Commission Implementing Regulation (EU) 2023/2659 of 27 November 2023 imposing a provisional anti-dumping duty on imports of certain polyethylene terephthalate originating in People’s Republic of China

Image omitted; see official source	Official Journal of the European Union	EN Series L
---	---	---
	2023/2659	28.11.2023

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 30 March 2023, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of polyethylene terephthalate (‘PET’) originating in the People’s Republic of China (‘the country concerned’ or ‘the PRC’) 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 14 February 2023 by PET Europe (‘the complainant’). The complaint was made on behalf of the Union industry of PET in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting threat of injury that was sufficient to justify the initiation of the investigation.

1.2.   Registration of imports

• (3) On 31 May 2023, the complainant submitted a request for registration of imports of PET originating in the PRC pursuant to Article 14(5) of the basic Regulation. As can be seen in Table, 1, in the present case, when comparing the imports from the initiation of the investigation onwards (i.e. April until July 2023) to the investigation period (i.e. calendar year 2022) and the same months in the investigation period based on Eurostat statistics, no increase in imports took place and therefore the legal condition under Article 10(4)(d) had not been met. Thus, the Commission decided not to register imports of PET originating in the PRC.

Table 1

Imports from China in the IP and after initiation (tonnes)

	Investigation period	Investigation period monthly average	April – July 2023	April – July 2023 monthly average
Imports from the PRC to the Union	305 055	25 421	100 657	25 164
Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat

• (4) 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) are not met. Since no increase in imports took place, as set out above, the Commission decided not to register imports of PET originating in the PRC during the period of pre-disclosure.

1.3.   Interested parties

• (5) 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 Chinese authorities, known importers, and users about the initiation of the investigation and invited them to participate.

• (6) 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.

1.4.   Comments on initiation

• (7) Following initiation, comments were received from the Chinese association China Petroleum and Chemical Industry Federation (‘CPCIF’), the user association Union of European Soft Drinks Associations (‘UNESDA’), and an unrelated importer (Svepol). The complainant submitted responses to these comments.

• (8) Both associations claimed that the complainant failed to provide meaningful non-confidential summaries of specific information, especially regarding an ICIS report on the price evolution of paraxylene, one of the raw materials for the production of PET, and regarding the closures and idling of Union production sites. UNESDA additionally claimed that some annexes were missing.

• (9) The open version of the complaint set out the conclusions of the ICIS report on the price evolution of paraxylene in paragraph 141, explaining that the price of paraxylene increased significantly over the course of 2022, affecting the import price of PET from all import destinations. The summary of the relevant open annex to the complaint indicated that this annex contained information on the idling and closures of certain Union producers during the period considered and investigation period of this complaint. UNESDA did not indicate which specific annexes were missing. Therefore, the Commission considered that the complaint included a meaningful non-confidential summary of all the information contained in the complaint and the claim was rejected.

• (10) Furthermore, both associations argued that the complaint was inconsistent and incorrect with regard the number of PET producers in the Union, claiming in part of the complaint that there are 12 producers and elsewhere in the complaint that there are around 40 producers.

• (11) As explained by complainant, this inconsistency was caused by a typographical error. The complainant clarified that the Union industry is made up by 12 companies that produce virgin PET (‘vPET’) and that in addition to those, there are around 40 smaller Union producers of recycled PET (‘rPET’) only. The companies known by the complainant have been included in an open annex to the complaint.

• (12) UNESDA claimed that the economic indicators about the situation of the domestic industry are not presented in a uniform manner. Similar information refers to ‘complainants’; ‘EU producers’; ‘related parties’; ‘unrelated parties’ without explanation as to who is covered under each denomination making the information unintelligible. Estimated data is provided without explanation of the methodology used.

• (13) Since UNESDA did not specify in which exact parts of the complaint the references to the different players on the Union market were unintelligible and which data was provided without explanation, the Commission could not assess this claim and rejected it.

• (14) UNESDA argued that the information provided in the complaint to support the allegation of threat of injury did not include data about the rPET industry which when taken into account would change the conclusions on basic injury factors.

• (15) The complaint did include estimated data on the rPET industry in its threat of injury assessment. This information was based on detailed capacity figures per rPET producer which was obtained by market intelligence of PET Europe and the complaining producers, and which was extrapolated for the other injury indicators (such as production and sales). The complainant represented 11 producers, which mainly produced vPET. Pursuant to Article 5(2) of the basic Regulation, a complaint must contain information as is reasonably available to the complainant. The Commission therefore considered the estimated data on the rPET industry as sufficient evidence at the stage of the complaint.

• (16) Svepol claimed that the investigation was solely opened to eliminate competition and protecting the international PET investments of one of the complaining producers.

• (17) The Commission considered this claim to be mere speculation for which the importer did not provide any substantive evidence. Therefore, it rejected the claim.

1.5.   Sampling

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

1.5.1.   Sampling of Union producers

• (19) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of largest representative volume of sales and of production of the like product in the Union in the investigation period, which could reasonably be investigated within the time available. This sample consisted of three Union producers which accounted for 35 % of the estimated total production in the Union. The Commission invited interested parties to comment on the provisional sample.

• (20) One of the users, Refresco, submitted that the selection only covered a small portion of PET production. The user further requested that the sample be extended by two more producers (JBF and Plastiverd), which have modern installations that should be able to produce economically, which are closer to users in France and Spain, and would thus cover a larger part of the European production and geographically a larger customer base served by the producers.

• (21) By selecting the three largest Union producers and sellers in the investigation period, located in three different Member States, the Commission covered the largest representative volume of production and sales which could reasonably be investigated within the time available, in line with Article 17(1) of the basic Regulation. The companies selected account for 35 % of the estimated total production in the Union, hence a substantial and representative part of the Union production. The selection of producers located in three different Member States equally ensures wide geographical coverage. Moreover, Refresco did not provide any evidence that the companies selected did not have any modern facilities with the ability to make the product more economically nor did it explain how this would have been a relevant criterion in selecting a representative sample. Therefore, Refresco’s claim for revision of the sample was rejected.

• (22) The Commission concluded that the sample of Union producers was therefore representative of the Union industry.

1.5.2.   Sampling of importers

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

• (24) One unrelated importer provided the requested information and agreed to be included in the sample. Since only one company replied, the Commission decided that sampling was not necessary.

1.5.3.   Sampling of exporting producers the PRC

• (25) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked all exporting producers in the PRC 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.

• (26) Nine exporting producers in the country concerned 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 three company groups 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.

• (27) One of the sampled exporting producers, Hainan Yisheng Petrochemical Co Ltd, withdrew its cooperation. Therefore, the Commission decided to replace this company in the sample with China Resources Chemical Innovative Materials Group, whose export quantities of the product under investigation to the Union as reported in the sampling questionnaire were the largest among the rest of the cooperating exporting producers. The final sample of exporting producers represented around 65 % of the exports reported by cooperating exporting producers from the PRC to the Union during the investigation period. 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 final sample. No comments were received.

1.6.   Individual examination

• (28) Five exporting producers in the PRC requested individual examination under Article 17(3) of the basic Regulation. However, none of them provided a reply to the questionnaire.

1.7.   Questionnaire replies and verification visits

• (29) 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’).

• (30) The Commission sent questionnaires to the sampled Union producers, the sampled exporting producers, the known importers and users. The same questionnaires were made available online ³ on the day of initiation.

• (31) 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:

• (a) Union producers:

• — Equipolymers Gmbh, Germany

• — Indorama Ventures Europe BV, the Netherlands

• — Neo Group UAB, Lithuania

• (b) Importers:

• — Svepol JSC, Bulgaria

• (c) Exporting producers in the PRC:

Wankai New Materials Group (‘Wankai Group’):

• — Wankai New Materials Co., Ltd. (‘Wankai’)

• — Chongqing Wankai New Materials Technology Co. Ltd. (‘Chongqing Wankai’)

Sanfame Group:

• — Jiangsu Hailun Petrochemical Co., Ltd (‘Hailun’)

• — Jiangsu Xingye Plastics Co., Ltd. (‘Xingye’)

• — Jiangyin Xingu New Material Co., Ltd. (‘Xingyu’)

• — Jiangyin Xingtai New Material Co., Ltd. (‘Xingtai’)

China Resources Chemical Innovative Materials Group (‘CRCIM Group’):

• — China Resources Chemical Innovative Materials CO., LTD. (‘CRCIM’)

• — Zhuhai China Resources Chemical Innovative Materials Co., Ltd. (‘Zhuhai CRCIM’)

1.8.   Investigation period and period considered

• (32) The investigation of dumping and injury covered the period from 1 January 2022 to 31 December 2022 (‘the investigation period’ or ‘the IP’). 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

• (33) The product under investigation is polyethylene terephthalate (‘PET’), having a viscosity of 78 ml/g or higher, according to ISO Standard 1628-5, currently falling under CN code 3907 61 00 (‘the product under investigation’).

• (34) PET is a chemical product normally used in the plastics industry to produce bottles and sheets. It belongs to the family of thermoplastics, i.e. the family of plastics that can be melted when heated and hardened when cooled. These characteristics are reversible. That is, it can be reheated, reshaped and frozen repeatedly, making it fully recyclable.

2.2.   Product concerned

• (35) The product concerned is PET, originating in the People’s Republic of China (‘the product concerned’).

2.3.   Like product

• (36) The investigation showed that the following products have the same basic physical and chemical 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 PRC; and

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

• (37) 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

• (38) A claim concerning the product scope of the investigation was received from Jiangsu Ceville New Materials Technology Co., Ltd. (‘Ceville’), an exporting producer which recycles post-consumed PET for the production of PET pellets for direct food contact. In its submission, Ceville requested the exclusion of rPET from the product under investigation arguing that the physical and chemical characteristics, usage, raw materials, production process, and producers of rPET are vastly different from vPET.

• (39) First, it is noted that, depending on the quality of the recycling process, rPET and vPET can have exactly the same physical, technical and chemical characteristics and are interchangeable for the same end uses. Second, PET (be it vPET or rPET) is ultimately the same compound molecule, and the production process is immaterial as both types of PET have the same physical and chemical characteristics. Third, while the producers of rPET might be different from vPET producers and while imports of rPET from the PRC might have been limited, the Commission found that a number of cooperating Chinese exporting producers did have both vPET and rPET production capacity and were able to and in some cases did export rPET to the Union during the IP. Fourth, vPET and rPET are substitutable and compete with each other. Furthermore, any change in the price of vPET affects the price of rPET and vice versa. Ceville’s claim was therefore rejected.

3. DUMPING

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

• (40) 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 the PRC, 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.

• (41) 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 the PRC to provide information regarding the inputs used for producing PET. Ten exporting producers submitted the relevant information.

• (42) 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 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. 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 comments were received.

• (43) In the Notice of Initiation, the Commission also specified that, in view of the evidence available, it may need to select an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks.

• (44) On 12 May 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.

• (45) In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of PET. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified two possible representative countries, namely Türkiye and Malaysia. The Commission received comments on the First Note from the Chinese producers’ association CPCIF, the unrelated importer Svepol, the exporting producer Wankai Group and the complainant.

• (46) On 27 July 2023, the Commission addressed the comments received from interested parties on the First Note by a second note (‘the Second Note’) and informed interested parties on the relevant sources it intended to use for the determination of the normal value, with Malaysia as the representative country. It also informed interested parties that it would establish selling, general and administrative costs (‘SG&A’) and profits based on available information for the company MPI Polyester Industries Sdn. Bhd. (‘MPI’), a producer in the representative country.

• (47) The Commission received comments on the Second Note from one unrelated importer (Svepol JSC), a Chinese producers’ association (CPCIF) and two sampled exporting producers (Wankai Group and Sanfame Group).

• (48) After having analysed the comments and information received, the Commission concluded that Malaysia 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 3.2.2 below.

3.2.   Normal value

• (49) 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’.

• (50) 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’).

• (51) 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

• (52) 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’.

• (53) 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.

• (54) 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’.

• (55) Pursuant to this provision, the Commission issued a country report concerning the PRC (‘the Report’) ⁴, 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). The Report was added to the investigation file at the initiation stage and interested parties were invited to rebut, comment, or supplement the evidence contained in the investigation file at the time of initiation.

• (56) The complaint provided additional evidence on significant distortions in the PET sector within the meaning of Article 2(6a)(b), complementing the Report. More specifically, the complaint indicated that the prevalence of State-Owned Enterprises (‘SOEs’) in the PRC and the influence and control exerted by the Chinese Communist Party (‘CCP’) over private enterprises means prices of the product under investigation are not determined by market forces. The complaint also claimed that State interventionist policies artificially decrease the domestic prices of raw materials in the PRC, resulting in lower costs of production of finished products such as PET.

• (57) The complaint also mentioned that the dominant state-ownership and interventionist government policies in the private sector of the CCP resulted in the non-market-based allocation of resources and the absence of fair competition. According to the complainant, the legal environment in the PRC is conducive of distortive practices such as preferential access to finance, land, energy, and market access restrictions exist, leading to overcapacities in encouraged industries. Furthermore, the State and the CCP control the conditions of competition in the PRC and encourage resources allocations in strategic sectors. In addition, the complaint alleged that the CCP exercises direct influence over the decision making of privately and state-owned enterprises and that all their investment is subject to approval by the National Development and Reform Commission (‘NDRC’).

• (58) In particular, the complaint referred to distortions concerning:

• (a) Petroleum and other raw materials

The complaint stated that prices of energy are heavily distorted and do not result from market forces. Notably, it was alleged that the GOC used to set the retail price for refined petroleum at a level that does not keep pace with international prices and that since 2013, prices are adjusted by the NRDC when international prices fluctuate by more than RMB 50 per tonne for a period of 10 working days. The complaint also affirmed that water pricing in the PRC is too low and can be seen as a distortion. Finally, the complainant considered that the State controls the supply, distribution and ownership of raw material notably through the use of stockpiling, the steering of investment activities and through SOEs representing 52 % of the industry of raw chemical materials in the PRC.

• (b) Energy costs

The complaint referred to the Report and recalled the significant involvement of the State in the production of electricity and the determination of electricity prices. Notably, reference was made to the fact that energy prices are controlled by the State and that cheaper energy is provided to a subset of industries.

• (c) Capital

The complaint referred back to the Report to underline that the corporate credit system in the PRC is affected by significant systemic distortions. The complaint also referred to a statement made by the U.S. Department of Commerce in a Countervailing Duty Investigation according to which the Chinese financial system is distorted.

• (d) Labour costs

The complaint recalled the Commission’s observation in the Report to show that wages do not result from normal market forces or negotiations between companies and the work force. It also mentioned a previous trade defence investigation confirming the existence of distortions in the labour market in the PRC. The complainant also underlined the impact on labour costs of the hukou system, the lack of explicit right to strike and the lack of independent collective bargaining.

• (e) Land costs

The complaint explained that some official documents show favoured land allocation to SOEs and referred to the Report and previous trade defence investigations to argue that the price paid for land-use rights is below market value. In addition, reference was made to the fact that other authorities investigating the situation in the PRC also found distortions with regard to preferential supply of land.

• (f) Other distortive practices in the PET market

The complaint underlined that the main raw materials used in the production of PET are petrochemicals, which is a priority sector according to the 13th and 14th Five-Year-Plans (‘FYP’). It also claimed that PET qualifies as a high-performance resin and polyethylene which are mentioned in Article VIII of the 14th FYP. In addition, the complaint stated that the largest producer of PTA is an SOE. As a result of the Chinese policies, production capacity of PET and PTA increased between 2020 and 2022 and there is significant overcapacity for PET, PTA, and in the Chinese chemical industry as a whole.

• (59) 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. One exporting producer group claimed in its questionnaire reply that the companies of the group made multiple purchases of materials from foreign suppliers, so these were made at undistorted values. However, this argument does not call in question the existence of significant distortions which concern not only raw materials, but the production process of PET as a whole. In addition, the exporting producer in question also bought raw materials from the domestic market and did not provide any further details to substantiate its claim.

• (60) 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 Article 2(6a) point (b) 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 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.

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

• (61) 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’ ⁵. 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 ⁶.

• (62) 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.’ ⁷ This illustrates the unquestioned and ever growing control of the CCP over the economic system of the PRC. 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.

• (63) 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 ⁸. 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.

• (64) 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 3.2.1.5 below) ⁹.

• (65) Second, on the level of allocation of financial resources, the financial system of the PRC is dominated by the State-owned commercial and policy 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) ¹⁰. 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 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 ¹¹.

• (66) 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 ¹². 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 ¹³.

• (67) 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 ¹⁴.

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

• (68) 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. In the sector of the product under investigation, the degree of state ownership remains significant, with a number of PET producers being fully or partially state-owned, such as: Zhuhai China Resources Chemical Innovative MATERIALS Co., Ltd (100 % owned by China Resources Group, a Central SOE ¹⁵) or Sinopec a producer of PTA (ultimately 100 % owned by SASAC ¹⁶). Given that CCP interventions into operational decision making have become the norm also in private companies ¹⁷, 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.

• (69) Similar level of control and policy supervision can be observed at the level of the relevant industry associations, such as the China Petrochemical and Chemical Industry Federation (‘CPCIF’) which is 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’ ¹⁸. Also the China Chemical Enterprise Management Association (‘CCEMA’) which characterizes itself as organisation comprising ‘more than 200 member units of the association are backbone enterprises in the chemical industry’ ¹⁹ states in Article 2 of its Articles of Association that it ‘abides by the Constitution, laws, regulations and national policies, practices the core values of socialism, promotes the spirit of patriotism, abides by social morality, and consciously strengthens the construction of integrity and self-discipline’. Moreover, according to Article 3 of the Articles of Association, CCEMA ‘establishes an organization of the Communist Party of China, carries out party activities, and provides necessary conditions for the activities of the party organization’ and it – just like in the case of CPCIF – ‘accepts the business 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’ ²⁰.

• (70) 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 the 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

• (71) Apart from exercising control over the economy by means of SOEs and other tools, the GOC is in a 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 ²¹, 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 ²²) 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 ²³, including exercising pressure on private companies to put ‘patriotism’ first and to follow party discipline ²⁴. 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 ²⁵. These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of the product under investigation and the suppliers of their inputs.

• (72) 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’) ²⁶ 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 ²⁷.

• (73) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions are commonplace in the PET sector. Chongqing Wankai New Materials’ general manager is also the CCP branch secretary. Jiangsu Sanfame Ltd’s deputy chairman of the board of directors and general manager is a CCP member. The company also signed an agreement with the CCP committee of the city of Zhouzhuang (Jiangsu). Chongqing Wankai New Materials is also participating in a joint CCP committee together with other companies along the industry chain and district authorities, this shows how public authorities can shape the whole industry chain via CCP organisations ²⁸.

• (74) The CCP’s interference into the business decisions is apparent also at the group level, as transpires from the available corporate filings. The 2022 annual report of the Sinopec Group, a PTA producer, points out that ‘[t]he company continuously improves the quality of party building work, boosting the spirit of the employees, strengthening discipline inspection and supervision work, helping the board of directors to effectively implement various decisions and arrangements, and promoting the high-quality development of the company’ ²⁹, while Sinopec’s website describes the role of the Party within the Group as follows: ‘[s]trengthen the leadership of the Party in the process of improving corporate governance, […] promote the Party organization to decide upon the list of major issues regarding Party building and other aspects, and allow the Party organization to pre-research and discuss the list of major business and management issues simultaneously covered by the internal control management, to be embedded in the […] list of decision-making matters, to develop a headquarter decision-making and information system fostering the establishment of a list of decision competences, the inclusion of this list in the decision making process and the informatization of this process. Take the pre-research and discussion of major business management issues as an important aspect of the Party group’s full performance of leadership duties […]’ ³⁰.

• (75) The State’s presence and intervention in the financial markets (see also 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 ³¹. Thus, the State presence in firms, in the chemical and petrochemical sector and other industries (such as the financial and input industries) allows 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

• (76) 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 ³².

• (77) The Chinese authorities have enacted a number of policies guiding the functioning of the sector of the product under investigation. To start with, PET is included in the advanced petrochemical materials and advanced light industry materials covered by the Made in China 2025 Roadmap ³³. Furthermore, the PET industry is listed amongst the industries to be encouraged as under the light industry and textile industry categories in the 2019 Guiding Catalogue for industry structural adjustment. This signals the authorities’ intentions to create a regulatory environment conducive to the sector’s development, which also potentially paves way to the industry’s access to finance ³⁴. The 2019 Guiding Catalogue for industry structural adjustment also lists some specific conventional PET production units (continuous polymerization production with a single line capacity of less than 200 000 tonnes/year) as an industry segment to be restricted meaning that the GOC seeks to strictly control its development ³⁵. At the same time, PET (conventional polyester batch polymerization production technology and equipment) is also listed amongst the industries to be eliminated which means the GOC will support its dismantling to ensure the upgrading of the industry and further demonstrates the involvement of the GOC in the sector. Moreover, the 14^th FYP on raw materials ³⁶ directly addresses the petrochemical sector by stating that ‘[i]n sectors including petrochemicals and chemicals, steel, non-ferrous metals, and building materials, we shall foster a number of industry chain pioneer enterprises exerting leadership on the ecosystem and characterized by core competitiveness […]. The guiding role of leading enterprises in chemical and building materials sectors shall be leveraged to promote corporate reform and restructuring,’.

• (78) The 14^th FYP also mentions that ‘[p]etrochemical and chemical, steel and other key sectors shall formulate specific implementation opinions based on the objectives and tasks of this Plan and the actual conditions in the aforesaid sectors’. In addition, the Guiding Opinion on promoting the high-quality development of the petrochemical and chemical industry ³⁷ provides for the enhancement of the supply capacity of high-end polymers and specialty chemicals, as well as for the acceleration of the exit of inefficient and backward production capacity.

• (79) On the provincial level, the Shandong 14^th FYP on the development of chemical industry ³⁸ calls on the local authorities to ‘[i]ncrease the technological transformation of existing enterprises, improve energy and resource utilization efficiency, and enhance the core competitiveness of enterprises. Establish a mechanism for enterprises to withdraw from parks, resolutely eliminate obsolete production capacity, strictly control restricted production capacity, and implement differentiated policies and measures for the allocation of resource factors such as land, electricity, and water to force enterprises to transform and develop’. It also calls to ‘[i]ncrease financial support. Strengthen fiscal policy incentives, coordinate and involve special funds, support chemical companies in accelerating technological transformation, intelligent transformation, industrial transfers, relocation into parks, elimination of obsolete equipment, etc., and implement tax exemptions applicable to imports of major technical equipment, VAT refunds, research and development policies such as additional deduction of expenses and insurance compensation for the first set of technical equipment. Actively guide various financial institutions and social capital to invest in the chemical industry, leverage the advantages of policy finance, development finance and commercial finance, and increase financial support for key areas of chemical technology’.

• (80) Similarly, the Jiangsu 14^th FYP on the high-end development of chemical industry ³⁹ promotes the intensive processing of basic raw materials including the downstream development of PTA.

• (81) Another example of public policies influencing free market forces is the Fujian Province Development and Reform Commission’s implementation Opinion on promoting high-quality development of petrochemical and chemical industries and accelerating the creation of a trillion-dollar pillar industry ⁴⁰ which provides that ‘[b]y 2025, the province’s designated petrochemical and chemical enterprises shall achieve operating income exceeding RMB 1 trillion, accelerate the creation of six characteristic industrial clusters, and strive to have 4 chemical industry parks (concentrated areas) with operating income exceeding RMB 100 billion, and 8 chemical industry parks (concentrated areas) with operating income exceeding RMB 10 billion’ and that ‘[b]y 2025, the output value contribution rate of chemical industry parks (concentration areas) shall increase to more than 70 %. The petrochemical industry chain shall continue to extend and improve, developing in the direction of new chemical materials, high-end petrochemical products, and fine chemicals, and the proportion of high value-added products shall further increase’. It also provides that authorities shall ‘[v]igorously cultivate a group of leading enterprises with core competitiveness. Encourage leading petrochemical and chemical companies to further concentrate, improve resource allocation efficiency through mergers and reorganizations, and further extend the industrial chain. Support eligible enterprises to apply for and focus on being included in the provincial key listed reserve enterprises and provide phased listing rewards in accordance with the provincial finance incentive policy for provincial key listed reserve enterprises; if the annual operating income of the enterprise exceeds RMB 10 billion for the first time, the provincial finance administration shall grant a one-time reward of RMB 3 million. Support eligible enterprises to issue various bond financing instruments such as medium-term notes, short-term financing bonds, enterprise bonds and corporate bonds. Support the listing, financing and refinancing of eligible high-quality key enterprises’.

• (82) Through these and other means, the GOC therefore directs and controls virtually every aspect in the development and functioning of the sector of the product under investigation, as well as the upstream inputs.

• (83) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives concerning the chemical industry and the PET industry. 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

• (84) 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 like 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 ⁴¹.

• (85) 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 ⁴². 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 ⁴³. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land ⁴⁴.

• (86) Much like other sectors in the Chinese economy, the producers of the product under investigation 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, based on the evidence available, appear to be fully applicable also in the chemical industry sector. The present investigation revealed nothing that would call those findings into question.

• (87) Considering the above, the Commission concluded that there was discriminatory application or inadequate enforcement of bankruptcy and property laws in the sector of the product under investigation.

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

• (88) A system of market-based wages cannot fully develop in the PRC as workers and employers are impeded in their rights to collective organisation. The PRC has not ratified a number of essential conventions of the International Labour Organisation, in particular those on freedom of association and on collective bargaining ⁴⁵. 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 ⁴⁶. 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 ⁴⁷. Those findings lead to the distortion of wage costs in the PRC.

• (89) No evidence was submitted to the effect that the chemical and PET industry would not be subject to the Chinese labour law system described. The sector is thus affected by the distortions of wage costs both directly (when making the product concerned 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 the PRC).

3.2.1.8.   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

• (90) Access to capital for corporate actors in the PRC is subject to various distortions. Firstly, the Chinese financial system is characterised by the strong position of State-owned banks ⁴⁸, 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) ⁴⁹ 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 ⁵⁰. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁵¹.

• (91) 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 ⁵², suggests that these provisions play only a secondary role in the application of the various legal instruments.

• (92) 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 ⁵³. 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’ ⁵⁴.

• (93) 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 ⁵⁵.

• (94) This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁵⁶. 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.

• (95) 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.

• (96) Thirdly, although nominal interest rate liberalisation 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 ⁵⁷. Official media in the PRC have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ ⁵⁸. Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

• (97) Overall credit growth in the PRC 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.

• (98) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in the PRC is affected by significant distortions resulting from the continuing pervasive role of the state in the capital markets.

• (99) No evidence was submitted in the present investigation demonstrating that the sector of the product under investigation is not affected by the government intervention in the financial system in the sense of Article 2(6a)(b), sixth indent of the basic Regulation. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

3.2.1.9.   Systemic nature of the distortions described

• (100) 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 3.2.1.2 to 3.2.1.8 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 3.1 and 3.2 and in Part II of the Report.

• (101) The Commission recalls that, in order to produce the product under investigation, certain inputs are needed. When the producers of PET 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.

• (102) As a consequence, not only the domestic sales prices of the product under investigation 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 the PRC. This means, for instance, that an input that in itself was produced in the PRC 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.

3.2.1.10.   Conclusion

• (103) The analysis set out in Sections 3.2.1.1 to 3.2.1.9, which includes an examination of all the available evidence relating to the PRC’s intervention in its economy in general as well as in the sector of 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.

• (104) 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 Malaysia, an appropriate representative country, in accordance with Article 2(6a)(a) of the basic Regulation, as described in the following section.

3.2.2.   Representative country

3.2.2.1.   General remarks

• (105) 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 the PRC. For this purpose, the Commission used countries with a gross national income per capita similar to the PRC on the basis of the database of the World Bank ⁵⁹;