China has agreed to consult with the United States on the alleged discriminatory value-added tax on chips, the Ministry of Commerce said in Beijing Friday.

The message has been sent to the US side via the Chinese delegation to the World Trade Organization, the ministry said. The two sides will decide the detailed arrangements of the consultation after negotiation.

The US administration called China's tax policy on chips "discriminative" to US chip manufacturers, and requested consultation with China at the WTO last Thursday.

China levies a 17 percent value-added tax on imported chips. Domestic producers also are subject to the tax but qualify for rebates of as much as 14 percent. Some US manufacturers claimed that is discriminatory to foreign firms.

According to WTO rules, China and the United States will have 60 days for consultation, and a further dispute settlement procedure will be launched if the two sides failed to reach an agreement.

China is a leading semiconductor market for the United States. US statistics show that US manufacturers sold up to US$ 2 billion worth of chips last year.

(Xinhua News Agency March 27, 2004)