Commission Implementing Regulation (EU) 2026/1857 of 27 July 2026 imposing a provisional anti-dumping duty on imports of benzyl alcohol 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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	2026/1857	28.7.2026

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_202601857EN.000101-E0001] (‘the basic Regulation’), and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

1. PROCEDURE

1.1.   Initiation

• (1) On 19 December 2025, the European Commission (‘the Commission’) initiated an anti-dumping investigation into imports of benzyl alcohol originating in the People’s Republic of China (‘the country concerned’) pursuant to Article 5 of the basic Regulation.

• (2) This followed a complaint lodged on 10 November 2025 by Lanxess Deutschland GmbH, Lanxess Chemical B.V. and Vynova Advanced Organics Maastricht B.V. (‘the complainants’) on behalf of the Union industry in the meaning of Article 5(4) of the basic Regulation.

• (3) The initiation was justified by the evidence of both dumping and resulting material injury provided in the complaint, as detailed in the Notice of Initiation in the Official Journal of the European Union [^ntr2-L_202601857EN.000101-E0002] (‘the Notice of Initiation’).

1.2.   Registration

• (4) The Commission made imports of the product concerned subject to registration by Commission Implementing Regulation (EU) 2026/362 [^ntr3-L_202601857EN.000101-E0003] (‘the registration Regulation’).

1.3.   Interested parties

• (5) In the Notice of Initiation, the Commission invited interested parties to participate in the investigation. Specifically, it notified the complainants, known Union producers, exporting producers, the authorities of the People’s Republic of China and other known stakeholders - including importers, suppliers and users - inviting their participation. All interested parties were given the opportunity to comment on the initiation and to request a hearing with the Commission or the Hearing Officer in trade proceedings.

1.4.   Sampling

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

Sampling of Union producers

• (7) In the Notice of Initiation, the Commission informed parties that it had provisionally selected a sample of Union producers. The sample was selected on the basis of representativity in terms of volume of production and sales of the like product in the Union between 1 October 2024 and 30 September 2025. This sample consisted of two Union producers, which accounted for over 95 % of the estimated total volume of production of the like product in the Union and over 95 % of the sales into the Union. The sample was representative of the Union industry. The Commission invited interested parties to comment on the provisional sample. There were no comments.

Sampling of unrelated importers

• (8) To determine if sampling was necessary, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

• (9) No unrelated importers provided duly completed sampling forms by the established deadline. The Commission thus decided that sampling was not necessary. Nonetheless, the Commission invited an unrelated importer that had submitted an incomplete sampling form, Fenchem Biochemie GmbH, to fill in the questionnaire intended for unrelated importers of the product under investigation.

Sampling of exporting producers

• (10) To determine if sampling was necessary, the Commission asked all exporting producers in the People’s Republic of 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.

• (11) 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 two exporting producers based on the largest representative volume, representing about 90 % of all exports to the Union from the country concerned, 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. There were no comments received on the sample that was chosen.

1.5.   Individual examination

• (12) One exporting producer in China requested individual examination under Article 17(3) of the basic Regulation. At this stage of the investigation and in view of the undue additional workload that the assessment of individual examination requests entail, and which could jeopardise the timely completion of the provisional stage of the investigation, the Commission has not taken any decision about the request for individual examination. The Commission will decide whether to grant individual examination at the definitive stage of the investigation.

1.6.   Questionnaire replies and verification visits

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

• (14) Furthermore, the complainant provided in the complaint sufficient evidence of raw material distortions in the People’s Republic of 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 the People’s Republic of China. For this reason, the Commission sent additional questionnaires in this regard to the GOC.

• (15) The Commission invited the two sampled Union producers, the unrelated importer which had made itself known and the two sampled exporting producers in the country concerned to complete the questionnaires, which were made available online [^ntr4-L_202601857EN.000101-E0004] on the day of initiation. The Commission prepared an additional questionnaire with a view to collect data on macro-indicators.

• (16) Questionnaire replies were received from the two sampled Union producers, an unrelated importer in the Union, the two sampled exporting producers and by the legal representative of the Union industry.

• (17) 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 or at the location of the accounting records:

Union producers

• — Lanxess Deutschland GmbH, Cologne, Germany

• — Vynova Advanced Organics Maastricht B.V., Maastricht, the Netherlands

Exporting producers in the PRC

• — Hubei Greenhome Materials Technology, Inc., Xiantao City, Hubei, China (‘Hubei Greenhome’)

• — Qianjiang Xinyihong Organic Chemical Co., Ltd., Qianjiang City, Hubei, China (‘Qianjiang Xinyihong’)

• (18) The questionnaire reply on macro-indicators submitted on behalf of the Union industry was verified at the premises of its legal representative in Brussels, Belgium.

1.7.   Investigation period and period considered

• (19) The investigation of dumping and injury covered the period from 1 October 2024 to 30 September 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

• (20) The product under investigation is benzyl alcohol (also known as phenylmethanol, benzenemethanol, phenylcarbinol and hydroxytoluene), an aromatic alcohol, usually falling under the Chemicals Abstract Services (CAS) number 100-51-6 and the Customs and Statistics Number (CUS) 0011660-9, currently falling under CN code 2906 21 00 (‘the product under investigation’).

• (21) Benzyl alcohol can be produced via two main processes: via chlorination from toluene (the main route) or via air oxidation of toluene.

• (22) Benzyl alcohol has a wide range of uses. The main ones are as a solvent and diluent for epoxy resins and coatings for basic industrial applications for construction. As a solvent for cleaning and degreasing, benzyl alcohol is also found in soaps, detergents, shampoos and various cleaning products. Inter alia, it is also used as a preservative (namely in cosmetics, personal care, animal nutrition and agrochemical products), as an excipient in medicines, as a carrier in food flavouring production, as a fuel additive in gasoline to enhance engine performance and lower emissions, as a dye aid in the dyeing of textiles, and as a precursor in chemical synthesis (particularly in the manufacture of benzyl esters and ethers).

2.2.   Product concerned

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

2.3.   Like product

• (24) 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 country concerned; and

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

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

3. DUMPING

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

• (26) 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.

• (27) To gather the data required for the potential application of Article 2(6a) of the basic Regulation, the Commission's Notice of Initiation requested that all Chinese exporting producers provide details on the inputs used in their production. Five exporting producers submitted the relevant information.

• (28) 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.

• (29) No questionnaire reply was received by the GOC. Neither did the GOC file any submission on the application of Article 2(6a) of the basic Regulation within the deadline. Subsequently, on 16 February 2026, the Commission informed the GOC that it intended to 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. No comments were received from the GOC further to this notification. The application of Article 18 for the determination of the existence of the significant distortions in the PRC in accordance with Article 2(6a) is therefore confirmed.

• (30) In point 5.3.2. the Notice of Initiation, the Commission also specified that, in view of the evidence available, it may 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. According to the information available to the Commission at that stage, possible appropriate representative third countries were inter alia Mexico or Türkiye.

• (31) On 9 February 2026, the Commission informed by a note (‘the First Note’) interested parties 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 the product concerned. The Commission also communicated that there is no production of the product under investigation in any country with similar level of economic development as China. The Commission based its further research on countries producing organic chemical products (classified under NACE 2014). In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified possible representative countries, namely Türkiye, Mexico, Indonesia, Malaysia or Brazil as an appropriate representative countries and invited all parties to comment and to put forward alternative countries fulfilling the basic criteria under Article 2(6a)(a) first indent.

• (32) On 27 April 2026, the Commission informed by a second note (‘the Second Note’) interested parties on the relevant sources it intended to use for the determination of the normal value, with Türkiye as the representative country. The Commission proposed to establish selling, general and administrative ('SG&A') costs and profits based on eleven producers in Türkiye active in the sector of manufacturing of organic chemicals, falling under NACE code 2014 [^ntr5-L_202601857EN.000101-E0005].

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

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 refereed hereinafter as ‘SG&A costs’).

• (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 and the exporting producers, 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 (‘the Report’) [^ntr6-L_202601857EN.000101-E0006], 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 complaint also contained some relevant evidence complementing the Report.

• (42) The complainant relied on the evidence contained in the Report that there are distortions in the Chinese benzyl alcohol industry. These distortions stem from the organization of the People’s Republic of China (‘PRC’), which is based on the concept of social market economy that is developed under the leadership of the Chinese Communist Party (‘CCP’) and covers all essential aspects of the State. According to the complaint, at the economic level, the CCP exercises a particularly tight control, which is translated into the high importance of the State-Owned Enterprises (SOE’) in the economy and the CCP’s strong leverage over the private sector. The complainant pointed to three main channels of intervention by the GOC in the Chinese economy: administrative, financial and regulatory control of the State [^ntr7-L_202601857EN.000101-E0007].

• (43) The complainant also referred to Commission findings in several recent investigations concerning the chemical sector in China, which confirmed the existence of significant distortions with regard to certain alkyl phosphate esters [^ntr8-L_202601857EN.000101-E0008].

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

• (45) First, the benzyl alcohol sector is being served to a significant extent by enterprises that operate under the ownership, control or policy supervision or guidance of state authorities.

• (46) The complainant argues that the GOC ensures a strong influence over both SOEs and private-owned companies, especially in encouraged industries like the chemical sector which encompasses benzyl alcohol. The GOC and CCP exercise control over SOEs and shape their corporate structure and competitive landscape in order to achieve strategic economic goals, notably, by the appointing and controlling key executives through the CCP Organization Department, and by providing SOEs with preferential access to important inputs [^ntr9-L_202601857EN.000101-E0009].

• (47) Moreover, at both national and local level, the GOC established the State-Owned Asset Supervision and Administration Commissions (‘SASAC’) intending to represent the State’s shareholder interests in SOEs. In addition, the GOC adopted a Law on State-owned Assets of Enterprise among other measures mandating State control and ownership over strategic industries. Additionally, the complaint states that the ‘Social Credit System’ reinforces the Party’s influence over enterprises in China and threatens to pressure foreign companies to comply with relevant Chinese industrial policies. The complainant further argues that with the 14^th Five-Year-Plan (‘FYP’), the GOC targets to uphold socialist policies and to bolster economic growth. With respect to SOEs, the FYP aims at building a stronger connection between the GOC and SOEs [^ntr10-L_202601857EN.000101-E0010].

• (48) According to the complaint, in the industry of toluene derivatives in particular, a substantial degree of ownership by the GOC continues to persist. SOEs have played a central role in facilitating the GOC’s intervention in the PRC’s chemical sector. These SOEs maintain a dominant position in the upstream feedstock supply chain, benefiting from privileged access to government-allocated resources, including financing, subsidies, land use rights, and other forms of state support. Moreover, their close alignment with state policy and significant influence over government decision-making processes further consolidate their strategic position within the industry [^ntr11-L_202601857EN.000101-E0011].

• (49) The complaint refers to at least three of the largest toluene producers globally which are all Chinese SOEs: China Petrochemical Corporation (SINOPEC Group), China National Petroleum Corporation (CNPC), and Sinochem Group. The GOC regularly allocates financial resources to these companies which distorts the toluene and the benzyl alcohol markets [^ntr12-L_202601857EN.000101-E0012].

• (50) Privately owned companies also remain under close control of the GOC. The complainant relies on the example of privately owned companies producing benzyl alcohol which were granted preferential corporate income tax rates, government grants or subsidies. The GOC’s involvement in the benzyl alcohol market also includes the participation of CCP members in corporate governance structures [^ntr13-L_202601857EN.000101-E0013].

• (51) On the basis of the foregoing, the complainant concludes that the Chinese benzyl alcohol market is, to a significant extent, served by enterprises that are subject to GOC ownership, financial support, political control, or policy supervision and guidance.

• (52) Second, the state presence in both SOEs and private benzyl alcohol companies also allows the authorities to interfere with prices and/or costs.

• (53) According to the complaint, the GOC preserves its influence in SOEs through the appointment and removal of key management personnel in SOEs, which is the main responsibility of SASAC. It also does so by heavily influencing the production of critical raw materials for the production of benzyl alcohol, notably toluene [^ntr14-L_202601857EN.000101-E0014].

• (54) One of the main strategies of the GOC to maintain control over SOEs is the appointment of personnel management, often members of the CCP. The Chinese SOE Law clearly establishes that SASAC and local SASACs have the power of appointing the management of SOEs. Additionally, the SASAC Regulation confirms that one of its duties is to ‘appoint or remove the responsible persons’ of SOEs. The complainant relies on the Commission’s findings in the Report, to argue that this is a ‘sign of significant State influence considering the scale of SOEs and the dominant role of the state-owned economy in China’. This strong influence is further reinforced by the fact that the CCP is directly involved in the appointment of SOE managers and has the right to set the relevant procedures and recommend specific candidates for the positions [^ntr15-L_202601857EN.000101-E0015].

• (55) Additionally, SOEs in China benefit from preferential access to a wide variety of inputs like land and energy, but also to financing systems. The strong State intervention within companies results therefore in a distorted allocation of resources, which is then translated into distorted costs and distorted prices for the products manufactured. Moreover, the GOC influences costs and prices of chemical products like benzyl alcohol through its presence and intervention in the upstream sectors of raw materials and inputs necessary for its production. For instance, the strong production of toluene in the PRC is mainly due to the rapid investment and expansion in the sector, as well as the availability of both financing and raw materials. The overcapacities in the production of toluene, resulted in bigger investments in the downstream industries, and in particular the one of benzyl alcohol. Furthermore, the GOC interferes with respect to prices and costs of energy. Although the GOC has undertook some efforts to create competition in the market and allow prices to be set by market forces, it remains that energy prices are still strongly controlled. This circumstance unquestionably allows the GOC to significantly lower the costs of energy to the benefit of chemical producers, notably of toluene and benzyl alcohol [^ntr16-L_202601857EN.000101-E0016].

• (56) Third, the GOC particularly intervenes in the energy sector and the electricity market through subsidization of coal as the main source of energy for steam production. In addition, the electricity market is being served to a significant extent by enterprises operating under the Chinese authorities.

• (57) According to the complaint, through direct subsidies, preferential financing, and price controls, the GOC ensures that coal remains artificially cheap, benefiting industries that rely on it as a primary energy source. While coal is predominantly used for electricity generation, it is also essential for producing industrial steam, a critical input in chemical manufacturing and other energy-intensive processes. The GOC’s influence extends further through price controls. For instance, the National Development and Reform Commission (NDRC) has set a ‘reasonable range’ for medium and long-term coal transaction prices between CNY 570 and 770 per tonne. Additionally, major state-owned miners such as China Shenhua Energy Co. and China Coal Energy Co. frequently sell coal at capped price, ensuring stable but artificially low costs for downstream industries [^ntr17-L_202601857EN.000101-E0017].

• (58) Moreover, the complaint argues that beyond steam production, China’s subsidized coal sector also provides an unfair advantage to domestic industries through its impact on electricity supply and pricing. As of 2022, coal-fired power plants accounted for 60 % of China's electricity generation. The GOC’s role in the electricity market extends beyond fuel subsidies to direct ownership and pricing controls, creating a system where electricity costs are artificially suppressed. The electricity sector is dominated by SOEs. The extensive state control over electricity pricing and distribution results in substantial market distortions. The PRC’s model ensures artificially low electricity costs for industrial users. This intervention benefits energy-intensive sectors, in particular the chemical industry, where electricity is a significant component of production costs [^ntr18-L_202601857EN.000101-E0018].

• (59) Fourth, the GOC pursues public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces.

• (60) 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. These plans, which cover virtually all economic sectors, set specific mandatory objectives which are monitored by authorities at each administrative level. The planning mechanism guides the allocation of resources, which is geared towards sectors designated as strategic or politically important by the government, rather than being allocated according to market forces [^ntr19-L_202601857EN.000101-E0019].

• (61) 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. For instance, the central 14th FYP lays out the strategic visions of the GOC for the transformation and upgrading of traditional industries, and the development axis for strategic emerging industries, like the chemical, building material, new material, and chemical fiber industries. Additionally, in the 2024 version of the Guidance Catalogue for the Industrial Structure Adjustment, the chemical and petrochemical industry appears as an encouraged one. Having this status allows for this industry to generally benefit from numerous subsidies and financial support by way of public finance, taxation, credit, import and export, as well as land. The complainant concludes that the production and sales of the entire benzyl alcohol chemistry value chain is actively controlled and regulated at the national and the provincial levels by the GOC [^ntr20-L_202601857EN.000101-E0020].

• (62) Fifth, much like in any other sector in the Chinese economy, the benzyl alcohol sector is subject to the distortions resulting from the discriminatory application or inadequate enforcement of Chinese bankruptcy, corporate and property rules.

• (63) According to the complaint, 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. The Chinese Bankruptcy Law is systematically under-enforced and targets mainly small companies. The complainant relies on the Commission’s Report to support the low enforcement of Bankruptcy Law, notably due to the lack of clarity in the criteria to open the proceedings and their outcome, and to the strong influence of State authorities in bankruptcy procedures. Moreover, the under-enforcement of bankruptcy laws impacts the Chinese financial and borrowing market, amounting to grant implicit State guarantees to these companies, which in turn distorts the costs of credits and access to finance [^ntr21-L_202601857EN.000101-E0021]. Furthermore, regarding property laws, the deficiencies of the system of property rights are particularly clear with regard to ownership of land and land-use rights in the PRC. Land allocation depends exclusively on the State, which may follow political goals rather than free market principles. While there are a number of laws that aim at allocating land use rights in a transparent manner and at market prices, the complainant argues that these provisions are frequently not respected [^ntr22-L_202601857EN.000101-E0022]. The complainant concludes that much like any other sector in the Chinese economy, producers of benzyl alcohol 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.

• (64) Sixth, wage costs are distorted in the benzyl alcohol sector as well.

• (65) According to the complaint, since wage formation in the PRC does not stem from normal market forces or genuine free collective bargaining, wage costs are subject to significant distortions. A truly market-based wage system cannot fully emerge in the PRC due to structural impediments to the rights of workers and employers to freely organize. In practice, only one trade union is legally recognized, the All-China Federation of Trade Unions (‘ACFTU’). However, the ACFTU lacks independence from the state. Moreover, evidence shows that senior positions within the ACFTU are often held by high-ranking party officials in SOEs or by managers in private companies [^ntr23-L_202601857EN.000101-E0023].

• (66) Furthermore, the mobility of the Chinese workforce is significantly constrained by the household registration system (hukou), which restricts access to comprehensive social security and public welfare benefits to individuals officially registered as residents of a given administrative area. As a result, many low-skilled workers remain excluded from essential public services and are placed in a precarious employment position, often compelled to accept lower wages and inferior working conditions compared to their locally registered counterparts. According to the complaint, this difference of treatment inevitably results in a wage cost distortion on the Chinese labour market [^ntr24-L_202601857EN.000101-E0024].

• (67) Much like any other sector in the Chinese economy, the industry of benzyl alcohol is also subject to Chinese labour laws and consequently also affected by these distortions in wage costs. The wage costs distortions are further exacerbated by labour subsidies provided by the Chinese state, particularly to benzyl alcohol producers [^ntr25-L_202601857EN.000101-E0025].

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

• (69) 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.

• (70) 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

• (71) 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’ [^ntr26-L_202601857EN.000101-E0026].

• (72) The state-owned economy is the ‘leading force in the national economy’ and the state has the mandate to ensure its ‘consolidation and growth’ [^ntr27-L_202601857EN.000101-E0027]. Indeed, compared to the 13^th FYP, SASAC confirmed that total assets of central enterprises grew by 44,6 % during the 14^th 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’ [^ntr28-L_202601857EN.000101-E0028].

• (73) 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.

• (74) 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 [^ntr29-L_202601857EN.000101-E0029].

• (75) 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.

• (76) 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.

• (77) 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.’ [^ntr30-L_202601857EN.000101-E0030] This illustrates the unquestioned and ever growing control of the CCP over the economic system of China.

• (78) This leadership and control is 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.

• (79) 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 [^ntr31-L_202601857EN.000101-E0031]. 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.

• (80) 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.

• (81) 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.

• (82) 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.).

• (83) 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 [^ntr32-L_202601857EN.000101-E0032].

• (84) 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 [^ntr33-L_202601857EN.000101-E0033].

• (85) 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 [^ntr34-L_202601857EN.000101-E0034].

• (86) 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 in order 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 [^ntr35-L_202601857EN.000101-E0035].

• (87) 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 [^ntr36-L_202601857EN.000101-E0036].

• (88) 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 [^ntr37-L_202601857EN.000101-E0037].

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.

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

• (90) The sector of the product concerned is mainly served by private companies, such as Hubei Greenhome Materials Technology [^ntr38-L_202601857EN.000101-E0038] or Wuhan Youji [^ntr39-L_202601857EN.000101-E0039]. Still, in the upstream sector of toluene, the single most important input used to produce benzyl alcohol, while some producers are private companies like Hengli Petrochemicals [^ntr40-L_202601857EN.000101-E0040], the degree of state ownership remains significant, with a number of producers being controlled by the state, such as Sinopec [^ntr41-L_202601857EN.000101-E0041] or Sinochem [^ntr42-L_202601857EN.000101-E0042], both state owned enterprises (‘SOEs’) controlled by SASAC [^ntr43-L_202601857EN.000101-E0043].

• (91) Moreover, CCP interventions into operational decision making have become the norm not only in SOEs, but also in private companies [^ntr44-L_202601857EN.000101-E0044], 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 such as, the 14^th FYP on raw materials [^ntr45-L_202601857EN.000101-E0045] which 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.’

• (92) Additionally, the Work Plan for the steady growth of the petrochemical and chemical industry [^ntr46-L_202601857EN.000101-E0046] is formulated in order ‘to promote the stable operation and structural optimization and upgrading of the petrochemical industry’ and to ‘expand effective investment and promote transformation and upgrading’.

• (93) Similarly, at provincial level, the Shandong 14^th FYP on developing the chemical industry [^ntr47-L_202601857EN.000101-E0047] seeks to ‘promote the high-quality development of the chemical industry in the province’ and to ‘comprehensively promote the upgrading of the industry base and the modernization of the industry chain, […] accelerate the withdrawal of backward and inefficient production capacity, […] guide enterprises to merge and reorganize, optimize resource allocation and industry chain structure and improve production efficiency and profitability’.

• (94) Also, the Hubei 14th FYP on economic and social development and 2035 perspectives [^ntr48-L_202601857EN.000101-E0048] stipulates that the governmental authorities ‘will optimize the development of specialty oils and downstream ethylene industries, upgrade traditional industries such as phosphorus chemicals, salt chemicals, and coal chemicals, vigorously develop high-end fine chemicals and new chemical materials, optimize the layout of the chemical industry along the Yangtze River, and focus on building a number of green and intelligent specialized chemical industrial parks in Wuhan, Yichang, Jingmen, Xiangyang, Jingzhou, Xiaogan, Huanggang, Qianjiang, and Xiantao to create a trillion-yuan-level modern chemical industry cluster’.

• (95) Government control and policy supervision can be also observed at the level of the relevant industry associations [^ntr49-L_202601857EN.000101-E0049].

• (96) For instance, the China Petrochemical and Chemical Industry Federation (‘CPCIF’) is the industry association for the sector of the product concerned. According to Art. 3 of CPCIF’s Articles of Association, the organisation ‘adheres to the comprehensive leadership of the CCP [and] 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_202601857EN.000101-E0050].

• (97) Moreover, Article 36 of CPCIF’s Articles of Association stipulates that the president, vice-presidents and secretary-general of the Association must ‘adhere to the leadership of the CCP, support socialism with Chinese characteristics, [and] resolutely implement the Party’s line, principles and policies [^ntr51-L_202601857EN.000101-E0051]’.

• (98) Furthermore, the CPCIF has set up a Light Hydrocarbons and Aromatics Special Committee covering aromatic hydrocarbons like toluene and aromatic alcohols like benzyl alcohol [^ntr52-L_202601857EN.000101-E0052].

• (99) Hengli Petrochemicals [^ntr53-L_202601857EN.000101-E0053], Sinopec [^ntr54-L_202601857EN.000101-E0054] and Sinochem [^ntr55-L_202601857EN.000101-E0055] are members of CPCIF.

• (100) 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.

• (101) 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.

• (102) 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_202601857EN.000101-E0056]) and the company shall provide the necessary conditions for the activities of the Party organisation.

• (103) 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_202601857EN.000101-E0057], including exercising pressure on private companies to put ‘patriotism’ first and to follow Party discipline [^ntr58-L_202601857EN.000101-E0058].

• (104) 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_202601857EN.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.

• (105) 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_202601857EN.000101-E0060] was released, which further expanded the role of the Party committees in private enterprises.

• (106) 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_202601857EN.000101-E0061].

• (107) The investigation confirmed that overlaps between managerial positions and CCP membership / Party functions exist also in the benzyl alcohol sector.

• (108) To provide an example, the General Manager of Wuhan Youji is also the Party Secretary and was rewarded as an outstanding CCP affairs worker by the Wuhan Municipality CCP Committee [^ntr62-L_202601857EN.000101-E0062].

• (109) Additionally, the 2022 annual report of the Sinopec Group, 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’. [^ntr63-L_202601857EN.000101-E0063] 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 [^ntr64-L_202601857EN.000101-E0064]. 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’ [^ntr65-L_202601857EN.000101-E0065].

• (110) Also, Sinochem’s chairman of the board of directors and general manager are respectively secretary and deputy secretary of the Party committee [^ntr66-L_202601857EN.000101-E0066].

• (111) 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 [^ntr67-L_202601857EN.000101-E0067]. Thus, the state presence in firms, in the benzyl alcohol sector 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

• (112) 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.

• (113) 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 [^ntr68-L_202601857EN.000101-E0068].

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

• (115) The 14^thFYP on economic and social development and 2035 perspectives [^ntr69-L_202601857EN.000101-E0069] 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 [^ntr70-L_202601857EN.000101-E0070].’

• (116) According to the 14^th FYP on the raw materials industry [^ntr71-L_202601857EN.000101-E0071], China ‘will develop a batch of industrial clusters in petrochemicals. […] In sectors including petrochemicals and chemicals, steel, non-ferrous metals, and building materials, [China] will foster a number of pioneering enterprises that could lead the ecosystem of the industrial chain with core competitiveness’ [^ntr72-L_202601857EN.000101-E0072].

Additionally, the Guiding Opinion on promoting the high quality development of the petrochemical and chemical industry [^ntr73-L_202601857EN.000101-E0073] 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 [and to g]ive full play to the role of the national industry-finance cooperation platform […]’.

• (117) Also, the Hubei 14^th FYP on the high quality development of the new materials industry aims at developing the downstream industry of the product concerned: ‘the Xiantao and Qianjiang New Materials Industrial Bases, primarily focused on supporting materials for basic components, will leverage the Xiantao New Materials Industrial Park to vigorously develop advanced polymer new materials such as benzyl benzoate [^ntr74-L_202601857EN.000101-E0074].’

• (118) Additionally, the Hubei 14th FYP on the high quality development of a modern chemical industry [^ntr75-L_202601857EN.000101-E0075] requires to ‘implement the upgrading and transformation of specialty oil products, promote product upgrading and premium brand development, expand the total scale of high-end products, further enhance the scale and efficiency of specialty products manufacturing bases with one million tons capacity, and accelerate the construction of chemical products manufacturing bases with one million tons capacity; [to i]ntegrate and optimize aromatic resources, actively connect with industries such as plastics and rubber, and create a petrochemical processing product industrial chain including C2, C3, C4, C5, toluene, C8, and C9 aromatics, promoting the transformation and development towards integrated refining, chemical, and specialty products.’ More specifically, as regards the Qianjiang Oil Upgrading and Deep Processing Project, the plan seeks to ‘actively develop aromatic chemicals, […] and improve and extend the petrochemical industrial chain [^ntr76-L_202601857EN.000101-E0076]’.

• (119) Hubei Greenhome Materials Technology [^ntr77-L_202601857EN.000101-E0077] or Wuhan Youji [^ntr78-L_202601857EN.000101-E0078] are both located in Hubei, and Wuhan Youji has a benzyl alcohol production unit located in Qianjiang [^ntr79-L_202601857EN.000101-E0079].

• (120) Furthermore, Hubei Greenhome Materials Technology is a national ‘little giant [^ntr80-L_202601857EN.000101-E0080]’ enterprise. The GOC defines ‘little giant’ companies as ‘the novel elites of China's small and medium-sized enterprises that are engaged in manufacturing, specialize in a niche market and boast cutting-edge technologies’ and intends to ‘scale up support for “little giants” during the 2024-2026 period, with a focus on key industrial chains, strategic emerging industries and other sectors. These funds will be used to encourage these firms to tackle technological challenges, develop new products, build up the supporting capacities of the industrial chain, and support local governments in nurturing “little giants”’ [^ntr81-L_202601857EN.000101-E0081]. Moreover, the Shandong 14^th FYP on the development of chemical industry [^ntr82-L_202601857EN.000101-E0082] 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’.

• (121) 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 and the downstream products.

• (122) 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

• (123) 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.

• (124) 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 [^ntr83-L_202601857EN.000101-E0083].

• (125) 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 [^ntr84-L_202601857EN.000101-E0084]. 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 [^ntr85-L_202601857EN.000101-E0085]. Moreover, authorities often pursue specific political goals including the implementation of the economic plans when allocating land [^ntr86-L_202601857EN.000101-E0086].

• (126) 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 benzyl alcohol sector. The present investigation revealed nothing that would call those findings into question.

• (127) 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

• (128) 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 [^ntr87-L_202601857EN.000101-E0087].

• (129) 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 [^ntr88-L_202601857EN.000101-E0088]. 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.

• (130) 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 [^ntr89-L_202601857EN.000101-E0089]. Those findings lead to the distortion of wage costs in China.

• (131) No evidence was submitted to the effect that the benzyl alcohol. 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

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

• (133) First, the Chinese financial system is characterised by the strong position of state-owned banks [^ntr90-L_202601857EN.000101-E0090], 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) [^ntr91-L_202601857EN.000101-E0091] and they regularly implement public policies designed by the GOC.

• (134) 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 [^ntr92-L_202601857EN.000101-E0092]. 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.

• (135) Recent developments further illustrate the extent of government influence over financial institutions in China. In March 2025, the 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. [^ntr93-L_202601857EN.000101-E0093]

• (136) 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 [^ntr94-L_202601857EN.000101-E0094]. 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’ [^ntr95-L_202601857EN.000101-E0095].

• (137) Furthermore, on the level of allocation of financial resources, with Several Measures to Further Promote the Development of Private Investment [^ntr96-L_202601857EN.000101-E0096], 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’ [^ntr97-L_202601857EN.000101-E0097].

• (138) 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 [^ntr98-L_202601857EN.000101-E0098]. This is compounded by additional existing rules, which direct finances into sectors designated by the government as encouraged or otherwise important [^ntr99-L_202601857EN.000101-E0099]. 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.

• (139) 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.