China said Friday that the request of the United States to consult with China within the World Trade Organization (WTO) is "beyond understanding," but China is studying the request. 

Spokesman Chong Quan of the Ministry of Commerce (MOC) said in a statement that China and the United States have had several bilateral negotiations on the issue of value-added tax on semiconductors, and certain progress has been made.

"At a time when bilateral negotiations are still under way, the United States suddenly requested at the WTO to consult with China on the issue; it is totally beyond understanding," Chong Quan said.

The spokesman said China is "making a serious study" of the US request.

The US administration accused China's tax policy on semiconductors "discriminatory" to US chip manufacturers, and requested consultation with China at the WTO.

China levies a 17 percent value-added tax on imported chips. Domestic producers also are subject to the tax but qualify for rebates of as much as 14 percent. Some US manufacturers said it discriminates against foreign firms.

But Chinese semiconductor industry experts said the discrimination charge was groundless because China's rebates policy is open to all companies willing to set up manufacturing operations in China.

China and the United States will have 60 days for consultation, and according to WTO rules, further dispute settlement procedures will be started if the two sides failed to reach agreement within the 60-day time limit.

China is a leading semiconductor market for the United States. US statistics show that last year US exports of semiconductors to China totaled US$2 billion.

(Xinhua News Agency March 20, 2004)