Commission Implementing Regulation (EU) 2025/796 of 24 April 2025 imposing a definitive countervailing duty on imports of mobile access equipment originating in the People’s Republic of China and amending Implementing Regulation (EU) 2025/45 imposing a definitive anti-dumping duty on imports of mobile access equipment originating in the People’s Republic of China

(179) Furthermore, the Commission has also determined (94) that the Chinese credit rating system cannot be considered to be solely driven by market forces and that it operates on a distorted basis.

(180) In view of the situation described in recitals (173) to (178), the Commission concluded that Chinese credit ratings do not provide a reliable estimation of the credit risk of the underlying asset. Those ratings were also distorted by the policy objectives to encourage key strategic industries, such as the MAE industry.

(181) Following definitive disclosure, the GOC claimed that the Chinese credit rating system is reliable and that the credit ratings of the companies should be re-assessed. It also argued that the Commission had arbitrarily assessed the sampled companies without the required knowledge and certificates and without a comprehensive understanding to the operation of the sampled companies. Moreover, the GOC argued that the ownership of the rating agencies operating on the Chinese market is more varied with an increasing presence of international credit rating agencies such as S&P or Moody’s China Limited leading to optimizing the rating methods.

(182) The Commission considered that it did not assess the credit rating of the sampled companies in an arbitrary manner. To the contrary, the Commission acted in full transparency and relied on a range of financial indicators to determine the credit rating of the sampled companies. The Commission also considered that the evolution of the market structure in the PRC did not have an impact on the shortcomings relating to the Chinese credit rating market as described in recitals (173) to (180). On this basis, these claims were rejected.

(183) Following definitive disclosure, the CCCME claimed that the existence of 14 credit rating agencies including two overseas agencies made the Chinese credit rating market robust and independent. It added that the use of different rating categories by Chinese local rating agencies do not question the independence of the formers and the authenticity of the rating results. It also argued that the Commission’s conclusion that China’s credit rating market is ‘closed’ is based on outdated and incorrectly interpreted evidence, in particular the CCCME considered that role of the CSRC and PBOC in regulating the qualification of the credit rating institutions was necessary to ensure that such credit rating agencies have the necessary expertise and referred to the regulatory improvements recognized in the OECD report referred to in recital (178).

(184) The Commission disagreed with these claims. Whereas the Commission does not dispute that certain foreign agencies are operating on the Chinese market, it considered that such foreign agencies represent only ‘a tiny fraction of the ratings performed on the Chinese credit rating market’ and ‘follow the same rating scales as the Chinese agencies and that they apply an uplift to their rating in terms of the companies’ strategic importance to the GOC and implicit State guarantees’ (95), whereby they cannot be considered independent. Also, as to the allegedly outdated nature of the evidence provided by the Commission, the Commission noted that the CCCME selectively chose the oldest pieces of evidence submitted by the Commission, and ignored several references from the years 2021-2022 used in recitals (177) to (178), as well as the reference to the Commission’s Staff Working Document on Significant Distortions in the Economy of the People’s Republic of China, which was issued in April 2024 (see recital (179)), long after foreign credit rating agencies became active in the PRC. These references clearly show that the situation of the Chinese credit rating market has not significantly changed during the investigation period. As far as the role of the CSRC and PBOC are concerned, the Commission did not dispute the OECD’s report and that the role of such entities includes the assessment of the qualifications of the credit rating agencies. However, it appeared that the PBOC’s role was not limited to such assessment, but also included ‘the supervision and management of credit ratings nationwide’ as per Article 3 of the Interim Measures for the Administration of the Credit Rating Industry published jointly by the People's Bank of China, National Development and Reform Commission, Ministry of Finance and China Securities Regulatory Commission (Order [2019] No. 5). These claims were thus rejected.

Short-term and long-term loans

(185) The Commission established that companies in all four sampled groups used short-term and long-term loans to finance their activities. These loans were mainly used for daily operations, working capital needs, for special projects and investments. One of the sampled groups of exporting producers also used long-term export credits.

(186) As demonstrated in recital (142) to (147) several legal documents, which specifically target companies in the MAE sector, direct the financial institutions to provide loans at preferential rates to the MAE industry. These documents demonstrate that the financial institutions only provide preferential financing to a limited number of enterprises or industries, which comply with the relevant policies of the GOC. The Commission considered that the reference to the MAE industry is sufficiently clear as this industry is identified either by its name or by a reference to the product that it manufactures or the industry group that it belongs to. Furthermore, one of the sampled exporting producers benefitted from loan provided by the China Development Bank, which supports ‘projects in key sectors recognized by the State’. Therefore, the fact that the GOC supports a limited group of encouraged industries, which includes the MAE industry, makes this subsidy specific.

(187) The Commission calculated the amount of the countervailable subsidy based on the benefit conferred on the recipients during the investigation period. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is the difference between the amount of interest that the company has paid on the preferential loan and the amount that the company would have paid for a comparable commercial loan, which the company could have obtained on the market.

(188) As explained in Sections 3.6.1 and 3.6.2 above, the loans provided by Chinese financial institutions reflect substantial government intervention and do not reflect rates that would normally be found in a functioning market.

(189) The sampled groups of companies differed in terms of their general financial situation. Each of them benefitted from different types of loans during the investigation period with variances in respect of maturity, collateral, guarantees and other conditions. For those two reasons, each company had an average interest rate based on its own set of loans received.

(190) The Commission assessed individually the financial situation of each sampled group of exporting producers in order to reflect these particularities. In this respect, the Commission followed the calculation methodology for preferential financing through loans established in the anti-subsidy investigation on aluminium converter foil originating in the PRC, as well as the anti-subsidy investigation on hot-rolled flat steel products originating in the PRC, the anti-subsidy investigations on tyres originating in the PRC, certain woven and/or stitched glass fibre fabrics originating in the PRC, optical fibre cables originating in the PRC and new battery electric vehicles designed for the transport of persons originating in the PRC (96), as explained in the recitals below. As a result, the Commission calculated the benefit from the preferential financing through loans practices for each sampled group of exporting producers on an individual basis and allocated such benefit to the product under investigation.

(191) As mentioned in recitals (90), the Chinese lending financial institutions did not submit any questionnaire response that could clarify the creditworthiness assessment conducted. Hence, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans accorded to the Sinoboom Group were at market level.

(192) The Sinoboom Group reported a profitable financial situation with a 12 % profit margin according to its own financial accounts for the financial year 2023.

(193) Sinoboom Group used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the group.

(194) Regarding short-term liquidity, the group presented an average current ratio of 1,44 during the investigation period. Although the company’s current assets fall within an acceptable range, it is not particularly strong. This indicates that while the company can technically meet its short-term obligations, its liquidity position is only marginally adequate. In the event of unexpected financial pressures, the company may struggle to maintain operations without liquidating assets or taking on additional debt. A more robust liquidity position would be necessary to ensure financial stability in the face of market volatility or unforeseen events.

(195) In terms of solvency, the company’s debt-to-equity ratio of 1,98 shows a serious reliance on debt. The company is almost twice as reliant on borrowed funds as it is on its own equity, which points to significant financial risk. Such high leverage makes the company vulnerable to rising interest rates or economic downturns, as its ability to service debt may be strained. The reliance on debt financing increases the risk of insolvency, especially if revenue growth or profitability slows down. This leverage is a serious concern that could jeopardize the company’s financial health.

(196) The Commission considered that the overall financial situation of the group corresponds to a BB rating. According to Standard & Poor’s credit rating definitions, a debtor rated ‘BB’, still has the capacity to meet its financial commitments under stable conditions. Nevertheless, adverse business, financial, or economic conditions may impair the debtor’s capacity or willingness to meet its financial commitments. This benchmark is therefore considered appropriate to reflect the high debt levels and heavy reliance on leverage of the group.

(197) The premium expected on bonds issued by firms with this a BB rating was then applied to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate as announced by the NIFC in order to determine the market rate.

(198) That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US BB rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019, to the Loan Prime Rate as announced by the NIFC, at the date when the loan was granted, and for the same duration as the loan in question. This was done individually for each loan and financial leasing provided to the company.

(199) The Commission noted that Zoomlion Group was awarded an B rating by Fitch rating credit rating agency in 2021. The Commission concurred with this rating as it aligns with the company’s financial profile as assessed based on the financial statements covering the investigation period.

(200) As the lending institutions did not provide any questionnaire response explaining the creditworthiness assessment, to establish the benefit, the Commission had to assess whether the interest rates for the loans granted to Zoomlion Group were at market level.

(201) Zoomlion Group presented itself in a generally profitable financial situation with a profit margin of around 8 % according to its own financial accounts for the year 2023. Zoomlion’s profitability is reasonable but quite modest in comparison with the average of companies in the sector and may limit its ability to reinvest and manage economic fluctuations.

(202) The group used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the company.

(203) Regarding short-term liquidity, the Commission used the current ratio. This ratio measures the company’s ability to pay short-term obligations, including short-term debt.

(204) The company’s current ratio was at 1,17 in the investigation period. This suggests that its liquidity is adequate but precarious, as the ratio is only slightly above the acceptable threshold. This shows also that while the company can meet its short-term liabilities with its current assets, any unexpected increase in liabilities or a slowdown in asset conversion could pose challenges. Considering this short-term liquidity indicator, the Commission concluded that the company at issue presented a fragile short-term liquidity position.

(205) The Commission based the long-term solvency risk assessment on the debt ratio. This ratio measures the company’s ability to meet its long-term debt obligations. It is used by lenders and bond investors when assessing the company’s creditworthiness.

(206) The debt ratio measures the amount of liabilities, in particular long-term debt. The company ratio of 1,93 reveals a heavy reliance on debt for financing, which significantly increases financial risk. High leverage means the company is exposed to difficulties in meeting debt obligations, particularly during periods of reduced revenue or rising interest rates. This reliance on debt underscores the need for a more balanced capital structure.

(207) The company’s efficiency in utilizing its assets does not support a high credit rating. An asset turnover ratio of 0,3 indicates that the company generates only ¥ 0,30 in revenue for every ¥ 1 of assets, reflecting underperformance in leveraging resources. Similarly, the return on assets (ROA) of 2,77 % is low, suggesting that the company is not deriving significant value from its investments. These metrics point to inefficiencies in asset management that hinder the company’s ability to generate revenue and profit.

(208) Therefore, considering the liquidity, solvency and efficiency issues described in recitals (202) to (207) the Commission considered that the company was not in a solid financial situation and presented a high risk profile for potential lenders and investors.

(209) The Commission considered that the overall financial situation of the group corresponds to a B rating, which does not qualify as ‘investment grade’.

(210) Based on publicly available data on Bloomberg, the Commission used as a benchmark the premium expected on bonds issued by firms with a B rating, which was applied to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate as announced by the NIFC (97) in order to determine the market rate.

(211) That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US B rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate published by the NIFC, at the date when the loan was granted (98) and for the same duration as the loan in question. This was done individually for each loan provided to the group of companies.

(212) As for loans denominated in foreign currencies, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, B rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(213) Following definitive disclosure, Zoomlion group claimed that the analysis of the financial ratios did not justify a lower credit rating that companies such as Dingli group and Sinoboom group. After a careful comparative analysis of the situation of the different sampled companies, the Commission confirmed its assessment on the grounds that Zoomlion group was mostly underperforming when compared with the other sampled companies.

(214) As set above in recital (90) the Chinese lending financial institutions did not provide any creditworthiness assessment. Therefore, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans granted to the Dingli Group were at market level.

(215) The Dingli Group reported a high profitability, and solid growth financial situation with a high profit margin (8-13 %) according to its own financial accounts for year 2023.

(216) Dingli Group used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the group.

(217) Regarding short-term liquidity, when considering the combined situation of various Dingli entities, the company would likely benefit from a mixed liquidity position. Dingli Machinery enjoys a strong current ratio of more than 2, reflecting a solid ability to meet short-term liabilities. However, Dingli Leasing’s current ratio of less than 1,2 indicates only a modest situation to face short-term obligations. The average of the two companies’ current ratios would likely fall between these two figures, suggesting that while short-term financial stability is generally acceptable, the consolidated entity would need to carefully manage liquidity to avoid potential financial tensions.

(218) Concerning long-term debt, the group would face a high level of leverage due to Dingli Leasing’s high debt-to-equity ratio of over 2,8, while Dingli Machinery’s conservative ratio of less than 0,7 brings down the overall financial risk. The combined debt-to-equity ratio would likely be moderate but still on the higher end, reflecting a significant reliance on debt. This poses potential risks, especially in uncertain economic conditions.

(219) From an efficiency point of view, Dingli Machinery’s asset turnover of less than 0,5 is low, indicating some inefficiencies, while Dingli Leasing’s asset turnover of less 0,15 is extremely poor, showing that the company generates very little revenue per unit of assets. This highlights a combined inefficiency in utilizing assets across both businesses. The company will need to focus on optimizing operations, liquidating idle assets, or enhancing operational strategies to improve returns.

(220) The Commission considered that the overall financial situation of the group corresponds to a BB rating. According to Standard & Poor’s credit rating definitions, a debtor rated ‘BB’, still has the capacity to meet its financial commitments under stable conditions. Nevertheless, adverse business, financial, or economic conditions may impair the debtor's capacity or willingness to meet its financial commitments. This benchmark is therefore considered appropriate to reflect the high debt levels and heavy reliance on leverage of the group.

(221) The premium expected on bonds issued by firms with this a BB rating was then applied to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate as announced by the NIFC in order to determine the market rate.

(222) That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US BB rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019, to the Loan Prime Rate as announced by the NIFC, at the date when the loan was granted, and for the same duration as the loan in question. This was done individually for each loan and financial leasing provided to the company.

(223) As for loans denominated in foreign currencies in the PRC, the same situation in respect of market distortions and the absence of valid credit ratings applies, because these loans are granted by the same Chinese financial institutions. Therefore, as found before, BB rated corporate bonds in relevant denominations issued during the investigation period were used to determine an appropriate benchmark.

(224) As set above in recital (90) the Chinese lending financial institutions did not provide any creditworthiness assessment. Therefore, in order to establish the benefit, the Commission had to assess whether the interest rates for the loans granted to the JLG Group were at preferential levels.

(225) JLG reported low profitability (less than 3 %) and return on assets according to its own financial accounts for the year 2023.

(226) JLG used short-term and long-term debt to finance its operations. The Commission assessed the short-term liquidity and the long-term solvency situation of the group.

(227) Regarding short-term liquidity, the group presented an average current ratio of 1,40 during the investigation period. Although the company’s current assets fall within an acceptable range, it is not particularly strong. This indicates that while the company can technically meet its short-term obligations, its liquidity position is only marginally adequate. In the event of unexpected financial pressures, the company may struggle to maintain operations without liquidating assets or taking on additional debt. A more robust liquidity position would be necessary to ensure financial stability in the face of market volatility or unforeseen events.

(228) In terms of solvency, the company’s debt-to-equity ratio of 2,19 suggests a serious reliance on debt. The company is using twice as much debt as equity to finance its operations, which exposes it to significant financial risk. Such high leverage makes the company vulnerable to rising interest rates or economic downturns, as its ability to service debt may be strained. The reliance on debt financing increases the risk of insolvency, especially if revenue growth or profitability slows down. This leverage is a serious concern that could jeopardize the company’s financial health.

(229) The Commission considered that the overall financial situation of the group corresponds to a B rating. A debtor rated ‘B’, still has the capacity to meet its financial commitments under stable conditions. Nevertheless, adverse business, financial, or economic conditions may impair the debtor's capacity or willingness to meet its financial commitments. This benchmark is therefore considered appropriate to reflect the high debt levels and heavy reliance on leverage of the group and its weak liquidity and profitability.

(230) The premium expected on bonds issued by firms with this a B rating was then applied to the PBOC Loan Benchmark Rate, or after 20 August 2019 to the Loan Prime Rate as announced by the NIFC in order to determine the market rate.

(231) That mark-up was determined by calculating the relative spread between the indices of US AA rated corporate bonds to US B rated corporate bonds based on Bloomberg data for industrial segments. The relative spread thus calculated was then added to the PBOC Loan Benchmark Rate, or after 20 August 2019, to the Loan Prime Rate as announced by the NIFC, at the date when the loan was granted, and for the same duration as the loan in question. This was done individually for each loan and financial leasing provided to the company.

(232) The Commission established that all sampled groups of exporting producers benefited from preferential financing through loans during the investigation period. In view of the existence of a financial contribution, a benefit to the exporting producers and specificity, the Commission considered preferential financing through loans a countervailable subsidy.

(233) Following definitive disclosure, the CCCME claimed that the benchmark used by the Commission to calculate the benefit and the subsidy amount was flawed. CCCME first argued that the Commission should not have resorted to an out-of-country benchmark on the grounds that the Commission did allegedly not demonstrate the absence of prevailing market terms and conditions as foreseen by Article 6(d) of the basic Regulation. Furthermore, it also claimed that the Commission failed to explain how it ensured that the spread of US corporate bonds indices sufficiently reflected the prevailing market conditions in China where the sampled MAE producers obtained their financing. Second, the GOC claimed that the Commission should have applied the absolute spread rather than the relative spread on the grounds that the absolute spread sufficiently factored in the risk exposures between the corporate bonds of different credit ratings. The CCCME also argued that the Commission failed to explain why applying the relative spread was more appropriate than applying the absolute one and how the LPR was equivalent to a AA-rating interest rate.

(234) The Commission considered that it had demonstrated that there were no prevailing market terms and conditions in the PRC whereby it could not calculate an appropriate benchmark based on the conditions applicable in the PRC. In this regard, the Commission referred to the conclusions drawn in Sections 3.6.1.4, 3.6.1.5 and 3.6.2 whereby it showed that the GOC relied on a normative framework to exercise control in a meaningful way over the state-owned and privately owned commercial banks that implement government policy when providing financing to economic operators in the PRC. Furthermore, it is recalled that none of the commercial banks that provided financing to the sampled producers cooperated with the investigation so that the Commission could not access information relating to the MAE producers or to other sectors, not encouraged by the PRC authorities.

(235) In the absence of cooperation by any Chinese financial institution, the Commission had to resort to an out-of-country benchmark. The Commission considered that the US market was of an equivalent size and offered available representative statistics as far as bonds of various credit ratings are concerned. The Commission also noted that no interested party proposed valid alternative out-of-country benchmark in this regard.

(236) As far as the use of the relative spread is concerned, the Commission first recognised that commercial banks usually use a mark-up expressed in absolute terms, and that this practice seemed mainly based on practical considerations because the interest rate is ultimately an absolute number. The absolute number was, however, the translation of a risk assessment that was based on a relative evaluation. As established in past investigations, the relative evaluation meant that the risk of default of a BB-rated company is X % more likely than the risk of default of the government or a risk-free company. The relative spread captures changes in the underlying market conditions which are not expressed when following an absolute spread (99). Second, interest rates reflect not only company-specific risk profiles, but also country- and currency-specific risks. The relative spread thus captures changes in the underlying market conditions, which are not expressed when following the logic of an absolute spread. Often, as in the present case, the country- and currency-specific risk varies over time, and the variations are different for different countries. As a result, the risk-free rates vary significantly over time, and are sometimes lower in the US, sometimes in China. These differences relate to factors such as observed and expected GDP growth, economic sentiment, and inflation levels. Because the risk-free rate varies over time, the same nominal absolute spread can signify a very different assessment of the risk. From an investor perspective, the relative spread is hence a better measure as it reflects the magnitude of the yield spread and the way it is affected by the base interest-rate level. Third, the relative spread is also country-neutral. For instance, where the risk-free rate in the US is lower than the risk-free rate in China, the method will lead to higher absolute mark-ups. On the other hand, where the risk-free rate in China is lower than in the US the method will lead to lower absolute mark-ups.

(237) As far the use of the LPR as a starting point is concerned, as provided in recital (156) and acknowledged by the GOC, the LPR corresponded to the most preferential lending rate offered by a commercial bank to its prime clients (100). On this basis the above claims, were rejected.

(238) Following definitive and additional disclosures, Zoomlion group claimed that the Commission had erroneously calculated the benefit amount relating to interests for loans and bank acceptance drafts on a 360-day basis, rather than 365 days. The Commission disregarded such claim on the grounds that the 360-day basis is a standard calculation practice as far as financial institutions are concerned (101). On these grounds, this claim was rejected.

(240) The purpose of a credit line is to establish a borrowing limit that the company can use at any time to finance its current operations thus making working capital financing flexible and immediately available when needed. The credit line agreements granted to the sampled groups refer to the various forms of financing available to the companies signing such agreements, which cover all types of short-term financing, such as short-term loans, bank acceptances, letters of credit, etc. Furthermore, according to financial literature, credit lines are also prevalent in a majority of cases in market economies. For example, they account for over 80 % of the bank financing provided to U.S. public firms (102). Furthermore, in Canada, where bank acceptances are a direct and unconditional liability of the accepting bank (as is the case in China), banks would normally only accept bank acceptance draws from corporate borrowers that have an established line of credit with that bank (103). Therefore, the Commission considered that in principle, all short-term financing of the sampled companies, such as short-term loans, bank acceptance drafts, etc., should be covered by a credit line instrument (104).

(241) Following definitive disclosure, CCCME claimed that the existence of a credit line was not a pre-requisite for short term borrowing. In its comments it referred to the lower bank financing rate applicable to Spanish firms.

(242) The Commission considered that the situation applicable on the Spanish market was not representative and that statistics pertaining to the US market, which is of a greater size and more comparable to the Chinese market were more appropriate. In any case, past and current investigations demonstrated that Chinese economic operators rely on such credit lines to obtain financing.

(243) The Commission established that Chinese financial institutions provided credit lines to each sampled group in connection with the provision of financing. These consisted of framework agreements, under which the bank allowed the sampled companies to use various debt instruments, such as working capital loans, bank acceptance drafts and other forms of trade financing within a certain maximum amount.

(244) As mentioned in recital (240) above, all short-term financing should be covered by a credit line. Therefore, the Commission compared the amount of the credit lines available to the cooperating companies during the investigation period with the amount of short-term financing used by these companies during the same period to establish whether all short-term financing was covered by a credit line. Where the amount of the short-term financing exceeded the credit line limit, the Commission increased the amount of the existing credit line by the amount actually used by the exporting producers beyond that credit line limit.

(245) Under normal market circumstances, credit lines would be subject to a so-called ‘arrangement’ or ‘commitment’ fee to compensate for the bank’s costs and risks at the opening of a credit line, as well as to a ‘renewal fee’ charged on a yearly basis for renewing the validity of the credit lines (105). These fees cover administrative costs, such as the cost of processing the application, and performing security checks, but also the cost stemming from the prudential requirements imposed on banks, since the capital committed under a credit line diminishes the capital ratios of the bank, which it needs to maintain to ensure against systemic risks. However, the Commission established that all sampled group of companies benefited from credit lines provided free of charge. Therefore, a benefit was conferred to the investigated groups of companies within the meaning of Article 6(d) of the basic Regulation.

(246) Following definitive disclosure, the CCCME claimed that the arrangement and renewal fees do not always apply to large companies, such as producers of MAE, which are in a business relation with large banks. More specifically, it argued that such fees tend to be bilaterally negotiated. In this regard, the CCCME pointed to certain bank websites referring to an ‘agreement’ or ‘discussion’ of the fee to be paid. The CCCME acknowledged, however, that it could not provide evidence on the rate of such negotiated fees due to the confidentiality of credit line agreements. Therefore the Commission could not consider such claim substantiated and rejected it.

(247) As mentioned in recital (144), according to Decision No 40 financial institutions shall provide credit support to encouraged industries.

(248) The Commission considered that since credit lines are intrinsically linked to all types of short-term financing provided to the sampled companies, they should be considered as a form of a preferential financial support by financial institutions to encouraged industries such as the MAE sector. As specified in Section 3.3 above, the MAE sector is among the encouraged industries and is therefore eligible for all possible financial support.

(249) The CCCME claimed that no Chinese economic operator paid any arrangement or renewal fee and therefore considered that such scheme was not specific to the MAE sector.

(250) First, the Commission noted that the website of the Bank of China points to the charging of fees for the existence of credit lines (106). Second, the Commission noted that the CCCME failed to demonstrate that companies in the PRC can equally benefit from the preferential conditions observed as regards the MAE industry. Moreover, as credit lines are intrinsically linked to other types of preferential lending, such as loans, and as they are part of the credit support specifically provided to encouraged industries, the specificity analysis for loans developed in Section 3.6.4.2 was also applicable to credit lines. On this basis, this claim was rejected.

(251) In accordance with Article 6(d)(ii) of the basic Regulation, the Commission considered the benefit conferred on the recipients to be the difference between the amount that they paid as a fee for the opening or the renewal of the credit lines by Chinese financial institutions, and the amount that they would pay for a comparable commercial credit line obtained at an undistorted market rate.

(252) None of the sampled companies paid a fee for their credit line. Similarly, the Commission did not find any in-country credit line fees in previous investigations. Publicly available information seems to suggest that in some cases, credit line charges are levied for companies in China (107), but the level of these fees could not be found. Therefore, the Commission look for an appropriate benchmark fee outside China. The rates for the arrangement fee and for the renewal fee were thus established at 1,75 % and 1,25 % respectively by reference to publicly available data (108).

(253) In principle, the arrangement fee and the renewal fee are payable on a lump sum basis at the time of the opening of a new credit line or the renewal of an existing credit line respectively. However, for calculation purposes, the Commission took into account credit lines which had been opened or renewed before the investigation period, but which were available to the sampled groups during the investigation period and also the credit lines that were opened during the investigation period.

(254) Following definitive disclosure, the CCCME claimed that the arrangement or renewal fees should apply to the average unused credit line balance or outstanding balance of the credit limit on a pro rata temporis basis. In this regard, the CCCME referred to a bank website requesting the payment of an arrangement or renewal fee on the undisbursed amount.

(255) The Commission disagreed. The fee to be paid is not equivalent to an interest rate so that its calculation should not take the duration of the period into account. Furthermore, the Commission considered that the evidence put forward by the CCCME stemmed from different sources not pointing to a common standard behaviour by the banks whereby the claim by the CCCME was insufficiently supported by evidence and hence considered inconclusive.

(256) Following definitive disclosure, Zoomlion group observed that the calculation of the subsidy amount for this scheme in relation to the exporting producer of MAE was different than the same calculation made for the mother company. Namely, in the first case the Commission did not apportion the total fee payable to the IP, based on the days of each credit line falling with the IP.

(257) The Commission rejected this claim. The Commission considered that the arrangement fee and the renewal fee are payable on a lump sum basis as a fee at the time of the opening of a new credit line or the renewal of an existing credit line respectively, regardless of the duration of the credit line. The Commission also noted, however, that the methodology for calculating the subsidy amount for the mother company was not in line with this principle. This was corrected accordingly so that the method described above was applied to all credit lines and companies. On 21 March 2025. The corrected calculations were re-disclosed to Zoomlion group.

(258) Following the additional disclosure, Zoomlion group reiterated its claim that the duration of the credit line should be taken into account for the calculation of the benefit. It referred to recital (245) and the nature of the fees (administrative costs), and to corporate finance literature (109) whereby ‘a commitment fee is a fee that is charged by a lender to a borrower to compensate the lender for keeping a credit line open. The fee also secures a lender’s promise to provide the credit line on the agreed terms at specific dates, regardless of the conditions of the financial markets. The fee compensates the lender for the risks associated with an open credit line despite uncertain future market conditions and the lender’s current inability to charge interest on the principal’, arguing that the duration of the credit line and its amount had an impact on the risk borne by the financial institution. Zoomlion group also referred to the fact that the Commission had considered credit lines opened before and during the investigation period in its subsidy calculation and claimed that the existence of these ‘parallel’ credit lines called for the use of the duration of the credit lines for the calculation of the subsidy amount. Zoomlion group also considered that credit lines were a financial instrument similar to term loans and bank acceptance drafts whereby the benefit could be calculated taking the duration into account.

(259) Although Zoomlion group submitted these additional comments outside the deadline foreseen in this regard; i.e. Zoomlion was not invited to provide comments on issues not concerned by the additional disclosure, the Commission considered such comments. According to recital (245) and the literature mentioned by Zoomlion group, the primary reason for financial institutions to charge a fee lies with the administrative cost, for opening or keeping open a credit line regardless of the financial conditions on a market. Such transactions bear a risk for the financial institutions but it is disconnected from the duration of the credit line which makes funds available to an economic operator on which it will normally pay interests when borrowing funds for a given duration through various credit instruments such as loans, letters of credit or bank acceptance drafts. As far as the amount subject to the credit line is concerned, the Commission did indeed consider such amount in its calculations. As far as ‘parallel’ credit lines are concerned, the Commission’s analysis revealed that there were no parallel or consecutive credit lines with the same financial institution whereby all credit lines, for which a benefit was calculated, could be considered as stand-alone credit lines which conferred a benefit upon Zoomlion group in distinct periods within the investigation period, regardless of when they were granted. The Commission also considered that the extreme examples described by Zoomlion group were not representative of its actual situation. The Commission also considered that credit lines are a distinct financial instrument from terms loans or bank acceptance drafts. Where credit lines are a pre-requisite or framework agreement for obtaining financing, term loans or bank acceptance drafts are the actual financing instruments. On these grounds, these claims were rejected.

(260) Zoomlion group also claimed that the fees paid upon the granting of credit lines should be deducted from the calculation of the subsidy amount. The Commission noted that accepting such a request would not change the subsidy rate since the fees paid were insignificant and did not apply to all credit lines granted.

(261) Bank acceptance drafts are a financial product aimed at developing a more active domestic money market by broadening credit facilities. It is a form of short-term financing that might ‘reduce fund cost and enhance capital efficiency’ of the drawer (110). In addition, as stated by the PBOC on its website, ‘the bank acceptance draft can guarantee the establishment and performance of the contract between the buyer and the seller, as well as promote the capital turnover via the intervention of Bank of China’s credit’ (111). In addition, on its website DBS Bank advertises bank acceptance drafts as a mean to ‘improve working capital by deferring payments’ (112). The general conditions for the issuance and use of bank acceptances are set out in the Negotiable Instruments Law of the People’s Republic of China (113).

(262) The Commission already established in previous investigations that bank acceptance drafts are largely used as a means of payment in commercial transactions as a substitute to a money order thus, facilitating the cash turnover and the working capital of the drawer (114).

(263) Indeed, bank acceptance drafts can only be used to settle genuine trade transactions, and the drawer must produce sufficient evidence in that respect, e.g. through purchase/sales agreement, invoice and delivery order etc. Bank acceptance drafts may be used as a standard means of payment in purchase agreements together with other means such as remittance or money order.

(264) The bank acceptance draft is drawn by the applicant (the drawer, which is also the buyer in the underlying commercial transaction) and accepted by a bank. By accepting the draft, the bank accepts to make unconditional payment of the amount of money specified in the draft to the payee/bearer on the designated date (the maturity date).

(265) In general, the bank acceptance contracts contain the list of the transactions covered by the amount of the draft with indication of the payment due date with the supplier and the maturity date of the bank acceptance draft.

(266) The Commission also established that bank acceptance drafts in China are issued within the framework of a bank acceptance draft agreement specifying the identity of the bank, suppliers and buyer, the obligations of the bank and the buyer and detailing the value per supplier, the payment due date agreed with the supplier and the maturity date of the bank acceptance draft.

(267) The Commission also established that credit line agreements generally list bank acceptance drafts as possible use of the finance limit along with other short-term financial instruments such as working capital loans.

(268) Depending on the conditions established by each bank, the drawer might be required to make a small deposit in a dedicated account, make a pledge and pay acceptance commission. In any event, the drawer is obliged to transfer the full amount of the bank acceptance draft to the dedicated account at the latest at the maturity date of the bank acceptance draft.

(269) Once accepted by the bank, the drawer endorses the bank acceptance draft and transfers it to the payee, who is also the supplier in the underlying commercial transaction, as a payment of the invoice. Consequently, the payment obligation of the buyer (drawer) towards the supplier (payee) is cancelled. A new payment obligation of the buyer is created towards the accepting bank for the same amount (the drawer has the obligation to pay the bank in cash before the maturity of the bank acceptance draft). This was further confirmed by the GOC during the verification visit in a previous investigation (115), namely that once the company pays the supplier with the bank acceptance draft, they no longer have an obligation in relation to the supplier but to the bank because the one who requested the bank acceptance draft to be issued will need to pay the bank in full on maturity date. Therefore, the issuance of a bank acceptance drafts has the effect to replace the obligation of the drawer towards its supplier by an obligation towards the bank.

(270) The maturity of bank acceptance drafts varies depending on the conditions set by each bank and can go up to 1 year.

(272) The issuance date of the bank acceptance draft generally corresponds to the payment due date agreed with the supplier but can also be a date prior or posterior to the payment due date. The investigation found that, as far as the sampled companies are concerned, the issuance date was generally on or before the due date of the payment with the supplier and in some cases even after the payment due date. The Commission established that the maturity of the bank acceptance drafts of the sampled companies is in most cases from 1 month up to 12 months after the payment due date of the invoice.

(273) Regarding the accounting treatment of bank acceptance drafts, they are recognised as liabilities to the bank in the accounts of the drawers, i.e. the sampled exporting producers. The Credit Reference Center of the People’s Bank of China (‘CRCP’) recognises bank acceptance drafts as ‘unsettled credit’ provided by banks at the same level as loans, letters of credit or trade financing. It should also be noted that the CRCP is fed by the financial institutions, which grant various types of loans, and that such financial institutions have thus recognised bank acceptance drafts as liabilities to them. Furthermore, the bank acceptance agreements collected during the investigation provide that, should the buyer not make the full payment on the expiry date of the bank acceptance drafts, the bank would treat the amount unpaid as an overdue loan to the bank.

(274) From a cash point of view, the instrument therefore de facto grants the drawer a deferred due date of payment because the actual cash payment of the transaction amount occurs at the maturity of the bank acceptance draft and not at the moment when the drawer had to pay its supplier. In the absence of such a financial instrument, the drawer would either use its own working capital, which has a cost, or contract a short-term working capital loan with a bank in order to pay its suppliers, which also has a cost. In fact, by paying with bank acceptance drafts, the drawer uses the supplied goods or services for a period of 1 month to 1 year but without advancing any cash and without bearing any cost.

(275) As an illustration of the use of bank acceptance drafts as a substitute of short-term loans, the Commission established that some sampled companies barely had any loans, i.e. Dingli group. However, the bank acceptance drafts issued by these companies during the investigation period represented a significant part of their liabilities.

(276) Following definitive disclosure, the CCCME considered that bank acceptance drafts are not a form of short-term financing on the grounds that the MAE producers had to reimburse banks on the agreed maturity date of the bank acceptance.

(277) The Commission disagreed with the CCCME for the reasons mentioned in recitals (269) to (274). The use of a bank acceptance draft transfers the obligation to pay the supplier to the bank whereas the MAE producer has a payment obligation towards the bank as recognised in its accounting books and by the CRCP. Moreover, depending on the terms of the bank acceptance draft agreement, the original payment term to the supplier is mostly extended by several months by the bank. Eventually, with the exception of a minimal fee, such short to medium term loan is given to the MAE producers at no cost. On this ground, this claim was rejected.

(278) Under normal market circumstances (116), as a financial instrument, bank acceptance drafts would imply a cost of financing for the drawer. The investigation showed that all the sampled companies used bank acceptance drafts during the investigation period and only paid a commission for the acceptance service provided by the bank, which was in general 0,05 % of the face value of the draft (117). However, none of the sampled companies bore a cost for the financing via bank acceptance drafts by deferring the cash payment of the supply of goods and services. Therefore, the Commission considered that the investigated companies benefitted from financing in the form of bank acceptance drafts for which they did not bear any cost.

(279) Considering the above, the Commission concluded that the bank acceptance system put in place in the PRC provided all sampled exporting producers a free financing of their current operations, which conferred a countervailable benefit as described in recitals (287) to (291) below, in accordance with Article 3(1)(a)(i) and 3(2) of the basic Regulation.

(280) This is in line with previous investigations, where the Commission established (118) that bank acceptance drafts effectively have the same purpose and effects as short-term working capital loans, as they are used by companies to finance their current operations instead of using short-term working capital loans, and that consequently, they should bear a cost equivalent to a short-term working capital loan financing.

(281) Concerning specificity, as mentioned in recital (144) according to Decision No 40, financial institutions shall provide credit support to encouraged industries.

(282) The Commission considered that bank acceptance drafts are another form of preferential financial support by financial institutions to encouraged industries such as the MAE sector. Indeed, as specified in Section 3.3 above, the MAE sector is among the encouraged industries and is therefore eligible for all possible financial support. Moreover, similar to credit lines, bank acceptance drafts are intrinsically linked to other types of preferential lending such as loans, and as they are part of the credit support specifically provided to encouraged industries, so the public body analysis and the specificity analysis as developed in Sections 3.6.1.1 to 3.6.1.5, as well as Section 3.6.2.2 above for loans is equally applicable.

(283) Furthermore, in 2020, the CBIRC issued a notice in which it states that in order to strengthen credit support to downstream enterprises in core enterprises, banking financial institutions may provide credit support for downstream enterprises to obtain goods and pay for goods by opening bank acceptance bills, domestic letters of credit, advance financing, etc. Bank acceptance drafts, as a form of financing, are thus part of the preferential financial support system by financial institutions to encouraged industries, such as the MAE industry.

(284) No evidence was provided that any undertaking in the PRC (other than within encouraged industries) can benefit from bank acceptance drafts under the same preferential terms and conditions.

(285) Following definitive disclosure, the CCCME claimed that bank acceptance drafts were used by almost all business operators in China and hence not specific. It added that the Commission had failed to demonstrate specificity.

(286) The Commission considered that this claim was unsubstantiated. More particularly, there was no evidence submitted to demonstrate that any undertaking in the PRC (other than within encouraged industries) can benefit from bank acceptance drafts under the same preferential terms and conditions observed as regards the MAE industry. On these grounds, this claim was rejected.

(287) For the calculation of the amount of the countervailable subsidy, the Commission assessed the benefit conferred on the recipients during the investigation period.

(288) As mentioned in recital (275), the Commission found that the sampled exporting producers used bank acceptance drafts to address their needs for short-term financing without paying a remuneration.

(289) The Commission thus concluded that bank acceptance drawers should pay a remuneration for the period of financing. The Commission considered that the period of financing started on the date of the issuance of the bank acceptance draft and ended on the maturity date of the bank acceptance draft. Regarding bank acceptance drafts issued before the investigation period and bank acceptance drafts with a maturity date after the end of the investigation period, the Commission calculated the benefit only for the period of financing covered by the investigation period.

(290) In accordance with Article 6(b) of the basic Regulation, considering that bank acceptance drafts are a form of short-term financing and that they effectively have the same purpose as short-term working capital loans, the Commission considered that the benefit thus conferred on the recipients is the difference between the amount that the company had actually paid as remuneration of the financing by bank acceptance drafts and the amount that it should pay by applying a short-term financing interest rate.

(291) The Commission determined the benefit resulting from the non-payment of a short-term financing cost. The Commission considered, as established in previous investigations (119), that bank acceptance drafts should bear a cost equivalent to a short-term loan financing. Therefore, the Commission applied the same methodology as to short-term loans financing denominated in RMB, described in Section 3.6.4 above.

(292) Following definitive disclosure, the CCCME claimed that the bank acceptance drafts should not be considered as a loan for which an interest rate benchmark should be used, but rather considered as a payment guarantee in return for a fee/commission. In this regard, it referred to the New York Federal Reserve Bank website (120) which makes an analogy between bank acceptance drafts and bank guarantees.

(293) The Commission disagreed. Considering the nature of the bank acceptance drafts, which provide for an extended payment term through a free short-term loan, the Commission considered that the benefit should be calculated based on an undistorted interest rate benchmark. As far as the reference to the New York Federal Reserve Bank website is concerned, the Commission first noted that the referred document is outdated (1981). Also, the Chinese bank acceptance drafts system differs from that described there, in the sense that payment terms are extended through the use of bank acceptance drafts. On these grounds, this claim was rejected.

(294) Following definitive disclosure, Zoomlion group observed that the Commission had wrongly calculated a subsidy amount for bank acceptance drafts receivables. The Commission accepted this claim. The corrected calculations were re-disclosed to Zoomlion group.

(295) Furthermore, in its comments following definitive and additional disclosures, Zoomlion claimed that the benefit relating to the bank acceptance drafts should be based on the draft amount net of the guarantees provided by Zoomlion group on the grounds that the net amount reflects the actual amount of the financing. It also reiterated that the fee paid by Zoomlion group on bank acceptance drafts should be deducted from the calculation of the benefit amount.

(296) The Commission noted that the provision of a guarantee in the form of a cash deposit or other form of guarantee is common practice and that financial institutions do not calculate the interest to be charged based on the value of the loan net of the cash deposit or other guarantee provided by the lender. The Commission also noted that the fee paid by Zoomlion group did not qualify as an interest charge. It is rather an administrative fee relating to the issuance of the bank acceptance draft. On these grounds these claims were rejected.

(297) One of the sampled groups, Zoomlion, benefited from preferential financing in the form of bonds.

— Law of the People’s Republic of China on Securities (version 2014) (‘Securities Law’) (121);

— Administrative Measures for the Issuance and Trading of Corporate Bonds, Order of the China Securities Regulatory Commission No 113, 15 January 2015;

— Regulation on the Administration of Corporate Bonds, issued by the State Council on 18 January 2011;

— Measures of the Administration of Debt Financing Instruments of Non-financial Enterprises on the Interbank Bond Market Issued by the People’s Bank of China, Order of the People’s Bank of China [2008] No 12, 9 April 2008.

(298) In line with the regulatory framework, bonds cannot be issued or traded freely in China. The issuance of each bond must be approved by various governmental authorities, such as the PBOC, the NDRC or the CSRC, depending on the type of bond and the type of issuer. In addition, according to the Regulations on the Administration of Corporate Bonds, there are annual quotas for the issuance of corporate bonds.

(299) Furthermore, according to Article 16 of the Securities Law applicable during the IP, a public offering of corporate bonds should satisfy the following requirements: ‘the usage purpose of the proceeds shall comply with State industrial policies […]’ and ‘the proceeds from a public offering of corporate bonds shall be used for approved purpose(s) only’. Article 12 of the Regulations on the Administration of Corporate Bonds reiterates that the purpose of the raised funds must comply with the industrial policies of the State. The issuance of bonds under such conditions targets an encouraged industry such as the MAE industry and corresponds with the practice of financial institutions to support those industries (122).

(300) According to Article 16(5) of the Securities Law, ‘the coupon rate of the corporate bonds shall not exceed the coupon rate stipulated by the State Council’. In addition, Article 18 of the Regulations on the Administration of Corporate Bonds provides further details by stating that, ‘the interest rate offered for any corporate bonds shall not be higher than 40 % of the prevailing interest rate paid by banks to individuals for fixed-term savings deposits of the same maturity’.

(301) Furthermore, Article 18 of the Administrative Measures for the Issuance and Trading of Corporate Bonds stipulates that only certain bonds complying with strict quality criteria, such as an AAA credit rating, may be issued in a public manner to public investors or be issued in a public manner to qualified investors only at the sole discretion of the issuer. The corporate bonds that fail to meet these standards can be issued in a public manner only to qualified investors. Therefore, it results that most corporate bonds are issued to qualified investors which have been approved by the CSRC and which are Chinese institutional investors.

(302) Though the legal and regulatory framework of this alternative source of funds was clearly identified, the GOC refused to provide any information in this regard. Findings were thus based on facts available under Article 28 of the basic Regulation.

(303) Furthermore, as an encouraged industry under the ‘Guiding Catalogue for Industry Restructuring’, the MAE industry is entitled to credit support by financial institutions based on Decision No 40. The fact that the bonds issued by the sampled companies bear a low interest rate; i.e. an interest rate close or below the LPR, is a strong indication that financial institutions, which are the major investors in these bonds, are obliged to provide ‘credit support’ to these companies and take into account other considerations than commercial considerations when taking the investment or financing decision, such as government policy objectives. Indeed, an investor operating in market conditions would be more sensitive to the financial return on the investment and would most probably not invest in corporate bonds bearing very low interest rates. This is especially the case for financial institutions, as the return of these bonds is close to or lower than the rate at which they can obtain funds themselves from other financial institutions.

(304) Moreover, the conclusions reached by the Commission about the financial situation of the four groups of exporting producers in Section 3.6.4 above in terms of their liquidity and solvency profiles further indicate that investors operating in market conditions would not invest in financial instruments such as these groups’ bonds, offering low financial returns, while the issuer presents high liquidity and solvency risks. Therefore, in the Commission’s view only investors having motivations other than a financial return on their investment, such as compliance with the legal obligation to provide financing to companies in encouraged industries, would make such an investment.

(305) According to the China bond market insight 2022 by Bloomberg, the bonds listed in the interbank bond market account for 88 % of the total trading volume of bonds (123). According to the same study, most of the investors are institutional investors, including financial institutions. In particular, commercial banks represent 57 % of the investors and policy banks represent 3 % (124). Therefore, investors buying bonds are mainly Chinese banks, including State-owned banks.

(306) On the basis of the above, the Commission considered that there is a body of corroborating evidence, according to which a major proportion of the investors in the corporate bonds issued by the sampled companies, are financial institutions which have a legal obligation to provide credit support to MAE producers.

(307) As described in recital (299), Article 16 of the Securities Law and Article 12 of the Regulations on the Administration of Corporate Bonds require that a public offering of corporate bonds complies with the industrial policies of the State. This has the effect that bonds can only be issued for purposes that are in line with the targets of the planning of the GOC regarding encouraged industries. The institutional investors, which are, as shown in recital (305), to a large extent commercial banks and policy banks, have to follow the policy orientations laid down in Decision No 40, which read together with the Guiding Catalogue for Industry Restructuring, provides for specific treatment of certain projects within certain encouraged industries, such as the MAE industry. The beneficial treatment to all of the sampled groups resulted in the decision to invest in bonds issued with an interest rate that does not reflect market-based criteria.

(308) Furthermore, as described in Section 3.6.1 above, the financial institutions are characterised by a strong State presence, and the GOC has the possibility to exercise a meaningful influence on them. The general legal framework in which these financial institutions operate is also applicable to bonds.

(309) In recital (164) above, the Commission concluded that State-owned financial institutions are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation and that they are in any event considered entrusted or directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation. In Section 3.6.2 above, the Commission concluded that private financial institutions are also entrusted and directed by the government.

(310) The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete issuances of bonds. It therefore examined the overall legal environment as set out above in recital (298) in combination with the concrete findings of the investigation.

(311) The Commission found that the bonds were issued with an interest rate below the level that should have been expected given the companies’ financial and credit risk situation, including below the risk-free reference rate published by the NIFC as referred to in recital (316) below.

(312) In practice, interest rates on bonds are influenced by the credit rating of the company, similar to loans. However, the Commission concluded in recital (180) that the local credit rating market is distorted and credit ratings are unreliable.

(313) In light of the above considerations, the Commission concluded that the Chinese financial institutions followed the policy instructions laid down in Decision No 40 and in the relevant guidelines for bonds by providing preferential financing to companies pertaining to an encouraged industry and thus acted either as public bodies within the meaning of Article 2(b) of the basic Regulation or as bodies which are entrusted or directed by the government within the meaning of Articles 3(1)(a)(iv) of the basic Regulation.

(314) By organising the issuance of a bond with an interest rate below the market rate corresponding to the actual risk profile of the issuer, as determined in recital (180) above, and by accepting to invest in such bond, the financial institutions provided a benefit to the sampled producer.

(315) The Commission considered that the preferential financing through bonds is specific within the meaning of Article 4(2)(a) of the basic Regulation as the bonds cannot be issued without approval from government authorities, and the Securities Law states that the issuance of bonds must comply with the State’s industrial policies. As already mentioned in recital (80) the MAE industry is regarded as an encouraged industry in the 14th Five-Year Plan (14 FYP) for the development of the construction industry, released by the China Construction Machinery Association (CCMA) in 2021.

(316) Since bonds are in essence another type of debt instrument, in principle similar to loans, and since the calculation methodology for loans is already based on a basket of bonds, the Commission decided to follow the calculation methodology for loans as described above in Section 3.6.4. This means that the relative spread between US AA corporate bonds and US B corporate bonds with the same duration is applied to the PBOC Loan Prime Rate to establish a market-based interest rate for bonds, which is then compared with the actual interest rate paid by the company in order to determine the benefit.

(317) Following definitive disclosure, Zoomlion group observed that the Commission had included the same bond several times in the calculation of the subsidy amount for the mother company.

(318) The Commission accepted this claim and eliminated the interest benefits counted multiple times for the same bonds. The corrected calculations were re-disclosed to Zoomlion group.

(319) Following additional disclosure, Zoomlion group made further comments relating to the calculation of the benefits. Such claims were accepted and the calculation was adapted accordingly.

(320) The Commission established that all sampled groups of exporting producers benefited from preferential financing in the form of credit lines, bank acceptance drafts and bonds. In view of the existence of a financial contribution, a benefit to the exporting producers and specificity, the Commission considered these types of preferential financing a countervailable subsidy.

(321) As a result of the corrections in the calculation of the subsidy amounts related to credit lines, bank acceptance drafts and corporate bonds, explained in recitals (256) to (260), (294) to (296) and (317) to (360) respectively, the total subsidy rate for other types of preferential financing increased for Zoomlion Group from 4,96 % to 5,46 %.

(323) The complainant alleged that Sinosure provided preferential export credit insurance, on a concessional basis to encouraged industries, such as the MAE industry. On its general website, Sinosure states that it promotes Chinese exports of goods, especially the exporting of high-tech products. According to a study undertaken by the Organisation for Economic Co-operation and Development (‘OECD’), the Chinese high-tech industry, of which the MAE industry is part, received 21 % of the total export credit insurance provided by Sinosure (125). Furthermore, Sinosure has taken an active role in fulfilling the ‘Made in China 2025’ initiative, guiding enterprises to use national credit resources, carrying out scientific and technological innovation and technological upgrading, and helping ‘going out’ enterprises become more competitive in the global market (126).

(324) The sampled groups of companies had outstanding export insurance agreements with Sinosure during the investigation period.

(325) As mentioned in recital (102) above, Sinosure failed to provide information concerning the investment income reported in its annual report, evidence concerning issues relating to its financial statement such as operating expenses, revenues, investment incomes, overall sum insured, sum insured of the machinery industry sector; information on its articles of association, information concerning sampled producers despite the existence of relevant company authorizations and supporting information concerning the independence of its credit risk assessment system.

(326) Therefore, the Commission had to complement the information provided by facts available.

(327) According to information provided in previous anti-subsidy investigations (129) and according to Sinosure’s website (130), Sinosure is a State-owned policy-oriented insurance company established and supported by the State to support the PRC’s foreign economic and trade development and cooperation. The company is 100 % owned by the State. It has a board of directors and a board of supervisors. The Government has the power to appoint and dismiss the company’s senior managers. Based on this information, the Commission concluded that there are formal indicia of government control with respect to Sinosure.

(328) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of Sinosure with respect to the MAE industry.

(329) According to the Notice on the issuance of the 2006 edition of China’s High-tech Products Export Catalogue No 16, ‘products included in the 2006 edition of the Export Catalogue may enjoy preferential policies granted by the State for the export of high-tech products’. The Export Catalogue of High-Tech Products specifically mentions construction machineries (131)

(330) The 14th Five-Year Plan (14 FYP) for the development of the construction industry, released by the China Construction Machinery Association (CCMA) in 2021 explicitly listed in the annex of this plan, MAE as an encouraged category of industry products. Specifically, aerial work machinery and emergency equipment are mentioned under this classification on page 3 of the annex. This inclusion underscores the strategic emphasis on promoting advanced construction machinery and highlights the growing importance of MAE within the industry.

(331) Furthermore, according to the Notice on the Implementation of the Strategy of Promoting Trade through Science and Technology by Utilising Export Credit Insurance (132), Sinosure should increase its support for key industries and products by strengthening its overall support for the export of high and new technology products, including ‘information and communications’ products. It should treat high and new technology industries, such as the MAE industry, listed in the China’s High-tech Products Export Catalogue, as its business focus and provide comprehensive support in terms of underwriting procedures, approval with limits, claims processing speed and rate flexibility. With regard to rate flexibility, it should give products the maximum premium rate discount within the floating range provided by the credit insurance company. Furthermore, the Annual Report of Sinosure for 2022 (133) states that ‘Special support measures for the [] engineering machinery sectors were formulated.’. The Annual Report of Sinosure for 2023 (134) also provides that: ‘The Board of Supervisors played the advising role by conducting dedicated researches on [], business demand of engineering machinery sector’.

(332) On this basis, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on such normative framework to exercise control in a meaningful way over the conduct of Sinosure.

(333) The Commission also sought concrete proof of the exercise of control in a meaningful way based on concrete insurance agreements. During the verification visit, the GOC maintained that in practice Sinosure’s premiums were market-oriented and based on risk assessment principles. However, no specific examples with respect to the MAE industry or the sampled companies were provided even though the sampled groups had provided relevant authorizations allowing access to relevant documentation.

(334) In the absence of concrete evidence, the Commission therefore examined the concrete behaviour of Sinosure about the insurance provided to the sampled companies. This behaviour contrasted with their official stance, as they were not acting based on market principles.

(335) After comparing the total claims paid with the total insured amounts, based on the data in the Sinosure’s Annual Report for 2023 (135), the Commission concluded that on average Sinosure would need to charge 0,29 % of the insured amount as a premium to cover the cost of the claims (without even taking into account overhead expenses).

(336) In addition, the Commission noted that Sinosure had booked a net loss from its operating activities in 2022 and 2023; i.e. the provision of export credit insurance, and that it would be loss making overall if it did not book significant revenues from investment income. As mentioned in recital (102), Sinosure failed to provide information on such investment income.

(337) Therefore, the Commission concluded that the legal framework set out above is being implemented by Sinosure in the exercise of governmental functions with respect to the MAE sector. Sinosure acted as a public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law. Furthermore, the sampled exporting producers received a benefit, since the insurance was provided at rates below the minimum fee needed for Sinosure to cover its operational costs.

(338) The Commission also determined that the subsidies provided under the export insurance programme are specific, because they could not be obtained without exporting and are thus export contingent within the meaning of Article 4(4)(a) of the basic Regulation.

(339) As Sinosure held a predominant market position during the investigation period, the Commission could not find a market-based domestic insurance premium. Therefore, in line with previous anti-subsidy investigations, the Commission thus used the most appropriate external benchmark, for which information was readily available, i.e. the premium rates applied by the Export-Import Bank of the United States of America to non-financial institutions for exports to OECD countries.

(340) The Commission considered that the benefit conferred on the recipients is the difference between the amount that the company had actually paid as insurance premium and the amount that it should have paid by applying the external benchmark premium rate mentioned in recital (291).

(341) Sinoboom and Zoomlion benefited from this scheme, and even though their benefit was negligible, it was accounted for in the calculation of their global subsidy margin. However, at a more granular level, the determined subsidy margin for them was set at 0,00 % due to rounding.

(343) The grants were awarded by national, provincial, city, or district government authorities. The level of legal detail for the particular law under which these benefits were granted, if there was any legal basis for them at all, was not disclosed to the Commission. As mentioned in recital (101), the GOC also failed to provide such information.

(344) The Commission found that all four sampled groups of companies benefitted from a variety of grant programmes. Given the large amount of grants that the Commission found in the books of the sampled groups of companies, only a summary of the key findings is presented in this Regulation. Evidence of the existence of numerous grants and the fact that they had been granted by various levels of the GOC was initially provided by the sampled groups and confirmed by their financial statements and during the verification visits. Detailed findings on these grants were provided to the individual companies in their specific disclosure documents.

(345) These grants constituted subsidies within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation, as a transfer of funds from the GOC in the form of grants to the sampled groups of companies took place that conferred a benefit equal to the amount of the grant.

(346) The Commission assessed all the grants received by the sampled companies and found that not all were specific to the production of MAE. However, the grants related to technology, innovation and development, the purchase of fixed assets, and industrial support and promotion were considered to be specific within the meaning of Articles 4(2)(a) and 4(3) of the basic Regulation given that, they appear to be limited to certain companies, certain industries, or specific projects in specific regions.

(347) Furthermore, these grants did not meet the non-specificity requirements of Article 4(2)(b) of the basic Regulation, given that the eligibility conditions and the actual selection criteria for enterprises to be eligible are not transparent, not objective and do not apply automatically.

(348) The benefit was calculated as the amount received in the IP, or allocated to the investigation period where the amount was depreciated over the useful life of the fixed asset to which the grant received before the investigation period was related. However, based on the Guidelines for the Calculation of the Amount of Subsidy in Countervailing Duty Investigations (136), non-recurring subsidies received in the IP, which amounted to less than 1 % ad valorem, were expensed, even when they were linked to the purchase of fixed assets. This allocation method is fully in line with the WTO report from the informal group of experts which provides that grants for which the purpose is for the purchase of fixed assets should be allocated while ‘it was deemed appropriate, primarily from the standpoint of administrative convenience, that very small subsidies be expensed regardless of type or other considerations. A level of less than 0,5 per cent of sales for any individual subsidy is recommended for this threshold’ (137).

Government provision of land use rights for less than adequate remuneration

(350) All land in the PRC is owned either by the State or by a collective, constituted of either villages or townships, before the land’s legal or equitable title may be patented or granted to corporate or individual owners. All parcels of land in urbanised areas are owned by the State and all parcels of land in rural areas are owned by the villages or townships.

(351) Pursuant to the PRC Constitution and the Land Law, companies and individuals may however purchase ‘land use rights’ (‘LUR’). For industrial land, the leasehold is normally 50 years, renewable for a further 50 years.

(352) The GOC indicated that LUR are neither goods (tangible or movable personal property other than money (138)) nor services, thus consequently the alleged programme does not constitute ‘provisions of goods or services at LTAR’ as per Article 3(1)(a)(iii) of the basic Regulation.

(353) The Commission disagreed with this allegation. First, the Manual on Statistics of International Trade in Services (‘the Manual’) on which the GOC relies to allege that LUR are not services, contains a category relating to ‘… government services not included elsewhere’ which are identified as main components of standard services. In addition, irrespective of the legal means by which the land, is acquired, it remains that the provision of LURs amounts in fine to the provision of land. In this regard, the WTO Dispute Settlement Body already confirmed that land is considered an ‘immovable’ good and that Article 1.1(a)(1)(iii) of the SCM Agreement may apply (139). Thus, provision of LUR is a provision of goods or services.

(354) Following definitive disclosure, the GOC indicated that more specific definition of the ‘government services not included elsewhere’ provided in the Manual proved that this category cannot include LURs. On that basis the GOC requested termination of the investigation into this programme.

(355) The Commission noted that irrespective of the above point, the second argument presented in the recital (353) remained valid: ‘the provision of LURs amounts in fine to the provision of land’. Therefore, Commission upheld its position that the provision of LUR was a provision of ‘goods and services’ and rejected the claim of termination.

(357) According to Article 10 of the Provision on Assignment of State-owned Construction Land Use Right through Bid Invitation, Auction and Quotation, local authorities set land prices according to the urban land evaluation system, which is updated every three years, and the government’s industrial policy.

(358) In previous investigations (147), the Commission found that prices paid for LURs in the PRC were not representative of a market price determined by free market supply and demand, since the auctioning system was found to be unclear, non-transparent and not functioning in practice, and prices were found to be arbitrarily set by the authorities. As mentioned in the previous recital, the authorities set the prices according to the urban land evaluation system, which instructs them among other criteria to consider also industrial policy when setting the price of industrial land.

(359) The above evidence contradicts the claims of the GOC that the prices paid for LUR in the PRC are representative of a market price, which is determined by free market supply and demand.

(360) Following definitive disclosure, the GOC reiterated its claims that LURs price formation mechanism and LURs market in China were clear, transparent and functional. The GOC also claimed that it thoroughly explained during the verification process auctioning system and price evaluation system. The GOC claims that the Commission should update and revise its view with respected to LURs market instead of relying on outdated findings of the previous investigations.

(361) The Commission, however, noted that the findings made in previous and recent anti-subsidy investigations were adequately substantiated and relate to the same subsidy programmes as those mentioned in the present investigation. The Commission relied in each of these prior investigations on a similar legal framework governing land use rights in the PRC and notably on the fact that local authorities set land prices according to the urban land evaluation system and the government’s industrial policy. This investigation did not show any noticeable change in this respect and GOC failed to provide evidence showing a discontinuation of this policy.

(362) The Commission also recalled that the GOC failed to provide information with regard to the acquisition of land by the producers/exporters of MAE. The GOC was unable to explain how in some circumstances companies were able to receive land for free. As explained in recital (106) those failures were among the points raised in the Article 28 Letter.

(363) Thus, on the basis of the information available in this investigation, the Commission rejected those claims.

(364) The findings of this investigation show that the situation concerning acquisition of LUR in the PRC is non-transparent and the prices were arbitrarily set by the authorities.

(365) Therefore, the provision of land-use rights by the GOC should be considered a subsidy within the meaning of Article 3(1)(a)(iii) and Article 3(2) of the basic Regulation in the form of provision of goods, which confers a benefit upon the recipient companies. As explained in recitals (350) to (351) and (357) to (359) above, there is no functioning market for land in the PRC and the use of an external benchmark (see recital (369)) demonstrates that the amount paid for land-use rights by the sampled exporting producers is well below the normal market rate.

(366) In the context of preferential access to industrial land for companies belonging to certain industries, the Commission noted that the price set by local authorities has to take into account the government’s industrial policy, as mentioned above in recital (358). Within this industrial policy, the MAE as part of part of the construction industry is listed as an encouraged industry. In addition, according to Decision No 40 of the State Council, public authorities shall take into account ‘The Guiding Catalogue of the Industrial Restructuring’ and the industrial policies when providing land. Article XVIII of Decision No 40 makes clear that industries that are ‘restricted’ will not have access to land use rights. It follows that the subsidy is specific under Article 4(2)(a) and 4(2)(c) of the basic Regulation because the preferential provision of land is limited to companies belonging to certain industries, in this case the MAE industry, and government practices in this area are unclear and non-transparent.

(367) As in previous investigations (148) and in accordance with Article 6(d)(ii) of the basic Regulation, land prices from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (‘Chinese Taipei’) were used as an external benchmark (149). The benefit conferred on the recipients is calculated by taking into consideration the difference between the amount actually paid by each of the sampled exporting producers (i.e., the actual price paid as stated in the contract and, when applicable, the price stated in the contract reduced by the amount of local government refunds/grants) for land use rights and the amount that should normally have been paid on the basis of the Chinese Taipei benchmark.

(369) Following the methodology applied in previous investigations (150), the Commission used the average land price per square metre established in Chinese Taipei corrected for inflation and GDP evolution as from the dates of the respective LUR contracts. The information concerning industrial land prices as of 2015 was retrieved from the website of the Industrial Bureau of the Ministry of Economic Affairs of Taiwan (151). For the previous years, the prices were corrected using the inflation rates and evolution of GDP per capita at current prices in USD for Chinese Taipei as published by the IMF for 2015.

(370) The GOC claimed that the above benchmark is not correct as the Commission is comparing the price for land ownership in Chinese Taipei with the price of land use rights for the limited duration in the PRC.

(371) In this respect, the Commission noted that the selection of Chinese Taipei as a benchmark was based on the examination of several factors listed in recital (368) above. The Commission considered however, that even if there were certain differences in the market conditions between land use rights in mainland China and sale of land in Chinese Taipei, these would not be of such nature to invalidate the choice of Chinese Taipei as a valid benchmark. The Commission could not identify during the course of the investigation any other adequate benchmark or adjustment method that would adequately reflect these differences in the market conditions.

(372) Following definitive disclosure, the GOC reiterated its position that the price of the land ownership cannot be a benchmark for the land use rights. However, no new arguments were presented which would invalidate the position of the Commission as expressed in recitals (368) and (371). The Commission also noted that the GOC was unable to present a reliable benchmark that would reflect the difference between land use rights and property rights. Therefore, this argument was rejected.

(373) Following definitive disclosure, CCCME claimed that the Commission’s choice of land prices in Chinese Taipei as benchmark was inappropriate in view of substantial difference of level of economic development and GDP per capita between Chinese Taipei and the PRC (which is even bigger if only Hunan province, where the production of MAE is mostly located, is taken for comparison). This difference was even more substantial in the past where LURs were actually obtained by the MAE producers. CCCME observed also that adjustments done to the benchmark based on the inflation and GDP evolution were not appropriate, as the correction indexes reflect changes in Chinese Taipei, which is not comparable with the respective developments in the PRC. Finally, the CCCME claimed that the Commission did not disclose the calculation details of the benchmark and thus deprived the CCCME and the companies it represented of the rights to understand how the subsidy amount was calculated.

(374) As explained in recital (371), the Commission relied on the benchmark that was considered the most appropriate, even considering differences between the market conditions. The Commission could not identify during the course of the investigation any other adequate benchmark or adjustment method that would adequately reflect these differences in the market conditions. Therefore, this argument was rejected.

(375) With regard to the claim of insufficient disclosure, the Commission noted that calculations of the subsidy amount were disclosed to the sampled Chinese exporting producers, which are members of the CCCME. For the sake of clarity these benchmarks were also added to the open file.

(376) Following definitive disclosure, Zoomlion group claimed that the subsidy amount under this scheme should be recalculated taking into account alleged abnormal development of industrial land prices in Chinese Taipei in 2021 and 2022. The company claimed that the Commission should disregard the price levels of these two years and replace them by indexing from the price level of previous years.

(377) The Commission disagreed. The methodology of calculation of subsidy amount under this scheme and the respective benchmarks was considered accurate, hence the Commission saw no reason or any factual or legal basis for an adjustment only because certain MAE producers obtained their LURs in specific years. Nevertheless, the Commission noted that Zoomlion group did not provide any data or supporting evidence substantiating its allegation on the ‘abnormal development of industrial land prices in Chinese Taipei’.

(379) According to the Law of the People's Republic of China on Enterprise Income Tax (‘EIT Law’), high and new technology enterprises to which the State needs to give key support benefit from a reduced enterprise income tax rate of 15 % rather than the standard tax rate of 25 %.

(381) Chapter IV of the EIT Law contains provisions regarding ‘Preferential Tax Treatment’. Article 25 of the EIT Law, which stands as a chapeau for Chapter IV, provides that ‘The State will offer income tax preferences to Enterprises engaged in industries or projects the development of which is specially supported and encouraged by the State’. Article 28 of the EIT law provides that ‘the rate of enterprise income tax on high and new technological enterprises needing special support of the State shall be reduced to 15 %’.

(383) The above-mentioned provisions clearly specify that the reduced enterprise income tax rate is reserved to ‘important high and new technology enterprises to be supported by the State’ which own key intellectual property rights and satisfy certain conditions such as ‘complying with the scope of the Key State Supported High and New Technology Areas’.

(384) According to Article 11 of the Administrative Measures for the Recognition of High-Tech Enterprises, to be recognised as high-tech an enterprise must simultaneously meet certain conditions among which: ‘it has obtained the ownership of intellectual property rights, which plays a central role in technically supporting its main products (services), through independent research, transfer, grant, mergers and acquisitions, etc.’ and ‘the technology that plays a central role in technically supporting its main products (services) is within the range predetermined in the “high-tech fields supported by the state”.’

(385) Companies benefiting from this measure have to file their income tax return and the relevant annexes. The actual amount of the benefit is included in the tax return.

(386) The Commission found that companies within the sampled exporting producer groups qualified as high-tech companies during the investigation period and thus enjoyed a reduced EIT rates of 15 %. However, only in three of the sampled groups the companies actually benefited from this scheme in the IP.

(387) The Commission considered that the tax offset at issue is a subsidy within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation because there is a financial contribution in the form of revenue foregone by the GOC that confers a benefit to the companies concerned. The benefit for the recipients is equal to the tax saving.

(388) This subsidy is specific within the meaning of Article 4(2)(a) of the basic Regulation as the legislation itself limits the application of this scheme only to enterprises that are operating in certain high technology priority areas determined by the State. The MAE industry is such a high technology priority.

(389) Thus, the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain companies and sectors.

(390) The GOC argued that this subsidy program was not specific as the legislation pursuant to which the granting authority operates, establishes objective criteria or conditions governing eligibility, and the amount of the tax reduction, and that eligibility is automatic and that the qualification criteria and conditions are strictly adhered to.

(391) The Commission disagreed with this claim. Article 4(2)(a) of the basic Regulation provides that ‘where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific’. Indeed, the subsidy scheme at issue have their legal basis in Chapter IV ‘Tax Preferences’ of the EIT. By its name and content, this chapter explicitly provides for specific preferential treatment which ‘explicitly limits access to a subsidy to certain enterprises’. More specifically, Article 93 of the Implementation Rules for the Enterprise Income Tax Law clarifies that ‘The important high and new technology enterprises to be supported by the state [shall satisfy certain] conditions’, such as ‘1. Complying with the scope of the Key State Supported High and New Technology Areas’. As is clear from the above, all enterprises or industries are not eligible to benefit from the same preferential tax treatments. Consequently, the subsidies provided under this tax exemption were considered specific under Article 4(2)(a) of the basic Regulation

(392) The amount of countervailable subsidy was calculated in terms of the benefit conferred on the recipients during the investigation period. This benefit was calculated as the difference between the total tax payable according to the normal tax rate and the total tax payable under the reduced tax rate.

(394) The tax offset for research and development entitles companies to preferential tax treatment for their R&D activities in certain high technology priority areas determined by the State and when certain thresholds for R&D spending are met.