China faces WTO case over financial news-sources

By Alan Wheatley, China Economics Editor

BEIJING, March 2 (Reuters) - The European Union and the United States have decided to file a joint complaint against China at the World Trade Organisation over how Beijing regulates foreign financial information providers, two people familiar with the issue said on Sunday.

The Beijing-based sources said China had been informed of the long-expected decision, which will add to strains in economic ties stemming from China's record -- and still fast-expanding -- trade surplus with both the EU and the United States.

One industry source said a formal announcement could be made in Geneva, the headquarters of the WTO, as early as Monday morning. A second diplomatic source said final paperwork could delay the announcement.

Both sources asked for anonymity due to the sensitivity of the issue. A spokesman for the EU delegation said he had no information.

Both Brussels and Washington object to rules that Xinhua, the Chinese state news agency, issued in September 2006 to preclude foreign companies from directly providing financial information to Chinese clients.

Instead, foreign companies such as Reuters Group Plc RTR.L, Dow Jones and Bloomberg, must go through Xinhua, which is also China's domestic regulator of financial information services.

The top U.S. and EU trade officials both said last Monday that a WTO suit was a strong possibility.

"We continue to be concerned about the situation that China has set up where the regulator is the competitor in terms of financial information. We believe that is totally inconsistent with their WTO obligations and don't see any evidence that they're going to fix the problem," U.S. Trade Representative Susan Schwab told Reuters in Washington.

"The EU shares the concern and we are definitely looking at the possibility of further litigation on this. I would just say on that, 'stay tuned'," Schwab said.

European Trade Commissioner Peter Mandelson said after talks in Beijing that the Chinese authorities were in no doubt where the 27-country bloc stood on the issue.

"We believe that non-Chinese agencies are being commercially threatened by new regulations promoting the interests of Xinhua, and I am actively considering what further moves the EU should take on this," Mandelson told Reuters after meetings with officials including Commerce Minister Chen Deming.

Schwab said the United States was also considering other new WTO cases against China.

Washington has won a victory against Chinese government subsidies at the WTO and settled two other cases involving semi-conductors and kraft liner board before getting to the litigation stage.

U.S. trade officials have also confirmed a recent win against China in a case that challenged that country's treatment of foreign auto parts. That ruling is expected to be made public in the coming weeks.

Washington is pressing ahead with two other cases aimed at reducing piracy and counterfeiting in China and lowering its barriers to imports of legitimate films, music, books and software.

Away from the WTO, the European Commission, the EU's executive arm, has initiated anti-dumping investigations into claims that Chinese manufacturers are selling a range of products, from steel to candles, in the EU market at prices that do not even cover their production costs. (Editing by Sanjeev Miglani)