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December 11, 2009

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China charges US, Russian steel dumpers in tense time for trade

CHINA will from today start levying charges on United States and Russian companies that export steel used in electrical apparatuses and dump it on the domestic market after receiving government subsidies.

It is another sign that trade tension is a part of life, at least in the short term.

An announcement yesterday by the Ministry of Commerce on imported flat-rolled electrical steel - used in transformers, rectifiers and reactors - said the US companies were dumping the product in China with a rate of 10.7-25 percent after they received subsidies ranging from 11.7-12 percent.

The ministry said the Russian flat-rolled steel producers were dumping with a rate from 4.6-25 percent.

China would collect cash deposits from the US and Russian steel producers of varying percentage amounts starting from today, the ministry said.

It was the first time China unveiled results of an anti-dumping and anti-subsidy investigation, which started in June.

The decision is preliminary and a final ruling is expected before next June.

The decision followed a US ruling last month that imposed countervailing tariffs on China-made pipes used in oil wells.

"It could be a coincidence that the Chinese announcement came just after the US decision but trade disputes are escalating," said Sun Lijian, an economics professor at Fudan University. "Although the sector involved is relatively small in the total trade spectrum, it will deepen people's fears about a full-blown trade war."

The US and Russia exported a combined US$602 million of the targeted steel products to China last year, compared with China's steel imports of US$23.4 billion during the same period.

China's overall imports totaled US$1.13 trillion in 2008.

"It seems China has learned fromthe global experience and is using countervailing duties to protect the interests of its domestic industry," said Wang Feng, a steel analyst at Guotai Jun'an Securities Co.

"US and Russian imports have hurt companies like Baosteel Group Corp and Wuhan Iron and Steel Group."

Trade tussles continued to hit headlines in China after the US decided to levy special tariffs on imports of Chinese tires in September.

China started an investigation into American exports of chicken and auto parts in October.

The agony deepened last month after the US Commerce Department issued a final ruling allowing the imposition of countervailing duties ranging between 10.36 and 15.78 percent on the China-made oil well pipes.

These duties will affect more than US$2.7 billion worth of products, making it the biggest trade conflict between the two countries in terms of value.

"Although the affected sectors are limited, investors and exporters are in fear they could be the next victim," said Xue Jun, a CITIC Securities Co analyst.

"It threatens the process of the global economic recovery, which is just showing signs of improvement."


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