Criteria of Market Economy

Updated: 2006-10-09 16:11

This includes:

(a) Any restrictive regulations concerning business operation and export permits of enterprises;

(b) Any legislation for reduction of control on enterprises;

(c) Any other governmental measures for reduction of control on enterprises.

On the other hand, if there is any control by the government with regard to enterprises' export activities by law. This includes: (a) any restrictive regulations concerning business operation and export permits of enterprises; (b) any legislation for reduction of control on enterprises; (c) any other governmental measures for reduction of control on enterprises. On the other hand with regard to the facts of governmental control on enterprises' export activities, the US Department of Commerce usually considers the following elements:

(a) Whether export prices are determined by the government or subject to government approval;

(b) Whether exporters have right to negotiate contract terms and sign contracts or other agreements;

(c) Whether exporters are free of government restriction in choosing their managing bodies and enjoys full autonomy;

(d) Whether exporters enjoy independent power of decision in distribution of profits and remedying losses.

The EU issued the No 905. 98 Act in 1998, which allows Chinese respondent enterprises to apply for the status of market economy in anti-dumping investigations and stipulates five criteria for determining the status of market economy, namely: (1) prices, costs and inputs etc are determined by market demand and supply; (2) firms have one clear set of basic accounting records which are independently audited in line with international accounting standards and are applied for all purpose. (3) The production costs and financial situation of firms are not subject to significant distortions carried over from the former non-market economy system, in particular in relation to depreciation of assets, other write-offs, barter trade and payment via compensation of debts. (4) The firms concerned are subject to bankruptcy and property laws that guarantee legal certainty and stability for the operation of firms, and, 5, exchange rate conversions are carried out at the market rate.

In its investigation on the issue of "non-market economy", Canada specified five aspects: (1) is the government's role in formulating economic policies and controlling economic activities interfering the normal performance of the market economy? This includes the percentage and structure of governmental influence in pricing, distribution of products and procedures for making offers; the pricing mechanism of domestic products and services; planning and controlling of production of commodities and provision of services and market restrictions; the control of domestic and international trade; further reforms in the structure and functions of government organizations. (2) how does the government control or govern enterprises in respect of production, sales and procurement? And how is control or governing applied in connection with enterprises' financing? (3) in respect of international trade, the conditions and procedures foreign trade enterprises must comply with the government to allow them to carry out foreign trade businesses; government guidance and control in respect of quotas and prices of import and export products. (4) market-oriented reforms of state-owned enterprises, including the existing types of owner-ship, when and how the ownership system was transformed; in the state-owned enterprises under government control, the mechanism for determining prices of elementary factors such as raw materials, energy, labor cost as well as quantity and prices of their products, the managing of enterprises' funds and performance, the distribution of profits, the relationship between employers and employees and the availability of loans etc. (5) whether there are different interest rates for different enterprises, industries and domestic and international trade departments. Whether exchange rates are determined by the market as far as exporters are concerned and whether enterprises enjoy autonomy in obtaining foreign exchanges and keeping foreign exchanges, etc.


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