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UPDATE 1-U.S. formally opposes China market economy status at WTO

(Adds comments from U.S. Treasury official)

WASHINGTON, Nov 30 (Reuters) - The United States has formally told the World Trade Organization (WTO) that it opposes granting China market economy status, a position that if upheld would allow Washington to maintain high anti-dumping duties on Chinese goods.

The statement of opposition, in a brief filed by the U.S. Trade Representative's office and made public on Thursday, follows a determination by the U.S. Commerce Department in October that China failed to meet the tests of a market economy as part of an aluminum foil anti-dumping case.

The U.S. brief draws formal battle lines in the WTO over China's bid to achieve market economy status 16 years after Beijing joined the trade body. Both the United States and European Union oppose such a designation because of the pervasive role of the Chinese state, including rampant granting of subsidies, in its economy.

"We are concerned that China's economic liberalization seems to have slowed or reversed, with the role of the state increasing" David Malpass, U.S. Treasury undersecretary for international affairs, told an event in New York on Thursday.

"State-owned enterprises have not faced hard budget constraints and China's industrial policy has become more and more problematic for foreign firms. Huge exports credits are flowing in non-economic ways that distort markets," Malpass said.

China says that the non-market economy designation in its 2001 accession to the WTO expired last December, and that WTO member countries should no longer have the right to substitute third-country prices in anti-dumping cases, which has resulted in prohibitively high duties on Chinese steel, solar panels and other products.

The move comes as trade tensions between Washington and Beijing are increasing as the Trump administration prepares several possible major trade actions, including broad tariffs or quotas on steel and aluminum and an investigation into Chinese intellectual property misappropriation.

The Commerce Department on Tuesday launched the first government-initiated anti-dumping and anti-subsidy investigations in decades on Chinese aluminum sheet imports.

The brief submitted to the WTO argues that China should be given the same treatment that communist eastern European countries, including Poland and Hungary, received when they joined the WTO's predecessor organization, the General Agreement on Tariffs and Trade, in the late 1960s and early 1970s.

"Because of the significant distortions arising from China's institutional structure and the control the government and the Chinese Communist Party exercise through that structure, the department finds that China remains a non-market economy for purposes of the U.S. anti-dumping law," the Commerce Department said in its report. (Reporting by David Lawder; Editing by Steve Orlofsky and Sandra Maler)