Chinese Firm Vows to Challenge U.S. Paper Duties

A Chinese company targeted by Washington with duties on "unfair" state subsidies said on Monday it would fight the move, which state media and officials said would exacerbate frictions caused by a huge U.S. trade deficit.

The United States imposed the duties on Chinese coated paper in a policy switch that could open the way for other U.S. producers to file complaints against Chinese exporters they say enjoy state backing in violation of trade rules.

On Friday Washington announced a preliminary countervailing duty of 10.9% on Shandong Chenming Paper Holdings and 20.35% on Gold East Paper, a subsidiary of multinational Asia Pulp and Paper. Other Chinese coated paper imports will attract duty of 18.16%.

China swiftly denounced the U.S. decision and on Monday Chenming said it would fight back, without holding out much hope of getting it reversed.

"We will challenge the legality and try to reduce the duty as far as is possible, but there may not be much we can do. After all, this isn't aimed at just us or even coated paper.

It's about subsidies, not just our companies," Wang Tianxia, a financial manager at Chenming, told Reuters by phone.

Another Chenming executive said the company would seek to have the decision thrown out when U.S. officials made a final decision on the duties later this year.

Gold East Paper referred inquiries to APP's office in Shanghai, but there was no immediate reaction.

The China Business Times newspaper quoted an unnamed Gold East official as saying: "We may reduce exports to the U.S. and expand them to other countries and regions. At worst, we'll abandon the U.S. market."

Combative and Unhelpful

Chinese media saw the move as confrontational.

"Such a combative mood will not help solve its problems," an editorial in the China Daily said of the U.S. duties. "Washington has gone against the consensus reached by both countries, which advocates resolving differences through dialogue."

China and the United States are due to hold the next round of a high-level "strategic dialogue" on trade in May.

Washington sought consultations at the World Trade Organisation in February about what it says are unlawful Chinese state subsidies for steel, computers, clothing and other industries.

Analysts said last week's move may unleash cascades of claims from U.S. industries for anti-subsidy duties against China.

"Other firms are likely now to file such cases -- steel and textiles being the two obvious candidates, but we believe we are likely to see filings from across the manufacturing spectrum," wrote Stephen Green, senior economist for Standard Chartered bank in China.

Zhou Shijian, a former trade negotiator for China, said Washington lacked evidence to show the paper companies received low-interest loans, tax breaks or other subsidies.

"The U.S. Department of Commerce hasn't produced substantive evidence," he told the China Business News.

U.S. anger over the trade deficit with China, which hit a record $233 billion last year, has spurred demands for a tougher response to Chinese government subsidies, which many U.S. lawmakers believe boost Chinese exports unfairly.

U.S. glossy paper imports from China rose to $224 million in 2006 from $29 million in 2004.