Commission Implementing Regulation (EU) 2023/2120 of 12 October 2023 imposing a provisional anti-dumping duty on imports of electrolytic manganese dioxides originating in the People’s Republic of China

Image omitted; see official source	Official Journal of the European Union	EN Series L
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	2023/2120	13.10.2023

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 7 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 16 February 2023, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of electrolytic manganese dioxides (‘EMD’) originating in the People’s Republic of China (‘China’, ‘the PRC’, or ‘the country concerned’) on the basis of Article 5 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union ² (‘the Notice of Initiation’).

• (2) The Commission initiated the investigation following a complaint lodged on 3 January 2023 by Autlan EMD SL (‘the complainant’) or (‘Autlan’). The complaint was supported by Tosoh Hellas Single Member S.A. The complaint was made by the Union industry of EMD 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.

1.2.   Registration

• (3) Pursuant to Article 14(5a) of the basic Regulation, the Commission should register imports subject to an anti-dumping investigation during the period of pre-disclosure unless it has sufficient evidence within the meaning of Article 5 that the requirements either under point (c) or (d) of Article 10(4) of that Regulation are not met. One of these requirements, as indicated in Article 10(4)(d) of the basic Regulation, is that there is a further substantial rise in imports in addition to the level of imports which caused injury during the investigation period. As can be seen in Table 1 below, the imports of EMD originating in the PRC showed a decrease of 66 % in the average monthly volume of imports during the six months following the initiation of the case, as compared to the average monthly imports during the investigation period. Furthermore, to account for any potential seasonality in imports, the Commission compared the average monthly volume of imports during the six months following the initiation of the case with the same six months in the investigation period. This analysis showed a decrease in the average monthly volume of imports of 68 %.

Table 1

Imports from China in the investigation period and after initiation (kg)

	Investigation period monthly average	March–August 2022 monthly average	March–August 2023 monthly average
Imports from China to the EU	1 048 558	1 082 617	351 404
Source: Eurostat, Surveillance database.	Source: Eurostat, Surveillance database.	Source: Eurostat, Surveillance database.	Source: Eurostat, Surveillance database.

• (4) Given that the evidence on the file showed that the requirement under point (d) of Article 10(4) was not met, the Commission did not make imports of the product concerned subject to registration under Article 14(5a) of the basic Regulation.

1.3.   Raw material distortions

• (5) On 7 September 2023, the complainant made a request in accordance with Article 7(2a) of the basic Regulation to include the examination of alleged raw material distortions in the country concerned regarding the product under investigation to assess whether, if relevant, a duty lower than the margin of dumping would be sufficient to remove injury. The complainant provided sufficient evidence that there are no value added tax (‘VAT’) refunds on exports of manganese ore in the country concerned. VAT refund reduction or withdrawal are listed in Article 7(2a), second subparagraph of the basic Regulation, as one of the relevant raw material distortions. Evidence on file also shows that manganese ore accounts for well over the threshold of 17 % of the cost of production of the product under investigation in the country concerned as required by Article 7(2a), fifth subparagraph of the basic Regulation. The comparison of the price of manganese ore in the PRC with the undistorted price of manganese ore sold in representative international markets, published by Fast Markets ³ shows that Chinese prices are below those of representative international markets ⁴ within the meaning of Article 7(2a), second subparagraph of the basic Regulation. To examine the raw material distortions and to assess whether a duty lower than the margin of dumping would be sufficient to remove injury at the definitive stage, the Commission amended the Notice of Initiation of 16 February 2023 on the basis of Article 7(2a) and Article 7(2b) of the basic Regulation. The amended Notice of initiation was published on 13 September 2023 ⁵ (‘amended Notice of Initiation’). Further to this amendment, the Commission invited the interested parties to provide information about spare capacities in the country concerned, competition for raw materials and the effect on supply chains for companies in the Union in a free format or by completing relevant parts of the questionnaires on raw material distortions. The Commission also sent to the GOC a questionnaire concerning raw material distortions within the meaning of Articles 7(2a) and 7(2b) of the basic Regulation. The determination on the raw materials distortions will be made at definitive stage. Therefore, the provisional findings contained in this Regulation are without prejudice to the conclusions of the investigation on the raw material distortions, which will be reflected in the definitive stage of the proceeding.

1.4.   Interested parties

• (6) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, other known Union producers, the known exporting producers and the authorities of the People’s Republic of China, known importers, traders and users, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

• (7) 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. Hearings with two users and one Union producer were held.

1.5.   Sampling

• (8) In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

Sampling of Union producers

• (9) Given the limited number of Union producers of electrolytic manganese dioxides, the Commission announced in the Notice of Initiation that it would make questionnaires available to the only two known Union producers. These two Union producers provided a questionnaire reply and no other Union producers made themselves known following the publication of the Notice of Initiation. Thus, the Commission did not have to resort to sampling.

Sampling of importers

• (10) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

• (11) No unrelated importers provided the requested information.

Sampling of exporting producers

• (12) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked all known exporting producers in China to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People’s Republic of China to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

• (13) Seven exporting producers in the country concerned that exported EMD to the Union during the investigation period, provided the requested information and agreed to be included in the sample. In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of two exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. In accordance with Article 17(2) of the basic Regulation, all known exporting producers concerned and the authorities of the country concerned were consulted on the selection of the sample.

• (14) Following the complainant’s comments arguing that the sample was not sufficiently representative for Germany, Belgium and Poland, where the product under investigation was predominantly sold, the Commission amended the proposed sample by including a third exporting producer. No further comments were received as regards the amended sample.

• (15) The sample of exporting producers or groups of exporting producers was the following:

• — Xiangtan Electrochemical Scientific Ltd, Xiangtan, China (‘Xiangtan’), including:

• — Jingxi Xiangtan Electrochemical Scientific Ltd;

• — Guangxi Guiliu New Material Co., Ltd, Luorong Town, Liuzhou, China (‘Guiliu’), including:

• — Guangxi Xiatian Manganese Mine Co. Ltd;

• — Guangxi Daxin Huiyuan New Energy Technology Co., Ltd, Xialei Town, Chongzuo, China (‘Daxin’).

1.6.   Individual examination

• (16) One exporting producer in China requested individual examination under Article 17(3) of the basic Regulation. At this stage of the investigation, the Commission has not taken any decision about the request for individual examination. The Commission will decide whether to grant individual examination at the definitive stage of the investigation.

1.7.   Questionnaire replies and verification visits

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

• (18) As announced in the amended Notice of Initiation, the investigation covered also raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation with regard to China. For that reason, the Commission invited the interested parties to provide information about spare capacities in the country concerned, competition for raw materials and the effect on supply chains for companies in the Union in a free format or by completing relevant parts of the questionnaires on raw material distortions. The Commission also sent to the GOC a questionnaire concerning raw material distortions within the meaning of Articles 7(2a) and 7(2b) of the basic Regulation.

• (19) The Commission sent questionnaires to the Union producers, sampled exporting producers in China, traders and users. The same questionnaires were made available online ⁶ on the day of initiation.

• (20) The Commission received replies from the sampled exporting producers and one unrelated trader in China, and only a partial reply from two other unrelated traders in China. Replies were also received from two Union producers and two users.

• (21) The Commission sought and verified all the information deemed necessary for a provisional determination of dumping, resulting injury and Union interest. Verification visits pursuant to Article 16 of the basic Regulation were carried out at the premises of the following companies:

Union producers

• — Tosoh Hellas Single Member S.A. (‘Tosoh’), Sindos, Greece;

• — Autlan EMD, S.L. (‘Autlan’), Oñati (Guipuzcoa), Spain.

Users

• — VARTA Consumer Batteries GmbH & Co. KGaA (‘Varta’), Ellwangen (Jagst), Germany;

• — Duracell International Operations Sàrl (‘Duracell’), Aarschot, Belgium.

Exporting producers in China

• — Xiangtan Electrochemical Scientific Ltd, Xiangtan, China;

• — Jingxi Xiangtan Electrochemical Scientific Ltd, Jingxi City, Guangxi, China;

• — Guangxi Guiliu New Material Co., Ltd, Luorong Town, Liuzhou, China;

• — Guangxi Daxin Huiyuan New Energy Technology Co., Ltd, Xialei Town, Chongzuo, China.

Unrelated traders in China

• — Forea Industries Co., Ltd (‘Forea’).

1.8.   Investigation period and period considered

• (22) The investigation of dumping and injury covered the period from 1 January 2022 to 31 December 2022 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2019 to the end of the investigation period (‘the period considered’).

2. PRODUCT UNDER INVESTIGATION, PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product under investigation

• (23) The product subject to this investigation is electrolytic manganese dioxides manufactured through an electrolytic process, which have not been heat-treated after the electrolytic process (‘the product under investigation’, ‘EMD’).

• (24) The product under investigation comprises two main types: carbon-zinc grade EMD and alkaline grade EMD. Both types are produced through an electrolytic process, with an adaptation of certain parameters in the process to obtain either carbon-zinc grade EMD or alkaline grade EMD. They both normally have a high purity of manganese and are generally used as intermediate products in the production of dry cell consumer batteries. The product under investigation may also be used in limited quantities in the other industries such as chemical, pharmaceutical and ceramics ⁷.

• (25) The investigation has shown that, despite some differences in terms of certain specific physical and chemical characteristics such as density, mean particle size, Brunauer-Emmet-Teller (BET) surface area and alkaline potential, both types of the product under investigation share the same basic physical, chemical and technical characteristics and are used for the same purposes. They are therefore considered to constitute a single product for the purpose of this proceeding.

2.2.   Product concerned

• (26) The product concerned is product under investigation originating in China, currently falling under CN code ex 2820 10 00 (TARIC code 2820100010) (‘the product concerned’).

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 domestic market of the People’s Republic of China; and

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

• (28) The Commission decided at this stage that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

2.4.   Claims regarding product scope

• (29) An exporter, Guizhou Manganese Mineral Group (‘GMMG’), claimed that the types of EMD products covered by this investigation have a wide range of uses, involving multiple industries and not only the production of dry cell consumer batteries. The imposition of antidumping measures on not heat-treated electrolytic manganese dioxide is likely to have a wide-reaching impact on multiple industries, as it would block the diverse and high-quality demand for EMD from the Union’s disposable battery and new energy power battery industries as well as other industries such as chemical, pharmaceutical and ceramics. GMMG claimed that the Union producers may not be able to meet the requirements of other industries (like chemical, pharmaceutical and ceramics) in terms of quantity and quality.

• (30) These other types of EMD users ⁸ did not come forward and did not express such concerns in the framework of this investigation. Besides, the investigation found that the Union producers supply these other types of users too. GMMG’s argument was therefore rejected.

• (31) GMMG also claimed that the Union producers are not able to supply EMD for a number of specific battery technologies (e.g. batteries for electric vehicles), where EMD is used ⁹. However, these technologies are currently not utilised in a large-scale production and are not used in the Union’s electric vehicle battery industry. Therefore, there is no indication that the Union producers would not supply to these industries using those technologies, should there be a demand. The argument of the party was therefore rejected.

• (32) GMMG further claimed that the special electrolytic manganese dioxide required by the button battery producers, needs to be processed by special processes involving physical and chemical treatment, while the Union producer in Spain allegedly cannot produce such product according to the current production technology.

• (33) The investigation found that Autlan (the Union producer in Spain) has not yet received any request to supply EMD for the production of button batteries. Hence, without any specific technical specifications there are no indications whether it can supply EMD for the such end-product. On the other hand, the Union producer in Greece supplied button battery producers during the period considered. The argument of the party was therefore rejected.

2.5.   Request to extend the product scope of the investigation

• (34) Five months after the initiation of the investigation, Autlan, requested to apply the anti-dumping measures imposed on EMD originating in China, if any, to EMD of Chinese origin contained in manganese dioxide alkaline and non-alkaline dry cell batteries imported into the Union from China. Those dry cell batteries fall under CN codes 8506 10 11, 8506 10 18, 8506 10 91 and 8506 10 98. Autlan provided an estimated development of imports of EMD contained in manganese dioxide alkaline dry cell batteries ¹⁰, demonstrating that imports of such batteries, as well as their EMD content, have increased sharply since 2019. The party claimed that EMD contained in manganese dioxide alkaline and non-alkaline dry cell batteries formed part of the product under investigation in the complaint referred in recital (2).

• (35) The Commission rejected the request. In the complaint, the product allegedly being dumped was defined as ‘electrolytic manganese dioxides (i.e. manganese dioxides produced through an electrolytic process) not heat-treated after the electrolytic process originating in the People’s Republic of China, usually declared for importation into the European Union within Combined Nomenclature (CN) code ex 2820 10 00’. Manganese dioxide alkaline and non-alkaline dry cell batteries are the downstream products of the product under investigation. Though imports of dry cell batteries were mentioned in the complaint, the product definition did not mention them, nor did it request to cover EMD included in batteries. Indeed, all the evidence in the complaint refers only to EMD, and never to EMD contained in batteries ¹¹. Further, the complaint clearly identifies dry cell battery producers, as the user industry. There was therefore no evidence provided in the complaint that the EMD contained in manganese dioxide alkaline and non-alkaline dry cell batteries, falling under CN codes 8506 10 11, 8506 10 18, 8506 10 91 and 8506 10 98 were dumped or that they caused injury to the Union industry.

• (36) Consequently, the Notice of Initiation defined ‘the product subject to this investigation is electrolytic manganese dioxides (namely manganese dioxides produced through an electrolytic process) not heat-treated after the electrolytic process’ and ‘the product allegedly being dumped is the product under investigation, originating in the People’s Republic of China, currently classified under CN code ex 2820 10 00 (TARIC code 2820100010). The CN and TARIC codes are given for information only, without prejudice to a subsequent change in the tariff classification. The scope of this investigation is subject to the definition of the product under investigation’. It follows, that the procedure for the determination of dumping and injury, as well as the assessment of Union interest did not include collection and analysis of the information on the EMD contained in manganese dioxide alkaline and non-alkaline dry cell batteries.

3. DUMPING

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

• (37) In view of the sufficient evidence available at the initiation of the investigation pointing to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation with regard to China, the Commission considered it appropriate to initiate the investigation with regard to the exporting producers from this country having regard to Article 2(6a) of the basic Regulation.

• (38) Consequently, in order to collect the necessary data for the eventual application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited all exporting producers in China to provide information regarding the inputs used for producing EMD. Seven exporting producers submitted the relevant information.

• (39) 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. In addition, in point 5.3.2 of the Notice of Initiation, 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. No questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation was received within the deadline. No 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 the PRC. The Commission invited the GOC to submit its comment on the application of Article 18. No comments were received.

• (40) In point 5.3.2 of the Notice of Initiation the Commission also specified that, in view of the evidence available, a possible appropriate representative country was Colombia, pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks. The Commission further 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.

• (41) On 12 June 2023, the Commission informed by a note (‘the First Note’) interested parties on the relevant sources it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production such as raw materials, labour, energy and water used in the production of EMD. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified Colombia as a possible appropriate representative country, being the only country with EMD production with a similar level of economic development as China. The Commission also identified publicly available financial data of the sole producer of EMD in the country, Quimica International Quintal S.A (‘Quintal’), and of another company using the similar production process (companies that use electrolytic processes in their production process), Quimpac de Colombia S.A (‘Quimpac’). The Commission received comments on the First Note from all sampled exporting producers, Autlan, VARTA and China Chamber of Commerce for Metals, Minerals and Chemicals Importers (‘CCCMC’) and Exporters and the Guanxi Manganese Industry Association (‘GMIA’).

• (42) On 4 July, and after having analysed all comments and information received on the First Note, the Commission issued a second note (‘the Second Note’) on the relevant sources it intended to use for the determination of the normal value. In the Second Note, the Commission updated the list of factors of production and the relevant sources and informed interested parties that it intended to use Colombia as the representative country.

• (43) As Quintal reported low profit level in 2022 and high selling, general and administrative (‘SG&A’) costs, the Commission considered its financial data not reasonable within the meaning of Article 2(6a)(a). Therefore, the Commission informed interested parties that it would establish SG&A costs and profits based on the 2022 financial data available for Quimpac. The Commission invited interested parties to comment. All comments received are addressed in detail in Section 3.2.

3.2.   Normal value

• (44) 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’.

• (45) 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’.

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

3.2.1.   Existence of significant distortions

3.2.1.1.   Introduction

• (47) 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’.

• (48) 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 provide 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.

• (49) 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’.

• (50) Pursuant to this provision, the Commission has issued a country report concerning the PRC (‘the Report’) ¹², including evidence 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.

• (51) The complaint contained information regarding the industry manufacturing the product concerned and referred to the Report regarding the structural distortions in the Chinese market. The complaint also contained some relevant evidence complementing the Report. The complaint established that the product concerned is classified under CN 28 which covers chemical products, a sector characterised by substantial government intervention in the PRC resulting in a distortion of the effective allocation of resources in line with market principles.

• (52) Moreover, the complaint explained that the industry manufacturing the product concerned is capital and resource intensive, and that energy products represent, in normal conditions, a significant portion of the cost of production. Therefore, the specific distortions contained in the Report related to key factors of production (such energy and labour) are very relevant for the investigation.

• (53) As indicated in recital (39), the GOC did not comment or provide evidence supporting or rebutting 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.

• (54) Comments in this regard were received from CCCMC, jointly with GMIA. Comments were also received from cooperating exporting producers, Xiangtan Electrochemical Scientific Ltd (Xiangtan) and Guangxi Daxin Huiyuan New Energy Technology Co., Ltd (Daxin).

• (55) First, CCCMC/GMIA submitted that Article 2(6a) of the Basic Regulation is not consistent with WTO law, in particular they submitted that Article 2.2 of the WTO Antidumping Agreement (‘ADA’) does not recognise the concept of significant distortions.

• (56) Second, CCCMC/GMIA maintained that there are no significant distortions in the Chinese EMD sector and that there is insufficient evidence to conclude that significant distortions exist in the EMD sector in China. They alleged that the main evidence provided by the complainant derives from the Commission’s China Report, which was published in December 2017. CCCMC/GMIA considered that the Report is outdated and that both the European and the Chinese economies have in the meantime experienced important policy and structural changes.

• (57) Another issue raised by CCCMC/GMIA pertains to the use of third-country data in determining the normal value. According to the WTO ADA, if a country’s investigating authority intends to utilise data from a third country, it must explain and demonstrate how this data has been adapted to accurately reflect prices or cost levels in the origin exporting country. CCCMC/GMIA considers that the absence of such explanation raises concerns about the reliability and validity of using unrelated data in assessing fair market conditions in China’s EMD sector.

• (58) Daxin provided similar comments as the comments received from CCCMC/GMIA. In particular, Daxin also argued that Article 2(6a) of the basic Regulation is not consistent with WTO law. In support of its claim the exporting producer provided the same arguments as CCCMC/GMIA, notably that Article 2.2 of the WTO ADA does not recognise the concept of significant distortions, and that there is no provision in the ADA allowing data from a third country which cannot reflect the prices or cost level of the exporting country to be used for determining the normal value.

• (59) Daxin also disputed that there are significant distortions in the Chinese EMD sector and commented that there is insufficient evidence to prove those distortions, considering that the main evidence provided by the complainant is the Commission’s China Report which is outdated.

• (60) The other cooperating exporting producer, Xiangtan, explained in its comments that the complainant failed to discharge its burden of proof in demonstrating that the costs of Chinese EMD industry in general, and Xiangtan in particular, are distorted. Xiangtan claimed that the Commission’s Report contains no specific or detailed discussion of the EMD sector. Xiangtan considered that the complainant, in assessing whether significant distortions exist, rely on supporting evidence that is either irrelevant or factually wrong. Moreover, Xiangtan explained that the complaint claimed that Chinese electricity price is distorted, however, much of the electricity consumed by Xiangtan is produced by itself, and thus could not be substantially affected by the allegedly ‘distorted’ electricity market in China.

• (61) First, concerning the claims that the provisions of Article 2(6a) of the basic Regulation are not consistent with the Union’s WTO obligations and the use of third country data in determining the normal value, the Commission considered that the provisions of the basic Regulation are fully consistent with WTO obligations. As explicitly clarified by the WTO Appellate Body in DS473, WTO law permits the use of data from a third country, duly adjusted, when such adjustment is necessary and substantiated. Furthermore, the Commission noted that, once it is determined that due to the existence of significant distortions in the exporting country in accordance with Article 2(6a)(b) of the basic Regulation it is not appropriate to use domestic prices and costs in the exporting country, the normal value is constructed by reference to undistorted prices or benchmarks in an appropriate representative country for each exporting producer according to Article 2(6a)(a) of the basic Regulation.

• (62) Moreover, the Commission examined whether it was appropriate or not to use domestic prices and costs in the PRC, 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 based on 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 the PRC’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 the PRC, including the developments subsequent to the publication of the Report. Therefore, these claims were rejected.

• (63) With regard to the claim concerning the outdated character of the evidence contained in the Report, the Commission noted that the Report is a comprehensive document based on extensive objective evidence, including legislation, regulations and other official policy documents published by the Chinese authorities, third party reports from international organisations, academic studies and articles by scholars, and other reliable independent sources. As it was made publicly available already in December 2017, any interested party had ample opportunity to rebut, supplement or comment on it and the evidence on which it is based, and no parties have submitted arguments or evidence rebutting the sources included in the Report. As to alleged similarities of the current EU industrial policies with policies in China, the Commission failed to see the relevance of this point in the context of assessing the existence of significant distortions in China in accordance with Article 2(6a) of the basic Regulation. These claims are therefore dismissed.

• (64) Concerning the claim that the applicant did not provide sufficient evidence to substantiate its claims regarding significant distortions in the PRC, as specified at Point 3 of the Notice of Initiation, the Commission considered that the complaint did provide sufficient evidence of significant distortions as required by Article 2(6a)(e) of the basic Regulation to initiate the investigation on this basis. There are no further evidence requirements of the type alleged by this party in Article 2(6a) of the basic Regulation. Indeed, while the determination on the actual existence of significant distortions and the consequent use of the methodology prescribed by Article 2(6a)(a) of the basic Regulation only occurs at the time of the disclosure, 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. In this case, the Commission deemed the evidence submitted in the request sufficient to initiate the investigation on this basis. Therefore, the Commission took the steps necessary to enable it to apply the methodology under Article 2(6a) of the basic Regulation in case the existence of significant distortions would be confirmed during the investigation. Moreover, the Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in the PRC. The Commission rejected this claim.

• (65) Regarding Xiangtan’s claim that no specific or detailed discussion of the EMD sector is contained in the Report and that regarding electricity, the majority of the electricity consumed by Xiangtan is produced by itself, and thus could not be substantially affected by the allegedly distorted electricity market, the Commission noted that the existence of significant distortions giving rise to the application of Article 2(6a) of the basic Regulation is established on a country-wide level. If the existence of significant distortions is established, then the provisions of Article 2(6a) of the basic Regulation apply to all exporting producers in the PRC and concern all costs relating to their factors of production. In any event, the same provision of the basic Regulation provides for the use of domestic costs which are positively established not to be affected by significant distortions. However, no domestic costs have been established to be undistorted based on accurate and appropriate evidence. In particular, the exporting producers did not submit accurate and appropriate evidence on undistorted prices and costs. Whether a producer has the capacity to generate electricity without sourcing such electricity from other sources does not positively establish that this factor of production is not affected by the distortions affecting the country as whole. This claim is therefore rejected.

3.2.1.2.   Significant distortions affecting the domestic prices and costs in the PRC

• (66) 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 the PRC. 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 emphasised 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.

• (67) 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 fundamental system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘The leadership of the Communist Party of China is the defining feature of socialism with Chinese characteristics’ ¹⁵. This illustrates the unquestioned and ever-growing control of the CCP over the economic system of the PRC. This leadership and control are 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.

• (68) 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.

• (69) 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 while this was a regular feature in previous planning cycles. 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 3.2.1.5 below) ¹⁷.

• (70) Second, on the level of allocation of financial resources, the financial system of the PRC 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 3.2.1.8 below). The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. These other parts of the financial sector are also 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 ¹⁸.

• (71) Third, on the level of regulatory environment, the interventions by the State into the economy take several 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 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 ¹⁹. 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 ²⁰.

• (72) 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 ²¹.

3.2.1.3.   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

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

• (74) The GOC and the CCP maintain structures that ensure their continued influence over enterprises, and in particular State-owned enterprises (‘SOEs’). The State (and in many aspects also the CCP) not only actively formulates and oversees the implementation of general economic policies by individual SOEs, but it also claims its rights to participate in operational decision-making in SOEs. This is typically done through rotation of management between government authorities and SOEs, through presence of party members on SOEs executive bodies and of party cells in companies (see also Section 3.2.1.4), as well as through shaping the corporate structure of the SOE sector ²². In exchange, SOEs enjoy a particular status within the Chinese economy, which entails a number of economic benefits, in particular shielding from competition and preferential access to relevant inputs, including finance ²³. The elements that point to the existence of government control over enterprises in the EMD sector is further developed in Section 3.2.1.4 below.

• (75) Specifically in the EMD sector, a substantial degree of ownership by the GOC exists. Moreover, an analysis of the main Chinese EMD exporting producers to the Union shows considerable state interference.

• (76) In the case of Xiangtan Electrochemical Technology Co., Ltd., is a holding company under the State-owned Assets Supervision and Administration Commission of Xiangtan City ²⁴. The two biggest shareholders are state-owned accounting for a total of 40 % state-owned shareholding. The chairman of the company is a CCP member and the company’s Party Committee Secretary ²⁵. The deputy general manager, secretary to the Board of Directors, is a CCP member and member of the company’s Party Committee ²⁶.

• (77) Guangxi Guiliu Chemical Co., Ltd., is a private company held by natural persons. However, the chairman and general manager is also a CCP member and CCP Committee Secretary ²⁷. And another member of the Board of Directors of the company is also a CCP member and Deputy secretary of the CCP Committee.

• (78) South Manganese Group Ltd is a 100 % held by South Manganese investment Group ²⁸. The Group used to be called CITIC Dameng Holdings ²⁹. Concerning the shareholders of South Manganese investment Group, 22 % is held by the City of Nanning and 4,9 % is held by CITIC Group ³⁰, a state-owned financial conglomerate. The Chairman of the board of South Manganese Group, is a Party Committee Secretary ³¹.

• (79) Guizhou Red Star Development Dalong Manganese Industry Co., Ltd., is held at 94 % by Guizhou Red Star Development. The actual controller of Guizhou Red Star development is Qingdao SASAC, so it is an SOE ³². The company’s controlling shareholder is Qingdao Hongxing Chemical Group Co., Ltd., and the actual controller is the State-owned Assets Supervision and Administration Commission of the Qingdao Municipal People’s Government. The chairman of the Group is also Party Committee Secretary ³³.

• (80) In addition, given that CCP interventions into operational decision-making have become the norm also in private companies ³⁴, 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 the PRC.

• (81) This is apparent also at the level of the China Petrochemical and Chemical Industry Federation (CPCIF) the sectoral industry association. According to Article 3 of CPCIF’s Articles of Association, the organisation ‘accepts the professional guidance, supervision and management by the entities in charge of registration and management, by entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ ³⁵.

• (82) Consequently, even privately owned producers in the sector of the product under investigation 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 3.2.1.5 below.

3.2.1.4.   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

• (83) Apart from exercising control over the economy by means of ownership of 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 ³⁶, CCP cells in enterprises, state owned and private alike, represent another important channel through which the State can interfere with business decisions. According to the PRC’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 ³⁷) 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 reinforced its claims to control business decisions in SOEs as a matter of political principle. The CCP is also reported to exercise pressure on private companies to put ‘patriotism’ first and to follow party discipline ³⁸. 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 ³⁹. These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of EMD and the suppliers of their inputs.

• (84) 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) ⁴⁰ 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 seeks to increase the role of the CCP in companies and other private sector entities ⁴¹.

• (85) The State’s presence and intervention in the financial markets (see also Section 3.2.1.8 below) as well as in the provision of raw materials and inputs further have an additional distorting effect on the market ⁴². Thus, the State presence in firms, including SOEs, in the chemical and other sectors (such as the financial and input sectors) allow the GOC to interfere with respect to prices and costs.

3.2.1.5.   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

• (86) 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 the PRC 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 ⁴³.

• (87) The EMD industry is regarded as a key industry by the GOC. This is confirmed in the ‘14th Five-Year Plan (“FYP”) raw material industry development plan’ ⁴⁴, as Section V.3 specifically mentioned electrolytic manganese: ‘Improve the level of comprehensive utilization of resources, support the highly efficient use of resources, continuously improve the management of key techniques and processes, improve primary resource utilization efficiency, and reduce resource and energy consumption over the whole process. Comprehensively promote the utilization of raw materials and industrial solid waste, focusing on […], electrolytic manganese slag […]. Encourage implementation across the country’.

• (88) EMD is also specifically mentioned in the 2019 version of the ‘Guiding Catalogue for industry structural adjustment’ ⁴⁵. In the catalogue, there are three categories of industries: ‘encouraged’, ‘restricted’ and ‘to be eliminated’. EMD is mentioned in the ‘restricted category’. At the same time, in the same Guiding Catalogue, a specific EMD production equipment called ‘reverberatory furnace’ used to reduce manganese dioxide, is mentioned in the ‘to be eliminated’ category.

• (89) Through these and other means, the GOC directs and controls virtually every aspect in the development and functioning of the sector. The GOC further guides the development of the sector in accordance with a broad range of policy tools and directives related to, inter alia: Section VIII.1 Implementation measures of the 14th FYP on developing the raw materials industry established the following: ‘All localities need to strengthen compliance with this Plan and integrate the Plan’s main contents and major projects into in their key local tasks. Petrochemical and chemical, steel and other key sectors shall formulate specific implementation opinions focussing on the objectives and tasks of this Plan and taking into account the actual conditions prevailing in the aforesaid sectors’.

• (90) In addition, the Guiding Opinion to promote the high-quality development of the petrochemical and chemical industries during 14th FYP ⁴⁶ quantifies further parameters of the sector’s planned development: ‘By 2025, the petrochemical and chemical industry will basically form a high-quality development pattern with strong indigenous innovation capabilities, a reasonable structural layout, a green, safe, low-carbon development. It will also greatly improve capabilities to ensure high-end product, significantly enhance core competitiveness, and take resolute steps towards high-level self-reliance and self-improvement’ ⁴⁷ and several targets for the chemical sector: ‘[t]he production concentration level of bulk chemicals production will be further increased, and the capacity utilization rate will reach more than 80 % […] about 70 chemical industry parks with competitive advantages will be established’ ⁴⁸. It also emphasises the need to: ‘strengthen the coordination of fiscal, financial, regional, investment, import and export, energy, ecological environment, price and other policies with industrial policies’ as well as to ‘[g]ive full play to the role of the national industry-finance joint cooperation platform, and promote bank-enterprise connections and industry-finance cooperation’ ⁴⁹.

• (91) There are also provincial policies supporting the manganese industry. Guizhou, Guangxi, Hunan and other places are the main production areas of electrolytic manganese dioxide in China, of which Guangxi accounts for nearly 80 % of the country’s total output ⁵⁰.

• (92) The Guangxi province published in 2017, the ‘Guangxi Metallurgical Industry Second Entrepreneurship Implementation Plan (2017-2025)’ ⁵¹. In Section I of the plan it is mentioned that ‘By 2025, the production capacity of ferroalloy in Guangxi will be controlled at about 6 million tons; the production capacity of electrolytic manganese metal will be controlled at about 600 000 tons; the production capacity of electrolytic manganese dioxide will be 270 000 tons; the production capacity of manganese sulfate will be about 100 000 tons;, Manganese-based lithium-ion power battery 400 million Ampere hours’. Section II.4.2 mentions that one of the objectives is to ‘Strengthen cooperation with iron and steel, stainless steel and foundry, and strive to improve the local ability to digest electrolytic manganese metal, electrolytic manganese dioxide and manganese sulfate and other products’.

• (93) Moreover, in 2018 Guangxi published a ‘Development plan for manganese industry clusters and industry chain’ ⁵² which was compiled and issued as a directional plan to guide the future development of the manganese industry in the region. In the same year it was published a ‘Policy Interpretation of the Guangxi Manganese Industry Cluster and Industrial Chain Development Plan’ ⁵³.

• (94) The development goals of the plan are ‘to optimise the structure and layout of the manganese industry, realise the coordinated development of mining, dressing, smelting, and deep processing, form industrial clusters for manganese ore mining and manganese ore processing, increase the protection of the ecological environment, pay attention to safe production and resource recycling, and vigorously promote energy conservation and emission reduction. Strive to control the production capacity of electrolytic manganese metal in our province at about 600 000 tons by 2020; the production capacity of electrolytic manganese dioxide at 270 000 tons, and the production capacity of manganese sulfate at about 100 000 tons’.

• (95) The implementation measures of the plan put forward six aspects including ‘strengthening organization and coordination, establishing and improving the manganese industry standard system, promoting the research and development, promotion and application of manganese products and processing technology, strengthening the construction of advantageous enterprises and talent teams, strengthening fiscal and tax financial support, and vigorously attracting investment’.

• (96) Moreover, Section III.4 of the above-mentioned plan, advocates for ‘Actively attract strong enterprises and build alliance of the strong ones, cultivate backbone enterprises, and encourage key enterprises in the region towards integration and reorganization. With leading enterprises such as CITIC Dameng Mining Co., Ltd., Guangxi Ferroalloy Co., Ltd., and Baise Mining Group Co., Ltd, the Manganese Qinzhou 1,5 million tons/year manganese-based new materials ecological cycle industrial park, Baikuang Group Jingxi manganese ore dressing and smelting-metal manganese deep processing-manganese slag comprehensive utilization base and other large-scale projects foster the integration of advantageous resources, fully combine the advantages of state-owned and private capital, so as to improve the operating efficiency of leading enterprises, optimise the industry and product structure, reduce competition in the same industry, and build leading enterprises into internationally renowned high-quality enterprises with strong market competitiveness’.

• (97) Furthermore, under Section IV Implementation measures, the plan refers to ‘Strengthen fiscal, tax and financial support. Strengthen government, bank, and enterprise information communication, effectively play the incentive and guiding role of financial funds, actively attract social capital, and support the development of the manganese industry. Give full play to the guiding role of industrial equity investment funds, coordinate, and support the development of the manganese industry. All administration departments shall use available funds to guide the development of manganese manufacturing innovation centers, application demonstration platforms, research and development institutions, and application demonstration projects. Further implement a series of policies that supported the innovation and development of enterprises in recent years, and effectively benefitted enterprises’.

• (98) In addition, the intervention of public authorities in the development of the EMD industry in the Guangxi Province, is further demonstrated by the ‘Recommendations published by the Secretary of the Party Leadership Group and Director of Baise Industry and Information Technology Bureau’ ⁵⁴. The recommendations mentioned that the country has listed manganese ore as a strategic mineral resource. Moreover, the recommendations mentioned that ‘In recent years, the party committee and government of the autonomous region have attached great importance to the optimization and upgrading of the industrial chain, vigorously implemented the second venture of the metallurgical industry, and the production capacity of manganese ore has continued to grow. In 2020, the output of electrolytic manganese dioxide in the region will be 260 500 tons, accounting for about 75 % of the national output; the output of electrolytic manganese metal will be 270 100 tons, accounting for about 18 % of the national output, ranking among the top in the country’.

• (99) Guangxi Province is not the only one with active promotion of the manganese industry. Guizou province introduced also measures to develop manganese and manganese processing industry. The Guizhou Province 14 FYP on economic and social development plan ⁵⁵ include among its objectives to cooperate with other provinces in the promotion of the manganese industry: ‘Strengthen exchanges and cooperation with Hunan, Hubei, Jiangxi and other provinces in the middle reaches of the Yangtze River in the fields of energy, tourism, equipment manufacturing, new materials, education, etc., and jointly build industrial bases such as new manganese deep processing’.

• (100) 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 of EMD. Such measures impede market forces from operating freely.

3.2.1.6.   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

• (101) 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 the PRC, 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 ⁵⁶.

• (102) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in the PRC ⁵⁷. All land is owned by the Chinese State (collectively owned rural land and State-owned urban land). 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 ⁵⁸. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land ⁵⁹.

• (103) Much like other sectors in the Chinese economy, the producers of EMD 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 appear to be fully applicable also in the EMD sector. The present investigation revealed nothing that would call those findings into question.

• (104) In light of the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the EMD sector, including with respect to the product concerned.

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