Commission Implementing Regulation (EU) 2023/935 of 11 May 2023 imposing a definitive anti-dumping duty on imports of high tenacity yarns of polyesters originating in the People’s Republic of China and produced by Zhejiang Hailide New Material Co., Ltd

12.5.2023	EN	Official Journal of the European Union	L 127/58

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union ¹ (the ‘basic Regulation’) and in particular Article 9(4) thereof,

Whereas:

1. PROCEDURE

1.1.   Original investigation and measures in force

• (1) Anti-dumping measures on imports of high tenacity yarns of polyesters (‘HTYP’) originating in the People’s Republic of China (‘China’ or ‘country concerned’) ranging from 5,1 % to 9,8 % were originally imposed by Council Implementing Regulation (EU) No 1105/2010 ² (‘the original measures’).

• (2) The original measures applied to all imports of HTYP originating in China, with the exception of imports of HTYP produced by the Chinese exporting producers Zhejiang Hailide New Material Co. Ltd. (‘Hailide’) and Hangzhou Huachun Chemical Fiber Co. Ltd. (‘Huachun’). No duty rate was originally imposed (Regulation (EU) No 1105/2010) on these companies, as no dumping was found.

• (3) Following a first expiry review pursuant to Article 11(2) of (the ‘basic Regulation’), the Commission, by Commission Implementing Regulation (EU) 2017/325 ³, as last amended by Commission Implementing Regulation (EU) 2017/1159 ⁴ maintained the original measures.

• (4) A second expiry review of the measures in force pursuant to Article 11(2) of the basic Regulation and a partial interim review ⁵ pursuant to Article 11(3) of the basic Regulation, limited in scope to the examination of dumping ⁶ were initiated on 23 February 2022 and 30 June 2022 respectively.

• (5) In line with the WTO Appellate Body report in case Mexico – Definitive Anti-dumping Measures on Beef and Rice ⁷ (‘the WTO Appellate Body report’), Hailide and Huachun were not examined in the subsequent reviews of the original measures as imposed by Regulation (EU) No 1105/2010 and are not subject to the measures in force.

1.2.   Initiation

• (6) On 30 June 2022, the Commission initiated an anti-dumping investigation under Article 5 of the basic Regulation with regard to imports of HTYP manufactured and exported to the Union by Hailide. A Notice of Initiation was published in the Official Journal of the European Union ⁸ (‘the Notice of Initiation’).

• (7) The Commission initiated the investigation following a complaint lodged on 16 May 2022 by The European Man-made Fibres Association (‘CIRFS’ or ‘the complainant’) on behalf of the Union industry of HTYP in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

• (8) The investigation is limited in scope to the exporting producer concerned (Hailide) and any related company thereto. Another exporting producer, Huachun, which also received no anti-dumping duty rate in the investigation that led to the imposition of the above anti-dumping measures, ceased to exist in 2021. Therefore, Huachun is not considered an exporting producer of the HTYP and a party concerned for the purposes of this investigation.

1.3.   Interested parties

• (9) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, it specifically informed the exporting producer concerned and the authorities in China about the initiation of the investigation and invited them to participate.

• (10) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

• (11) A user association together with five users requested a hearing with the Commission services and were granted an opportunity to be heard.

1.4.   Sampling of Union producers and of unrelated importers

• (12) In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample based on production and sales volumes, taking into account their geographical location. This sample consisted of 3 Union producers. The sampled Union producers accounted for more than 50 % of the estimated total EU production and EU sales volume of the like product. In accordance with Article 17(2) of the basic Regulation, the Commission invited interested parties to comment on the provisional sample. No interested party submitted comments on the provisional sample, which was confirmed as the definitive sample. The sample is representative of the Union industry.

• (13) In order to enable the Commission to decide whether sampling would be necessary in respect of the unrelated importers in the Union, those parties were requested to make themselves known and to provide the Commission with the information requested in the respective Notice of Initiation. One unrelated importer came forward as an interested party, but did not provide the requested sampling information. Therefore, sampling was not necessary for the unrelated importers.

1.5.   Questionnaire replies and verification visits

• (14) The Commission sent a questionnaire concerning the existence of significant distortions in China within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of China (‘GOC’).

• (15) The Commission sent questionnaires to the sampled Union producers, users and to the exporting producer concerned. The same questionnaires had also been made available online on the day of initiation.

• (16) The Commission received questionnaire replies from Hailide and three sampled Union producers. Questionnaire replies were also received from two users of HTYP. However, these replies could not be taken into consideration in the context of this proceeding, as the users in question did not use the product concerned produced by Hailide.

• (17) In view of the outbreak of Covid-19 and the confinement measures put in place by various Member States as well as by various third countries, the Commission could not carry out verification visits pursuant to Article 16 of the basic Regulation at the Hailide’s premises in China.

• (18) The Commission instead cross-checked with Hailide remotely all the information deemed necessary for its determinations in line with its Notice on the consequences of the Covid-19 outbreak on anti-dumping and anti-subsidy investigations ⁹.

• (19) Furthermore, verification visits were carried out at the premises of the following companies:

• (a) Related trader of the exporting producer concerned: Hailide Fibers Europe A/S, Denmark

• (b) Union producers

• — Glanzstoff Longlaville, Longlaville, France

• — PHP Fibers GmbH, Obernburg, Germany

• — Brilen Tech S.A., Zaragoza, Spain

1.6.   Subsequent procedure

• (20) On 30 January 2023, in accordance with Article 19a(2) of the basic Regulation, the Commission informed the interested parties of its intention not to impose provisional measures. The Commission did not impose provisional anti-dumping measures in this investigation in order to align the timing of the definitive findings of this proceeding with the expiry review and the partial interim review referred to in recital (4) above.

• (21) On 20 February 2023, the Commission disclosed the essential facts and considerations on the basis of which it intended to impose the definitive anti-dumping duties. Furthermore, an additional disclosure was made on 20 March 2023. All parties were granted a period within which they could make comments on the disclosures.

• (22) The comments made by interested parties were considered by the Commission and taken into account, where appropriate. The parties who so requested were granted a hearing.

1.7.   Investigation period and period considered

• (23) The investigation of dumping and injury covered the period from 1 January 2021 to 31 December 2021 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2018 to the end of the investigation period (‘the period considered’).

2. PRODUCT UNDER INVESTIGATION, PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product under investigation

• (24) The product subject to this investigation is high tenacity yarn of polyesters not put up for retail sale, including monofilament of less than 67 decitex, (excluding sewing thread and ‘Z’-twisted multiple (folded) or cabled yarn, intended for the production of sewing thread, ready for dyeing and for receiving a finishing treatment, loosely wound on a plastic perforated tube), currently falling under CN Code ex 5402 20 00 (TARIC code 5402200010) (‘the product under investigation’). The CN and TARIC codes are given for information only without prejudice to a subsequent change in the tariff classification.

• (25) HTYP are used in a number of diverse applications such as tyre reinforcement, broad fabrics, seatbelts, airbags, ropes, nets and a number of industrial applications.

2.2.   Product concerned

• (26) Product concerned by this investigation is the product under investigation originating in China and produced by Hailide.

2.3.   Like product

• (27) 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 when exported to the Union;

• — the product under investigation produced and sold on the Chinese domestic market; and

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

• (28) These products are therefore considered to be like products within the meaning of Article 1(4) of the basic Regulation.

3. DUMPING

3.1.   Procedure for the determination of the normal value under Article 2(6a) of the basic Regulation

• (29) The evidence available at the initiation of the investigation pointed to the existence of significant distortions in China within the meaning of Article 2(6a), point (b) of the basic Regulation. The Commission therefore considered it appropriate to initiate the investigation having regard to Article 2(6a) of the basic Regulation.

• (30) In order to collect the necessary data for a possible application of Article 2(6a) of the basic Regulation the Commission invited Hailide to provide information regarding the inputs used for producing HTYP. Hailide submitted the relevant information.

• (31) In addition, the Commission invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of the Notice of Initiation in the Official Journal of the European Union.

• (32) In point 6.3.2 of the Notice of Initiation the Commission informed interested parties that based on the information available at that stage possible appropriate representative countries pursuant to Article 2(6a)(a) of the basic Regulation was Türkiye.

• (33) The Commission also stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in 2(6a)(a) first indent of the basic Regulation.

• (34) On 19 July 2022, the Commission issued a First note on the sources for the determination of the normal value (the ‘First Note’) by which it informed interested parties on the relevant sources it intended to use for the determination of the normal value.

• (35) In that note, the Commission provided a preliminary list of all known factors of production (‘FOP’) such as raw materials, labour and energy, used in the production of HTYP. In addition, the Commission identified Türkiye, Brazil and Thailand as possible appropriate representative countries. The Commission gave all interested parties opportunity to comment. The Commission received comments from Hailide as well as from the complainant.

• (36) On 30 November 2022, and after having analysed the comments received, the Commission issued the Second note on the sources for the determination of the normal value (the ‘Second Note’) (the First Note and Second Note are collectively referred to as the ‘Notes’).

• (37) In the Second Note, the Commission updated the list of factors of production and informed interested parties of its intention to use Türkiye as the representative country under Article 2(6a)(a), first indent of the basic Regulation. It also informed interested parties that it would establish selling, general and administrative costs and profits based on publicly available financial statements of an HTYP producer in Türkiye. An additional note with revised exchange rates for a number of benchmarks as well as including a more detailed disclosure of benchmark for labour cost calculation was issued and placed on the open file on 16 December 2022.

• (38) The Commission invited interested parties to comment. Comments were received from Hailide as well as from the complainant and a group of users (IVGT, Delcotex, Gleistein, Guth&Wolf, Heytex and Jakob Eschbach).

• (39) After having analysed the comments and information received, the Commission concluded that Türkiye was an appropriate representative country from which undistorted prices and costs would be sourced for the determination of the normal value. The underlying reasons for that choice are further described in detail in Section 3.3.2 below.

3.2.   Application of Article 18 of the basic Regulation

• (40) In order to obtain information it deemed necessary for its investigation with regard to the alleged significant distortions, the Commission sent a questionnaire to the GOC. No questionnaire reply was received from the GOC. Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in China.

3.3.   Normal value

• (41) According to Article 2(1) of the basic Regulation, “the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country”.

• (42) However, according to Article 2(6a)(a) of the basic Regulation, “in case it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks”, and “shall include an undistorted and reasonable amount of administrative, selling and general costs and for profits” (“administrative, selling and general costs” is referred hereinafter as ‘SG&A’).

• (43) As further explained below, the Commission concluded in the present investigation that, based on the evidence available and given the lack of cooperation of the GOC, the application of Article 2(6a) of the basic Regulation was appropriate.

3.3.1.   Existence of significant distortions

3.3.1.1.   Introduction

• (44) Article 2(6a)(b) of the basic Regulation stipulates that ‘significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements:

• — the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country;

• — state presence in firms allowing the state to interfere with respect to prices or costs;

• — public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces;

• — the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws;

• — wage costs being distorted;

• — access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state’.

• (45) As the list in Article 2(6a)(b) of the basic Regulation is non-cumulative, not all the elements need to be given regard to for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list. However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provides the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

• (46) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector’.

• (47) Pursuant to this provision, the Commission has issued a country report concerning China (hereinafter ‘the Report’) ¹⁰, showing the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as steel and chemicals). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report was placed in the investigation file at the initiation stage. The complaint also referred to other documents issued by Chinese authorities at the national ¹¹ or provincial ¹² level, complementing the Report.

• (48) More specifically, the complaint alleged that the factors of production, including the main raw materials and energy to produce HTYP are heavily distorted. The complaint referred to the Report and the distortions identified therein with respect to the chemical sector, including the monoethylene glycol (‘MEG’) and purified terephthalic acid (‘PTA’) industry. Further, the complaint referred to the 14^th Five-Year Development Plan (‘FYP’) for Petroleum and Chemical Industry of the Zhejiang Province and its call for the development of petrochemical upstream and midstream industries. Moreover, the complaint pointed – with reference to the Report – to existing distortions with respect to energy costs. The complaint also observed that Chinese authorities support implementing preferential fiscal and financial policies for the chemical industry, not least in line with the mandate of the 14^th national and provincial FYPs for the “optimization and structural adjustment of the raw materials industries such as petrochemicals” and for accelerated “transformation and upgrading of enterprises in key industries such as chemicals”. The complaint further noted the State interference with respect to the labour market, the land-use rights, as well as the fact that HTYP producers benefitted from export loans. Against this background, the complaint provided some specific examples, how Hailide may have benefitted from the distortions in terms of sourcing raw materials or receiving financial support by government authorities.

• (49) As indicated in recital (40), the GOC did not comment or provide evidence supporting or contradicting the existing evidence on the case file, including the Report and the additional evidence provided by the complainant, on the existence of significant distortions and/or on the appropriateness of the application of Article 2(6a) of the basic Regulation in the case at hand.

• (50) Comments were received from Hailide as well as from a group of users. The claims are addressed in section 3.3.1.11 below.

• (51) The Commission examined whether it was appropriate or not to use domestic prices and costs in China, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file, including the evidence contained in the Report, which relies on publicly available sources. That analysis covered the examination of the substantial government interventions in China’s economy in general, but also the specific market situation in the relevant sector including the product under investigation. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in China.

3.3.1.2.   Significant distortions affecting the domestic prices and costs in China

• (52) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of China. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’. The State-owned economy is the ‘leading force of the national economy’ and the State has the mandate ‘to ensure its consolidation and growth’ ¹³. Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation. The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the State with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the State ownership ¹⁴.

• (53) In addition, under Chinese law, the socialist market economy is developed under the leadership of the Chinese Communist Party (‘CCP’). The structures of the Chinese State and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the State are indistinguishable. Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution. Following the already existing first sentence of the provision: ‘[t]he socialist system is the basic system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘[t]he defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China.’ ¹⁵ This illustrates the unquestioned and ever growing control of the CCP over the economic system of China. This leadership and control is inherent to the Chinese system and goes well beyond the situation customary in other countries where the governments exercise general macroeconomic control within the boundaries of which free market forces are at play.

• (54) The Chinese State engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market ¹⁶. The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as the level of the regulatory environment.

• (55) First, on the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans covers a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government. Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means in order to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans still contain explicit output targets. Under the plans, individual industrial sectors and/or projects are being singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.). The economic operators, private and State-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans (see also section 3.3.1.5 below) ¹⁷.

• (56) Second, on the level of allocation of financial resources, the financial system of China is dominated by the State-owned commercial banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government’s industrial policy objectives rather than primarily assessing the economic merits of a given project (see also section 3.3.1.8 below) ¹⁸. The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Also these parts of the financial sector other than the banking sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the State and the CCP ¹⁹.

• (57) Third, on the level of regulatory environment, the interventions by the State into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market-based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted in order to facilitate the achievement of goals designed by State policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies ²⁰. Similarly, in the area of investment, the GOC maintains significant control and influence over destination and magnitude of both State and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining State control over key sectors or bolstering domestic industry ²¹.

• (58) In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with the free play of market forces, resulting in distorting the effective allocation of resources in line with market principles ²².

3.3.1.3.   Significant distortions according to Article 2(6a)(b), first indent of the basic Regulation: the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country

• (59) In China, enterprises operating under the ownership, control and/or policy supervision or guidance by the State represent an essential part of the economy.

• (60) While in the HTYP sector, the degree of state ownership does not appear to be significant, the GOC maintains shareholding exceeding 5 % in Hailide ²³. In addition, given that CCP interventions into operational decision making have become the norm also in private companies ²⁴, with CCP claiming leadership over virtually every aspect of the country’s economy, the influence of the State by means of CCP structures within companies effectively results in economic operators being under control and policy supervision of the government, given how far the State and Party structures have grown together in China.

• (61) This is apparent also at the level of the China Chemical Fiber Association (‘CCFA’) ²⁵, the sectoral industry association, of which Hailide is a member. According to Art. 2 of CCFA’s Articles of Association, the organisation’s purpose is, among others, to “implement the country’s industrial policy”. Article 3 confirms CCFA’s subordination to the CCP by stipulating that “[t]he Association adheres to the overall leadership of the Communist Party of China, establishes organizations of the Communist Party of China, develops party activities, and provides the conditions necessary for the activities of the party organizations in accordance with the provisions of the Constitution of the Communist Party of China.”

• (62) Consequently, even privately owned producers in the HTYP sector are prevented from operating under market conditions. Indeed, both public and privately owned enterprises in the sector are subject to policy supervision and guidance as also set out in section 3.3.1.5 below.

3.3.1.4.   Significant distortions according to Article 2(6a)(b), second indent of the basic Regulation: State presence in firms allowing the state to interfere with respect to prices or costs

• (63) Apart from exercising control over the economy by means of ownership of State-owned enterprises (‘SOEs’) and other tools, the GOC is in position to interfere with prices and costs through State presence in firms. While the right to appoint and to remove key management personnel in SOEs by the relevant State authorities, as provided for in the Chinese legislation, can be considered to reflect the corresponding ownership rights, ²⁶ CCP cells in enterprises, State-owned and private alike, represent another important channel through which the State can interfere with business decisions. According to China’s company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution ²⁷) and the company shall provide the necessary conditions for the activities of the party organisation. In the past, this requirement appears not to have always been followed or strictly enforced. However, since at least 2016 the CCP has been reinforcing its claims to control business decisions in companies as a matter of political principle ²⁸, including exercising pressure on private companies to put ‘patriotism’ first and to follow party discipline ²⁹. In 2017, it was reported that party cells existed in 70 % of some 1.86 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies ³⁰. These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of HTYP and the suppliers of their inputs.

• (64) In addition, on 15 September 2020 a document titled General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era (‘the Guidelines’) ³¹ was released, which further expanded the role of the party committees in private enterprises. Section II.4 of the Guidelines state: “[w]e must raise the Party’s overall capacity to lead private-sector United Front work and effectively step up the work in this area”; and section III.6 states: “[w]e must further step up Party building in private enterprises and enable the Party cells to play their role effectively as a fortress and enable Party members to play their parts as vanguards and pioneers.” The Guidelines thus emphasise and seek to increase the role of the CCP in companies and other private sector entities ³².

• (65) The State’s presence and intervention in the financial markets (see also section 3.3.1.8 below) as well as in the provision of raw materials and inputs further have an additional distorting effect on the market ³³. Thus, the State presence in firms, in the HTYP and other sectors (such as the financial and input sectors) allow the GOC to interfere with respect to prices and costs.

3.3.1.5.   Significant distortions according to Article 2(6a)(b), third indent of the basic Regulation: public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces

• (66) The direction of the Chinese economy is, to a significant degree, determined by an elaborate system of planning which sets out priorities and prescribes the goals the central and local governments must focus on. Relevant plans exist on all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government. Overall, the system of planning in China results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces ³⁴.

• (67) The chemical fiber industry is regarded as a key industry by the GOC. This is evident from the 2022 Guiding Opinions on the High-quality Development of Chemical Fiber Industry (‘the Guiding Opinions’) issued by Ministry of Industry and Information Technology National Development and Reform Commission ³⁵, according to which “The chemical fiber industry is an essential pillar of the stable development and continuous innovation of the textile industry chain, an internationally competitive advantage industry, and an important part of the new material industry”. Article I.2. of the Guiding Opinions explicitly articulates the GOC’s intention to determine the geographical and corporate structure of the sector, as well as essential production parameters. ³⁶ The Government intervention may take the form of production sites relocations (“implement the regional development strategy, under the premise of complying with industry, energy, environmental protection and other policies, encourage leading enterprises to build integrated bases for the whole industry chain of chemical fiber textile in Guangxi, Guizhou, Xinjiang and other central and western regions, and form efficient and collaborative supply chain systems with neighbouring countries and regions”), mergers aimed at creating industrial champions (“encourage enterprises to optimize the allocation of production factors through mergers and reorganization, and accelerate business process reengineering and technological upgrading. Support leading enterprises to gather high-quality resources such as technology, brands, channels and talents”), designation of companies as eligible for special support through dedicated Government programs (“promote the integration and development of large, medium and small enterprises, cultivate specialized and specific new "little giant" enterprises and single champion enterprises”) etc. ³⁷

• (68) This central Government’s strategy is confirmed in numerous planning documents focused on the chemical fiber industry issued at provincial and municipal level.

• (69) The Zhejiang, Jiangsu, Fujian and Shandong provinces, as well as the Chongqing municipality provide good examples.

• (70) The Jiangsu 14^th Five year Plan on the high-end development of chemical industry ³⁸ not only contains detailed provisions on development goals for a wide range of subsectors within the chemical sector ³⁹ but it also mirrors the above-mentioned policies of the Guiding Opinions on the industrial structure:

Through the consolidation of resources, accelerate the construction of a number of large enterprises and enterprise groups with leading roles, increase the level industry concentration, and form a number of world-class enterprises and "single champion" enterprises. ⁴⁰ […]

The layout of the chemical industry in the province abides by the requirements of the national and provincial industrial planning and layout plans, with chemical parks as important development carriers, they are also essential to lead the development of the chemical industry in each district and city. The industrial development orientation abides by the requirements of the relevant industry policies of the state and of Jiangsu province, establishes the development concept led by encouraged industries, and implements the upgrading of traditional chemical industries as well as the coordinated development of industries in new fields. ⁴¹

as well as the geographic distribution of production:

The overall layout plan is based on the whole province, according to the characteristics of each city’s industry development, highlighting the advantages of industry development, further improving the development level of characteristic industries, and expanding the industries that meet regional development needs taking into account each city’s relevant industries and local market conditions, ensuring the differentiated development of the chemical industry in each city of the province, and forming a comprehensive industry system with each city having complementary advantages ⁴².

• (71) Similarly, the Special plan for the development of strategic emerging industries in the Fujian Province during the 14th FYP ⁴³contains a mandate for the provincial authorities to support the chemical fibers sector and guide its development:

Accelerate the development of new textile fabrics, and increase the research and development of functional differentiated fibers, high-performance fiber blends, high-count and high-quality yarns and their fabrics, new heat-bonding composite fibers (ES fibers) for sanitary use, and high-performance metal fibers. ⁴⁴ […]

Support the construction of Fuzhou’s new functional materials industry clusters (membrane materials, advanced textiles, high-performance metal materials, high-performance composite materials, etc.), Xiamen new functional materials industry clusters […], Putian’s new functional materials industry cluster (new chemical fibers and functional textile materials, etc.) and Xiamen biomedical industry cluster […].

• (72) The interference of Fujian’s authorities with the development of the chemical fibers’ sector is further apparent from the provincial 14^th FYP on developing a high quality manufacturing industry which gives the following instruction to the stakeholders:

Promote the construction of Baihong polyester industrial yarn project, and develop special chemical fiber materials used in the automotive sector, marine engineering, military equipment, medical health and other fields. Accelerate the research on cutting-edge fiber technology, focus on breakthroughs in key fiber technologies such as nano-, intelligent, and biomedical fibers, and strive to achieve breakthroughs in high-end fibers such as carbon fiber, aramid fiber, polyphenylene sulfide, and ultra-high molecular weight polyethylene. ⁴⁵

• (73) Also Shandong’s 14^th FYP on developing the chemical industry ⁴⁶ emphasizes the need to “[focus on the development of ethylene-based polyolefins and synthetic resins as end-use products„ propylene-polypropylene, other engineering plastics as well as modified materials, synthetic and rubber materials made of butene and C4, end-products made with high performance polyurethane isocyanate and toluene, new materials, textile and engineering materials made of nylon, benzene and polyamide, PX-PTA-polyester and six other major industry chains” ⁴⁷, with similar language present also in Zhejiang‘s 14^th FYP on developing new materials industry: ⁴⁸„In the field of advanced basic materials, implement a number of digital and green transformation projects and production expansion projects for high-end and scarce products; in the fields of key strategic materials such as advanced semiconductor materials, new display materials, biomedical materials, high-performance fibers and composite materials, implement a number of industrialization and application expansion projects” ⁴⁹ or Chongqing’s 14 FYP on high quality development of manufacturing industry: ⁵⁰„Use the raw material bases to encourage relevant enterprises to research, develop and manufacture high-performance PVA (polyvinyl alcohol) functional fibers, differentiated spandex, special polyester fibers, polyamide fibers, PU (polyurethane) microfibers and other products.” ⁵¹

• (74) Through these and other means, the GOC therefore directs and controls virtually every aspect in the development and functioning of the sector.

• (75) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives of supporting encouraged industries, including the production the main raw materials used in the manufacturing of HTYP. Such measures impede market forces from operating freely.

3.3.1.6.   Significant distortions according to Article 2(6a)(b), fourth indent of the basic Regulation: the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws

• (76) According to the information on file, the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than China, the Chinese system is characterised by systematic under-enforcement. The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings, which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the State in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings ⁵².

• (77) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in China. ⁵³ All land is owned by the State (collectively owned rural land and State-owned urban land) and its allocation remains solely dependent on the State. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates ⁵⁴. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land ⁵⁵.

• (78) Much like other sectors in the Chinese economy, the producers of HTYP are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies, too, are subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the chemical fibers sector. The present investigation revealed nothing that would call those findings into question.

• (79) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the chemical fibers sector, including with respect to the product under investigation.

3.3.1.7.   Significant distortions according to Article 2(6a)(b), fifth indent of the basic Regulation: wage costs being distorted

• (80) A system of market-based wages cannot fully develop in China as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of essential conventions of the International Labour Organisation (‘ILO’), in particular those on freedom of association and on collective bargaining ⁵⁶. Under national law, only one trade union organisation is active. However, this organisation lacks independence from the State authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary ⁵⁷. Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area. This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration. ⁵⁸ Those findings lead to the distortion of wage costs in China.

• (81) No evidence was submitted to the effect that the chemical fibers sector, including the producers of HTYP, would not be subject to the Chinese labour law system described. The chemical fibers sector is thus affected by the distortions of wage costs both directly (when making the product under investigation or the main raw material for its production) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in China).

3.3.1.8.   Significant distortions according to Article 2(6a)(b), sixth indent of the basic Regulation: access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the State

• (82) Access to capital for corporate actors in China is subject to various distortions.

• (83) Firstly, the Chinese financial system is characterised by the strong position of State-owned banks ⁵⁹, which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similarly to non-financial SOEs, the banks remain connected to the State not only through ownership but also via personal relations (the top executives of large State-owned financial institutions are ultimately appointed by the CCP) ⁶⁰ and, again just like non-financial SOEs, the banks regularly implement public policies designed by the GOC. In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State ⁶¹. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁶².

• (84) While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

• (85) For example, the GOC has clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. One of the State’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues ⁶³. Also, the performance evaluation criteria of commercial banks have now to, notably, take into account how entities ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’. ⁶⁴

• (86) Specifically in the chemical fibers sector, the prioritisation of sectors on criteria related to industrial policies rather than creditworthiness of a given project is apparent from a number of policy documents, such as the Shandong Province’s 14^th FYP on developing the chemical industry which provides for the following with respective to chemical industry: ⁶⁵

Increase financial support. Strengthen fiscal policy incentives, ensure the overall involvement of special funds, support chemical enterprises to accelerate technological transformation, intelligent transformation, industry transfer, relocation into parks, elimination of obsolete capacities, etc., and implement policies such as tax exemption for imported major technical equipment, value-added tax credits and refunds, additional deductions of research and development expenses, and insurance compensation for the first (set) of technical equipment. Actively guide all kinds of financial institutions and social capital to invest in the chemical industry, give play to the advantages of policy-based finance, development finance and commercial finance, and increase financial support to the key areas of chemical industry and technology. ⁶⁶

• (87) Similarly, under the 14^th FYP on the high-end development of the chemical industry ⁶⁷ of the Jiangsu province, the local authorities are obliged to “[g]ive full play to the guiding role of government investment funds, flexibly expand funding channels and guide social capital investments.» ⁶⁸

• (88) Furthermore, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm’s strategic importance to the GOC and the strength of any implicit guarantee by the government. Estimates strongly suggest that Chinese credit ratings systematically correspond to lower international ratings. ⁶⁹

• (89) This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁷⁰. This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

• (90) Secondly, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the growth in corporate leverage in the State sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

• (91) Thirdly, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces, but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 ⁷¹. Official media in China have recently reported that the CCP called for ‘guiding the loan market interest rate downwards.’ ⁷² Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

• (92) Overall credit growth in China indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly, with the GOC a number of times opting to either avoid defaults, thus creating so called ‘zombie’ companies, or to transfer the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

• (93) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in China is affected by significant distortions resulting from the continuing pervasive role of the State in the capital markets. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

3.3.1.9.   Systemic nature of the distortions described

• (94) The Commission noted that the distortions described in the Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above in Sections 3.3.1.1 – 3.3.1.5 as well as in Part I of the Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above in Sections 3.3.1.6-3.3.1.8 and in Part II of the Report.

• (95) The Commission recalls that in order to produce HTYP, a range of inputs is needed. When the producers of HTYP purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors.

• (96) As a consequence, not only the domestic sales prices of HTYP are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention, as described in Parts I and II of the Report. Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout China. This means, for instance, that an input that in itself was produced in China by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth. No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation.

3.3.1.10.   Conclusion

• (97) The analysis set out in sections 3.3.1.2. to 3.3.1.9, which includes an examination of all the available evidence relating to China’s intervention in its economy in general as well as in the chemical fibers sector (including the product under investigation) showed that prices or costs of the product under investigation, including the costs of raw materials, energy and labour, are not the result of free market forces because they are affected by substantial government intervention within the meaning of Article 2(6a)(b) of the basic Regulation as shown by the actual or potential impact of one or more of the relevant elements listed therein. On that basis, and in the absence of any cooperation from the GOC, the Commission concluded that it is not appropriate to use domestic prices and costs to establish normal value in this case.

• (98) Consequently, the Commission proceeded to construct the normal value exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, that is, in this case, on the basis of corresponding costs of production and sale in an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, as discussed in the following section.

3.3.1.11.   Comments by interested parties

• (99) In the course of the investigation, comments were received from Hailide as well as from a group of users.

• (100) In their comments on the First Note on factors of production, Hailide, apart from stating that the application of Article 2(6a) of the basic Regulation would be WTO incompatible, alleged that the analysis in the complaint pertaining to the existence of significant distortions – in China in general as well as concerning Hailide specifically – was flawed for the following reasons: (i) the complaint’s allegations are general in nature – for example when referring to energy or labour costs – and they concern China or its chemical sector, rather than the HTYP market; the allegations also rely exclusively on the Report, rather than being based on positive evidence; (ii) the complainant, in assessing whether significant distortions exist, relies on supporting evidence that is either irrelevant – typically outdated – or factually wrong – quoting past distortive obligations which no longer exist under Chinese law; (iii) the raw materials (purified terephthalic acid (‘PTA’)and monoethylene glycol (‘MEG’))are two commodity goods traded globally and priced in a transparent manner and in line with international prices, for which reason the complaint’s claims about their prices being distorted in China is flawed; (iv) the complainants failed to provide any positive and concrete evidence as regard the factors listed in Article 2(6a)(b) of the basic Regulation and therefore no valid conclusion can be drawn concerning the existence of significant distortions. A group of users made a similar claim in support of Hailide.

• (101) The arguments raised by Hailide could not be accepted. At the outset, the Commission emphasized its position that the provisions of Article 2(6a) of the basic Regulation are fully consistent with the European Union’s WTO obligations.. As to the arguments concerning the allegedly flawed significant distortions analysis in the complaint, the Commission recalled, first of all, that Article 2(6a)(e) of the basic Regulation lays down an obligation to collect the data necessary for the application of this methodology when the investigation has been initiated on this basis. Consequently, far from drawing conclusions concerning the existence of significant distortions, the Commission merely deemed the evidence submitted by the complainant on the significant distortions sufficient to initiate the investigation. Moreover, the Commission pointed out that certain types of distortions present in China – such as distortion related to energy or labour – are cross-cutting, affecting the entire Chinese economy and therefore also prices and/or the raw materials and costs of production of the product under investigation.

• (102) Further, concerning the claim that allegations in the complaint rely exclusively on the Report and are at any rate based on outdated or inaccurate information, the Commission pointed out that while the complaint may be striving to demonstrate the unchanged nature of the significant distortions by referring to policy documents of the 12^th or 13^th planning cycle, the complaint also identified relevant documents for the 2021-2025 planning period, such as 14^th Five-Year Plan for National Economic and Social Development of the People’s Republic of China or the 14^th Five-Year Development Plan for Petroleum and Chemical Industry of the Zhejiang Province. In addition, the Commission recalled that Article 2(6a)(d) of the basic Regulation explicitly provides the Union industry with the possibility to rely on the information contained in the Report when bringing a complaint or a review request. The Commission therefore considered that the evidence identified in the complaint and referred to in the Notice of Initiation was sufficient to warrant initiation of an investigation on the basis of Article 2(6a) of the basic Regulation. As to the claim that raw materials PTA and MEG are traded internationally and their prices in China are therefore not being distorted, this argument has to be dismissed for the reasons set out above, in particular in recitals (95)-(97).

3.3.2.   Representative country

3.3.2.1.   General remarks

• (103) The choice of the representative country was based on the following criteria pursuant to Article 2(6a) of the basic Regulation:

• — A level of economic development similar to China. For this purpose, the Commission used countries with a gross national income per capita similar to China on the basis of the database of the World Bank ⁷³;

• — Production of the product under investigation in that country ⁷⁴;

• — Availability of relevant public data in the representative country.

• — Where there is more than one possible representative country, preference should be given, where appropriate, to the country with an adequate level of social and environmental protection.

• (104) As explained in recitals (34)-(37), the Commission issued and placed on the file two Notes on the sources for the determination of the normal value. The Notes described the facts and evidence underlying the relevant criteria and addressed the comments received by the parties on these elements and on the relevant sources. In the Second Note, the Commission informed interested parties of its intention to consider Türkiye as an appropriate representative country in the present case if the existence of significant distortions pursuant to Article 2(6a) of the basic Regulation would be confirmed. The Commission’s assessment can be summarised as follows.

3.3.2.2.   A level of economic development similar to China and production of the product under investigation

• (105) In the investigation period, the World Bank classified countries with a similar level of economic development as China as ‘upper-middle income’ countries on a gross national income basis. In the First Note, a sizeable production of the product under investigation was found to exist only in five of these countries, namely in Belarus, Brazil, Mexico, Thailand and Türkiye.

• (106) However, in view of the fact that Belarus is not a WTO-member and not a market economy, the said country was not examined further as a potential representative country.

• (107) The Commission therefore further analysed Brazil, Mexico, Thailand and Türkiye as potential representative countries.

3.3.2.3.   Availability of relevant public data in the representative country

• (108) For the countries considered and mentioned above, the Commission further verified the availability of the public data, including the data on imports of factors of production as well as of financial data from the producers of the product under investigation in the potential representative countries.

• (109) The analysis of imports of the main factors of production showed that Türkiye imported overall more significant and representative undistorted volumes of the key inputs for production of the HTYP (namely PTA, MEG and Polyethylene terephthalate (‘PET’) chips) compared to Brazil, Mexico or Thailand.

• (110) The analysis further showed that Turkish imports were not materially affected by imports from China or any of the countries listed in Annex I to Regulation (EU) 2015/755 of the European Parliament and of the Council ⁷⁵. Furthermore the HTYP production and production capacity is significant in Türkiye and no particular trade distortions on the factors of production nor on HTYP exist in the country. Moreover, detailed and sufficiently representative data on import prices of the material inputs are readily available in the Global Trade Atlas (‘GTA’) for Türkiye.

• (111) Regarding the producers in representative countries and availability of their data, the Commission identified a HTYP producer KORDSA TEKNIK TEKSTIL A.S. (‘Kordsa Türkiye’) for which consolidated 2021 financial results are available. On the other hand, the financial data for Brazilian (KORDSA BRASIL S.A.), Mexican (Monosuisse, Performance Fibers Mexico Operations and Akra Polyester SA DE CV) and Thai companies (THAI TORAY SYNTHETICS CO LTD and TEIJIN POLYESTER (THAILAND) CO LTD.) producing HTYP are not readily available for the full investigation period and are not fully compliant with the International Financial Reporting Standards (for the Thai producers).

• (112) It is observed that Kordsa Türkiye does not produce solely HTYP, but approximately 86 % of its 2021 revenues were in the segment covering HTYP ⁷⁶. The Commission noted in this respect that in the event that no financial information is readily available specifically and only in relation to the product under investigation (which is nearly always the case), the Commission seeks the closest readily available proxy, including consolidated information of producer(s) active among others in the business covering the product under investigation. In these circumstances, the consolidated SG&A and profit identified for Kordsa Türkiye are therefore deemed sufficiently representative to be applied for the purposes of the present investigation.

• (113) Given the public availability of Kordsa Türkiye’s full and comprehensive annual report for 2021 ⁷⁷, the Commission therefore resorted to the use of the information included therein.

3.3.2.4.   Level of social and environmental protection

• (114) Having established that Türkiye was an appropriate representative country based on all of the above elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

3.3.2.5.   Conclusion

• (115) In view of the above analysis, Türkiye met the criteria laid down in Article 2(6a)(a), first indent of the basic Regulation in order to be considered as an appropriate representative country.

3.3.3.   Comments of the parties

• (116) With respect to the choice of the representative country, a group of users suggested in response to the Second Note that Republic of Korea is the most appropriate representative country, given the level of economic development similar to China, production of the product under investigation, availability of relevant public data, and its adequate level of social and environmental protection.

• (117) It is recalled that for the purpose of identifying countries with a level of economic development similar to China, the Commission considers on the basis of the database of the World Bank ⁷⁸ only ‘upper-middle income’ countries on a gross national income basis. However, Republic of Korea has been classified, in and prior to IP, as a ‘high income’ country by the World Bank and hence cannot be considered as a potential representative country.