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By Diao Ying (China Daily)
Updated: 2008-02-15 06:53

China will act according to the rules, officials said Thursday over a World Trade Organization (WTO) dispute on car parts which some experts have said is unfair to the country.

"China respects the procedure of the WTO to solve the dispute," Foreign Ministry spokesman Liu Jianchao said at a regular news briefing.

Related readings:  China's auto industry stands WTO tests  China becomes 2nd largest exporter of auto parts to US  Car parts makers see lower margin  China ratifies protocol amending WTO's TRIPS agreement  China gets first judge on WTO's top court

A WTO panel ruled on Wednesday that the country improperly taxes imported car parts at the same rate as finished vehicles. The case, initiated by the United States, European Union and Canada, is the first time China has been the subject of a complaint that went all the way to the WTO's Dispute Settlement Body, since joining the organization in 2001.

The Permanent Mission of China to the WTO said in a statement Thursday that China is investigating the initial WTO ruling. It said China respects the WTO procedure but otherwise will not comment before the panel makes its final decision.

China taxes imported auto parts at the same rate as completed automobiles if more than 60 percent of parts the finished vehicles are made from are imported.

The rules aim to prevent tax evasion by companies who import whole cars as spare parts to avoid higher tariff rates, officials from the Ministry of Commerce had said.

The US and EU filed the case to the WTO in March 2006, complaining China's taxes on imports of foreign auto parts discouraged Chinese carmakers from using them.

But analysts said the status quo will hardly change even if a sanction is imposed.

"I don't think it will be a big help for them financially even if China slashes its tariffs on parts as requested," Liu Yuandong, an analyst with CSM Worldwide, an international industry consultant, was quoted by Reuters as saying.

Zhou Shijian, a trade expert, said China's regulation on car parts aims to prevent tariff evasion and is not to prejudice against foreign carmakers. He said the WTO decision is unfair to China.

"It could push China to re-examine the rationality of WTO rules," Mei Xinyu, a Ministry of Commerce researcher, said.

China is the world's second-largest vehicle market after the US. Sales rose 22 percent last year to 8.8 million units, according to the China Association of Automobile Manufacturers.