Commission Implementing Regulation (EU) 2026/1045 of 12 May 2026 imposing a provisional anti-dumping duty on imports of certain alkyl phosphonic acids and their sodium salts originating in the People’s Republic of China

Image omitted; see official source	Official Journal of the European Union	EN L series
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	2026/1045	13.5.2026

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union [^ntr1-L_202601045EN.000101-E0001] (‘the basic Regulation’), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 18 September 2025, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of certain alkyl phosphonic acids and their sodium salts originating in the People’s Republic of China (‘China’, or ‘the country concerned’) on the basis of Article 5 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union [^ntr2-L_202601045EN.000101-E0002] (‘the Notice of Initiation’).

• (2) The Commission initiated the investigation following a complaint lodged on 7 August 2025 by LANXESS Deutschland GmbH (‘Lanxess’ or ‘the complainant’). The complaint was made by the Union industry of certain alkyl phosphonic acids and their sodium salts in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

1.2.   Registration

• (3) The Commission made imports of the product concerned subject to registration by Commission Implementing Regulation (EU) 2025/2385 [^ntr3-L_202601045EN.000101-E0003] (‘the registration Regulation’).

1.3.   Interested parties

• (4) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the known exporting producers and Chinese authorities, known importers and users about the initiation of the investigation and invited them to participate.

• (5) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

1.4.   Comments on initiation

• (6) No comments were received from interested parties on the initiation of the investigation.

1.5.   Sampling

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

No sampling of Union producers

• (8) Given that Lanxess is the sole Union producer, no sampling was necessary in this case.

Sampling of unrelated importers

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

• (10) Three unrelated importers pertaining to the same corporate group provided the requested information and agreed to be included in the sample. In view of the low number of replies, the Commission decided that sampling was not necessary.

Sampling of exporting producers

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

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

• (13) Shandong Green Technologies Import and Export Co., Ltd., a non-sampled Chinese exporting producer, objected to its non-inclusion in the sample.

• (14) The Commission analysed the merits of the objection. The Commission confirmed that the export volumes of this exporting producer during the investigation period were significantly lower than the volumes of the sampled exporters. Moreover, the Commission found that the proposed sample constituted the largest representative volume of exports to the Union during the investigation period, which could reasonably be investigated within the time available, as required under Article 17(1) of the basic Regulation. Consequently, the Commission found no reason to amend the sample. The sample was therefore maintained.

1.6.   Individual examination

• (15) Shandong Green Technologies Import and Export Co., Ltd., also informed Commission that it may request individual examination under Article 17(3) of the basic Regulation. However, this exporting producer did not submit a questionnaire reply and therefore ultimately did not request individual examination.

1.7.   Questionnaire replies and verification visits

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

• (17) Furthermore, the complainant provided in the complaint sufficient evidence of raw material distortions in China regarding the product concerned. Therefore, as announced in the Notice of Initiation, the investigation covered those raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation with regard to China. For this reason, the Commission sent additional questionnaires in this regard to GOC.

• (18) The Commission sent questionnaires to to the sampled companies in China. The same questionnaires were made available online [^ntr4-L_202601045EN.000101-E0004] on the day of initiation.

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

Union producers:

• — LANXESS Deutschland GmbH, Cologne, Germany;

Unrelated importers:

• — Connect Chemicals GmbH, Connect Chemicals Benelux B.V. and Connect Chemicals Italia Srl (‘Connect’), Ratingen, Germany;

Users:

• — Hypred SAS, Dinard, France (‘Hypred’);

Exporting producers in China:

• — Jiyuan Qingyuan Water Treatment Co., Ltd., Jiyuan, China,

• — Nantong Uniphos Chemicals Co., Ltd., Nantong, China,

• — Shandong Taihe Technologies Co., Ltd., Zaozhuang, China;

Related importer in the Union:

• — Uniphos GmbH, Gross-Gerau, Germany.

1.8.   Investigation period and period considered

• (20) The investigation of dumping and injury covered the period from 1 July 2024 to 30 June 2025 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2022 to the end of the investigation period (‘the period considered’).

2. PRODUCT UNDER INVESTIGATION, PRODUCT CONCERNED AND LIKE PRODUCT

2.1.   Product under investigation

• (21) The product under investigation is 2-phosphonobutane-1,2,4-tricarboxylic acid and its sodium salt Tetrasodium hydrogen 2-phosphonatobutane-1,2,4-tricarboxylate, in solid form or in an aqueous solution, currently falling under CN code 2931 49 80 (TARIC code 2931 49 80 60) (‘the product under investigation’ or ‘PBTC’).

• (22) The product under investigation usually falls under the Chemicals Abstract Services (‘CAS’) 37971-36-1 and 66669-53-2, is registered in the European Union under the European Community (EC) reference numbers 253-733-5 and 266-442-3, respectively, and the Customs and Statistics Numbers (‘CUS’) on the European Customs Inventory of Chemical Substances (‘ECICS’) database are 0027475-9 and 0087281-1.

• (23) The product under investigation is produced through the following three main steps. First, dimethyl phosphite (‘DMPI’) and maleic acid dimethyl ester (‘MDE’) react with a base catalyst in a reactor, forming phosphonosuccinic acid tetramethylester (PBS-Ester). The PBS-Ester formed in the first reactor is then transferred without isolation into a second reactor where PBS-Ester reacts with acrylic acid methylester (AM) in another base-catalysed reaction to form 2-phosphonobutane-1,2,4-tricarboxylic acid pentamethylester (PBTC-Ester). The PBTC-Ester is then transferred to a third reactor. To form PBTC the PBTC-Ester is hydrolysed with water. PBTC-Na4 is produced from PBTC by neutralisation with sodium hydroxide.

• (24) The main applications of PBTC include water treatment processes, and industrial and institutional cleaning. This is due to their optimal role as scale and corrosion inhibitors.

2.2.   Product concerned

• (25) The product concerned is the product under investigation originating in China.

2.3.   Like product

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

• — the product concerned when exported to the Union,

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

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

• (27) Therefore, the Commission decided at this stage that those products are like products within the meaning of Article 1(4) of the basic Regulation.

2.4.   Claims regarding product scope

• (28) The Commission did not receive any submission or claim from interested parties regarding the product scope of the investigation.

3. DUMPING

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

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

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

• (31) In order to obtain information it deemed necessary for its investigation with regard to the alleged significant distortions, the Commission sent a questionnaire to the GOC. In addition, in point 5.3.2 of the Notice of Initiation, the Commission invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of the Notice of Initiation in the Official Journal of the European Union. No questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation was received from other parties within the deadline. Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in China.

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

• (33) On 13 March 2026, the Commission informed interested parties by a note (‘the Note’) on the relevant sources it intended to use for the determination of the normal value. In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of PBTC. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified Brazil as an appropriate representative country. Two interested parties (Shandong Taihe Technologies Co., Ltd (‘Taihe’) and Lanxess) submitted comments on the Note. The comments are addressed in Section 3.2.

3.2.   Normal value

• (34) According to Article 2(1) of the basic Regulation, ‘the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’.

• (35) However, according to Article 2(6a)(a) of the basic Regulation, ‘in case it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks’, and ‘shall include an undistorted and reasonable amount of administrative, selling and general costs and for profits’ (‘administrative, selling and general costs’ is referred to hereinafter as ‘SG & A’).

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

3.2.1.   Existence of significant distortions

• (37) Article 2(6a)(b) of the basic Regulation states that ‘significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces as they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements:

• — the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country,

• — state presence in firms allowing the state to interfere with respect to prices or costs,

• — public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces,

• — the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws,

• — wage costs being distorted,

• — access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state’.

• (38) As the list in Article 2(6a)(b) of the basic Regulation is non-cumulative, not all the elements need to be given for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list.

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

• (40) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector’.

• (41) Pursuant to this provision, the Commission issued a country report concerning China [^ntr5-L_202601045EN.000101-E0005] (‘the Report’), which contains evidence of the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as selected sectors (such as chemical, …). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report concerning China was placed in the investigation file at the initiation stage. The complainant relied on the evidence contained in the Report, in particular the specific chapter of the Report addressing the distortions in the chemical sector in China [^ntr6-L_202601045EN.000101-E0006].

• (42) The complainant pointed out that the Chinese State is a socialist market economy developed under the leadership of the Chinese Communist Party (‘CCP’) which covers all essential aspects of the State, including the economy and the judicial system, as the Chinese institutions are not governed by the principle of separation of powers. It argued that the CCP exercises a particularly tight control at economic level which translated into the high importance of the State-Owned Enterprises (‘SOEs’) in the Chinese economy. The CCP is involved in the governmental institutions as well as in the corporate structures of both private companies and SOEs to the extent that it can exercise dominance and absolute control over the entire Chinese economy. The complainant pointed to three main channels of intervention by the GOC in the Chinese economy: administrative, financial and regulatory [^ntr7-L_202601045EN.000101-E0007].

• (43) The complaint also contained some relevant evidence complementing the Report. The complainant also referred to Commission findings in several recent investigations, which confirmed the existence of significant distortions with regard to Chinese chemical sector, including in the investigation concerning certain alkyl phosphate esters [^ntr8-L_202601045EN.000101-E0008], acesulfam [^ntr9-L_202601045EN.000101-E0009], citric acid [^ntr10-L_202601045EN.000101-E0010] and monosodium glutamate [^ntr11-L_202601045EN.000101-E0011].

• (44) Moreover, the complaint recalled the following elements resulting in significant distortions.

• (45) First, the PBTC sector is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of State authorities. The GOC ensures a strong influence over both SOEs and private companies, especially in industries considered as strategic or encouraged such as the chemical sector (encompassing PBTC and its sodium salt). The GOC appoints and controls key executives through the CCP as well as provides SOEs with preferential access to important inputs (such as land and capital) and other competitive advantages. At both national and local level, the GOC established the State-Owned Assets Supervision and Administration Commissions (‘SASAC’) to represent the State’s shareholder interests in SOEs. The complainant also referred to the ‘Social Credit System’ as a new tool endorsed by the CCP that the GOC will be using to monitor, rate and condition the conduct of all domestic and foreign companies in China [^ntr12-L_202601045EN.000101-E0012]. Finally, in 2021 the GOC released the 14th Five-Year Plan that aims to uphold socialist policies and bolster the economic growth of China through a socialist market economy.

• (46) Specifically relating to the PBTC industry, a substantial degree of GOC ownership persists and according to publicly available information several key producers of PBTC and PBTC-Na4 are SOEs. For example, the China National Chemical Corporation (ChemChina), of which Sinochem Holding Company Limited is the shareholder [^ntr13-L_202601045EN.000101-E0013]. Similarly, privately owned companies also appear under close control of the GOC [^ntr14-L_202601045EN.000101-E0014]. According to the complainant, the GOC also intends to further invest and strengthen SOEs active in the PBTC and PBTC-Na4 industry [^ntr15-L_202601045EN.000101-E0015].

• (47) Second, the State presence in PBTC companies also allows the authorities to interfere with prices and/or costs. Through regulatory and policy measures, the GOC also influences the production, as well as costs and prices of products like PBTC and PBTC-Na4 through its presence and intervention in the upstream sectors of raw materials and inputs necessary for its production [^ntr16-L_202601045EN.000101-E0016]. For example, the GOC set up strategic investment projects in the Shandong province relating to maleic anhydride, a key raw material for producing PBTC, which demonstrates the GOC’s aim to increase its production and underscores maleic anhydride’s importance in the Chinese chemical industry [^ntr17-L_202601045EN.000101-E0017]. Another example is yellow phosphorus, a key raw material used in the production of PBTC and PBTC-Na4. The complainant referred to the recent anti-dumping investigation concerning imports of certain alkyl phosphate esters from China in which the Commission recognised that the GOC has put in place a strategy to control and intervene in the production of yellow phosphorus [^ntr18-L_202601045EN.000101-E0018]. The GOC also maintains an export tax on yellow phosphorus set at 20 % which prevents this raw material from being exported and creates immense overcapacity in China. The complainant further argued that such export tax constitutes a market distortion within the meaning of Article 7(2a) of the basic Regulation, which artificially lowers the cost of production of phosphorus derivatives such as PBTC and its salts. Moreover, the GOC’s export tax policy has also created international distortions concerning yellow phosphorus affecting Vietnamese and Kazakh suppliers of the raw material [^ntr19-L_202601045EN.000101-E0019].

• (48) Third, the GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces. The complainant explained that the development of the Chinese economy is determined by an elaborate system of planning which sets out priorities and prescribes the goals that the central and local governments must focus on and strive to implement. The GOC has consistently given a strong focus to the chemical industry in its different policy documents and has clearly shaped its measures to favour domestic chemical producers. See in particular in this regard the Decision of the State Council Regarding Promulgating the Implementation of Interim Provisions on the Promotion of Industrial Restructuring (‘Decision No 40’) which clearly indicates that the GOC supports the development of the fine chemicals industry. The complainant referred to various other implementing plans and policies of the GOC that all demonstrate the GOC’s strong support for the Chinese chemicals industry, but also in particular the development and focus on the production of yellow phosphorus, which is a key raw material for the production of PBTC and its salts (for example, the Implementation Plan for Promoting the Efficient and High-value Utilization of Phosphorus Resources (‘Implementation Plan for Phosphorus Resources’) [^ntr20-L_202601045EN.000101-E0020].

• (49) Fourth, much like in any other sector in the Chinese economy, the chemical sector is subject to the distortions resulting from the discriminatory application or inadequate enforcement of Chinese bankruptcy, corporate and property rules. The complainant argued that the Chinese bankruptcy system delivers inadequately on its main objectives such as to fairly settle claims and debts, and to protect the rights of creditors and debtors, which in turn affects the Chinese financial and borrowing market. Moreover, the deficiencies of the system of property rights are particularly clear with regard to ownership of land and land-use rights in China, i.e. that all land is owned by the Chinese State. Therefore, according to the complainant, producers of PBTC and its salts are subject to the Chinese bankruptcy, corporate and property rules, and are therefore also subject to the distortions resulting from the discriminatory application or inadequate enforcement of these laws [^ntr21-L_202601045EN.000101-E0021].

• (50) Fifth, wage costs are distorted in the PBTC and PBTC-Na4 sector as well. Wage costs do not result from normal market forces or free collective bargaining but are subject to significant distortions in China. Wage cost distortions are further enhanced by labour subsidies provided by the Chinese State, in particular, to PBTC producers. For example, according to the complainant, Shandong Taihe Water Treatment Technologies Co., Ltd., and Henan Qingshuiyuan Technology Co. Ltd. reported several such subsidies including, training subsidies, employee trainee subsidies, enterprise job stabilization subsidies, introducing talent funds, and skills upgrading subsidies. As such, the heavy influence of the GOC on the wage cost in the PBTC industries considerably impacts costs and free market forces, inevitably creating significant distortions on the market [^ntr22-L_202601045EN.000101-E0022].

• (51) Sixth, the complainant argued that PBTC producers have access to finance granted by institutions which implement public policy objectives or otherwise are not acting independently from the State. Since the State maintains an influence over all major aspects of the Chinese financial system, access to capital for corporate actors in China is subject to important distortions. These various distortions include a strong government presence in the financial institutions, and artificially low borrowing costs, in order to stimulate investment growth, which reveals a situation incomparable to other market-based economies. The complainant also referred to a number of policy documents and legal provisions laying down preferential lending principles, including the Implementation Plan for Phosphorus Resources, to demonstrate that the industry of PBTC and PBTC-Na4 is affected by significant distortions created by GOC interference in the financial system. Moreover, the complainant alleged that Chinese producers of PBTC and PBTC-Na4 directly benefitted from preferential loans both from State-owned and private banks. For example, Henan Qingshuiyan Technology Co. Ltd. obtained loans from several Chinese banks, like the Agricultural Bank of China, Bank of China, China Construction Bank, China Merchants Bank and the CITIC Bank [^ntr23-L_202601045EN.000101-E0023].

• (52) The complainant submitted that the above-mentioned distortions are systemic. In conclusion, the complainant argued that significant distortions pursuant to Article 2(6a) of the basic Regulation are present in the Chinese PBTC and PBTC-Na4 sector and that, as a result, it is not appropriate to use domestic costs to establish the normal value. It requested that the Commission construct the normal value on the basis of corresponding costs of production and sale in an appropriate representative country [^ntr24-L_202601045EN.000101-E0024].

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

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

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

• (55) The Chinese economic system is based on the concept of a ‘socialist market economy’. That concept is enshrined in the Chinese Constitution and determines the economic governance of China. The core principle is the ‘socialist public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people’ [^ntr25-L_202601045EN.000101-E0025].

• (56) The State-owned economy is the ‘leading force in the national economy’ and the State has the mandate to ensure its ‘consolidation and growth’ [^ntr26-L_202601045EN.000101-E0026]. Indeed, compared to the 13th FYP, SASAC confirmed that total assets of central enterprises grew by 44,6 % during the 14th FYP, ‘effectively driving the integrated development of upstream and downstream enterprises in the industrial chain and providing strong support for the successful achievement of the main goals and tasks of my country's economic and social development’ [^ntr27-L_202601045EN.000101-E0027].

• (57) Consequently, the overall setup of the Chinese economy not only allows for substantial government interventions into the economy, but such interventions are expressly mandated. The notion of supremacy of public ownership over the private one permeates the entire legal system and is emphasized as a general principle in all central pieces of legislation.

• (58) The Chinese property law is a prime example: it refers to the primary stage of socialism and entrusts the State with upholding the basic economic system under which the public ownership plays a dominant role. Other forms of ownership are tolerated, with the law permitting them to develop side by side with the State ownership [^ntr28-L_202601045EN.000101-E0028].

• (59) In addition, under Chinese law, the socialist market economy is developed under the leadership of the CCP. The structures of the Chinese State and of the CCP are intertwined at every level (legal, institutional, personal), forming a superstructure in which the roles of CCP and the State are indistinguishable.

• (60) Following an amendment of the Chinese Constitution in March 2018, the leading role of the CCP was given an even greater prominence by being reaffirmed in the text of Article 1 of the Constitution.

• (61) Following the already existing first sentence of the provision: ‘[t]he socialist system is the basic system of the People’s Republic of China’ a new second sentence was inserted which reads: ‘[t]he defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China’ [^ntr29-L_202601045EN.000101-E0029]. This illustrates the unquestioned and ever-growing control of the CCP over the economic system of China.

• (62) This leadership and control are inherent to the Chinese system and go well beyond the situation customary in other countries where the governments exercise general macroeconomic control within the boundaries of which free market forces are at play.

• (63) The Chinese State engages in an interventionist economic policy in pursuance of goals, which coincide with the political agenda set by the CCP rather than reflecting the prevailing economic conditions in a free market [^ntr30-L_202601045EN.000101-E0030]. The interventionist economic tools deployed by the Chinese authorities are manifold, including the system of industrial planning, the financial system, as well as the level of the regulatory environment.

• (64) First, on the level of overall administrative control, the direction of the Chinese economy is governed by a complex system of industrial planning which affects all economic activities within the country. The totality of these plans covers a comprehensive and complex matrix of sectors and crosscutting policies and is present on all levels of government.

• (65) Plans at provincial level are detailed while national plans set broader targets. Plans also specify the means in order to support the relevant industries/sectors as well as the timeframes in which the objectives need to be achieved. Some plans still contain explicit output targets.

• (66) Under the plans, individual industrial sectors and/or projects are being singled out as (positive or negative) priorities in line with the government priorities and specific development goals are attributed to them (industrial upgrade, international expansion etc.).

• (67) The economic operators, private and State-owned alike, must effectively adjust their business activities according to the realities imposed by the planning system. This is not only because of the binding nature of the plans, but also because the relevant Chinese authorities at all levels of government adhere to the system of plans and use their vested powers accordingly, thereby inducing the economic operators to comply with the priorities set out in the plans [^ntr31-L_202601045EN.000101-E0031].

• (68) Second, on the level of allocation of financial resources, the financial system of China is dominated by the State-owned commercial and policy banks. Those banks, when setting up and implementing their lending policy need to align themselves with the government’s industrial policy objectives rather than primarily assessing the economic merits of a given project [^ntr32-L_202601045EN.000101-E0032].

• (69) The same applies to the other components of the Chinese financial system, such as the stock markets, bond markets, private equity markets etc. Also, these parts of the financial sector are institutionally and operationally set up in a manner not geared towards maximizing the efficient functioning of the financial markets but towards ensuring control and allowing intervention by the State and the CCP [^ntr33-L_202601045EN.000101-E0033].

• (70) Third, on the level of regulatory environment, the interventions by the State into the economy take a number of forms. For instance, the public procurement rules are regularly used in pursuit of policy goals other than economic efficiency, thereby undermining market-based principles in the area. The applicable legislation specifically provides that public procurement shall be conducted to facilitate the achievement of goals designed by State policies. However, the nature of these goals remains undefined, thereby leaving broad margin of appreciation to the decision-making bodies [^ntr34-L_202601045EN.000101-E0034].

• (71) Similarly, in the area of investment, the GOC maintains significant control and influence over destination and magnitude of both State and private investment. Investment screening as well as various incentives, restrictions, and prohibitions related to investment are used by authorities as an important tool for supporting industrial policy goals, such as maintaining State control over key sectors or bolstering domestic industry [^ntr35-L_202601045EN.000101-E0035].

• (72) In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with the free play of market forces, resulting in distorting the effective allocation of resources in line with market principles [^ntr36-L_202601045EN.000101-E0036].

3.2.1.2.   Significant distortions according to Article 2(6a)(b), first indent of the basic Regulation: the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country

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

• (74) The sector of the product concerned is mainly served by private companies, such as Shandong Taihe Technologies Co. Ltd. [^ntr37-L_202601045EN.000101-E0037] or Jiyuan Qingyuan Water Treatment Co. Ltd. [^ntr38-L_202601045EN.000101-E0038] but also by companies partially State-owned like Nantong Uniphos Chemicals Co. Ltd. [^ntr39-L_202601045EN.000101-E0039] which is 67 % held by Nantong Jiangshan Agrochemicals and Chemicals Co. Ltd. [^ntr40-L_202601045EN.000101-E0040], which in turn is 27 % State-owned [^ntr41-L_202601045EN.000101-E0041]. Moreover, in the upstream sector of yellow phosphorus, a primary raw material used to produce PBTC, the degree of State ownership remains significant, with a number of producers being partially owned or controlled by the State [^ntr42-L_202601045EN.000101-E0042], such as Hubei Xingfa Chemicals Group Co. Ltd. [^ntr43-L_202601045EN.000101-E0043] [^ntr44-L_202601045EN.000101-E0044] of which 20 % are held by Yichang Xingfa Group Co. Ltd., an SOE controlled by the Yichang Municipality People’s Government or Yunnan Phosphorus Group Co., Ltd. [^ntr45-L_202601045EN.000101-E0045] a wholly owned subsidiary [^ntr46-L_202601045EN.000101-E0046] of Yunnan Yuntianhua, an SOE ultimately controlled by the Yunnan State-owned Asset Supervision and Administration Commission [^ntr47-L_202601045EN.000101-E0047].

• (75) Still, CCP interventions into operational decision making have become the norm not only in SOEs, but also in private companies [^ntr48-L_202601045EN.000101-E0048], with CCP claiming leadership over virtually every aspect of the country’s economy. Indeed, the State’s influence by means of CCP structures within companies effectively results in economic operators being under the government’s control and policy supervision, given how far the State and Party structures have grown together in China. Moreover, the whole sector of the product concerned is subject to several government policies: to start with, low polluting ‘phosphorus mud treatment processes for yellow phosphorus production’ are listed amongst the industries to be encouraged as under the chemical and petrochemical industry category in the 2024 Edition of the Guiding Catalogue for industry structural adjustment [^ntr49-L_202601045EN.000101-E0049], which signals the authorities’ intentions to create a regulatory environment conducive to the sector’s development and which also potentially paves the way to the industry’s access to finance. At the same time, yellow phosphorus producers with smaller production capacities are also listed amongst the industries to be eliminated, showing the Chinese authorities’ intention to influence the phosphorus industry layout: ‘yellow phosphorus production units with a single unit capacity of less than 5 000 tons/year’ [^ntr50-L_202601045EN.000101-E0050]. Other inputs such as methanol and methyl methacrylate produced by smaller producers are also listed under the restricted industries category [^ntr51-L_202601045EN.000101-E0051].

• (76) Moreover, the 14th FYP on raw materials [^ntr52-L_202601045EN.000101-E0052] directly addresses the petrochemical and chemical sectors by stating that ‘[i]n sectors including petrochemicals and chemicals, steel, non-ferrous metals, and building materials, we shall foster a number of industry chain pioneer enterprises exerting leadership on the ecosystem and characterized by core competitiveness, […]. The guiding role of leading enterprises in chemical and building materials sectors shall be leveraged to promote corporate reform and restructuring’. Also, the plan seeks to ‘strictly control new capacities in industries such as […] yellow phosphorus’.

• (77) Additionally, the ‘Implementation Plan for Phosphorus Resources’ [^ntr53-L_202601045EN.000101-E0053] is formulated in order ‘to implement the key tasks of relevant national plans, realize efficient and high-value utilization of phosphorus resources, and enhance the competitive advantage of the entire industrial chain’. More specifically, the plan seeks to ‘accelerate the transformation and upgrading of traditional industries such as […] yellow phosphorus, vigorously develop emerging industries such as high-end phosphorus chemicals, accelerate the cultivation of advanced manufacturing clusters, and build a high-end, intelligent, green, integrated and concentrated phosphorus chemical industry systems’.

• (78) Government control and policy supervision can be also observed at the level of the relevant industry associations [^ntr54-L_202601045EN.000101-E0054].

• (79) For instance, the China Petrochemical and Chemical Industry Federation (‘CPCIF’) the sectoral industry association. According to Article 3 of CPCIF’s Articles of Association, the organisation ‘accepts the professional guidance, supervision and management by the entities in charge of registration and management, by entities in charge of Party building, as well as by the relevant administrative departments in charge of industry management’ [^ntr55-L_202601045EN.000101-E0055].

• (80) Furthermore, the CPCIF has set up a High-End Chemicals Special Committee explicitly covering ‘water treatment agents’ [^ntr56-L_202601045EN.000101-E0056].

• (81) Hubei Xingfa Chemicals Group Co. Ltd. and Yunnan Yuntianhua are members of CPCIF [^ntr57-L_202601045EN.000101-E0057] [^ntr58-L_202601045EN.000101-E0058].

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

3.2.1.3.   Significant distortions according to Article 2(6a)(b), second indent of the basic Regulation: State presence in firms allowing the State to interfere with respect to prices or costs

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

• (84) According to China’s company law, a CCP organisation is to be established in every company (with at least three CCP members as specified in the CCP Constitution [^ntr59-L_202601045EN.000101-E0059]) and the company shall provide the necessary conditions for the activities of the Party organisation.

• (85) In the past, this requirement appeared not to have always been followed or strictly enforced. However, since at least 2016 the CCP has been reinforcing its claims to control business decisions in companies as a matter of political principle [^ntr60-L_202601045EN.000101-E0060], including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline [^ntr61-L_202601045EN.000101-E0061].

• (86) Already in 2017, it was reported that party cells existed in 70 % of some 1,86 million privately owned companies, with growing pressure for the CCP organisations to have a final say over the business decisions within their respective companies [^ntr62-L_202601045EN.000101-E0062]. These rules are of general application throughout the Chinese economy, across all sectors, including to the producers of the product concerned and the suppliers of their inputs.

• (87) In addition, on 15 September 2020 a document titled General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era [^ntr63-L_202601045EN.000101-E0063] (‘the Guidelines’) was released, which further expanded the role of the Party committees in private enterprises.

• (88) Section II.4 of the Guidelines states: ‘[w]e must raise the Party’s overall capacity to lead private-sector United Front work and effectively step up the work in this area’; and Section III.6 states: ‘[w]e must further step up Party building in private enterprises and enable the Party cells to play their role effectively as a fortress and enable Party members to play their parts as vanguards and pioneers’. The Guidelines thus emphasise and seek to increase the role of the CCP in companies and other private sector entities [^ntr64-L_202601045EN.000101-E0064].

• (89) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the PBTC and PBTC-Na4 sector.

• (90) To provide an example, the President of Henan Qingshuiyuan Technology [^ntr65-L_202601045EN.000101-E0065], the Group holding Jiyuan Qingyuan Water Treatment Co. Ltd., is also the head of the Group’s General Party Branch [^ntr66-L_202601045EN.000101-E0066].

• (91) Similarly, the Chairman and Deputy Chairman of Nantong Jiangshan Agrochemicals and Chemicals Co. Ltd. respectively occupy the positions of Deputy Secretary and Secretary of the Party Committee [^ntr67-L_202601045EN.000101-E0067].

• (92) Furthermore, Article 13 of Shandong Taihe Technologies Co. Ltd.’s Articles of Association [^ntr68-L_202601045EN.000101-E0068] stipulates: ‘In accordance with the provisions of the Constitution of the Communist Party of China, the Company shall establish a Communist Party organization and carry out Party activities. The Company shall provide the necessary conditions for the activities of the Party organization’.

• (93) The CCP’s interference in the upstream industry transpires from the available corporate filings. The 2024 annual report of Hubei Xingfa Chemicals Group Co. Ltd. indicates that the company’s Chairman, General Manager and several Directors are respectively Secretary and Deputy Secretaries of the Party Committee of the holding company Yichang Xingfa Group Co. Ltd. [^ntr69-L_202601045EN.000101-E0069]. During its investigation, the Commission established that Yichang Xingfa Group Co. Ltd. actively participates in industry coordination actions [^ntr70-L_202601045EN.000101-E0070] organized and supervised by the CCP.

• (94) The State’s presence and intervention in the financial markets as well as in the provision of raw materials and inputs further have an additional distorting effect on the market [^ntr71-L_202601045EN.000101-E0071]. Thus, the State presence in firms, in the PBTC sector and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

3.2.1.4.   Significant distortions according to Article 2(6a)(b), third indent of the basic Regulation: public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces

• (95) The direction of the Chinese economy is to a significant degree determined by an elaborate system of planning which sets out priorities and prescribes the goals the central, provincial and local governments must focus on. Relevant plans exist at all levels of government and cover virtually all economic sectors. The objectives set by the planning instruments are of a binding nature and the authorities at each administrative level monitor the implementation of the plans by the corresponding lower level of government.

• (96) Overall, the system of planning in China results in resources being driven to sectors designated as strategic or otherwise politically important by the government, rather than being allocated in line with market forces [^ntr72-L_202601045EN.000101-E0072].

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

• (98) The 14th FYP on economic and social development and 2035 perspectives [^ntr73-L_202601045EN.000101-E0073] aims to ‘upgrade traditional industries, promote the optimization and structural adjustment of raw material industries such as petrochemicals, steel, nonferrous metals, and building materials, expand the supply of high-quality products in sectors such as light industry and textiles, speed up the transformation and upgrading of enterprises in key industries such as the chemical industry and papermaking, and improve the green manufacturing system’ [^ntr74-L_202601045EN.000101-E0074].

• (99) According to the 14th FYP on the raw materials industry [^ntr75-L_202601045EN.000101-E0075], China ‘will focus on the subfields or key products with solid industrial foundations, prominent comparative advantages, and leading technologies, with a view to giving full play to the guiding role of leading enterprises in the industrial chain, […] and developing a batch of industrial clusters in petrochemicals. […] In sectors including petrochemicals and chemicals, steel, non-ferrous metals, and building materials, we will foster a number of pioneering enterprises that could lead the ecosystem of the industrial chain with core competitiveness’ [^ntr76-L_202601045EN.000101-E0076].

• (100) More specifically, the 14th FYP on the green development of industry [^ntr77-L_202601045EN.000101-E0077] mandates that ‘new capacity should be brought under strict control in industries such as […] yellow phosphorus’ [^ntr78-L_202601045EN.000101-E0078].

• (101) Additionally, the Guiding Opinion on promoting the high quality development of the petrochemical and chemical industry [^ntr79-L_202601045EN.000101-E0079] requires to ‘strengthen sectoral policies and scientifically regulate the scale of the industry: […] enhance the supply capacity of high-end polymers, specialty chemicals and other products’; as well as to ‘[i]mprove supporting policies: strengthen the coordination of fiscal, financial, regional, investment, import and export, energy, ecological, environmental, price and other policies with industrial policies. Give full play to the role of the national industry-finance cooperation platform […]’.

• (102) Also, the ‘Implementation Plan for Phosphorus Resources’ [^ntr80-L_202601045EN.000101-E0080] aims at ‘enhancing the competitive advantage of the entire [phosphorus] industry chain’ and mandates to ‘accelerate the transformation and upgrading of traditional industries such as phosphate fertilizers and yellow phosphorus, vigorously develop emerging industries such as high-end phosphorus chemicals, accelerate the cultivation of advanced manufacturing clusters, and build a high-end, intelligent, green, integrated and concentrated phosphorus chemical industry system to provide strong support for promoting new industrialization and accelerating the construction of a manufacturing power’.

• (103) On the provincial level, the Henan 14th FYP on the high-quality development of the manufacturing industry requires to ‘build a national salt industry base [and to] accelerate the transformation of the chemical industry towards fine chemicals and new chemical materials’ [^ntr81-L_202601045EN.000101-E0081]. More specifically, Henan released in 2017 an Implementation Plan for technological innovation [^ntr82-L_202601045EN.000101-E0082] seeking to ‘promote and upgrade traditional industries [and to focus on] developing key technologies and efficient complete sets of equipment of advanced industrial wastewater treatment’.

• (104) Jiyuan Qingyuan Water Treatment Co. Ltd. is located in Henan.

• (105) Furthermore, the Shandong 14th FYP on the development of chemical industry [^ntr83-L_202601045EN.000101-E0083] calls on the local authorities to ‘[i]ncrease the technological transformation of existing enterprises, improve energy and resource utilization efficiency, and enhance the core competitiveness of enterprises [and to] establish a mechanism for enterprises to withdraw from parks, resolutely eliminate obsolete production capacity, strictly control restricted production capacity, and implement differentiated policies and measures for the allocation of resource factors such as land, electricity, and water to force enterprises to transform and develop’. It also calls to ‘[i]ncrease financial support. Strengthen fiscal policy incentives, coordinate and involve special funds, support chemical companies in accelerating technological transformation, intelligent transformation, industrial transfers, relocation into parks, elimination of obsolete equipment, etc., and implement tax exemptions applicable to imports of major technical equipment, VAT refunds, research and development policies such as additional deduction of expenses and insurance compensation for the first set of technical equipment. Actively guide various financial institutions and social capital to invest in the chemical industry, leverage the advantages of policy finance, development finance and commercial finance, and increase financial support for key areas of chemical technology’. More specifically, the plan seeks to ‘guide and develop the salt chemical industry towards strategic emerging industries such as new materials, new environmental protection, and new energy’.

• (106) Additionally, the Shandong Three-year Action Plan for the high-quality development of ecological and environmental protection industry 2023-2025 [^ntr84-L_202601045EN.000101-E0084] mandates that the Zaozhuang Municipality ‘expands and strengthens the chemical new materials industry, primarily focused on high-end water treatment agents, adjust the industrial structure and energy supply structure of water treatment agents, optimize the industrial layout, build a high-end environmental protection new materials industrial chain, and strive to create a major domestic industrial base for environmental protection new materials (water treatment agents)’. The Action Plan also mandates that ‘on the basis of existing projects and industrial chain foundations such as Shandong Taihe Technologies Co. Ltd. and Xintai Water Treatment, [the Zaozhuang Municipality] constructs more than ten key projects, including the expansion of the water treatment agent industrial chain, develop new varieties of water treatment agents, and increase the proportion of environmentally friendly and green process water treatment agent products. By 2025, the production capacity of various environmental protection new materials (water treatment agents) will reach 1 million tons’.

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

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

3.2.1.5.   Significant distortions according to Article 2(6a)(b), fourth indent of the basic Regulation: the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws

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

• (110) The number of bankruptcies remains notoriously low in relation to the size of the country’s economy, not least because the insolvency proceedings suffer from a number of shortcomings which effectively function as a disincentive for bankruptcy filings. Moreover, the role of the State in the insolvency proceedings remains strong and active, often having direct influence on the outcome of the proceedings [^ntr85-L_202601045EN.000101-E0085].

• (111) In addition, the shortcomings of the system of property rights are particularly obvious in relation to ownership of land and land-use rights in China [^ntr86-L_202601045EN.000101-E0086]. All land is owned by the State (collectively owned rural land and State-owned urban land) and its allocation remains solely dependent on the State. There are legal provisions that aim at allocating land use rights in a transparent manner and at market prices, for instance by introducing bidding procedures. However, these provisions are regularly not respected, with certain buyers obtaining their land for free or below market rates [^ntr87-L_202601045EN.000101-E0087]. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land [^ntr88-L_202601045EN.000101-E0088].

• (112) Much like other sectors in the Chinese economy, the producers of the product concerned are subject to the ordinary rules on Chinese bankruptcy, corporate, and property laws. That has the effect that these companies, too, are subject to the top-down distortions arising from the discriminatory application or inadequate enforcement of bankruptcy and property laws. Those considerations, on the basis of the evidence available, appear to be fully applicable also in the PBTC and PBTC-Na4 sector. The present investigation revealed nothing that would call those findings into question.

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

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

• (114) A system of market-based wages cannot fully develop in China as workers and employers are impeded in their rights to collective organisation. China has not ratified a number of essential conventions of the International Labour Organisation, in particular those on freedom of association and on collective bargaining [^ntr89-L_202601045EN.000101-E0089].

• (115) Under national law, only one trade union organisation is active. However, this organisation lacks independence from the State authorities and its engagement in collective bargaining and protection of workers’ rights remains rudimentary [^ntr90-L_202601045EN.000101-E0090]. Moreover, the mobility of the Chinese workforce is restricted by the household registration system, which limits access to the full range of social security and other benefits to local residents of a given administrative area.

• (116) This typically results in workers who are not in possession of the local residence registration finding themselves in a vulnerable employment position and receiving lower income than the holders of the residence registration [^ntr91-L_202601045EN.000101-E0091]. Those findings lead to the distortion of wage costs in China.

• (117) No evidence was submitted to the effect that the PBTC and PBTC-Na4 sector would not be subject to the Chinese labour law system described. The sector is thus affected by the distortions of wage costs both directly (when making the product concerned or the main raw material for its production) as well as indirectly (when having access to capital or inputs from companies subject to the same labour system in China).

3.2.1.7.   Significant distortions according to Article 2(6a)(b), sixth indent of the basic Regulation: access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the State

• (118) Access to capital for corporate actors in China is subject to various distortions.

• (119) First, the Chinese financial system is characterised by the strong position of State-owned banks [^ntr92-L_202601045EN.000101-E0092], which, when granting access to finance, take into consideration criteria other than the economic viability of a project. Similar to non-financial SOEs, the banks remain connected to the State not only through ownership but also via personal relations (the top executives of large State-owned financial institutions are ultimately appointed by the CCP) [^ntr93-L_202601045EN.000101-E0093] and they regularly implement public policies designed by the GOC.

• (120) In doing so, the banks comply with an explicit legal obligation to conduct their business in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State [^ntr94-L_202601045EN.000101-E0094]. While it is acknowledged that various legal provisions refer to the need to respect normal banking behaviour and prudential rules such as the need to examine the creditworthiness of the borrower, the overwhelming evidence, including findings made in trade defence investigations, suggests that these provisions play only a secondary role in the application of the various legal instruments.

• (121) Recent developments further illustrate the extent of government influence over financial institutions in China. In March 2025, the GOC announced an issuance of RMB 500 billion in treasury bonds to provide substantial financial support to major banks, including the Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China. This intervention was aimed at stabilising these institutions amidst declining profitability and record low net interest margins, highlighting the proactive measures taken by the State to maintain economic stability [^ntr95-L_202601045EN.000101-E0095].

• (122) Also, the GOC has clarified that even private commercial banking decisions must be overseen by the CCP and remain in line with national policies. One of the State’s three overarching goals in relation to banking governance is now to strengthen the Party’s leadership in the banking and insurance sector, including in relation to operational and management issues [^ntr96-L_202601045EN.000101-E0096]. Also, the performance evaluation criteria of commercial banks have now to, notably, take into account how entities ‘serve the national development objectives and the real economy’, and in particular how they ‘serve strategic and emerging industries’ [^ntr97-L_202601045EN.000101-E0097].

• (123) Furthermore, on the level of allocation of financial resources, with Several Measures to Further Promote the Development of Private Investment [^ntr98-L_202601045EN.000101-E0098], the GOC seeks to ‘increase central budget resources to support qualified private investment projects and to actively play a guiding and leading role’. The GOC also intends to ‘make good use of new policy financial instruments [and] support a number of qualified private investment projects in important industries and key areas’ [^ntr99-L_202601045EN.000101-E0099].

• (124) Additionally, bond and credit ratings are often distorted for a variety of reasons including the fact that the risk assessment is influenced by the firm's strategic importance to the GOC and the strength of any implicit guarantee by the government [^ntr100-L_202601045EN.000101-E0100]. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important [^ntr101-L_202601045EN.000101-E0101]. This results in a bias in favour of lending to SOEs, large well-connected private firms and firms in key industrial sectors, which implies that the availability and cost of capital is not equal for all players on the market.

• (125) Second, borrowing costs have been kept artificially low to stimulate investment growth. This has led to the excessive use of capital investment with ever lower returns on investment. This is illustrated by the growth in corporate leverage in the State sector despite a sharp fall in profitability, which suggests that the mechanisms at work in the banking system do not follow normal commercial responses.

• (126) Thirdly, although nominal interest rate liberalization was achieved in October 2015, price signals are still not the result of free market forces but are influenced by government-induced distortions. The share of lending at or below the benchmark rate still represented at least one-third of all lending as of the end of 2018 [^ntr102-L_202601045EN.000101-E0102]. Official media in China have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ [^ntr103-L_202601045EN.000101-E0103]. Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

• (127) Overall credit growth in the China indicates a worsening efficiency of capital allocation without any signs of credit tightening that would be expected in an undistorted market environment. As a result, non-performing loans have increased rapidly, with the GOC a number of times opting to either avoid defaults, thus creating so called ‘zombie’ companies, or to transfer the ownership of the debt (e.g. via mergers or debt-to-equity swaps), without necessarily removing the overall debt problem or addressing its root causes.

• (128) In essence, despite the steps that have been taken to liberalize the market, the corporate credit system in China is affected by significant distortions resulting from the continuing pervasive role of the State in the capital markets. Therefore, the substantial government intervention in the financial system leads to the market conditions being severely affected at all levels.

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

3.2.1.8.   Systemic nature of the distortions described

• (130) The Commission noted that the distortions described in the updated Report are characteristic for the Chinese economy. The evidence available shows that the facts and features of the Chinese system as described above as well as in Part I of the updated Report apply throughout the country and across the sectors of the economy. The same holds true for the description of the factors of production as set out above and in Part II of the updated Report.

• (131) The Commission recalls that in order to produce the product concerned, certain inputs are needed. When the producers of the product concerned purchase/contract these inputs, the prices they pay (and which are recorded as their costs) are clearly exposed to the same systemic distortions mentioned before. For instance, suppliers of inputs employ labour that is subject to the distortions. They may borrow money that is subject to the distortions on the financial sector/capital allocation. In addition, they are subject to the planning system that applies across all levels of government and sectors. These distortions were described in detail above. The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, PBTC and PBTC-Na4 producers being subject to those rules as any other economic operator in China. The distortions have therefore a direct bearing on the cost structure of the product concerned.

• (132) As a consequence, not only the domestic sales prices of the product concerned are not appropriate for use within the meaning of Article 2(6a)(a) of the basic Regulation, but all the input costs (including raw materials, energy, land, financing, labour, etc.) are also affected because their price formation is affected by substantial government intervention, as described in Parts I and II of the updated Report.

• (133) Indeed, the government interventions described in relation to the allocation of capital, land, labour, energy and raw materials are present throughout China. This means, for instance, that an input that in itself was produced in China by combining a range of factors of production is exposed to significant distortions. The same applies for the input to the input and so forth.

• (134) No evidence or argument to the contrary has been adduced by the GOC or the exporting producers in the present investigation.

3.2.2.   Representative country

3.2.2.1.   General remarks

• (135) The choice of the representative country was based on the following criteria pursuant to Article 2(6a)(a) of the basic Regulation:

• — A level of economic development similar to China. For this purpose, the Commission used countries with a gross national income per capita similar to China on the basis of the database of the World Bank [^ntr104-L_202601045EN.000101-E0104],

• — Production of the product under investigation in that country,

• — Existence of relevant readily available data in the representative country,

• — Where there is more than one possible representative country, preference was given, where appropriate, to the country with an adequate level of social and environmental protection.

• (136) As explained in recital (33), on 13 March 2026 the Commission issued a Note for the file on the sources for the determination of the normal value. The Note described the facts and evidence underlying the relevant criteria, and informed interested parties of the Commission’s intention to consider Brazil as an appropriate representative country in the present case if the existence of significant distortions pursuant to Article 2(6a)(a) of the basic Regulation would be confirmed.

3.2.3.   A level of economic development similar to China