the banking institutions itself. Contrary to the statements of Jushi Egypt, there are also indications that the company would not have been able to honour its obligations if all of its debtors had been external banking institutions. For example, although the company was loss-making in the years 2015 and 2016, and had a negative equity in 2016, it still made large capital repayments to CDB, totalling 54 million USD (around 546 million EGP) in these years. The company would thus not have been in a position to honour its external obligations without financial support from the parent company.

• (182) In view of the above considerations, the Commission rejected these claims.

• (183) All subsidies found were established for the total turnover of the company. The subsidy amount was then allocated to the turnover of the product concerned sold to the Union.

• (184) The subsidy amounts found for preferential financing through loans from Chinese policy banks, directly or via the parent company Jushi (China), amounted to 6,46 % for Jushi Egypt.

3.3.3.   Support for capital investment

• (185) In addition to the direct loans and intercompany loans, Jushi Egypt needed to cover its financial needs also by increasing its capital.

• (186) Previous investigations found that substantial subsidies were received at the level of the parent companies of Chinese groups to support foreign investment under the Belt & Road Initiative, in the form of grants, preferential financing and equity injections. This was notably the case in the recently concluded anti-subsidy investigation on Tyres (‘the Tyres case’) ⁶⁹.

3.3.3.1.   Legal basis

• — 13^th Five-Year Plan for the Development of Foreign Trade, issued by MOFCOM, 26 December 2016;

• — Guiding Opinions of the State Council on the Promotion of International Production Capacity and Equipment Manufacturing Cooperation, issued in 2015 (‘Guiding Opinions’);

• — Building Materials Industry Development Plan 2016-2020, Ministry of Industry and Information Technology, GXBG [2016] No 315;

• — The 13^th Five-Year Plan for Fibre and Composite Materials Industry;

• — Made in China 2025, State Council, July 7, 2015.

3.3.3.2.   Application of the provisions of Article 28(1) of the basic Regulation in relation to the Jushi group

• (187) In the request for information referred to in recital 8, the Commission requested information from the Jushi Group, inter alia, concerning any changes in the capital structure, including capital increases and changes in shareholder rights, Jushi Egypt and a number of direct and indirect parent companies belonging to the Jushi Group, itself member of the China National Building Materials Group (‘CNBM Group’).

• (188) The investigation revealed that China National Building Material Co. Ltd. (‘CNBM’) is a Chinese state-owned enterprise owned directly and indirectly as to 41,27 % by China National Building Material Group Co., Ltd., which is in turn wholly owned by SASAC. CNBM is the biggest shareholder with a 26,97 % stake in China Jushi Co., Ltd. (‘China Jushi’), which is the sole shareholder of Jushi Egypt ⁷⁰.

• (189) Initially, Jushi Egypt provided very limited information in respect of the direct and indirect parent companies.

• (190) As a consequence, on 18 March 2020 the Commission sent a letter to Jushi Egypt identifying the shortcomings, and informing Jushi Egypt about the possible application of the provisions of Article 28 of the basic Regulation. Among others, the Jushi Group did not provide the information requested concerning the rationale for the changes in capital structure and information about how the capital increases were financed for Jushi Egypt, the Jushi Group, China Jushi Co. Ltd. and CNBM.

• (191) In response to this letter, Jushi Egypt provided a submission addressing some of the shortcomings, in particular how the changes in the capital structure were reflected in the financial statements of the various group companies. However, the information provided in respect of the involvement of government and non-government entities (e.g. state-owned commercial banks) were mere statements without supporting evidence, and the information concerning the underlying reasons for the changes and the financial details was very limited.

• (192) However, as stated above, the significant state ownership, in CNBM is significant. In addition, according to publically available information on the CNBM website ⁷¹, the whole management team of CNBM holds party functions such as Secretary of the Party Committee, Deputy Secretary of the Party Committee or Party Committee Standing Member. Furthermore, Mr Cao Jianglin, Executive Director of CNMB and Party Committee Standing Member also serves as Chairman of China Jushi since 2002 ⁷². Therefore, the statement that all decisions concerning the capital increases of the companies concerned were made independently by the relevant board of directors without any involvement of government or other non-governmental entities in the process is not credible given the state ownership and party involvement of the management.

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

• (194) The Commission thus concluded that it had to rely partially on facts available for its findings concerning the Jushi Group, China Jushi Co. Ltd. and CNBM.

3.3.3.3.   Findings of the investigation

• (195) During the investigation period, Jushi Egypt benefited from grants channelled by CNBM, a State-controlled entity, through equity injections, specifically via paid-in capital.

• (196) In 2012 there was a significant shareholders’ contribution of 42.6 million USD for the funding of Jushi Egypt. Since then, the capital of Jushi Egypt significantly increased up to 162 million USD until the investigation period. At the end of the investigation period the capital of Jushi Egypt was approximately four times larger than in 2012.

• (197) Jushi Egypt is fully owned by Jushi Group, which is fully owned by China Jushi. The principal shareholder of China Jushi is CNBM holding, which continuously held more than 25 % of its shares since 2010.

• (198) In parallel to the increase of capital in Jushi Egypt, the participation of CNBM in the capital structure of China Jushi has increased in a similar order of magnitude. Specifically, CNBM increased sixfold its paid-in capital contribution into China Jushi from 2011 to the end of 2018, from 190 million CNY (30,2 million USD) in 2011 to 944 million CNY (140,9 million USD) in 2018.

• (199) This similar trend and magnitude in the increase of capital in both Jushi Egypt and China Jushi strongly suggests that CNBM raised funds in order to increase the capital of Jushi Egypt through China Jushi up to the investigation period.

• (200) In addition to the paid-in capital increases, there have been substantive amounts of funds transferred from CNBM to China Jushi and Jushi Group through other types of capital accounts.

• (201) In order to determine the nature of the transfers and the circumstances in which the ownership capital within the companies concerned evolved, the Commission sought to have access to the relevant information originated in CNBM. However, as explained in Section 3.3.3.2, Jushi Egypt did not fully cooperate with the investigation and it did not provide the necessary information. In the absence of this information and following the application of the provisions of Article 28 of the basic Regulation, the Commission had to rely partially on facts available for its findings. In particular, the Commission had to use facts available in order to identify the source of financing of the capital provided by CNBM to Jushi Egypt, inter alia, via China Jushi.

• (202) To reach this conclusion, the Commission established the existence of a clear commitment from CNBM to invest overseas in encouraged industries. In this respect, CNBM advertises itself as an ‘active practitioner of the Belt & Road Initiative’ in its annual report, on its website, and on site in the plants. For example, it ‘undertook 312 cement projects in 75 countries and regions globally, more than 60 fiberglass projects, the implementation of 33 investment projects, the construction of 5 overseas warehouses, operated 14 overseas building materials supermarket chains, and managed more than 30 factories globally’ ⁷³.

• (203) More specifically, within the context of GFR, CNBM established Jushi Egypt in 2012, a producer of GFR in Egypt, and a subsidiary of the Chinese exporting producer Jushi. In the subsequent years, several important investment projects were undertaken to expand the production capacity of Jushi Egypt.

• (204) Furthermore, Jushi Group has established a number of overseas production and trading subsidiaries in South Africa, South Korea, Italy, Spain, France, Canada, India, Singapore, Japan, USA and Hong Kong. In 2016, the CNBM Group raised over 5 billion CNY (USD 747,38 million) for its globalization strategy in the 13^th five years plan (2016 to 2020), among which the Egyptian projects mentioned above, as well as a USD 300 million investment in a factory in the USA, for production starting in 2018 ⁷⁴. In India, the plan is to put up a manufacturing facility with a capacity of 100 000 tonnes by mid-2020.

• (205) All of these overseas projects fit within the wider context of China’s ‘going out’ policy. In this respect, Song Zhiping, the Chairman of CNBM, stated for example: ‘The signing of the Jushi US project is a milestone in the strategic development of China Jushi’s globalization, and in the meantime a critical step forward in its pursuit for higher goals. It also has a referential significance for the globalization of CNBM and even of China’s building materials industry as a whole’.

• (206) Furthermore, GFR is also an encouraged industry under the Made in China 2025 initiative ⁷⁵, 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 GFR industry such as the National Integrated Circuit fund, the Advanced Manufacturing Fund and the Emerging Industries Investment Fund ⁷⁶.

• (207) GFR is often referred to under the umbrella of ‘new materials’. The Made in China 2025 Roadmap ⁷⁷ 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 ⁷⁸. 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 ⁷⁹.

• (208) For these key industries, the plan ‘Made in China 2025’ explicitly mentions in its Chapter 3.9 that China will:

• — ‘ Support enterprises to perform mergers, equity investment and venture capital investment overseas.

• — Actively participate in and promote international industrial cooperation and implement major strategic plans like the Silk Road Economic Belt and the 21st-Century Maritime Silk Road to accelerate building interconnected infrastructure with surrounding countries and deep industrial cooperation.

• — Make use of “opening u p” along borders and build a number of overseas manufacturing cooperation parks in eligible countries.

• — Encourage the overseas transfer of high-end equipment, advanced technology and strong industry ’.

• (209) In another interview, Song Zhiping mentioned that from the enterprise point of view, CNBM paid special attention to the national ‘Belt and Road’ related policies, and that ‘Belt and Road’‘is really a once-in-a-lifetime opportunity for China’s building materials group’. He also pointed out that ‘going out’ is linked to financial cooperation, it only works when ‘we combine finance, sovereign fund cooperation, buyer’s credit, financial leasing and other ways, have a mutual cooperation “going ou t”’. Along the same line, Song Zhiping further stated that ‘International capacity cooperation must be combined with the “Belt and Roa d” national policy, especially the country’s financial policy. We used to make simple investments, borrowing money and lending investments, and that’s not going to be massive. I would like to adopt a model similar to that of China’s Guoxin Holdings, where companies contribute 10 per cent and the state foreign exchange contributes 90 per cent. We need to change our old reliance on loans and look for new financing business models and organizational models. I think we should give full play to the country’s current strong financial advantages, raise the establishment of building materials investment funds, mobilize more capital to participate in investment, to support building materials enterprises to “go ou t”’.

• (210) This vision is supported by the Chinese government, as can be seen in a speech given by Xiao Yaqing, director of the State Council’s SASAC at a conference organized by CNBM: ‘central enterprises are the backbone of the national economy, and should be closely integrated with the “Belt and Roa d” national strategy, making use of advantageous production capacity, highlighting key areas, and promoting international production capacity and equipment cooperation. They take the lead in creating a new business card for the “going ou t” of the country …. In recent years, China Building Materials and China Materials Group have accelerated the pace of “going ou t”, they have achieved outstanding results, and restructuring of the group to lead the internationalization of China’s building materials industry is of great significance…. After the reorganization, the new company’s initial planned investment projects in countries along the Belt and Road, will amount to an investment of more than 90 billion yuan’ ⁸⁰.

• (211) The investigation revealed that China National Building Material (‘CNBM’) is a Chinese state-owned enterprise owned directly and indirectly as to 41,27 % by CNBM Parent, which is in turn wholly owned by SASAC. CNBM owns 26,97 % stake in China Jushi Co., Ltd., which is the sole shareholder of Jushi ⁸¹.

• (212) Therefore, CNBM Building is a Chinese State-owned enterprise owned directly and indirectly by CNBM Parent, which is in turn wholly owned by SASAC. SASAC is the key vehicle through which the Chinese government controls in several ways State-owned enterprises as a means to implement its government policies and plans rather than to follow a market logic in its business operations ⁸². Without prejudice to the conclusion on the public body nature of CNBM within the meaning of Article 3 of the basic Regulation, on the basis of all of the above evidence it can be concluded that CNBM and the Jushi group at large pursue industrial and governmental policies including with regard to the ‘Belt and Road’ initiative and the ‘going out’ policies in the production and export of the product concerned.

• (213) It is in this context that CNBM received a financial contribution from the government in order to implement these policies, including to fund its investment in Egypt for the production of the product concerned. Due to the lack of complete cooperation of Jushi Egypt on this point, the Commission was unable to identify the actual source of financing and substantiate in detail whether this financial contribution was made by SASAC or by the Silk Road Fund (‘SRF’) as the vehicle to implement the ‘Belt and Road’ strategy. However, on the basis of the facts available pursuant to Article 28 of the basic Regulation the Commission concluded that both SASAC ⁸³ and the SRF ⁸⁴ are considered public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation when providing the financial contribution to CNBM. In any event, even if they would not constitute public bodies, both SASAC and the SRF would be considered as entrusted and directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic Regulation ⁸⁵.

• (214) Likewise due to the lack of cooperation, based on all the above evidence on the funding under the ‘Belt and Road’ initiative of projects outside of China including Egypt, as well as on the findings in the Tyres case, the Commission concluded that CNBM received a financial contribution in the form of grants that were then used for successive capital contributions to increase the capital available to Jushi Egypt for its operations in Egypt.

• (215) In the absence of further evidence provided by CNBM, and based on the publicly available evidence, the Commission decided to countervail the successive capital increases of Jushi Egypt as equity injections supported by the State, with the aim of setting up and expanding the production facilities of CNBM in Egypt. Such support would equally fall under the items agreed upon between China and Egypt in the Cooperation Agreement to set up the SETC-Zone, attributed to Egypt for the same reasons explained in recital 91 above and can thus be allocated to the products exported from Egypt.

3.3.3.4.   Benefit

• (216) The Commission then analysed whether the financial contribution provided by GOC via SASAC and/or the SRF conferred a benefit to Jushi Egypt. Once again, due to the non-cooperation of Jushi Egypt, the Commission had to base its findings on the provisions of facts available according to Article 28 of the basic Regulation.

• (217) The body of evidence in the subsection above has shown that the mandate and objective of both SASAC and the SRF is to implement governmental policies and plans, including by providing financial support and funding for the encouraged sectors among which GFR in order to enact the going-out strategy. SASAC and the SRF do not follow market principles and behaviour when providing funding, but operate to implement the respective government policies. A notable example of their operations delinked from a market perspective was found in the Tyres case, where the SRF had provided a grant of the group parent company for an acquisition of a subsidiary in the EU. Furthermore, in the Tyres case the Commission established that such projects followed a similar pattern ⁸⁶. It is thus reasonable to assume that CNBM, as a major central SOE, would follow the same pattern and would benefit from similar subsidies.

• (218) The Commission further noted that the amount of successive parallel capital increases of Jushi Egypt received via China Jushi corresponded approximately to the amount of the funding gap for the investment project in Egypt left after the funding via the preferential financing. As explained above in recitals 171 to 174, the successive magnitude and scale of capital increases of CNBM into Jushi Group and China Jushi substantially mirrored the capital increases into Jushi Egypt precisely to close this funding gap. This was fully coherent with the purpose of the functioning and funding of SASAC and the SRF.

• (219) Based on the evidence on file and in accordance with Article 28 of the basic Regulation, the Commission concluded that the financial contribution provided by SASAC and/or the SRF conferred a benefit within the meaning of Article 3(2) of the basic Regulation.

3.3.3.5.   Calculation of the subsidy amount

• (220) As explained in Section 3.3.3.2 above, Jushi Egypt did not provide a full reply to the request of information. Therefore, it was impossible to verify the subsidies received at the level of the parent company in connection with the group’s foreign investments related to the product concerned, and to determine an accurate benefit amount.

• (221) The Commission therefore resorted to facts available in application of Article 28 of the basic Regulation to determine the subsidy amount conferred by the financial contribution by SASAC or the SRF in the form of grants. As explained above, the Commission found parallel capital increases in the various group companies in China and ultimately channelled to Jushi Egypt in the same magnitude and over the same period. Because CNBM received these funds from SASAC and/or SFR earmarked for the investment in Egypt under the Belt and Road Initiative and the going out policy, it was used simply to channel those funds all the way down to Jushi Egypt without keeping any benefit to itself as this would be inconsistent with the earmarking. The fact that the amount of the funding gap in the Egyptian investment of Jushi Egypt by and large corresponded to the amount of the capital increases further confirms this.

• (222) In order to determine the amount of funds channelled by CNBM to Juhi Egypt as equity injections, the Commission analysed and traced the successive increases in equity in the companies concerned, namely Juhi Egypt, Jushi Group and China Jushi of which CNBM is the main shareholder.

• (223) When following the trail of funds, the Commission examined not only the increases in paid-in capital, but also the increases in other equity instruments. Specifically, substantive amount of funds were discovered in the form of capital surpluses in the intermediate companies China Jushi and Jushi Group. With regard specifically to these intermediate companies, the Commission noticed that in certain equity increases the amount of funds transferred to these companies were larger than the amounts the company would later register under paid-in capital. The company would therefore have access to these funds without the expected change on the share of company’s ownership. By taking into consideration the equity injections via paid-in capital and the amounts found under other type of capital accounts, such as capital surplus, the Commission could determine that more than 87 % of the equity of Jushi Egypt could have been imputable to CNBM. The total amount of the benefit to the recipient using this approach would therefore be (142,8 million USD).

• (224) However, due to the limited access to more detailed information, the Commission could not determine the exact origin of all these funds, and it thus could not establish with a sufficient standard of likelihood that the all amounts contained in other capital accounts of Jushi Egypt, were channelled and transferred by CNBM.

• (225) Therefore, the Commission adopted a more prudent approach, focusing exclusively on the evolution of the paid-in capital amounts that matched the standard of likelihood as to their source from CNBM. More specifically, the Commission simply took into consideration the increase of paid-in capital of CNBM in China Jushi since 2011 and parallel development of capital increases into Jushi Egypt since 2012. As a result, the Commission considered that 51 % of the equity in Jushi Egypt (or 81,8 million USD) was provided by CNBM through the financial contribution received by SASAC or the SRF.

• (226) Once the full amount of the grants were established, the Commission proceeded to calculate the benefit conferred to Jushi Egypt during the investigation period according to Articles 6 and 7 of the basic Regulation. The benefit of the grants via equity increases should be allocated to the IP considering the amortization period of equity, which is not a fixed asset and therefore would normally be subject to the allocation provisions under Article 7(4) of the basic Regulation.

• (227) Due to the absence of cooperation from Jushi Egypt in replying to the request for information, the Commission did not have any further information on any specific agreement concerning the use of the grant linked to the equity investments with SASAC or the SRF. In the tyres case, the Commission amortised the grant amount over a period of seven years because this was in line with the average investment duration of SRF investment and with another concurring loan taken out for that transaction ⁸⁷. However, in the absence of cooperation and specific shareholders agreement in this case, the Commission decided to follow a conservative approach and decided to use the average useful life of the assets of Jushi Egypt on the assumption that the funding was used to fill the gap for the investment project in line with Article 7(3) in conjunction with Article 7(4) of the basic Regulation, which provides that a different amortisation period can be used if the circumstances so justify. On this basis, the Commission used an amortization period of 12 years.

• (228) All subsidies found were established for the total turnover of the company. The subsidy amount was then allocated to the turnover of the product concerned sold to the European Union.

• (229) This resulted in a subsidisation amount of 2,01 %.

3.3.3.6.   Comments on the support for capital investment

• (230) Following final disclosure the exporting producer claimed that the Commission failed to demonstrate that the equity is attributable to CNBM and more specifically, that it did not originate from China Jushi or Jushi Group’s profits. In this line the company also claimed that the Commission failed to explain why funds were given by CNBM every year to China Jushi since 2010 but that funds only passed on to Jushi Group and Jushi Egypt during some of those years. Similarly, it argued that the Commission failed to establish that the support for capital investment is attributable to any public body and, as a result, it cannot constitute a subsidy. Finally, the exporting producer requested that, should the Commission maintain its approach, it must disclose how it considers that there is any pattern between the support for capital from CNBM to China Jushi and that between Jushi Group and Jushi Egypt.

• (231) Firstly, concerning the origin of the funds, the Commission noted that the company did not provide any additional evidence to substantiate the claim. The Commission nonetheless, analysed further the accounts of the concerned companies to identify whether increases in equity were sourced by their profits. The Commission observed that none of the increases in equity were originated from the profits or retained earnings accounts. The Commission, nonetheless, identified that certain equity increases of China Jushi taking place in the years 2012 and 2016 could be attributed to capital reserves. However, the company failed to provide information on the origin of the funds of the capital reserve accounts. The Commission therefore concluded that undistributed profit or retained earnings were not the attributable source of the funds used for the equity increases in Jushi Egypt since 2012.

• (232) Secondly, concerning the moment when the funds were transferred to Jushi Group and Jushi Egypt, the Commission noted that the exporting producer failed to provide any further evidence to substantiate or explain CNBM equity increases scheduling. Similarly, the Commission noted that in addition to the time lags on equity transfers from company to company, equity increases also responded to the different capital requirements in Jushi Egypt linked to the investments over the period analysed.

• (233) Thirdly, concerning whether the origin of the funds supporting the capital increase can be attributable to a public body, the Commission noted in recital 215 that, even if they would not constitute public bodies, both SASAC and the SRF would be considered as entrusted or directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic Regulation.

• (234) Finally, regarding the disclosure on the establishment of the pattern between the support for capital from CNBM to China Jushi and between Jushi Group and Jushi Egypt, the Commission noted that this information was provided. Recitals 186 above to 231 above explained in detail the findings and the methodology used to calculate the subsidy amount. Similarly, in the specific disclosure, the exporting producer was provided with complete information concerning the evidence at the Commission’s disposal and its analysis regarding the capital support from CNBM to China Jushi and for Jushi Group to Jushi Egypt.

• (235) Following all the above-mentioned arguments, the Commission rejected these claims.

• (236) The exporting producer also claimed that the Commission failed to establish the amount of the benefit and must demonstrate why each provision of equity capital is not in line with the usual investment practice.

• (237) The Commission recalled that during the investigation the case team sought to have access to the relevant information in CNBM. However, as explained in Section 3.3.3.2, neither CNBM nor the Jushi Group cooperated fully with the investigation and the Commission had to rely on facts available for its findings. Moreover, recitals 218 to 221 described how the benefit is established. In essence, it explains that SASAC and SRF did not follow market principles when providing funding, but operated to implement the respective government policies. The Commission therefore rejected the claim.

• (238) The exporting producer further argued that it cannot be considered that all funds provided by CNBM originated from public bodies since CNBM is a publicly listed company with several other means of raising funds. As a result, the Commission cannot conclude that the entirety of the alleged capital support from CNBM to China Jushi constitutes a subsidy. Therefore, the company argued that the benefit cannot be higher than the subsidy rate found for CNBM in China in the investigation on Glass Fibre Fabrics Regulation ⁸⁸, multiplied by the amount of capital support. The exporting producer also claimed that the Commission failed to calculate the benefit as it did not consider that the support for capital investment from CNBM came in exchange of shares and, thus, dividends.

• (239) First, the Commission noted that the company has not provided any additional evidence to substantiate the claim. Similarly, the Commission recalled that neither CNBM nor the Jushi Group cooperated fully with the investigation and the Commission had to rely on facts available for its findings. In this respect, the Commission recalled that the subsidy rate found for CNBM in Section 3.4 and 3.8 of the glass fibre fabrics Regulation was based on loans and grants visible in the publicly available audit report of CNBM, and thus it limited its findings in a very prudent manner only to certain subsidies within specific subsidy schemes, which could be easily identified and which are not related to the subsidy scheme at hand in this investigation. Therefore, if anything the Commission erred on the side of caution.

• (240) Finally, the Commission noted that it did not analyse whether the funds transferred from CNMB were done in exchange of shares. In fact, no evidence was provided that indeed CNMB received shares in exchange. On the contrary, the investigation established that CNBM received financial contributions from the government in order to implement its policies, and that these financial contributions were received in the form of grants that were then used for capital contributions to finance the operations of Jushi Egypt.

• (241) Following all the above-mentioned arguments, the Commission rejected the claim.

3.4.   Provision of goods for less than adequate remuneration

3.4.1.   Provision of power for less than adequate remuneration

• (242) No benefit was found for the provision of electricity for less than adequate remuneration since electricity rates are set at national level in Egypt, and the exporting producer pays the usual rate for industrial users within a certain voltage range.

• (243) No benefit was found for the provision of gas for less than adequate remuneration. Rates for gas are set for certain industrial sectors, but the exporting producer falls within the residual category of industrial users, which does not benefit from the lowest rate. Hence, there is no specificity, and no benefit.

3.4.2.   Provision of land for less than adequate remuneration

3.4.2.1.   Purchase of land by Jushi Egypt

(a) Legal basis

• (244) The legal bases of this programme are:

• — Law No 83/2002 on Economic Zones of a Special Nature (‘Law 83/2002’);

• — Decree of the President of the Arab Republic of Egypt on Law No 27/2015 Amending some Provisions of Law of Economic Zone of Special Nature issued by Law No 83/2002 (‘Law 27/2015’);

• — Law No 8 of 1997 On Investment Guarantees and Incentives (‘Law 8/1997’);

• — Investment Law as Enacted by Law No 72 of 2017;

• — The Prime Minister’s Draft Resolution No. (2310) of 2017 Concerning issuing the Executive Regulations of Investment Law Issued by virtue of Law No 72 of 2017.

(b) Partial non-cooperation and use of facts available in relation to TEDA Investment Co. Ltd. – application of the provisions of Article 28(1) of the basic Regulation in relation to the GOE

• (245) The Commission sent to the GOE a request for information intended for Tianjin TEDA and asked information necessary to assess the involvement of the GOE or GOC in the control of the company. The Commission considered the request for information necessary in light of the role that the company has had in the in developing and construct the SETC-Zone, as explained in recital 34 above.

• (246) In replying to the request for information, TEDA only provided data concerning Egypt TEDA Investment Co., Ltd. which had been already submitted as a reply to the initial questionnaire.

• (247) However, the Commission ascertained that very limited information concerning Tianjin TEDA was provided.

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

• (249) Therefore, the Commission informed the GOE that it might have to resort to the use of facts available under Article 28 of the basic Regulation when examining the existence and the extent of the alleged subsidisation for companies located in the SETC-Zone. The GOE objected and stressed that it had fully cooperated with the Commission and that it could not provide information about a company outside of its jurisdiction.

• (250) However, the Commission considered that the information provided about Tianjin TEDA was not sufficient and that the GOE, as explained in recital 16 above, was in a position to provide the information.

• (251) In light of the above considerations, the Commission applied Article 28 of the basic Regulation and relied on facts available with respect to this point.

(c) Findings of the investigation

• (252) According to Article 5 of the Law 83/2002, as amended in 2015, in the SCZone, ‘the ownership of land shall be vested in the Authority within the zone’. Since 2015, it is not possible anymore to purchase the full ownership of land from the General Authority. Currently, the General Authority only provides usufruct rights of the land to the Main Development Company (‘MDC’), an Egyptian developer. The MDC then puts the usufruct of the land up for bidding to sub-developers such as TEDA. These sub-developers subsequently rent out the land to the companies located in the zone.

• (253) However, when Jushi Egypt started to build its plant in 2011, it was still possible to acquire full ownership of land from the Egyptian authorities. At the time, Jushi Egypt bought a plot of land from Egypt TEDA. TEDA in turn bought this plot in 1998 through its predecessor, the Egypt China Joint Venture Company, from the Suez Governorate at an extremely low price (less than 1 USD/m²), and without any bidding procedure. Following the initial purchase in 1998, TEDA invested in basic infrastructure to make the undeveloped desert land viable for industrial projects.

• (254) In this respect, the Commission ascertained whether the ECJV and TEDA were public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. In view of the lack of cooperation of the GOE, the Commission had to rely on facts available. The Commission thus sought information about State ownership as well as formal indicia of government control in these entities. It also analysed whether control had been exercised in a meaningful way.

• (255) First, the Commission found that ECJV and TEDA were related entities, and that they were both fully State-owned. Indeed, as mentioned in recital 33 above, Tianjin TEDA is an SOE under the Tianjin Municipal Government, which formed a joint venture with the Egyptian Suez Canal Administration, the National Bank of Egypt, and four more Egyptian State-owned enterprises to create the ECJV, in order to develop and construct the economic zone. The Chinese side held 10 % of the shares of the ECJV, and the Egyptian side 90 % ⁸⁹. Furthermore, as mentioned in recital 36 above, in October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund, a subsidiary of the China Development Bank, to set up China-Africa TEDA Investment Co., Ltd. (‘China-Africa TEDA’), as the main Chinese investment entity in the cooperation zone. China-Africa TEDA united with the ECJV to create a new company, TEDA, in order to drive the development of the SETC-Zone in Egypt. This time, the Chinese side held 80 % of the shares, and the Egyptian side (represented by the ECJV) 20 %.

• (256) The Commission further established the existence of formal indicia of control by the State of those investors. Since both entities are fully State-owned, the Chinese and Egyptian governments formally have full control over them. In particular, in the absence of specific information indicating otherwise, the Commission considered that managers and supervisors in the entities at issue are assumed to be appointed by and accountable to the State as is the case for State-owned companies in those countries.