(Agencies)
Updated: 2007-09-04 16:28

China's trade ministry said that a complaint by the United States and Mexico over Chinese tax breaks that led to a World Trade Organization investigation was based on a "huge misunderstanding" and had political purpose.

The WTO's Dispute Settlement Body on Friday accepted the complaint, targeting China's industrial subsidies that the two North American countries claim unfairly give Chinese products a competitive edge on the world market.

"The Chinese side thinks the suitors' actions are motivated by domestic politics," said a statement posted on the Commerce Ministry's website on Monday.

"They attempt to mix up the self improvement in China's tax laws and regulations with the fruits of the WTO's dispute settlement mechanism."

The complaint was initially filed in February but was dismissed by China in July as the country was allowed to do under the global trade body's rules.

The commerce ministry statement said the complaint ignored the improvements China has made in updating its tax policies in line with the global trade body's regulations in the past years, and was based on a "huge misunderstanding" about current Chinese rules.

"Some of the subsidies in their lawsuit have already been scrapped, and China's policies will also be in line with the WTO regulations after the Enterprise Income Tax Law comes into effect," said the statement.

It said China would not be forced by the complaint to change its own pace of improving its economic laws and regulations, including tax policies.