China on Tuesday blocked US and Mexican requests to involve a World Trade Organization (WTO) experts panel in an investigation of alleged illegal Chinese industrial subsidies, trade sources said.

"We are puzzled by the complainants' decision to initiate the panel process," the Chinese trade delegation told a meeting of the WTO's Dispute Settlement Body (DSB).

China stressed that measures were already underway to reform its company taxation regime and that those "measures identified by the complainants were fully in line with WTO subsidy rules."

It also raised the issue of "several non-existent measures" included in the US and Mexican complaints, which China showed as proof of their "misunderstanding and false allegations."

"For the reasons mentioned, China cannot condone the establishment of a panel at this meeting," it said.

The United States has accused China of using taxation measures to "subsidize" exports and limit imports, an act which would be flouting WTO rules. The complaint was first voiced to the WTO in February and picked up steam when Mexico backed it.

The United States, Mexico have already held two rounds of consultations with China, with Washington describing them as "constructive". However, with their concerns still unresolved, the United States and Mexico insisted the WTO panel process continue. 

Under WTO rules, a panel request could only be blocked once, therefore should the request be renewed at the WTO's next DSB meeting, possibly in September, a panel would be automatically established.

However, such a panel can take years to come to a final ruling.

(Xinhua News Agency July 25, 2007)