Commission Implementing Regulation (EU) 2026/1063 of 12 May 2026 imposing a provisional anti-dumping duty on imports of PET Spunbond 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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	2026/1063	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_202601063EN.000101-E0001] (‘the basic Regulation’), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 15 September 2025, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of PET Spunbond originating in the People’s Republic of China (‘the country concerned’, ‘the PRC’ or ‘China’) on the basis of Article 5 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union [^ntr2-L_202601063EN.000101-E0002] (‘the Notice of Initiation’).

• (2) The Commission initiated the investigation following a complaint lodged on 8 August 2025 by Freudenberg Performance Materials and Johns Manville (‘the complainants’), the sole known Union producers of PET Spunbond. The complaint was made on behalf of the Union industry of PET Spunbond 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 Implementing Regulation (EU) 2025/2409 [^ntr3-L_202601063EN.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 complainants, the known exporting producers and the Government of China (‘GOC’), known importers, and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

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

1.4.   Comments on initiation

• (6) Following initiation, the China Chamber of Commerce for Import and Export of Textiles (CCCT) [^ntr4-L_202601063EN.000101-E0004] and the importer Iko Europe NV submitted comments.

• (7) CCCT considered that the volumes of imports from the PRC was established on an unreliable basis since the complainants used an estimation method rather than figures sourced directly from Eurostat. CCCT also submitted that the alleged low prices of Chinese imports were based on selectively chosen and inconsistently applied data, such as price quotations and import data. Finally, CCCT claimed that the evidence collected for undercutting and underselling was insufficient, partly due to the unreliability of the import data used.

• (8) At the outset, the Commission noted that it carried out its examination of the complaint in accordance with Article 5 of the basic Regulation and came to the conclusion that the requirements for initiation of an investigation were met, i.e. that there was sufficient evidence of dumping, injury and a causal link between the allegedly dumped imports and the alleged injury to initiate the investigation.

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

• (10) The Commission considered that the claim of CCCT goes beyond the requirements of Article 5(3) of the basic Regulation, as the Commission’s role at initiation stage is to examine the accuracy and adequacy of the evidence provided in the complainant to determine whether there was sufficient evidence to justify the initiation. The Commission considered that the method used for the calculation of import volumes was sufficiently reliable for serving the purpose to open an investigation. The CN codes under which the product under investigation is imported also cover products falling outside the scope of the investigation. Therefore, Eurostat statistics could not be used to determine import volumes and market shares. As explained in the complaint, the complainants established imports based on total demand in the Union minus the Union sales of the Union producers. Overall imports were then split between imports from China and those from other countries, based on an assessment of Eurostat data. The resulting figures were then cross-checked with available market intelligence. With regard to import prices, it follows from the nature of preparing a complaint that the complainants are not in a situation to collect direct, first-hand evidence from individual transactions. Thus, it had to resort to other data collection methods, and the Commission considered that the criteria for sufficient evidence at initiation were met. Thus, in the view of the Commission, the evidence presented to it sufficed to justify the opening of an investigation. The Commission considered the prices, such as quotations, were sufficiently objective and thus also sufficiently reliable for the purpose of calculating undercutting and underselling.

• (11) The CCCT also questioned the negative impact that imports from the PRC have had on the Union producers. First, as CCCT also inferred in recital 7, given that prices of imports were unreliable, a causal link between imports and injury to the Union industry could not be established. Moreover, CCCT also referred to other factors such as the prices of PET chips, the main raw material, that also contributed to the injury suffered by the Union industry, putting the causal link into question.

• (12) The Commission considered that the complainants presented sufficient evidence of undercutting and underselling, as well as a link between imports from China and the injurious situation of the Union industry.

• (13) Following the initiation, suppliers to the EU industry (BASF, Cargill, Corepla, Synthomer, Valmieras Stikla Skiedra), submitted comments in support of the investigation. The Italian associations of plastics recyclers ASSORIMAP and Plastics Recyclers Europe also expressed support noting the importance of PET Spunbond for PET-recycling. The Polish association of roofing membranes (users of the product under investigation) expressed support, as did the European association of non-wovens, EDANA. A German user also came forward, expressing concern and noting the importance of Chinese imports for their security of supply.

• (14) In response to the initiation of the proceeding, the importer/user Iko Europe NV made a request for product exclusion. This claim is set out in more detail in Section 2.4 below.

1.5.   Sampling

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

1.5.1.   Sampling of Union producers

• (16) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission invited interested parties to comment on the provisional sample. No comments were received, but finally the Commission decided that sampling of Union producers was not necessary as the three known and cooperating Union producers represented 100 % of the estimated total Union production of the product under investigation.

1.5.2.   Sampling of unrelated importers

• (17) 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. Two unrelated importers provided the requested information and agreed to be included in the sample. In view of the low number of replies, the Commission decided that sampling was not necessary. The two unrelated importers that came forward during the sampling exercise were invited to submit a response to the questionnaire.

1.5.3.   Sampling of exporting producers

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

• (19) Eight 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 two exporting producers, one of which consisting of two entities, 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 [^ntr5-L_202601063EN.000101-E0005]. No comments were received on the selection of the sample.

1.6.   Questionnaire replies and verification visits

• (20) The Commission sent a questionnaire concerning the existence of significant distortions in the PRC within the meaning of Article 2(6a)(b) of the basic Regulation to the GOC.

• (21) The Commission also sent questionnaires to the Union producers and to importers and made questionnaires available to the sampled exporting producers in the PRC. Other questionnaires, such as questionnaires for Union users, were made available online [^ntr6-L_202601063EN.000101-E0006] on the day of initiation.

• (22) 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

• — Johns Manville GmbH, Bobingen, Germany

• — Politex SAS di Freudenberg Politex SRL, Milano, Italy

• — Freudenberg Performance Materials S.A.S, Colmar, France

Exporting producers in the PRC

• — Changde Tiandingfeng Nonwovens Co Ltd, Changde City, Hunan province

• — Tiandingfeng Nonwovens Co Ltd, Dezhou City, Shandong province

• — Hubei Unibon nonwovens Co Ltd, Jingmen City, Hubei province

1.7.   Investigation period and period considered

• (23) 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

• (24) The product subject to this investigation is certain non-woven needle-punched sheets of polyester filaments, whether or not reinforced by glass fibres, weighing more than 70 g/m², of a thickness exceeding 0,5 mm but not exceeding 1,8 mm, impregnated with one or more binders, containing less than 30 % of glass fibres by weight, not coated or covered, currently classified under CN codes ex 5603 13 90 , 5603 14 20 and ex 5603 14 80 (TARIC codes 5603 13 90 70 and 5603 14 80 70) [^ntr7-L_202601063EN.000101-E0007] (‘the product under investigation’).

• (25) The Commission clarified that products produced from staple fibres do not fall under the scope of the investigation, which only includes products made of man-made filaments, i.e. continuous fibres of man-made material.

• (26) The production process to manufacture PET Spunbond starts with PET chips (or PET flakes) that are first molten and thereafter formed into filaments by spinning and stretching the molten polymer. These filaments are then dispersed on a net (directed with air streams) to form a web. The filaments are then entangled together mechanically by needle-punching, bound together by a starch-based or polymer-based (chemical) binder, and can be reinforced with glass fibre. The final product is wound up and packaged in large rolls or cut to size according to the customer’s requirements.

• (27) PET Spunbond is normally sold in rolls and used, essentially, as a carrier for bituminous membranes, i.e. waterproofing material for roofing in the construction industry. Bituminous membranes are typically produced by impregnating a PET Spunbond carrier membrane (sometimes reinforced with fiberglass to enhance strength and durability) in bitumen, a petroleum-based substance that is highly resistant to water and moisture.

2.2.   Product concerned

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

2.3.   Like product

• (29) 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 concerned produced and sold on the domestic market of the PRC; and

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

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

2.4.   Claims regarding product scope

• (31) The Commission received a claim on the product scope from the importer/user Iko Europe NV (Iko). Iko requested to exclude certain types of PET Spunbond with a width of more than 5 meters and without a binder. The Commission clarified that PET Spunbond products with a binder are included, regardless of the width. Moreover, the Commission also clarified that according to the product definition, product types without binder are outside the product scope of the investigation.

• (32) The product control numbers (PCN’s), as established at initiation, distinguished between glass-fibre reinforced and non-reinforced PET Spunbond. Several parties argued in favour of a more refined PCN, that also would consider the different types of binders applied to it (acrylic or starch). However, both the Union industry and the exporting producers use a mixture of binders. All types were found to have similar uses and prices. Hence, a more detailed analysis of products with different types of binder that do not differ in use or price was not found to be necessary.

3. DUMPING

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

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

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

• (35) 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.

• (36) In respect of the use of the application of Article 2(6a) of the basic Regulation, no exporting producers questioned the use thereof, while one of them claimed that its factors of production used were all undistorted. However, since it did not further substantiate this claim and since the verification of the questionnaire reply showed that all factors of production were domestically procured and thus subject to the significant distortions detailed in Section 3.2.1. below, the claim was rejected.

• (37) No questionnaire reply was received from the GOC. Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in the PRC.

• (38) In point 5.3.2 of the Notice of Initiation, the Commission also specified that, in view of the evidence available pursuant to Article 2(6a)(a) of the basic Regulation, for the purpose of determining the normal value based on undistorted prices or benchmarks, possible appropriate representative third countries are Thailand and Türkiye. The Commission further stated that it would examine other possibly appropriate representative countries in accordance with the criteria set out in 2(6a)(a) first indent of the basic Regulation.

• (39) The Commission issued two notes for the file to inform interested parties on the relevant sources it intended to use for the determination of the normal value: the first note on the production factors of 14 November 2025 (hereinafter the ‘First Note’) and the second note on the production factors of 9 February 2026 (hereinafter the ‘Second Note’).

• (40) In these notes, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of the product concerned. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries.

• (41) In the First Note, the Commission identified readily available financial statements for three producers of the product under investigation in Thailand and Indonesia. In the second Note, the Commission proposed to establish selling, general and administrative costs (‘SG&A’) and profits based on PT Multi Spunindo Jaya Tbk a producer of the product concerned in Indonesia, since the readily available financial data obtained from Thai producers were deemed unreliable.

• (42) These notes also addressed the comments received by the interested parties on these elements and on the relevant sources. The comments provided by the parties are addressed in the following sections.

3.2.   Normal value

• (43) 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’.

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

• (45) 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

• (46) 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.’

• (47) 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.

• (48) 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.

• (49) 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**’.

• (50) Pursuant to this provision, the Commission issued a country report concerning China (‘the Report’) [^ntr8-L_202601063EN.000101-E0008], 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 chemicals.

• (51) 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 complaint also contained some relevant evidence complementing the Report.

• (52) The complainant relied on the evidence contained in the Report [^ntr9-L_202601063EN.000101-E0009]. Moreover, the complainant referred to the numerous preferential policies and plans of the GOC that provide support to domestic Chinese PET Spunbond producers, provide ample evidence that the Chinese PET Spunbond industry is subject to significant distortions and not operating under normal market conditions [^ntr10-L_202601063EN.000101-E0010].

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

• (54) First, the market in question is served to a significant extent by enterprises that operate under the ownership, control, or policy supervision or guidance of the authorities of the exporting country. In particular, the complaint claimed that several PET Spunbond producers have close ties with the GOC, regional or local governments, either directly or via associations [^ntr11-L_202601063EN.000101-E0011]. As an example, the complaint mentioned that PET Spunbond producer Langfang Chinatex Nonwovens is part of the state-owned conglomerate Chinatex Corporation (part of the COFCO Group) where the Chinatex Party Committee stands on the same level as the Board of Directors and provided and Annex with information as evidence of the claim [^ntr12-L_202601063EN.000101-E0012].

• (55) Furthermore, the complaint also mentioned that the GOC keeps close links with Chinese PET Spunbond producers via representative industry associations such as the China Nonwovens and Industrial Textiles Association (‘CNITA’), the China Nonwovens Technical Association in Shanghai (‘CNTA Shanghai’), the China National Building Waterproof Association (‘CWA’ or ‘CNBWA’) and the China Building Materials Federation (‘CBMF’) [^ntr13-L_202601063EN.000101-E0013]. Consequently, even private companies in the PET Spunbond industry are subject to policy supervision and guidance.

• (56) Second, the state presence in PET Spunbond companies also allows the authorities to interfere with prices and/or costs. The complaint noted that the costs of most, if not all, factors of Chinese PET Spunbond production are distorted, including raw materials, electricity, land, and labour costs [^ntr14-L_202601063EN.000101-E0014].

• (57) Moreover, the complainant explained that several raw materials to produce PET Spunbond, including PET, yarns and starch, are subject to significant distortions themselves as confirmed by the Commission in the recent cases PET and GFY [^ntr15-L_202601063EN.000101-E0015]. The complaint also claimed that China also distorts the prices of corn starch and rice starch used to produce the binder of the PET Spunbond, through stockpiling practices [^ntr16-L_202601063EN.000101-E0016].

• (58) The complaint also pointed at the cost of energy in China and claimed that the GOC intervenes significantly and systematically in the Chinese power market and that the National Development and Reform Commission (‘NDRC’) regulates the Chinese domestic prices of electricity and gas [^ntr17-L_202601063EN.000101-E0017].

• (59) Furthermore, the complaint argued that the costs of machinery are also distorted as several State policies bring down the cost of equipment and machinery for encouraged industries such as textiles, nonwovens and PET Spunbond industries [^ntr18-L_202601063EN.000101-E0018]. The complaint also contained evidence that distortions exist also in land and wage costs [^ntr19-L_202601063EN.000101-E0019].

• (60) In essence, the complaint noted that due to the policy interventions in all factors for PET Spunbond production, Chinese costs and prices are not driven by market forces. As such, the GOC exerts significant influence over price-setting and the development of the PET Spunbond industry.

• (61) Third, the complaint explained that GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces. The complaint argued that 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 on which the central and local governments must focus. The Chinese textiles and non-woven fabrics sectors are subject to a number of policies. This confirms the continued importance which the GOC attributes to the PET Spunbond, including the intention to intervene in the sector to shape it in line with government policies.

• (62) In that regard, the complaint mentioned several examples. For instance, in the 14th 5-Year Plan, the PET Spunbond sector is a supported industry benefiting from intelligent manufacturing support projects in the Textile sector as well as the Light Industry and Building Materials sectors [^ntr20-L_202601063EN.000101-E0020]. The textile and light industry sectors are also promoted in the Made in China 2025 initiative and the 14th 5-Year Intelligent Manufacturing Plan [^ntr21-L_202601063EN.000101-E0021]. The Catalogue Encouraged Industries foresees support in the Textile industry for improving non-woven production technologies. The Guiding Catalogue for Industry Structural Adjustment also lists new technologies for non-woven processes and polyester recycling to produce non-woven materials in the encouraged category, making them eligible for State support in the form of fiscal, tax, land, and credit assistance [^ntr22-L_202601063EN.000101-E0022].

• (63) Fourth, the complaint submitted that PET Spunbond producers have access to finance granted by institutions which implement public policy objectives or otherwise are not acting independently from the State [^ntr23-L_202601063EN.000101-E0023]. The complaint noted that the Chinese financial system is characterised by the strong position of state-owned banks, that take into consideration criteria other than the economic viability of a project when granting access to financing. The complaint also referred in this regard to the Commission’s China Report and argued that just like non-financial SOEs, Chinese banks regularly implement public policies designed by the state [^ntr24-L_202601063EN.000101-E0024].

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

• (65) 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 based on the evidence available on the file. The evidence on the file included the evidence contained in the Report, which relies on publicly available sources.

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

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

• (67) 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_202601063EN.000101-E0025].

• (68) 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_202601063EN.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_202601063EN.000101-E0027].

• (69) 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.

• (70) 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_202601063EN.000101-E0028].

• (71) 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.

• (72) 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.

• (73) 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_202601063EN.000101-E0029]. This illustrates the unquestioned and ever growing control of the CCP over the economic system of China.

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

• (75) 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_202601063EN.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.

• (76) 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.

• (77) 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.

• (78) 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.).

• (79) 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_202601063EN.000101-E0031].

• (80) 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_202601063EN.000101-E0032].

• (81) 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_202601063EN.000101-E0033].

• (82) Third, on the level of regulatory environment, the interventions by the state into the economy take several 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_202601063EN.000101-E0034].

• (83) 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_202601063EN.000101-E0035].

• (84) 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_202601063EN.000101-E0036].

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

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

• (86) The sector of the product concerned is mainly served by private companies, such as Tiandingfeng Non-wovens Co., Ltd [^ntr37-L_202601063EN.000101-E0037]. and Changde Tiandingfeng Non-wovens Co. [^ntr38-L_202601063EN.000101-E0038], Ltd., both wholly-owned by Tiandingfeng Holdings Co. Ltd which is in turn wholly-owned by Beijing Oriental Yuhong Waterproof Technology Co. Ltd. [^ntr39-L_202601063EN.000101-E0039], Hubei Bushi Non-Woven Co., Ltd [^ntr40-L_202601063EN.000101-E0040], Jiangyin Huasicheng Nonwovens Co., Ltd [^ntr41-L_202601063EN.000101-E0041] held by Jiangsu Huahong Industrial Group Co. Ltd, or Hebei Qianjin Non-Woven Group Co. Ltd [^ntr42-L_202601063EN.000101-E0042]. Still, in the upstream sectors, the degree of state ownership remains significant, with a number of PET producers being fully or partially state-owned, such as Zhuhai China Resources Chemical Innovative Materials Co., Ltd (100 % owned by China Resources Group, a Central State owned enterprise (‘SOE’) [^ntr43-L_202601063EN.000101-E0043]) or Sinopec, a producer of PTA - a key input to produce PET - and ultimately 100 % owned by SASAC [^ntr44-L_202601063EN.000101-E0044].

• (87) However, CCP interventions into operational decision making have become the norm not only in SOEs, but also in private companies [^ntr45-L_202601063EN.000101-E0045], 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, PET, one of the main inputs of PET Spunbond is included in the advanced petrochemical materials and advanced light industry materials covered by the Made in China 2025 Roadmap [^ntr46-L_202601063EN.000101-E0046].

• (88) Furthermore, the PET industry is listed amongst the industries to be encouraged in the 2024 Edition of the Guiding Catalogue for industry structural adjustment 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 [^ntr47-L_202601063EN.000101-E0047]. At the same time, PET producers with smaller production capacities are also listed amongst the restricted industries showing the Chinese authorities intend to influence the PET industry layout: ‘[c]onventional polyester (PET) continuous polymerization production with a single line capacity of less than 200 000 tons/year’.

• (89) Moreover, the 14th FYP on raw materials [^ntr48-L_202601063EN.000101-E0048] directly addresses the petrochemical sector by stating that ‘[i]n sectors including petrochemicals and chemicals, steel, non-ferrous metals, and building materials, we shall foster a number of industry chain pioneer enterprises exerting leadership on the ecosystem and characterized by core competitiveness, (…). The guiding role of leading enterprises in chemical and building materials sectors shall be leveraged to promote corporate reform and restructuring’.

• (90) Government control and policy supervision can be also observed at the level of the relevant industry associations [^ntr49-L_202601063EN.000101-E0049].

• (91) For instance, the China Petrochemical and Chemical Industry Federation (‘CPCIF’) the sectoral industry association. According to Art. 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’ [^ntr50-L_202601063EN.000101-E0050]. Sinopec is a member of CPCIF [^ntr51-L_202601063EN.000101-E0051].

• (92) Additionally, the China Non-woven and Industry Textile Association [^ntr52-L_202601063EN.000101-E0052] (‘CNITA’) is also relevant for the product concerned. Article 3 of CNITA’s Articles of Association stipulates that ‘[the] association adheres to the overall leadership of the Communist Party of China, establishes Party organizations, carries out Party activities’, and ‘accepts the business guidance and supervision of the registration and management authority, the Party building leadership authority, and relevant industry management departments’ [^ntr53-L_202601063EN.000101-E0053]. Tiandingfeng Holdings Co. Ltd [^ntr54-L_202601063EN.000101-E0054] and Hebei Qianjin Non-Woven Group [^ntr55-L_202601063EN.000101-E0055] are members of CNITA.

• (93) 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.

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

• (94) 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.

• (95) 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 [^ntr56-L_202601063EN.000101-E0056]) and the company shall provide the necessary conditions for the activities of the Party organisation.

• (96) 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 [^ntr57-L_202601063EN.000101-E0057], including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline [^ntr58-L_202601063EN.000101-E0058].

• (97) 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 [^ntr59-L_202601063EN.000101-E0059]. 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.

• (98) In addition, on 15 September 2020 a document titled General Office of CCP Central Committee’s Guidelines on stepping up the United Front work in the private sector for the new era (‘the Guidelines’) [^ntr60-L_202601063EN.000101-E0060] was released, which further expanded the role of the Party committees in private enterprises.

• (99) 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 [^ntr61-L_202601063EN.000101-E0061].

• (100) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the PET Spunbond sector.

• (101) To provide an example, two Vice-Presidents [^ntr62-L_202601063EN.000101-E0062] of Beijing Oriental Yuhong Waterproof Technology Co. Ltd are also members of the CCP [^ntr63-L_202601063EN.000101-E0063].

• (102) Furthermore, Changde Tiandingfeng Non-wovens Co. Ltd. set up a Party Branch in 2021 and ‘adheres to the Party building leadership to guide the company’s development [^ntr64-L_202601063EN.000101-E0064].’ For instance, ‘9 party members played a leading role in production, business operations and technological innovation’. Also, ‘as regards industry upgrading, the Party organization coordinates to promote the coordinated development of the upstream and downstream industry chain [^ntr65-L_202601063EN.000101-E0065].’

• (103) Changde Tiandingfeng Non-wovens Co. Ltd’s Party Branch was commended by the Changde Municipal Party Committee as an ‘advanced grassroot Party organization [^ntr66-L_202601063EN.000101-E0066].’

• (104) The CCP’s interference into the business decisions is apparent also in the upstream industry as transpires from the available corporate filings. The 2022 annual report of the Sinopec Group, a producer of inputs to produce PET, points out that ‘[t]he company continuously improves the quality of party building work, boosting the spirit of the employees, strengthening discipline inspection and supervision work, helping the board of directors to effectively implement various decisions and arrangements, and promoting the high-quality development of the company’. [^ntr67-L_202601063EN.000101-E0067]. Moreover, Sinopec Group’s chairman of the board of directors is the secretary of the Party committee and several members of the board serve as deputy secretaries of the Party committee [^ntr68-L_202601063EN.000101-E0068]. Sinopec Group stated that it intends to ‘focus on the company’s new mission and new tasks on the new journey, carry forward the party’s self-revolutionary spirit, strengthen the party’s leadership and party building in an all-round and integrated manner, and systematically promote comprehensive and strict party governance, so as to provide a strong guarantee for writing a new chapter of China’s modern petrochemical industry’ [^ntr69-L_202601063EN.000101-E0069].

• (105) 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 [^ntr70-L_202601063EN.000101-E0070]. Thus, the state presence in firms, in the PET Spunbond and other sectors (such as the financial and input sectors) allows the GOC to interfere with respect to prices and costs.

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

• (106) 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.

• (107) 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 [^ntr71-L_202601063EN.000101-E0071].

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

• (109) The PET industry is mentioned in the Made In China 2025 Roadmap [^ntr72-L_202601063EN.000101-E0072] as a sector to be further developed, either as an advanced petrochemical material and also as an advanced light industry material.

• (110) The 14th FYP on Economic and Social Development and 2035 Perspectives [^ntr73-L_202601063EN.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_202601063EN.000101-E0074].’

• (111) According to the 14th FYP on the Raw Materials Industry [^ntr75-L_202601063EN.000101-E0075], ‘The layout plan for the petrochemical industry will be put in place and new xylene and ethylene projects other than those laid down in the plan shall be strictly prohibited. […] [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, […] green building materials, and new materials.’ [^ntr76-L_202601063EN.000101-E0076].

• (112) Additionally, the Guiding Opinion on Promoting the High Quality Development of the Petrochemical and Chemical Industry [^ntr77-L_202601063EN.000101-E0077] 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 […]’.

• (113) On the provincial level, the Shandong 14th FYP on the development of chemical industry [^ntr78-L_202601063EN.000101-E0078] calls on the local authorities to ‘[i]ncrease the technological transformation of existing enterprises, improve energy and resource utilization efficiency, and enhance the core competitiveness of enterprises. Establish a mechanism for enterprises to withdraw from parks, resolutely eliminate obsolete production capacity, strictly control restricted production capacity, and implement differentiated policies and measures for the allocation of resource factors such as land, electricity, and water to force enterprises to transform and develop’. It also calls to ‘[i]ncrease financial support. Strengthen fiscal policy incentives, coordinate and involve special funds, support chemical companies in accelerating technological transformation, intelligent transformation, industrial transfers, relocation into parks, elimination of obsolete equipment, etc., and implement tax exemptions applicable to imports of major technical equipment, VAT refunds, research and development policies such as additional deduction of expenses and insurance compensation for the first set of technical equipment. Actively guide various financial institutions and social capital to invest in the chemical industry, leverage the advantages of policy finance, development finance and commercial finance, and increase financial support for key areas of chemical technology’. Tiandingfeng Non-wovens Co. [^ntr79-L_202601063EN.000101-E0079], Ltd is located in Shandong.

• (114) Furthermore, the Hunan 14th FYP on the development of strategic and emerging industries [^ntr80-L_202601063EN.000101-E0080] also seeks to develop new chemical materials: ‘develop new synthetic rubbers, speciality resins, high-performance engineering plastics and other polymer materials.’ Changde Tiandingfeng Non-wovens Co. Ltd is located in Hunan, more precisely in Changde Municipality‘s West Dongting Industry Development Zone which issued an implementation plan for five improvements 2022-2025 [^ntr81-L_202601063EN.000101-E0081] seeking to ‘strengthen leading industries, expand emerging industries and cultivate future industries […and] on the basis of large-scale projects such as Tiandingfeng, [to] attract a number of upstream and downstream industries to form an industrial chain’. To this end, the West Dongting authorities ‘helped Changde Tiandingfeng Non-woven Co. Ltd. Successfully apply for the provincial advanced manufacturing highland construction special fund project, the provincial digital industry high-quality development special fund project and the provincial intelligent manufacturing benchmark enterprise, etc., to help enterprises obtain policy and financial support.’ [^ntr82-L_202601063EN.000101-E0082].

• (115) In addition, the Hubei 14th FYP on the high-quality development of the new materials industry [^ntr83-L_202601063EN.000101-E0083] seeks to focus on engineering plastics and ‘improve the industry’s technological level for high-performance engineering plastics such as polyoxymethylene, PET / PBT resin, […]’.

• (116) 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.

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

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

• (118) 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.

• (119) 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 [^ntr84-L_202601063EN.000101-E0084].

• (120) 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 [^ntr85-L_202601063EN.000101-E0085]. 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 [^ntr86-L_202601063EN.000101-E0086]. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land [^ntr87-L_202601063EN.000101-E0087].

• (121) 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 PET Spunbond sector. The present investigation revealed nothing that would call those findings into question.

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

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

• (123) 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 [^ntr88-L_202601063EN.000101-E0088].

• (124) 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 [^ntr89-L_202601063EN.000101-E0089]. 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.

• (125) 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 [^ntr90-L_202601063EN.000101-E0090]. Those findings lead to the distortion of wage costs in China.

• (126) No evidence was submitted to the effect that the PET Spunbond 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).

3.2.2.6.   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

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

• (128) First, the Chinese financial system is characterised by the strong position of state-owned banks [^ntr91-L_202601063EN.000101-E0091], 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) [^ntr92-L_202601063EN.000101-E0092] and they regularly implement public policies designed by the GOC.

• (129) 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 [^ntr93-L_202601063EN.000101-E0093]. 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.

• (130) Recent developments further illustrate the extent of government influence over financial institutions in China. In March 2025, the Government of China (GOC) announced an issuance of CNY 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 [^ntr94-L_202601063EN.000101-E0094].

• (131) 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 [^ntr95-L_202601063EN.000101-E0095]. 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’. [^ntr96-L_202601063EN.000101-E0096] .

• (132) Furthermore, on the level of allocation of financial resources, with Several Measures to Further Promote the Development of Private Investment [^ntr97-L_202601063EN.000101-E0097], 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’ [^ntr98-L_202601063EN.000101-E0098].

• (133) 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 [^ntr99-L_202601063EN.000101-E0099]. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important [^ntr100-L_202601063EN.000101-E0100]. 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.

• (134) 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.

• (135) 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 [^ntr101-L_202601063EN.000101-E0101]. Official media in China have recently reported that the CCP called for ‘guiding the loan market interest rate downwards’ [^ntr102-L_202601063EN.000101-E0102]. Artificially low interest rates result in under-pricing, and consequently, the excessive utilization of capital.

• (136) 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.

• (137) 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.

• (138) 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.

3.2.3.   Systemic nature of the distortions described

• (139) 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.

• (140) 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, in particular in recitals 67 to 138. The Commission pointed out that the regulatory setup underpinning those distortions is generally applicable, PET Spunbond 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.

• (141) 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.

• (142) 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.

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

3.2.4.   Arguments from the interested parties

• (144) It follows from recital 36 that no party questioned the use of Article 2(6a) of the basic Regulation per se, and that GOC did not cooperate in the investigation.

3.2.5.   Conclusion