China may appeal a ruling by the World Trade Organization (WTO) that would break up a monopoly of two State-owned firms as the sole foreign audiovisuals importers.

A WTO dispute settlement panel, in a report released yesterday, ruled that China's practices were inconsistent with international trade rules, and that China needs to revise them.

The US filed the case two years ago. The case involves publications, audio and video products, and music download services imported by China.

The ruling, if approved by WTO, would adversely affect the two importers of foreign films. But other companies hailed the ruling.

"It is good news for private companies. We would like to join in. The game was unfair, but I believe complete competition is coming," said Wang Zhonglei, president of Huayi Brothers, China's leading privately owned media company.

The Chinese government has appointed China Film Group and Huaxia Film Distribution to import and distribute audiovisuals from abroad.

This, as the US claimed, has not only run against the fundamental WTO rules requiring equal treatment between local and foreign businesses, but also breached the commitment China made when it joined the WTO to open up sales and distribution.

"China has been performing its duty on publications market access, and we have been providing unblocked access to overseas imports of audiovisual products," the Ministry of Commerce said yesterday on its website.

"We regret the dispute panel did not turn down the US."

China has imported approximately 500,000 titles of publications of all kinds every year since joining the WTO in 2001, as promised in its entry agreement.

Under the WTO framework, the US and China must decide within two months whether to appeal any part of the ruling.

"We will carefully evaluate the report," the ministry said.

The ministry's Department of Treaty and Law, which is responsible for the issue, refused to comment.

Lin Xiaoxia, associate professor from Beijing Film Academy, defended China's policies.

"Film in China can be hardly a pure commercial product. Its educational and social functions are still important. It's understandable China takes measures to protect the film industry from being invaded by foreign products, especially when ours is still too weak to compete," Lin said.

But Tao Jingzhou, a partner of US Jones Day, a leading international law firm, said China has little chance of winning an appeal.

The American Chamber of Commerce China also hailed the ruling.

(China Daily August 14, 2009)