Commission Implementing Regulation (EU) 2024/1064 of 9 April 2024 imposing a provisional anti-dumping duty on imports of certain alkyl phosphate esters originating in the People’s Republic of China

Image omitted; see official source	Official Journal of the European Union	EN L series
---	---	---
	2024/1064	10.4.2024

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 11 August 2023, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of certain alkyl phosphate esters originating in the People’s Republic of China (‘China’) 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 30 June 2023 by ICL Europe U.A., Lanxess Deutschland GmbH and PCC Rokita S.A. (‘the complainants’). The complaint was made by the Union industry of certain alkyl phosphate esters (‘APE’) 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.

• (3) On 21 December 2023, the Commission initiated a separate anti-subsidy investigation regarding imports of APE originating in China by publishing a Notice of Initiation in the Official Journal of the European Union ³.

1.2.   Registration of imports

• (4) Under Article 14(5a) of the basic Regulation, the Commission shall 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.

• (5) The Commission did not register imports during the period of pre-disclosure as there was no increase in import quantities after the initiation of the investigation and therefore the conditions in Article 10(4) were not met.

• (6) The Union industry requested the registration of imports under Article 14(5) in the complaint and its submission of 11 December 2023. The request was denied on the basis that import quantities decreased following the initiation of the investigation.

1.3.   Interested parties

• (7) In the Notice of Initiation, the Commission invited interested parties to contact it to participate in the investigation. In addition, the Commission specifically informed the complainants, the known exporting producers and the Chinese authorities, known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

• (8) 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.   Sampling

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

1.4.1.   Sampling of Union producers

• (10) In the Notice of Initiation, the Commission provided for the possibility to select a sample of Union producers. Given that the three producers acting as complainants were understood to represent all the Union industry, the Commission provisionally decided that a sample was not necessary.

• (11) The Commission invited interested parties to comment on the provisional decision to investigate all three known Union producers. No comments were received and the decision to investigate all three known Union producers was confirmed.

1.4.2.   Sampling of importers

• (12) 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.

• (13) Two unrelated importers provided the requested information and agreed to be included in the sample. In view of the low number of replies, the Commission decided that sampling was not necessary and asked the cooperating importers to submit replies to the questionnaire.

1.4.3.   Sampling of exporting producers

• (14) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all 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.

• (15) 14 exporting producers in China provided the requested information and agreed to be included in the sample.

• (16) In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three exporting producers based on the largest representative volume of exports to the Union which could reasonably be investigated within the time available.

• (17) In accordance with Article 17(2) of the basic Regulation, all known exporting producers and the Chinese authorities were consulted on the selection of the sample.

• (18) One exporting producer not sampled, Zhejiang Wansheng Co., Ltd, responded to the consultation and requested to be included in the sample, extending the sample to four exporting producers.

• (19) The request was not accepted, as this would be unduly burdensome on the grounds that Zhejiang Wansheng was a large group of companies, and adding Zhejiang Wansheng to the sample would effectively double the number of companies to be inspected.

• (20) The initial sample was therefore confirmed and the reasons for not changing the sample placed on the open file ⁴.

1.5.   Individual examination

• (21) Two Chinese exporting producers, Zhejiang Wansheng Co., Ltd (which also requested to be sampled) and Futong Chemical Co., Ltd. requested individual examination under Article 17(3) of the basic Regulation.

• (22) The examination of these requests during the provisional stage of the investigation would have been unduly burdensome given the need to investigate the three already sampled exporting producers.

• (23) A final decision on accepting both, or neither, of these requests for an individual examination will be made at the definitive stage of the investigation.

1.6.   Questionnaire replies and verification visits

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

• (25) The complainants also provided in the complaint sufficient evidence of raw material distortions in China regarding the product concerned. Therefore, as announced in the Notice of Initiation, the investigation covered those raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation. For this reason, the Commission sent an additional questionnaire to the GOC.

• (26) The Commission sent questionnaires to the Union producers, importers and exporting producers. The same questionnaires were made available online ⁵ on the day of initiation.

• (27) Questionnaire replies were received from three Union producers, one importer, eight users, and five Chinese exporting producers. No questionnaire replies were received from the GOC.

• (28) 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

• — ICL Europe U.A., Amsterdam, The Netherlands

• — Lanxess Deutschland GmbH, Cologne, Germany

• — PCC Rokita S.A., Brzeg Dolny, Poland

Importers

• — Quimidroga S.A., Barcelona, Spain

Exporting producers in China

• — Anhui RunYue Technology Co., Ltd, Huaibei, China (‘Anhui RunYue’)

• — Shandong Yarong Chemical Co., Ltd, Taian City, Shandong, China (‘Shandong Yarong’)

• — Nantong Jiangshan Agrochemical & Chemicals Limited Liability Co., Nantong, China (‘Nantong Jiangshan’).

1.7.   Investigation period and period considered

• (29) The investigation of dumping and injury covered the period from 1 July 2022 to 30 June 2023 (‘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

• (30) The product under investigation is certain alkyl phosphate esters (‘APE’), currently classified under CN code ex 2919 90 00 (TARIC codes 2919900050 and 2919900065) and CN code ex 3824 99 92 (TARIC code 3824999238) (‘the product under investigation’).

• (31) APE is defined as certain alkyl phosphate esters based exclusively on side chains with a length of two or three carbon atoms (also includes chlorinated alkyl chains) and with a phosphorus content of at least 9 % (per weight) and a viscosity between 1 and 100 mPa·s (at 20-25 °C) falling under Chemical Abstracts Service (‘CAS’) numbers 13674-84-5, 1244733-77-4 and 78-40-0.

• (32) APE covers two product types, tris (2-chloro-1-methylethyl) phosphate (‘TCPP’) and triethyl phosphate (‘TEP’). They are commonly used as flame retardants in rigid and flexible foams.

2.2.   Product concerned

• (33) The product concerned is the product under investigation originating in the People’s Republic of China.

2.3.   Like product

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

• — the product concerned when exported to the Union,

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

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

• (35) 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

• (36) The China Petrochemical and Chemical Industry Federation (‘CPCIF’), two importers of the product concerned, Prochema and Quimidroga, and one user, Kingspan, submitted claims regarding the product scope, requesting the exclusion of TEP from the product scope.

• (37) In its comments to initiation CPCIF claimed that TCPP and TEP have different uses and are not interchangeable. It pointed out the differences in their respective production processes, in their distribution channels and in their technical and chemical characteristics.

• (38) It claimed that TCPP is predominantly used as flame retardant in rigid and flexible polyurethane foam, while TEP is used as plasticiser in polymers, rubbers, and plastics and only in a secondary limited manner as a flame retardant.

• (39) According to CPCIF, TEP is 60 % more expensive to produce than TCPP and therefore substituting TCPP with TEP would not be economically viable. CPCIF also brought forward that TCPP and TEP are classified under different chapters in the combined nomenclature.

• (40) Two importers of the product concerned, Prochema and Quimidroga, and one user, Kingspan, submitted similar comments.

• (41) They brought forward the technical and chemical characteristics and contested the view that TCPP and TEP would be interchangeable due to differences in their technical characteristics and flame-retardant behaviour.

• (42) Kingspan also argued that China is the only producer of TEP worldwide and where substitution between TEP and TCPP is technically possible, it would still need a considerable amount of reformulation, recertification and significant capital expenditure.

• (43) Kingspan and Quimidroga further claimed that the inclusion of TEP in the product scope is arbitrary, since there are a number of other products that have equally similar physical, chemical and technical characteristics as TEP and TCPP, such as cresyl diphenyl phosphate (‘CDP’), tris(2-ethylhexyl) phosphate (‘TEHP’) and Tributyl phosphate.

• (44) The Commission analysed these claims. First, even if the production process, the molecule structure and certain chemical characteristics of TCPP and TEP differ, they both share similar essential physical, technical and chemical characteristics defined in recitals 31 to 32 above.

• (45) The other products named by Kingspan and Quimidroga (CDP, TEHP and Tributyl phosphate) do not fall under the product scope of alkyl phosphate esters as defined in the complaint and in recitals 31 to 32. In fact, these products are not alkyl phosphate esters and do not have the same effectiveness as flame retardants. Also, no evidence was brought forward that CDP, TEHP and Tributyl phosphate could effectively be used in the same applications as a substitute of TCPP or TEP.

• (46) Second, it was not contested by any of the parties that TCPP and TEP are substitutable for rigid foam applications which represent around two thirds of the total Union consumption of TCPP and TEP. TEP has a higher phosphorus content than TCPP and is therefore of a higher flame-retardant nature. According to a submission by Kingspan a smaller amount of TEP is needed to replace TCPP (about 1,8 kg of TCPP is needed to replace 1 kg of TEP), which would partially compensate for the higher production cost of TEP.

• (47) Even if replacement of TCPP by TEP in new product types or compositions would need reformulation and recertification process, there was no evidence brought forward that this process would need significant or extraordinary capital expenditure. Furthermore, such recertifications costs are typically one-off costs and not recurrent ones.

• (48) Third, the differences in production process, distribution channels and classification in the combined nomenclature do not negate the fact that both TCPP and TEP fall within the product definition as set out in recitals 30 to 32 and share similar essential physical and technical characteristics and the same main uses.

• (49) On the basis of the above, the Commission concluded at this stage that TEP should not be excluded from the product scope.

3. DUMPING

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

• (50) 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 regarding China, the Commission considered it appropriate to initiate the investigation for the Chinese exporting producers having regard to Article 2(6a) of the basic Regulation.

• (51) Consequently, to collect the necessary data for the possible 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 APE. 10 exporting producers submitted the relevant information.

• (52) 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 the Notice of Initiation the Commission also 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.

• (53) No questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation from the GOC was received within the deadline.

• (54) Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in China.

• (55) 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.

• (56) On 25 October 2023 the Commission informed interested parties on the relevant sources it intended to use for the determination of the normal value by publishing a Note (‘the First Note’). 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 APE. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified Brazil and Türkiye as possible appropriate representative countries.

• (57) The Commission received comments on the First Note from two Chinese exporting producers (Shandong Yarong and Anhui RunYue) and the Chinese association CPCIF.

• (58) On 19 January 2024, the Commission informed interested parties by a second note (‘the Second Note’) about the relevant sources it intended to use for the determination of the normal value, and about the selection at this stage of the investigation of Brazil as the representative country.

• (59) It also informed interested parties that it would establish selling, general and administrative costs (‘SG&A’) and profits based on the 2022 financial data available for the Brazilian company Elekeiroz, a producer of a product in the same general category as the product under investigation.

• (60) The Commission received comments on the Second Note from Shandong Yarong and Anhui RunYue and the Chinese association CPCIF. All comments received are addressed in detail in Section 3.2.

• (61) The Commission therefore concluded that normal value should be constructed using the method set out in Article 2(6a) of the basic Regulation, and that costs and prices in China should be rejected.

3.2.   Normal value

• (62) 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’.

• (63) However, according to Article 2(6a)(a) of the basic Regulation, if ‘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 [SG&A] and for profits’.

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

3.2.1.   Existence of significant distortions

• (65) Article 2(6a)(b) of the basic Regulation states 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.’

• (66) As the list in Article 2(6a)(b) of the basic Regulation is non-cumulative, not all the elements need to be given 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.

• (67) However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) of the basic Regulation must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provides the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

• (68) 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’.

• (69) Pursuant to this provision, the Commission issued a country report concerning China (‘the Report’ ⁶) containing evidence of the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as steel and chemicals). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report was placed in the investigation file at the initiation stage. The complaint also contained some relevant evidence complementing the Report.

• (70) More specifically, the complaint indicated that domestic prices and costs of certain alkyl phosphate esters in China cannot be accepted since they are at odds with the notion of free play of market forces but rather result from the complex and all-encompassing state intervention.

• (71) The complaint pointed out that distortions in the Chinese industry of certain alkyl phosphate esters stem in the first place from the very organisation of China which is based on the concept of the socialist market economy.

• (72) The socialist market economy is developed under the leadership of the Chinese Communist Party (‘CCP’ or ‘the Party’) which directs all aspects of the state, including the economy and the judicial system. The CCP’s power to intervene applies at all levels, including business decisions of individual enterprises, both State-Owned Enterprises (‘SOE’) and privately owned companies.

• (73) Consequently, although the Chinese economy consists to a large extent of non-state actors, the CCP and the state maintain a predominant role in the economic governance of the country. The main channels of the GOC intervention in the Chinese economy consist of the administrative, financial, and regulatory control of the state.

• (74) As to the allocation of financial resources in China, five large commercial banks, that are majority state-owned, operate large branch networks on a nationwide basis and account for nearly half of total bank assets. In addition to state ownership of these banks, the CCP appoints executives in state-owned banks and other state-owned financial institutions.

• (75) As to the regulatory channel, the state maintains a significant control and influence, in particular within the areas of public procurement and investment, which are used to pursue public and industrial policy objectives rather than economic efficiency. Much like other sectors, the sector of certain alkyl phosphate esters is subject to state intervention and the resulting distortions.

• (76) As a result of manifold subsidies and state interventions, the Chinese market for certain alkyl phosphate esters is disconnected from the normal market behaviour and as such, the domestic prices and costs of the Chinese industry of certain alkyl phosphate esters cannot be used.

• (77) Moreover, the complaint pointed out the following elements below resulting in significant distortions.

• (78) The APE sector is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of state authorities. As referred in the Report, the GOC ensures a strong influence over both SOE and private companies, especially in industries considered strategic, which is the case of certain alkyl phosphate esters.

• (79) Overall, the GOC and the CCP exercise control over SOE, shaping their corporate structure, as well as the overall competitive landscape in order to achieve strategic economic goals. The CCP appoints key SOE executives, and SOE obtain preferential access to important inputs (such as land and capital) and other competitive advantages.

• (80) Moreover, the GOC established the State-owned Assets Supervision and Administration Commission of the State Council (‘SASAC’). Its basic functions include guiding the reform of SOEs, taking daily charge of supervisory panels assigned to large SOE. The GOC continues to have full authority over how SOE use allocations of state capital and which projects SOE pursue.

• (81) With respect to the sector of certain alkyl phosphate esters, a substantial degree of ownership by the GOC persists. First, available information indicates that a large number of key producers of certain alkyl phosphate esters in China are SOE.

• (82) Zhejiang Wansheng Co., Ltd., Jiangsu Yoke Technology Co., Ltd., Yangzhou Chenhua New Material Co., Ltd., Shouguang Weidong Chemical Co., Ltd., and Shandong Tianyi Chemical Co. Ltd. are the main state-owned flame-retardant manufacturers in China.

• (83) The complaint pointed out Zhejiang Wansheng Co. Ltd., Yangzhou Chenhua New Material Co. Ltd., and Jiangsu Yoke Technology Co. Ltd., produced and exported TCPP to the EU in 2022. Moreover, Zhejiang Wansheng Co. Ltd. and Jiangsu Yoke Technology Co. Ltd. also produce TEP.

• (84) Another example of SOEs which produce TCPP is CMEC Wuxi Machinery Engineering Co. Ltd., which is a wholly owned subsidiary of China Machinery Engineering Corporation (‘CMEC’) that is in turn owned by the SOE Sinomach.

• (85) Besides, instead of reducing the number of SOEs in the industry of certain alkyl phosphate esters, recent initiatives aiming at pressuring private companies to invest in, or merge with, SOEs, rather prove that the GOC and the CCP opted for further concentration of the market.

• (86) For instance, Jiangsu Yoke Technology Co., Ltd., producing both TCPP and TEP, includes among its shareholders, on top of private shareholders, National Industry Integrated Circuit Industry Investment Fund Co., Ltd. and Wuxi Equity Investment Centre of Agricultural Bank II. These two entities are directly controlled by the GOC.

• (87) In a similar vein, privately owned companies remain also under close control of the GOC. Privately owned producers of certain alkyl phosphate esters underline their close alignment with the goals of the GOC and remain under direct influence of the GOC.

• (88) For example, the largest stake (45 %) of Futong Chemical Co., Ltd., is held by Hubei Xingfa Chemicals Group Co., Ltd. The major shareholder (19,5 %) of Hubei Xingfa Chemicals Group Co., Ltd., is the Xingshan County SASAC. Along with the production of TCPP, Hubei Xingfa Chemicals Group Co., Ltd. produces TEP as well.

• (89) Moreover, the CEO of Hubei Xingfa Chemicals Group Co., Ltd., was a delegate at the 20th National Congress of the CCP, which in turn portrays a strong bond between the GOC and the enterprise. He is also a member of the CCP.

• (90) Additionally, a member of the senior management personnel of Jiangsu Yoke Technology Co., Ltd., obtained the Wuxi Outstanding Communist Party Member award. He also serves as the vice chairman of the China Petroleum and Chemical Industry Federation’s Flame Retardant Materials Professional Committee, an entity within the China Petroleum and Chemical Industry Federation, which in turn adheres to the CCP leadership ⁷. It is possible to list a number of examples of personal connections between the management of TCPP and TEP producers and the CCP including the presence of CCP members among the higher management of TCPP producers, including in Hubei Xingfa Chemical Group Co. Ltd., and Jiangsu Yoke Technology Co. Ltd.

• (91) Furthermore, with regard to raw materials used in the production of TCPP, China has aggressively developed its own propylene oxide production base. Among Chinese producers of propylene oxide, Sinochem is a SOE.

• (92) Also, the majority owner of Hangjin Technology Co., Ltd. is the Wuhan SASAC. Ningbo ZRCC Lyondell Chemical Co., Ltd. is a joint venture that receives investments from Sinopec. The majority shareholder in Wanhua Chemical Group Co., Ltd. is the Yantai SASAC. Wudi Xinyue Chemical Group Co., Ltd. is a subsidiary of the Lubei Enterprise Group, which is a SOE.

• (93) With regard to phosphorus oxychloride, a key raw material used both in the production of TEP as well as TCPP, Sinochem is one of the Chinese producers.

• (94) With respect to ethanol, another key raw material in the production of TEP, Chinese producers also have major state-presence: SDIC Biological Jilin Co., Ltd. is a part of China's state Development and Investment Corporation, a large state-owned investment holding, while 40 % of shares in Henan Tianguan Fuel Ethanol Co., Ltd. is controlled by Sinopec.

• (95) Moreover, the influence of the GOC over the economy extends beyond ownership since the non-public sectors are also considered a component of the socialist market economy.

• (96) Therefore, even privately-owned producers of certain alkyl phosphate esters are incentivised to align their activities with state policies laid out in the relevant plans, since conforming to the plans is more likely to result in favourable treatment by the government authorities, usually in terms of financial treatment or market access.

• (97) In conclusion, China’s market of certain alkyl phosphate esters is served to a significant extent by enterprises subject to the ownership, control or policy supervision or guidance by the GOC.

• (98) The state presence in APE firms allows the state authorities to interfere with prices and/or costs. The GOC preserves its influence in SOEs through the appointment and removal of key management personnel, which is the main responsibility of SASAC. Both SOEs and private companies also host internal Party committees capable of exercising government and Party influence over the companies’ corporate governance and business decisions.

• (99) CCP cells are in a position to gain significant influence even over privately owned firms, where they set the economic agenda, control all aspects of its implementation and exercise a growing pressure to have a final say over the business decisions. This means that business decisions, including those relating to costs and prices, are significantly influenced by the state's public policies and thus not subject to free market forces.

• (100) This applies also to the industry of certain alkyl phosphate esters. For instance, several Hubei Xingfa Chemical Group Co. Ltd.s’ senior managers are connected to the CCP. Such members include directors, including the Executive Deputy General Manager, and others. This confirms the importance of the CCP’s influence inside the TCPP and TEP producing companies, even privately owned.

• (101) The GOC is also able to influence the costs and prices of TCPP and TEP through its presence and intervention in upstream raw materials and input sectors. For instance, senior managers of Sinochem Pharmaceutical Co., Ltd., a producer of propylene oxide and phosphorus oxychloride, are CCP members.

• (102) The President of Sinochem, and the Chairman of the Supervisory Board, are CCP members. Similar links to the Party can be found in Wanhua Chemical Group Co., Ltd.: for example, the Group’s director served in several governmental positions for over 30 years, prior to joining the Group. Since 2018, he has also been the Party Committee secretary while serving as Chairman of the Board.

• (103) In this regard, through its intervention in the raw material prices, the Chinese state allows the industry of certain alkyl phosphate esters to enjoy abnormal costs, as the GOC is in a position to effectively control operational decision making in both SOEs and privately owned companies through the state’s presence.

• (104) The GOC further interferes with respect to prices and costs of the energy. The Chinese electricity market is characterised by the presence of SOEs at various stages of the supply chain, since around 50 % of the generation capacity is state owned while the entire transmission grid is owned by two SOEs. The state’s presence in the energy market and its influence in price setting therefore allows the GOC to significantly lower electricity costs to the benefit of TCPP and TEP producers.

• (105) The GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces. The development of the economy is determined by an elaborate planning system which sets out priorities and prescribes the goals that the central and local governments must focus on and strive to implement. The planning mechanism guides the allocation of resources, which is geared towards sectors designated as strategic or politically important, rather than being allocated according to market forces.

• (106) The central 14th Five-Year Plan (‘FYP’) lays out the strategic visions of the GOC for the transformation and upgrading of traditional industries and the development axis for strategic emerging industries, including the industries of chemicals, building materials, new materials, and chemical fibres. The 2019 version of Guidance Catalogue for the Industrial Structure Adjustment ⁸ provides for the support to the production of flame-retardant materials.

• (107) Consequently, TCPP and TEP products are subject to preferential treatment, especially in terms of access to financing. By thus incentivising the development and application of technologies for higher-performance and high-quality products, state authorities guide the restructuring of the certain alkyl phosphate ester industry into a globally competing industry. The whole structure of the sector is therefore imposed by the planning system and implementing decisions, rather than freely developing in line with the market forces.

• (108) Overall, with respect to flame retardants, the state interventions occur on two axes: (i) support for the development of the industry; and (ii) active control and regulation of the industry and its raw materials.

• (109) In regard to TCPP, the GOC provides numerous subsidies and financial support for the flame-retardant industry by way of public finance, taxation, credit, import and export, as well as land.

• (110) For example, the Opinions on the Implementation of the 14th FYP on the Development of the Building Materials Industry notes that the GOC intends to ‘[i]mprove the intelligent level of production and operation’ of building materials and ‘[b]roaden financing channels, give full play to the guiding role of national financial funds, coordinate the support of financial institutions’.

• (111) The GOC not only regulates the TCPP industry, but also its inputs. For instance, yellow phosphorus is an upstream raw material used in the production of phosphorus oxychloride, which is used as input to produce TCPP and TEP. In addition, there is an export restriction in place on export of yellow phosphorus taking the form of export licensing. According to the Export License Management Goods Catalogue (2023 version), the export of phosphate rock is subject to an export license issued by the Ministry of Commerce. The production and sales of this key input for certain alkyl phosphate esters are therefore actively controlled and regulated in China.

• (112) With respect to inputs of TEP, the GOC aims to vigorously support the production and commercialisation of such products. For instance, the GOC plans to develop the ethanol industry. The 14th FYP on Renewable Energy Development notes that the GOC continues to ‘promote the commercialization of fuel ethanol […]’. It also notes that it plans to ‘actively develop cellulose and other non-food fuel ethanol’.

• (113) The industry, including TCPP and TEP, is supported as well as actively regulated by GOC through various policy instruments in a way that is discriminating in favour of domestic suppliers and influencing free market forces.

• (114) The lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws also exists in the APE sector in China. The Chinese bankruptcy system delivers inadequately on its main objectives such as to fairly settle claims and debts, and to protect the rights of creditors and debtors.

• (115) The system is characterised by the state’s active role state in bankruptcies through, among others, the far-reaching discretion of state-dependent courts, the close relation between insolvency administrators and local governments, or the state guidance on insolvencies. Most importantly, the under-enforcement of bankruptcy laws impacts the Chinese financial and borrowing market, amounting to implicit state guarantees to some companies, which in turn distorts the costs of credits and access to finance.

• (116) Regarding property laws, the deficiencies of the system are particularly clear with regard to land ownership and land-use rights. All land is owned by the state and its allocation therefore depends exclusively on the state, which may follow political goals rather than free market principles.

• (117) The 13th FYP Plan on Land Resources controls the allocation and prices of land use and provides for preferential land supply to emerging strategic industries and modern service businesses. Since low prices for land allocation characterise the Chinese manufacturing sector overall, they also apply to the TCPP and the TEP industries.

• (118) Much like any other sector in the Chinese economy, certain alkyl phosphate esters’ producers are subject to the Chinese bankruptcy, corporate and property rules, and are therefore also subject to the distortions resulting from the discriminatory application or inadequate enforcement of these law.

• (119) Wage costs are distorted in APE sector as well. A system of market-based wages cannot fully develop in China because workers and employers are impeded in their rights to collective organisation. In fact, only one trade union is legally recognised – the ACFTU – which lacks independence from the state since it is subject to the leadership of the CCP and does not adequately engage in collective bargaining and protection of workers’ rights.

• (120) Moreover, senior positions in the trade union are typically occupied by senior Party figures in SOEs, hampering their ability to efficiently represent workers’ interests. Furthermore, the mobility of the Chinese workforce is affected by the household registration system, which provides that only local residents of a given administrative area are granted access to the full range of social security and public welfare benefits.

• (121) These workers, who are not in possession of the local residence registration, find themselves in a vulnerable employment position and thus receive a lower income. The industry of certain alkyl phosphate esters is also subject to Chinese labour laws and thus to these distortions in wage costs.

• (122) Wage cost distortions are further enhanced by labour subsidies, in particular, to TCPP and TEP producers. Several companies reported such subsidies including training subsidies, employee trainee subsidies, enterprise job stabilisation subsidies, introducing talent funds, and skills upgrading subsidies ⁹.

• (123) APE companies have access to finance granted by institutions which implement public policy objectives or otherwise are not acting independently from the state. Relevant distortions include a strong government presence in the financial institutions, as well as artificially low borrowing costs to stimulate investment growth.

• (124) First, the Chinese financial system, dominated by the banking sector, is characterised by the strong position of three categories of state-owned or controlled banks: large commercial banks, joint-stock commercial banks and state policy banks. It is controlled not only through ownership, but also by the GOC’s power to appoint the top management positions, with strong decision-making powers.

• (125) Moreover, the Chinese legal framework provides for an explicit legal obligation of financial institutions 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.

• (126) Additionally, there are binding legislative provisions for all economic institutions on promotion and support of encouraged industries, with the flame-retardant industry explicitly listed as an encouraged industry.

• (127) As a result, when granting access to finance, other criteria than economic viability are taken into account, as banks implement public policies designed by the government.

• (128) The bond market is dominated by government-related actors and the non-governmental bond market is to a large extent dominated by SOEs. Access to the market is tightly regulated by governmental institutions, and the major players on the market (users, holders, underwriters of bonds) are mainly state-owned entities.

• (129) Bond and credit ratings are thus heavily distorted for various reasons, such as the influence of the firm's strategic importance on the risk assessment and the strength of any implicit guarantee by the government. The APE industry has benefited from the distortions on the bond market since high ratings had been granted to Chinese TCPP and TEP producers.

• (130) The existence of significant distortions in the Chinese financial system has already been established by the Commission in recent anti-dumping investigations and is further confirmed by the US Department of Commerce. Moreover, there is strong evidence demonstrating that Chinese producers of certain alkyl phosphate esters directly benefitted from preferential loans both from state-owned and private banks (several producers of the product concerned have reported receiving short-term and long-term loans from Chinese banks on non-market terms).

• (131) The Commission examined whether it was appropriate or not to use domestic prices and costs in China, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation (see recital 65). 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.

• (132) That analysis covered the examination of the substantial government interventions in China’s economy in general, but also the specific market situation in the relevant sector including the product concerned. The Commission further supplemented these evidentiary elements with its own research on the various criteria relevant to confirm the existence of significant distortions in China.

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

• (133) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of China. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’.

• (134) The state-owned economy is the ‘leading force of the national economy’ and the state has the mandate ‘to ensure its consolidation and growth’ ¹⁰. 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.

• (135) 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 ¹¹.

• (136) In addition, under Chinese law, the socialist market economy is developed under the leadership of the 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.

• (137) 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.

• (138) 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’ ¹². This illustrates the unquestioned and ever growing control of the CCP over the economic system of China.

• (139) 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.

• (140) 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 ¹³. 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.

• (141) 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.

• (142) 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.

• (143) 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.).

• (144) 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 ¹⁴.

• (145) Second, on the level of allocation of financial resources, the financial system of China 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 ¹⁵.

• (146) 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 maximising the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the state and the CCP ¹⁶.

• (147) 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 ¹⁷.

• (148) 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 ¹⁸.

• (149) 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 ¹⁹.

3.2.2.1.   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

• (150) In China, 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 concerned, the degree of state ownership remains significant, with a number of APE producers being fully or partially state-owned, such as: Shandong Yarong Chemical Co., Ltd. (previously known as Taian Yarong Biotechnology Co., Ltd. ²⁰); Nantong Jiangshan Agrochemical & Chemicals Limited Liability Co. ²¹; Wengfu (Group) Co., Ltd. ²²; Zhejiang Wansheng Co., Ltd. ²³

• (151) Given that CCP interventions into operational decision making have become the norm also in private companies ²⁴, with CCP claiming leadership over virtually every aspect of the country’s economy, the influence of the state by means of CCP structures within companies effectively results in economic operators being under control and policy supervision of the government, given how far the state and Party structures have grown together in China.

• (152) 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’) the sectoral industry association.

• (153) 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’ ²⁵.

• (154) Also the China Chemical Enterprise Management Association (‘CCEMA’) which characterises itself as organisation comprising ‘more than 200 member units of the association are backbone enterprises in the chemical industry’ ²⁶ 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’.

• (155) 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’ ²⁷.

• (156) Consequently, even privately owned producers in the sector of the product concerned are prevented from operating under market conditions. Indeed, both public and privately owned enterprises in the sector are subject to policy supervision and guidance.

3.2.2.2.   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

• (157) 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 ²⁸, CCP cells in enterprises, state-owned and private alike, represent another important channel through which the state can interfere with business decisions.

• (158) According to China’s company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution ²⁹) 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.

• (159) However, since at least 2016 the CCP has been reinforcing its claims to control business decisions in companies as a matter of political principle ³⁰, including exercising pressure on private companies to put ‘patriotism’ first and to follow party discipline ³¹.

• (160) 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 ³². These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of the product concerned and the suppliers of their inputs.

• (161) 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) ³³ was released, which further expanded the role of the party committees in private enterprises.

• (162) 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 ³⁴.

• (163) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the APE sector. To provide an example, in the company Nantong Jiangshan Agrochemical & Chemicals Limited Liability Co. ³⁵ members of the company’s management simultaneously hold CCP positions ³⁶.

• (164) The CCP interference into the business decisions is apparent also on the group level, as transpires from the available corporate filings. The 2022 annual report of the Sinopec Group 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’ ³⁷.

• (165) 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 […]’ ³⁸.

• (166) The state’s presence and intervention in the financial markets as well as in the provision of raw materials and inputs further have an additional distorting effect on the market ³⁹. Thus, the state presence in firms, in the APE and other sectors (such as the financial and input sectors) allow the GOC to interfere with respect to prices and costs.

3.2.2.3.   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

• (167) 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, provincial and local governments must focus on. Relevant plans exist at all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of a binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government.

• (168) Overall, the system of planning in China results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces ⁴⁰.

• (169) The Chinese authorities have enacted a number of policies guiding the functioning of the sector of the product concerned.

• (170) To start with, the 14th FYP on Raw Materials ⁴¹ directly addresses the sector of the product concerned by stating that ‘[p]roduction capacity increase in urea, ammonium phosphate, calcium carbide, caustic soda and yellow phosphorus sectors will be strictly controlled. New projects shall follow the principle of replacing the same amount of existing production capacity or replacing more production capacity’ ⁴².

• (171) Moreover, the 2019 and 2024 Guiding Catalogues for Industry Structural Adjustment ⁴³ list flame retardants as an encouraged industry.

• (172) Furthermore, the 2023 MIIT Work plan for the steady growth of the chemical and petrochemical industry ⁴⁴ provides that one of its main objectives is to ‘[s]upport the national demonstration bases for the new industrialisation model in the petrochemical and chemical industry to improve the quality of development and promote the Ningbo Green Petrochemical Cluster and other national advanced manufacturing clusters in the petrochemical and chemical industry to move towards world-class clusters. Build an industrial base for efficient and high-value utilization of phosphorus resources, accelerate the structural adjustment of traditional industries such as phosphate fertilizer and yellow phosphorus, and enhance the supply capacity of phosphorus chemical products required for new energy, food, and health’ ⁴⁵.

• (173) Moreover, the 2022 NDRC Guiding Opinion on the high-quality development of the chemical fibre industry ⁴⁶ aims to promote the high-end development of new fibre materials ‘[d]evelop new functional polyester, high-quality chemical monomers and super-simulators, flame retardants, as well as antibacterial and antiviral, conductive, phase changing and energy storing, temperature controlling, photochromic, liquid coloring, absorbing and separating, biomedical and other types of functional fibers. […] Research and development of key materials and auxiliaries. Research and develop key materials, auxiliary materials, and additives such as flame retardants, modifiers, masterbatch, catalysts, and oils used for functional fibers’ ⁴⁷.

• (174) On the province level, the Shandong 14th FYP on the development of chemical industry ⁴⁸ call on the local authorities to ‘give full play to the production capacity advantages of caustic soda co-production of chlorine and hydrogen, accelerate the vertical extension and horizontal coupling expansion of the salt chemical industry, and improve the deep processing of chlor-alkali, soda ash and bromine, […] guide the traditional chlor-alkali downstream industry to extend towards fine chemicals, and ensure the layout of sub-chloride Chlorine downstream deep processing projects’ ⁴⁹. Section III.2.3 of the Plan plans for the following government action: ‘Promote the replacement of chlor-alkali production capacity reduction and strictly control production capacity. […] Encourage the comprehensive utilization of waste hydrochloric acid to produce chlorine and hydrogen’ ⁵⁰.

• (175) Similarly, according to the Jiangsu 14^th FYP on the high-end development of chemical industry [^ntr51-L_202401064EN.000101-E0051]: ‘[b]ased on the industrial foundation and advantages, the benefits of industrial concentration, land utilization rate and factor input and output shall be significantly improved, through adjustment and optimization […] and the extension of the industry chain towards high end products will achieve high-quality development of the province's chlor-alkali industry’ ⁵².

• (176) Furthermore, the government authorities are set to shape the sector’s industrial layout as follows: ‘[i]n accordance with the national industrial policy requirements of strictly controlling the new production capacity in industries with overcapacities, and implementing equivalent or reduced replacement for advanced technological transformation and upgrading projects that meet the policy requirements, the total amount of production capacity of products such as caustic soda shall be controlled, and the overall scale shall remain at the current level. Through mergers and reorganizations, through elimination of obsolete equipment, through capacity replacement and horizontal alliances, implement government-guided and corporate voluntary operations based on investment attraction, and market orientation for capacity replacement index transactions, and guide production capacity, resources and markets towards powerful companies and integrate them. In the chlor-alkali industry, form leading backbone enterprises, optimize the industrial structure and resource allocation, and increase the concentration level’ ⁵³.

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

• (178) In sum, the GOC has measures in place to induce operators to comply with the public policy objectives concerning the sector. Such measures impede market forces from operating freely.

3.2.2.4.   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

• (179) According to the information on file, the Chinese bankruptcy system delivers inadequately on its own main objectives such as to fairly settle claims and debts and to safeguard the lawful rights and interests of creditors and debtors. This appears to be rooted in the fact that while the Chinese bankruptcy law formally rests on principles that are similar to those applied in corresponding laws in countries other than China, the Chinese system is characterised by systematic under-enforcement.

• (180) 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 ⁵⁴.

• (181) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in China ⁵⁵. 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 ⁵⁶. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land ⁵⁷.

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

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

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

• (184) A system of market-based wages cannot fully develop in China as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of essential conventions of the International Labour Organisation, in particular those on freedom of association and on collective bargaining ⁵⁸.