Just weeks before President Hu Jintao's January visit to the United States, the US government said Wednesday it had asked the World Trade Organization to deal with allegedly illegal subsidies that favor Chinese manufacturing firms.

The United States alleges China offers multi-million-dollar grants to only companies making turbines and other equipment with Chinese parts, a violation of trade rules.

"China appears to provide subsidies that are prohibited under WTO rules," US trade officials said in a statement announcing their request for WTO arbitration.

The request means that representatives from Beijing and Washington will have to discuss a solution within the WTO.

If no agreed solution is found, the United States can ask the World Trade Organization to move toward sanctions.

Chinese officials Thursday attacked the move, with the Commerce Ministry saying it was "highly concerned" with the development, and insisting that China's approach to the field "comply with WTO rules."

The claim comes as the two economic superpowers face off over a range of export issues from tires to beef to currency levels, and amid anger in Washington that its exports are being stiffed.

Obama is expected to press his Chinese counterpart to open the door to more US imports when the two leaders meet in January, a means of bolstering the US recovery and rebalancing global trade flows, which are seen as unfairly favoring Beijing.

"These subsidies effectively operate as a barrier to US exports to China," said US Trade Representative Ron Kirk, vowing Washington was committed to "ensuring a level playing field."

The grants, said to be worth as much as 22.5 million dollars, are part of a vast Chinese effort to become a world-beater in green technology.

Despite heavy US spending to improve its own green energy sector, it is still seen as lagging the emerging giant.

The US move was prompted by a major trade union, which in September accused Beijing of handing out hundreds of billions of dollars in illegal subsidies in a bid to corner the green energy market.

The United Steelworkers (USW) union accused China of blocking access to materials used in green technologies, illegally linking subsidies to export sales, curbing imports and demanding foreign investors hand over technology secrets.

It also accused China of providing more than 216 billion dollars worth of subsidies to green technology makers "more than twice as much as the US spent in the sector and nearly half of the total 'green' stimulus spent worldwide."

Kirk said the United States would investigate the union's other claims, but appeared to rule out imminent action.

"If we are able to develop sufficient evidence to support those allegations and they can be effectively addressed through WTO litigation, we will pursue the enforcement of our rights at the WTO," Kirk said.

Members of Congress from both political parties welcomed the move.

"The United States needs to take a more assertive approach to China's mercantilist policies, and the administration's action today is a welcome step in the right direction," said senior Democratic Representative Sander Levin.

earlier related report
China 'concerned' over US wind power challenge at WTO
Beijing (AFP) Dec 23, 2010 - China said Thursday it was "highly concerned" over the US decision to ask the World Trade Organization to examine subsidies to the Chinese wind power sector, insisting its policies comply with WTO rules.

Less than a month before President Hu Jintao visits the United States, Washington said it had asked the Geneva-based trade body to deal with allegedly illegal subsidies that favour Chinese manufacturing firms.

In the latest in a string of trade rows between the two sides, the United States claims China offers multi-million-dollar grants only to companies making turbines and other equipment with Chinese parts, a violation of trade rules.

"China is highly concerned about the US raising the case to the WTO... China will carefully study the discussion request," the commerce ministry said in a statement.

"China's relevant measures to develop wind power are conducive to energy saving, emission reduction and environment protection. They are important approaches to realising sustainable development and comply with WTO rules."

The US request for WTO arbitration means that representatives from Beijing and Washington will have to discuss a solution within the WTO.

If no agreed solution is found, the United States can ask the trade body to move toward sanctions.

The United States and China are facing off over a long list of trade disputes ranging from tyres to chicken meat to the value of China's yuan currency.

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