China, US solve semiconductor trade dispute

China and the United States on Wednesday solved their dispute over China's import of US semiconductor products after China pledged to end tax rebates to domestic manufacturers.

The two countries signed a memorandum of understanding on the value-added tax of semiconductors on Wednesday, in which China promises to fully phase out tax rebates to domestic semiconductor makers by April 2005.

The agreement was reached after four rounds of talks in Geneva, Beijing and Washington after the United States requested consultation with China at the World Trade Organization (WTO) in March.

China levies a 17 percent value-added tax on imported and domestically-produced chips but domestic producers alone qualify for rebates of as much as 14 percent. Some US manufacturers have accused this practice of being "discriminatory".

But Chinese semiconductor industry experts said the discrimination charge was groundless because China's rebates policy is open to all companies willing to set up manufacturing operations in China.

The dispute is the first complaint against China since it joined the World Trade Organization (WTO) in 2001.

China is a leading semiconductor market for the United States. US statistics show that last year US exports of semiconductors to China totaled two billion US dollars.