A Study Of The Issues Relating To Subsidies By The Chinese Local Governments

China is encountering a growing number of countervailing investigations. Viewed from the external conditions, it is because other countries take the trade protection policy, and they want to restrain the economic development of our country. However, from our own perspective, there are issues in the subsidy policies. Especially the local government subsidies, it is easier to affirm the subject of subsidy, financial contribution and specificity, compared to the central government. Therefore, it is necessary to analyze the local government subsidies, in order to find some ways to get rid of practical difficulties.The paper states the theory source of subsidy from the perspective of trade theory, and analyzes the power source of providing subsidy for the local government, including the legitimate foundation and reasonable basis.This paper divides the issues of Chinese local government subsidies into three categories:identification of the subject of providing subsidies, identification of conferring benefits, and identification of specificity. And then, this part analyzes how to identify the issues in the case of "Certain Steel Wheels from the People’s Republic of China" and in the cases of Dispute Settlement Body. Wherein, it discusses the identification of "public body" mainly in the first issue, analyzes the determination of the benchmark mostly in the second issue, and discusses the identification of a group of enterprises or industries mainly in the last issue.Based on this, the paper concludes that the characteristics of countervailing investigations which are encountered by the Chinese local government subsidies are that the countervailing investigation is often followed, and the rate which the countervailing investigation leads to countervailing measures is high. And then, according to the characteristics, the writer summarizes the solutions for the local government and enterprise. The local government must define its role accurately, make subsidy policies precisely. And they should strengthen internal communication at all levels of governments, cooperate with the enterprises closely when they cope with the countervailing investigation. Besides, the local governments should participate in the proceedings actively. For the enterprises, they should pay close attention to the international development of their own industries, in order to take precautions for potential litigation. Meanwhile, they must change the profit-driven manner which is dependent on government to reduce the possibility of causing countervailing investigations. When they encounter the countervailing investigation, they must respond actively by cooperating with the governments, law firms and colleges. In addition, the coordinating function of industry association between the government and enterprise is useful in the countervailing investigations.Finally, the conclusion points out the related issues which this paper does not discuss.