Commission Implementing Regulation (EU) 2024/1959 of 17 July 2024 imposing a provisional anti-dumping duty on imports of erythritol originating in the People’s Republic of China

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	2024/1959	19.7.2024

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 21 November 2023, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of erythritol 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 9 October 2023 by Jungbunzlauer S.A. (‘the complainant’). The complaint was made by the Union industry of erythritol in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

1.2.   Registration

• (3) The Commission made imports of the product concerned subject to registration by Commission Implementing Regulation (EU) 2024/1608 ³ (‘the registration Regulation’).

1.3.   Interested parties

• (4) 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, the known exporting producers and the authorities of the People’s Republic of China, known importers, traders and users about the initiation of the investigation and invited them to participate.

• (5) 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

• (6) Following initiation, the China Chamber of Commerce of Metals, Minerals and Chemical Importers and Exporters (‘CCCMC’), an organisation empowered by four exporting producers ⁴ to represent them in this investigation on injury, causality and Union interest aspects of the investigation, submitted comments related to the complaint and the initiation of the investigation, on material injury, on causality and on Union interest.

• (7) CCCMC claimed that the complainant did not submit information as required by Article 5(2) of the basic Regulation and that the Commission failed to review properly the information in the complaint as required by Article 5(3) of the basic Regulation.

• (8) In particular, CCCMC claimed that the complainant omitted to address properly productivity, wages to personnel, real factors affecting prices. Moreover, it argued that the complaint partly lacked data on employment (no breakdown of administrative staff and direct labour on the manufacturing of erythritol), return on investments, ability to raise capital or investments and actual and potential effect on cash flow.

• (9) At the outset, the Commission noted that it carried out its examination of the complaint in accordance with Article 5 of the basic Regulation and came to the conclusion that the requirements for initiation of an investigation were met, i.e. that there was sufficient evidence to initiate the investigation.

• (10) According to Article 5(2) of the basic Regulation, a complaint shall contain such information as is reasonably available to the complainant. The legal standard of evidence required for the purpose of initiating an investigation (‘sufficient’ evidence) is different from that which is necessary for the purpose of a preliminary or final determination of the existence of dumping, injury or of a causal link. Therefore, evidence which is insufficient in quantity or quality to justify a preliminary or final determination of dumping, injury or causation, may nevertheless be sufficient to justify the initiation of an investigation ⁵.

• (11) The Commission noted that the non-confidential summary of the complaint did contain the relevant factors and indices having a bearing on the state of the industry, as required by Article 5(2) of the basic Regulation. Economic factors listed in Article 3(5) of the basic Regulation are referred to in Article 5(2)(d) of that Regulation by the way of an example (‘such as’). It follows that Article 5(2) does not require all these economic factors to be included at the stage of the complaint. Therefore, this claim was rejected.

• (12) CCCMC also claimed that the Commission failed to examine and to consider publicly known challenge of the Union industry to procure main raw materials and energy in quantities for the production at competitive prices, as well as scientific findings that are likely to affect consumer’s choices and change consumption pattern in the EU.

• (13) In this regard, the Commission noted that the claim of CCCMC goes beyond the requirements of Article 5(3) of the basic Regulation, as the Commission’s role at initiation stage is to examine the accuracy and adequacy of the evidence provided in the complainant to determine whether there was sufficient evidence to justify the initiation. As this was indeed performed by the Commission, the claim of CCCMC was rejected.

• (14) Regarding significant market distortions in China, the CCCMC firstly claimed that the complaint relied on the Commission Staff Working Document of 2017 which is relevance is doubtful as it was published around 5 years prior to the initiation of the proceeding and that because the report has been prepared with the specific purpose of facilitating Union industries to lodge a request in the area of trade measures, it is partial and not objective. Secondly, CCCMC claimed that the references and analogies from other investigations is not legally sound as it consists of a substitution of facts for the product concerned with findings of other products such as citric acid, sulphanilic acid or monosodium glutamate.

• (15) The Commission noted that, as shown in section 3.2. below, the fact that the Commission Staff Working Document was issued in December 2017 does not undermine its value in identifying the market distorting factors that continue to be relevant for the product concerned. Regarding the use of findings of other investigations, again the findings on closely related markets and industries can be relevant for the production and sales of the product concerned in China, as shown in section 3.1. below. These claims of CCCMC were therefore rejected.

• (16) Moreover, CCCMC claimed that its rights of defence were severely infringed because:

• (i) The open version of the complaint treats statistics on import volumes and prices as confidential which are disclosed in ranges and indexes;

• (ii) The injury factors are not disclosed in a meaningful form allowing an objective understanding of the data submitted in confidence;

• (iii) The applicant marked Annexes pertinent to export prices, as non-susceptible to summarisation;

• (iv) The applicant withheld most of the sources of information on which the complaint was based, mainly non-disclosing of data sources; and

• (v) The applicant withheld a large portion of crucial data based on copyright considerations and due to alleged fear of retaliation.

• (17) On the above claims the Commission noted that as the Union industry consists of a single producer it is understandable that injury factors were given in ranges and in indexed form in the complaint. The examination of the allegations of CCCMC has shown that these indexes and ranges allowed for an understanding of the trends and levels of the data on the various injury indices submitted by the applicant in confidence. Also, regarding the non-disclosure of sources, as the actual data is now provided in section 4.3. below, this issue is remedied.

• (18) Other specific comments on normal value, injury, causation and Union interest which were not directly linked to the initiation are dealt with in the relevant sections below (Sections 3, 4 and 5).

1.5.   Sampling

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

Sampling of Union producers

• (20) Given the limited number of Union producers of erythritol, the Commission announced in the Notice of Initiation that it would make available questionnaires to the known Union producer, namely Jungbunzlauer S.A. This Union producer provided a questionnaire reply and no other Union producers made themselves known following the publication of the Notice of Initiation. Thus, the Commission did not have to resort to sampling.

Sampling of importers

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

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

Sampling of exporting producers in the PRC

• (23) To decide whether sampling would be 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.

• (24) Four exporting producers in the country concerned provided the requested information and agreed to be included in the sample.

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

• (26) 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. No comments were received as regards sample selected.

1.6.   Individual examination

• (27) One exporting producer in the PRC requested individual examination under Article 17(3) of the basic Regulation. However, this exporting producer did not submit a questionnaire reply to the Commission.

1.7.   Questionnaire replies and verification visits

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

• (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) Questionnaire replies were received from the sole Union producer, three Chinese exporting producers and two users. No questionnaire replies were received from the GOC.

• (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:

Union producer

• — Jungbunzlauer S.A., Marckolsheim, France

Exporting producers in the PRC

• — Baolingbao Biology Co., Ltd., Yucheng City, Shandong Province

• — Dongxiao Biotechnology Co., Ltd., Zhucheng City, Shandong Province

• — Sanyuan Biotechnology Co., Ltd, Binzhou City, Shandong Province

• (32) The Commission performed a desk analysis of the information submitted by:

Users

• — Bojati food GmbH, Oyten, Germany

• — Rio Mints & Sweeteners BV, Utrecht, the Netherlands

1.8.   Investigation period and period considered

• (33) The investigation of dumping and injury covered the period from 1 October 2022 to 30 September 2023 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2020 to the end of the investigation period (‘the period considered’).

2. PRODUCT UNDER INVESTIGATION, PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product under investigation

• (34) The product under investigation is erythritol, a four-carbon sugar alcohol (polyol) sweetener made from sugar or glucose, in its pure form or contained in blends containing less than 10 % of other products by weight (‘the product under investigation’).

• (35) The Chemical Abstracts Service (CAS) registry number for erythritol in its pure form is 149-32-6.

• (36) Erythritol is a natural, zero-calorie sweetener with zero glycaemic index. It is used mainly as sugar replacer in food and beverage products, either in its pure form or blended with other ingredients, such as the natural high intensity sweetener stevia. The main segment is tabletop sweeteners, followed by beverages, confectionery, bakery, sports nutrition and other food categories.

2.2.   Product concerned

• (37) The product concerned is the product under investigation originating in the PRC, currently falling under CN code ex 2905 49 00 for erythritol in its pure form and CN codes ex 2106 90 92 and ex 2106 90 98 for blended products (TARIC codes 2905490015, 2106909265, and 2106909815) (‘the product concerned’).

2.3.   Like product

• (38) 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 country concerned; and

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

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

3. DUMPING

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

• (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 erythritol. Four 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. 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.

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

• (44) 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.

• (45) On 21 December 2023, the Commission informed by a note to the file interested parties on the relevant sources it intended to use for the determination of the normal value (‘the First Note’).

• (46) 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 erythritol. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries, namely Brazil, Colombia and Thailand.

• (47) On the basis of the information collected during the investigation, apart from in the Union and the PRC, erythritol is produced, in industrial quantities, only in a country with a different level of economic development than the PRC, namely the USA.

• (48) Consequently, the Commission endeavoured to identify, in a representative country with a similar level of economic development as the PRC, a product in the same general category and/or sector of the product under investigation with (mostly) the same factors of production as erythritol.

• (49) The Commission first analysed sweeteners other than erythritol. However, the Commission found no sweeteners commercially produced by the same or similar production processes as/to erythritol. Erythritol is commercially produced via ‘natural’ fermentation of carbohydrates. However, artificial sweeteners such as sucralose, saccharin, aspartame, or Acesulfame-K are manufactured via an artificial chemical synthesis/process.

• (50) The Commission then analysed citric acid, a product in the same general category and/or sector of the product under investigation suggested by the complainant. Like erythritol, citric acid is an organic chemical product produced by fermentation of agricultural carbohydrates.

• (51) Both citric acid and erythritol are produced by a fermentation process with regulated steps followed by a crystallisation phase and the drying of the crystals. Even if the fermentation processes of both products differ in terms of microorganisms and yeast, there are common auxiliary materials, such as a defoamer, corn steep liquor or perlite. Thus, citric acid and erythritol have the same core input raw materials, relevant consumables in common and very similar production processes.

• (52) The Commission concluded that citric acid was an appropriate product in the same general category and/or sector as the product under investigation with a view to identifying an undistorted value in a representative country with a similar level of economic development as the PRC for the factors of production used in the production of erythritol.

• (53) The Commission received comments on the First Note from one of the sampled exporting producers (Dongxiao Biotechnology Co., Ltd.) as well as from the complainant.

• (54) On 11 April 2024, the Commission addressed the comments received from interested parties on the First Note in a Second Note to the file and informed parties in that note also on the relevant sources it intended to use for the determination of the normal value, with Colombia as the representative country. It further informed interested parties that it would establish selling, general and administrative costs (‘SG&A’) and profits based on Sucroal S.A, a producer of citric acid in the representative country (‘the Second Note’).

• (55) The Commission received comments to the Second Note from the Union Industry and from Dongxiao Biotechnology Co., Ltd. These have been addressed under respective heading under Section 3.3.3. below.

• (56) After having analysed the comments and information received, the Commission concluded that Colombia was an appropriate representative country from which undistorted prices and costs would be sourced for the determination of the normal value. The underlying reasons for that choice are further described in detail in Section 3.3. below.

3.2.   Normal value

• (57) 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’.

• (58) 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’).

• (59) 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

• (60) 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.’

• (61) 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.

• (62) 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 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.

• (63) 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’.

• (64) Pursuant to this provision, the Commission issued a country report concerning the PRC (‘the Report’) ⁶, which contains 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 selected sectors (such as the chemical sector). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report concerning the PRC was placed in the investigation file at the initiation stage. The complaint also contained some relevant evidence complementing the Report.

• (65) The complainant relied on the evidence contained in the Report to stress out the relevance of the below-mentioned distortions in the context of EU anti-dumping proceedings concerning food ingredients. Moreover, the complainant pointed out that US trade authorities have too documented significant distortions of prices and costs in the PRC both in general and in the chemical sector in particular, with regard to bio-chemical products such as erythritol, citric acid or sodium gluconate.

• (66) The complainant also referred to Commission findings in several recent investigations concerning the chemical sector in the PRC, which confirmed the existence of significant distortions with regard to prices and costs in the PRC, namely the investigations concerning sodium gluconate ⁷, certain polyvinyl alcohols ⁸, sulphanilic acid ⁹, citric acid ¹⁰ and monosodium glutamate ¹¹.

• (67) Consequently, since the producers investigated in the above-mentioned cases are active in the same sector as the producers of erythritol, the complaint submitted that the conclusions with respect to the existence of significant distortions reached in the above investigations apply also to erythritol producers in the PRC.

• (68) The complaint indicated that domestic prices and costs of erythritol in the PRC 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.

• (69) Significant market distortions in the chemical sector, in particular the sector of erythritol, are regularly confirmed by the PRC’s actions as documented by formal acts, as well as subsequent actions of private and state-owned companies.

• (70) For instance, several erythritol producers are located in provinces where significant distortions exist, such as Hebei, which has put in place specific support schemes for the chemical sector, or Shandong, which published a Notice of a Plan Fostering the Building of a Strong Agricultural Province (2021-2025), that includes several politically guided and market-distorting provisions for the agricultural sector. In the same vein, Heilongjiang has its own Five-Year-Plan (‘FYP’) on Developing Corn Processing Industry, while the FYP on Strategic and Emerging Industries of Jilin promotes biochemical industrialization.

• (71) Moreover, the complainant indicated that companies manufacturing erythritol often publish on their websites statements referring to factors underpinning the distortions. For example, the website of Sanyuan Biotechnology Co. Ltd., the PRC’s largest erythritol producer, stated that their products were identified as national key new products. The same company, along with many other erythritol producers – such as the second largest, Baolingbao Biology Co., Ltd – received numerous national or provincial awards and titles connected to the field of work (for example: National Sugar Engineering Technology Research Center, National Quality Award, National Green Factory), which, according to the complainant is a sign of close connection between the state and companies active in the erythritol sector.

• (72) Furthermore, most erythritol producers are members of the China Food Additive and Ingredients Association (‘CFAA’) and they or their suppliers are also members of the China Starch Industry Association (‘CSIA’).

• (73) Referring to the above-mentioned sodium gluconate investigation, the complainant pointed out that according to the PRC’s 14^th FYP, which covers the period from 2021 to 2025, the PRC is determined to keep a ‘tight supervision on the chemical industry’. Similarly, the complainant recalled that the investigations concerning certain polyvinyl alcohols, sulphanilic acid, citric acid and monosodium glutamate concluded that the PRC interferes with business decisions through the Chinese Communist Party (‘CCP’) cells present in enterprises, state owned and private alike. The CCP is reported to exercise pressure not only on state-owned but also on private companies to follow party discipline. In 2017, 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.

• (74) The complainant emphasized that in the sodium gluconate investigation, the Commission noted that the above-mentioned distortions could also be observed with respect to other chemicals, concluding that the entire chemical and petrochemical sector in the PRC was affected by distortions in the sense of Article 2(6a)(b) of the basic Regulation. The Commission found that the system of planning in the PRC generally resulted in resources being concentrated in sectors designated as strategic or otherwise politically important by the GOC, rather than being allocated in line with market forces.

• (75) Moreover, pointing out that the producers in the above-mentioned Commission investigations are the same as those in the erythritol sector, the complaint recalled the following elements resulting in significant distortions.

• (76) First, the chemical sector, including the erythritol subsector, is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of state authorities:

• — As established in the sodium gluconate investigation, a substantial degree of ownership and control by the GOC persisted in the chemical sector, with a number of enterprises, even if not fully state-owned, were found to have an important proportion of direct and indirect state shareholding.

• — Similarly, in the sulphanilic acid investigation showed that the CCP entertained a prominent role in the operations and decision-making processes of several Chinese exporting producers of that product.

• (77) Second, the state presence in erythritol companies also allows the authorities to interfere with prices and/or costs:

• — The sodium gluconate investigation demonstrated that the GOC was in a position to interfere with prices and costs in the chemical sector through personal connections between exporting producers and the CCP, at the level of manufacturing enterprises, producers of raw materials, as well industry associations.

• — Moreover, since most erythritol producers are members of the CFAA and they or their suppliers are members of the CSIA, they have to follow the overall leadership of the CCP and organize party activities in their companies, in line with the CFAA/CSIA Articles of Association.

• (78) Third, the GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces:

• — In the sodium gluconate investigation, the industry was found to be covered by several plans, directives and other documents focused on chemicals, including food additives, which were issued at national, regional and municipal level, such as the 14^th FYP. The latter’s technological goals were defined in the FYP on Developing the Raw Materials Industry, which set out to foster the preparation of comprehensive industry chains of bio-based materials.

• — The PRC involvement into developing the chemical industry is also apparent from the Guiding Opinions to Promote the High-Quality Development of the Petrochemical and Chemical Industries during the FYP, which include the objectives to speed up the transformation and upgrading of the industry and improve its competitiveness and which refers to a catalogue of technologies and products that the petrochemical and chemical industry is encouraged to promote and apply.

• — The 2018 Notice of Several Policy Measures to Support the High-Quality Development of Agricultural Products’ Deep Processing lists numerous policy goals set by the state authorities, such as to optimize the industry structure; to organise and promote the coordinated development of the intensive processing of agricultural products with their primary processing and comprehensive use and ensure connexion with upstream and downstream industries such as the production of specific raw materials etc.

• (79) Fourth, much like in any other sector in the Chinese economy, the chemical sector is subject to the distortions resulting from the discriminatory application or inadequate enforcement of Chinese bankruptcy, corporate and property rules:

• — The sodium gluconate investigation concluded that the Chinese bankruptcy and property laws generate distortions in particular when maintaining insolvent firms afloat and when allocating land use rights in the PRC.

• (80) Fifth, wage costs are distorted in the chemical sector as well:

• — The sodium gluconate investigation concluded that the sector was affected, both directly and indirectly, by distortions of wage costs.

• (81) Sixth, erythritol producers have access to finance granted by institutions which implement public policy objectives or otherwise are not acting independently from the state:

• — The sodium gluconate investigation concluded that the substantial government intervention in the financial system had led to the market conditions being severely affected at all levels.

• (82) The complainant submitted that the above-mentioned distortions are systemic. State interventions are found throughout the country and across all sectors of the economy, in relation to the allocation of capital, land, labour, energy and raw materials, among others. The sodium gluconate investigation has shown that, when the producers purchase or contract for inputs, the prices paid and registered as costs are exposed to the systemic distortions described above. For instance, suppliers of inputs employ labour that is subject to the distortions, borrow money that is subject to the distortions in the financial sector/capital allocation and are subject to the planning system that applies across all levels of government and sectors.

• (83) In conclusion, the complainant argued that significant distortions pursuant to Article 2(6a) of the basic Regulation are present in the erythritol sector.

• (84) The Commission examined whether it was appropriate or not to use domestic prices and costs in the PRC, due to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation. The Commission did so on the basis of the evidence available on the file. The evidence on the file included the evidence contained in the Report, as well as in its updated version (‘updated Report’) ¹², which relies on publicly available sources.

• (85) 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 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 the PRC.

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

• (86) 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’ ¹³.

• (87) The state-owned economy is the ‘leading force in the national economy’ and the state has the mandate to ensure its ‘consolidation and growth’ ¹⁴. 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.

• (88) 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 ¹⁵.

• (89) 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.

• (90) 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.

• (91) 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.’ ¹⁶ This illustrates the unquestioned and ever growing control of the CCP over the economic system of the PRC.

• (92) 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.

• (93) 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 ¹⁷. 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.

• (94) 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.

• (95) 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.

• (96) 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.).

• (97) 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 ¹⁸.

• (98) 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 ¹⁹.

• (99) 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 ²⁰.

• (100) 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 ²¹.

• (101) 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 ²².

• (102) 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 ²³.

3.2.3.   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

• (103) 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.

• (104) The sector of the product concerned is mainly served by private companies, such as: Sanyuan Biotechnology Co., Ltd. ²⁴; Dongxiao Biotechnology Co., Ltd ²⁵; Baolingbao Biology Co., Ltd. ²⁶; Zhejiang Huakang Pharmaceutical Co., Ltd. ²⁷

• (105) However, CCP interventions into operational decision making have become the norm not only in State owned enterprises (‘SOEs’), but also in private companies ²⁸, with CCP claiming leadership over virtually every aspect of the country’s economy. Indeed, the State’s influence by means of CCP structures within companies effectively results in economic operators being under the government’s control and policy supervision, given how far the State and Party structures have grown together in the PRC.

• (106) Moreover, the sector of the product concerned is subject to several government policies, such as the 2022 key policies announced by the Ministry of Finance and the Ministry of Agriculture and rural affairs: ‘[i]ntegrated development of agricultural industry. Coordinate the layout and construction of a number of national modern agricultural industrial parks, advantageous and characteristic industrial clusters, and agricultural industrial strong municipalities. Focusing on ensuring national food security and effective supply of important agricultural products, focusing on rice, wheat, corn, […] build a modern rural industrial system based on strong industrial towns, industrial parks as the engine, and industrial clusters as the backbone, provincial, county and township layouts, and coordinated promotion of points, lines, and areas, so as to improve the quality and efficiency of industrial development as a whole’ ²⁹. Similarly, the 14^th FYP on promoting the modernization of agriculture and rural areas sets the following objectives: ‘[n]ational food security industry belt construction. Based on the production and supply of rice, wheat, corn, soybeans, etc., coordinate the layout of capacity building in production, processing, storage, and circulation, and build food safety industrial belts […]’ ³⁰.

• (107) Government control and policy supervision can be also observed at the level of the relevant industry associations ³¹.

• (108) For instance, CFAA states in Art. 3 of its Articles of Association that 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’ ³². The Party Branch of CFAA ³³ is further set to ‘continuously enhance business research capabilities, […] strengthen the Party building work of industry associations and fully implement the general requirements for Party building in the new era’ ³⁴.

• (109) Sanyuan Biotechnology Co., Ltd., Baolingbao Biology Co., Ltd. and Zhejiang Huakang Pharmaceutical Co., Ltd. are among the members of CFAA ³⁵. Not only, Baolingbao Biology Co., Ltd. and Zhejiang Huakang Pharmaceutical Co., Ltd. are among the members of some of CFAA’s Professional Committees ³⁶.

• (110) CSIA, according to Art. 2 of its Articles of Association, pursues the goal to ‘publicize and implement national industrial policies, serve the industry wholeheartedly, and promote industrial production’. In addition, Art. 3 states that CSIA ‘establishes an organization of the Communist Party of China, carries out Party activities, and provides the necessary conditions for the activities of the Party organization’ and – just like in the case of CFAA – ‘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’ ³⁷.

• (111) Dongxiao Biotechnology Co., Ltd., Biotlogy Co., Ltd. and Zhejiang Huakang Pharmaceutical Co., Ltd. are among the members of CSIA’s executive council ³⁸.

• (112) Similar provisions are found also in the Articles of Associations of China Biological Fermentation Industry Association (‘CBFIA’) ³⁹. Baolingbao Biology Co., Ltd. and Zhejiang Huakang Pharmaceutical Co., Ltd. are both vice-chairmen of CBFIA ⁴⁰.

• (113) Consequently, 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.

3.2.4.   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

• (114) The GOC is in position to interfere with prices and costs through state presence in firms. Indeed, CCP cells in enterprises, state-owned and private alike, represent an important channel through which the state can interfere with business decisions.

• (115) 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 ⁴¹) and the company shall provide the necessary conditions for the activities of the Party organisation.

• (116) In the past, this requirement appeared 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 ⁴², including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline ⁴³.

• (117) Already 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 ⁴⁴. 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.

• (118) 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’) ⁴⁵ was released, which further expanded the role of the Party committees in private enterprises.

• (119) Section II.4 of the Guidelines states: ‘[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 ⁴⁶.

• (120) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the erythritol sector. To provide an example, the General Manager of Dongxiao Biotechnology Co., Ltd. holds CCP positions and is also a representative at the current 14^th People’s Congress of Shandong (elected in January 2023) ⁴⁷. The company’s Chairman of the Trade Union, who also is CCP member, when asked about the relationship between Party building and enterprise development, said: ‘Party building leads the enterprise, and the Party and enterprise are integrated and strong’ ⁴⁸.

• (121) Additionally, several members of the board of directors of directors of Sanyuan Biotechnology Co., Ltd., the largest producer of the product concerned, are CCP members ⁴⁹. The same applies to Baolingbao Biology Co., Ltd. ⁵⁰ and Zhejiang Huakang Pharmaceutical Co., Ltd., whose chairman is not only a CCP member and the company’s Party secretary, but also a Representative at the 14^th People’s Congress of Zhejiang ⁵¹.

• (122) 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 ⁵². Thus, the state presence in firms, in the erythritol and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

3.2.5.   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

• (123) 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.

• (124) 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 ⁵³.

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

• (126) The 2022 key policies of the Ministry of Finance and the Ministry of Agriculture and rural affairs mentioned above (see recital (106)) contain also the following provisions influencing the functioning of the sector: ‘[t]he state will continue to implement policies such as subsidies for corn and soybean producers, subsidies for rice, and incentives for large grain-producing counties, so as to consolidate the effectiveness of supply-side structural reform in agriculture and ensure national food security’ or ‘[r]ewards for major seed production counties. Expand the scope of support for major seed production counties of rice, wheat, corn […], and promote the transformation and upgrading of the seed industry’ ⁵⁴.

• (127) The 14^thFYP on promoting the modernization of agriculture and rural areas ⁵⁵ aims to ‘[i]mprove grain production support policies. Stabilize grain farmers’ subsidies, improve the minimum purchase price policy for rice and wheat, and the subsidy policy for corn and soybean producers. Improve the compensation mechanism for the interests of major grain-producing areas and improve the support policy system for major grain-producing counties’ ⁵⁶. According to the 14^th FYP on developing the planting sector at national level ⁵⁷, ‘[d]uring the 14^th Five-Year Plan period, we will explore potential expansion, increase production capacity, optimize structure, promote diversified development, and improve supply guarantee capabilities’ ⁵⁸.

• (128) The CSIA’s 14^th FYP ⁵⁹ further shows the existing government policies in the sector by explaining that ‘[s]ince 2016, the state has adjusted the corn temporary storage policy of the three northeastern provinces and the Inner Mongolia Autonomous Region to a new mechanism of “market-oriented purchase” plus “subsidy”, which has caused a sharp drop in corn prices and greatly reduced the production cost of corn starch; in order to digest excess corn Inventory, Heilongjiang, Jilin, Liaoning, Inner Mongolia and other places have given different degrees of subsidies to corn deep processing enterprises, which have continued to increase the production capacity of corn deep processing and corn starch production’ ⁶⁰.

• (129) The 14^th FYP on the development of bio-economy ⁶¹ directly addresses the sector of the product concerned, by aiming to ‘[s]trengthen the main position of enterprise innovation. Give play to the leading and supporting role of leading enterprises in the biological field, guide large enterprises to open resources such as technological innovation, supply chain, and financial services to the upstream and downstream of the industrial chain, and promote integration and innovation in small and medium-sized enterprises. Focusing on key fields with large scale and wide influence such as biomedicine, bio-agriculture, and bio-manufacturing, bio-innovative enterprises are encouraged to deepen their cultivation in subdivided fields, cultivate their development advantages, and cultivate them into individual champions with global competitiveness’ ⁶².

• (130) On the province level, similarly, according to the Hebei 14^th FYP on strategic and emerging industries ⁶³ the government authorities are set to shape the sector’s industrial layout as follows: ‘Vigorously develop the industries of bio-fermentation, bio-based products, and characteristic biological products, and promote the integrated application of biotechnology in the fields of medicine, chemical industry, materials, food deep processing, and new energy. Consolidate and improve the advantages of amino acids, starch sugars, enzyme preparations, vitamins, and other products, and develop new biological materials such as bio-based fibers, bio-based chemicals’ ⁶⁴.

• (131) Furthermore, in 2024, Shandong issued a major policy to promote, upgrade and develop the corn industry ⁶⁵, providing important tax support for research and development. This tax support has benefitted, for instance, Sanyuan Biotechnology Co., Ltd., whose legal representative said: ‘As regards the company’s position on the international track, it is inseparable from the strong support of the tax department […] The upgraded tax incentives give us full motivation for research and development. The company’s 50 000-ton erythritol production capacity project has been put into production, and the market share is expected to further increase’ ⁶⁶.

• (132) 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.

• (133) 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.

3.2.6.   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

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

• (135) 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 ⁶⁷.

• (136) 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 ⁶⁸. 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 ⁶⁹. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land ⁷⁰.

• (137) 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 chemical, and therefore erythritol, sector. The present investigation revealed nothing that would call those findings into question.

• (138) 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.

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

• (139) 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 ⁷¹.

• (140) 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 ⁷². 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.

• (141) 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 ⁷³. Those findings lead to the distortion of wage costs in the PRC.

• (142) No evidence was submitted to the effect that the erythritol sector 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).

3.2.8.   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

• (143) Access to capital for corporate actors in the PRC is subject to various distortions.

• (144) First, the Chinese financial system is characterised by the strong position of state-owned banks ⁷⁴, which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similar 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) ⁷⁵ and they regularly implement public policies designed by the GOC.

• (145) 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 ⁷⁶. While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

• (146) 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 ⁷⁷. 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’. ⁷⁸

• (147) 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 ⁷⁹. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important ⁸⁰. 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.

• (148) Second, 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.

• (149) Thirdly, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 ⁸¹. Official media in the PRC have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ ⁸². Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

• (150) 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.

• (151) 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. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

• (152) No evidence was submitted in the present investigation demonstrating that the sector of the product concerned 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.

3.2.9.   Systemic nature of the distortions described

• (153) The Commission noted that the distortions described in the updated Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above as well as in Part I of the updated 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 and in Part II of the updated Report.