China could face economic action directed by two of its biggest trading partners after the US filed a complaint against Beijing and Japan admitted that it may follow suit.
Washington formally lodged its grievance with the WTO on February 2, saying that China’s policy of subsidizing critical industries is unfair.
US Trade Representative Susan Schwab said China subsidizes steel, wood products, information technology and other industries at America’s expense. "The US believes that China uses its basic tax laws and other tools to encourage exports and to discriminate against imports of a variety of American manufactured goods," she said.
The complaint alleges China uses illegal tax breaks that encourage companies to export goods to the US while taxes and tariffs limit purchases of US-made products in China.
"China’s use of market-distorting subsidies creates an uneven playing field and subverts China’s own efforts to foster consumption-led growth," Shwab argued.
If the US wins the case, it would be allowed to impose sanctions on Chinese products
China’s Ministry of Commerce was quick to condemn the move but did not offer a specific response. Beijing said the complaint was a "pity" and that it was "deliberating" the case.
Two days later, Japan said it would consider joining the US complaint against China’s industrial subsidies but, as of right now, is only looking for more information.
China is Japan’s largest trading partner and Japanese companies depend on China as an industrial base and a consumer market.
"As of now, we are asking for detailed and concrete information from the Chinese side," said Akira Amari, Japan’s minister for economy, trade and industry. "Based on our findings, we hope to decide as soon as possible whether to join (the US complaint) as a third party."
The WTO complaint comes amid increasing pressure on China to let the yuan float freely.