China is considering requests from Japan and the European Union to join Sino-US consultations over tax breaks given to Chinese chipmakers, said the Ministry of Commerce.

The EU asked to be included in talks on March 26, followed by Japan on March 31, a ministry official said yesterday (Apr. 5).

China agreed to consult with the United States on March 26 after the United States officially filed a complaint to the World Trade Organization (WTO) on March 18, the first against China since it joined the WTO in late 2001.

The complaint says a tax break for domestically manufactured semiconductors gives them an unfair advantage over imports.

The official did not say when the Chinese Government will make a decision on the requests from EU and Japan.

China and United States are still working on the timing and venue of the consultation, he said.

Under WTO dispute resolution rules, the US and China must hold consultations for at least two months before a panel will begin to adjudicate the complaint.

If the case is accepted by the WTO, it usually takes one or two years to make a decision.

US chip makers accuse the Chinese Government of rebating all but 3 to 6 per cent of the 17 per cent added value tax for domestic producers while levying the full tax on imports.

But local industry analysts said US firms misunderstand the Chinese policy, which does not bring substantial financial benefits to domestic manufacturers and can also be enjoyed by foreign funded businesses.

"We imported more than 80 per cent of our semiconductors last year, and I do not see how much more open our market could be," said Zhang Qi, a director-general at the Ministry of Information Industry.

The US$19 billion Chinese semiconductor market has become a major player for foreign-made chips, including US$2 billion worth from the United States last year.

Editor: Donald