China Rejects U.S. Complaint on Computer Chip Tax (Update1)
March 17 (Bloomberg) -- A U.S. complaint over tax breaks for chipmakers in China, which the Financial Times reported may be submitted to the World Trade Organization as early as today, is groundless, a Chinese government official said.
``It's based on a misunderstanding,'' Zhang Qi, director of the Ministry of Information Industry's electronic products division, said in an interview at a semiconductor conference in Shanghai. ``There's no discrimination at all. We treat all companies the same.''
The action, which follows protests by an American industry group whose members include Intel Corp. and Micron Technology Inc., would be the first against China in the global trade body. China's chip market, the world's fastest-growing, will expand 30 percent to $38 billion this year, according to Gartner Inc.
The Chinese government imposes a 17 percent value-added tax on semiconductors and integrated circuits. According to the U.S. Semiconductor Industry Association, companies that make chips in China get 14 percentage points of that tax refunded to them, giving them an unfair advantage over overseas chipmakers.
U.S. Trade Representative Robert Zoellick last week told members of Congress ``we're going to bring a case'' unless China removes the tax. Neena Moorjani, a spokeswoman for Zoellick's office, declined to comment about the report.
Capacity Constraints
Ministry of Information Industry official Zhang declined to comment on whether China may alter the tax, saying this was a matter for the State Council, or cabinet.
The tax isn't unfair to overseas companies because many chips designed in China are manufactured overseas in places such as the U.S., Taiwan and Singapore before being imported back into China. These chips are subject to the same tariffs, she said.
``If it's called discrimination, then we are discriminating against our Chinese companies as well,'' Zhang said. ``The U.S. action is groundless.''
China's semiconductor manufacturing capacity was able to meet only 17 percent of demand last year, with the rest coming from imports, according to Zhang. She forecast China's share of global chip production will more than triple to 10 percent by 2007, from less than 3 percent last year.
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