Abstract

International trade is necessary in the modern world with all of the demands and expectations for a better economic situation in a nation. Fair competition is necessary to boost economy of a country. Such fairness is brought about by the implementation of subsidies by domestic country while competing in the international trading scenario. But biased nature of subsidies towards a domestic market implemented by a country such as China has proved to create problems and disputes, in addition to causing disruption of fairness in international trade. Chinese state-owned companies pose significant problems to the global trading system due to their size and importance. One question is whether a state-owned enterprise falls within the World Trade Organization anti-subsidy system as a "public body” and whether such public bodies are involved in “financial contribution” to the domestic market. The Chinese government instructs state-owned enterprises and state-owned banks to provide loans and raw resources to support the growth of important sectors. Such contributions fulfil all the conditions to be called subsidies. Even if the government refuses to release any relevant information, state-owned enterprises can be deemed to be public bodies under the governmental authority standard and the facts-available process. This research work contends that the countervailing measures statute is a workable instrument to combat the subsidies that China indirectly provide through its State-Owned Enterprises. Further, we will look at how the subsidies are implemented by China in its domestic market through State Owned Enterprises and the effect that the subsidies have with respect to General Agreement on Trade and Tariff 1994 and Subsidies and Countervailing Measures agreement. The current state of the economy will be discussed, including the way China views subsidies, their effects, and the apparent failure of the World Trade Organization's Agreement on Subsidies and Countervailing Measures to address them.

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