Published: Friday, 6 Nov 2009 | 12:45 AM ET

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China denounced as protectionist new U.S. anti-dumping duties on Friday and vowed to protect the interests of its industry a week before President Barack Obama heads for talks in Beijing and Shanghai.

The United States on Thursday slapped preliminary anti-dumping duties of up to 99 percent on $2.63 billion in Chinese-made oil well pipe.

The move, the biggest U.S. trade action against Beijing, could weigh heavily on Obama's discussions with Chinese leaders.

"China resolutely opposes the abuse of protectionist measures and will take measures to protect the interests of our domestic industry," the Ministry of Commerce said on its website.

The statement also called on Washington to proceed quickly with recognition of China as a market economy, "thoroughly overcoming its double standards and giving equal and fair treatment to Chinese firms".

The new punitive measures add to counter-vailing duties on the same product, announced in September.

China had been expected to keep any reaction limited, hoping to avoid rancour during Obama's visit, when the U.S. President may even announce trade concessions that would be welcomed by Beijing, said Wang Yong, a professor at Peking University who specialises in China-U.S. economic ties.

"Within the bounds of its laws, China may also examine anti-dumping measures against certain U.S. products ... But China does not want bickering to spoil the visit. That's a priority."

In trade meetings with U.S. officials last week in Hangzhou, China pressed for recognition as a market economy before a 2016 deadline set as part of admission to the World Trade Organisation. The United States promised to set up a panel to consider the issue.

"Obama may, say, announce progress on recognising China as a market economy during the visit. So before that he needs to show people at home that China must play by the rules," said Wang.

Markets and Market Economies

As long as China has no recognition as a market economy, trade partners can compare its products to those of other nations with different cost structures for labour or transport, when assessing whether products have been dumped.

Export-dependent Chinese industries are dominated by private firms, which cut margins to the bone by competing with each other at home and for export markets. Entrepreneurs pile into any promising industry, creating overcapacity that destroys profits.

Pipes that can carry highly corrosive oil and natural gas presented a new opportunity for Chinese steel processors moving up the value chain. Exports to the United States, their biggest market, tripled to $2.63 billion in 2008 compared with 2007.

"These duties have a big effect, and we no longer export to the U.S. The measure has been threatened for a while, and clients don't dare order from Chinese producers any more," said Zhang Kemin, a trader with Changzhou Darun, now targeting the Ukrainian market.

Similar trade disputes have piled up as the global economic crisis increased competition with American manufacturers.

China is particularly upset over first U.S. use of safeguard duties, against tyres, because safeguard duties only have to show a surge in exports, without proving dumping or subsidies.

"This has set a very bad example. China must keep cool-headed and make long-term preparations," Wei Jianguo, a former Vice Minister of Commerce, wrote of the safeguard duties in Southern Breeze, a Chinese current affairs magazine.

"China must be decisive and not at all polite."

The U.S. International Trade Commission votes on Friday on whether to approve three more probes covering coated paper, certain standard steel fasteners and sodium and potassium phosphate salts from China.

"At the moment, most of our firms who export are private firms. They get really hurt by any obstacles to exports," said Yang Junfeng, who runs an information portal for fastener producers. He said the threat of duties against Chinese fasteners had benefited Taiwanese exporters over their mainland rivals.

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