Government points to trade deficit

China confirmed Monday that it will challenge last week’s landmark World Trade Organization ruling against its state-controlled system of importing and distributing movies. Hollywood has claimed the WTO’s move as a victory for its efforts to crack the lucrative China market.

The Chinese government described the ruling, which upheld key parts of a U.S. complaint about China’s controls on importing cultural products, including Hollywood pics, as “regrettable.”

“We think it was improper for the WTO not to reject the U.S. request,” said Ministry of Commerce spokesman Yao Jian. “Based on the WTO schedule, we are actively preparing the documents necessary to lodge an appeal.”

He said the Chinese cultural sector, including the film biz, had suffered a “huge” trade deficit and its competitiveness was weak. “Against this backdrop, I think it is appropriate and just for China to impose some controls that are in line with the country’s economic development stage, and cultural and historical tradition,” he said.

The appeal will add to tensions in trade relations between Washington and Beijing.

The complicated WTO ruling found that China had contravened the stipulation requiring equal treatment between local and foreign businesses and commitments China made in 2001, when it joined the WTO, to open up sales and distribution within three years.

It did not directly address China’s foreign-film quota, under which the China Film Group, backed by the powerful State Administration of Radio, Film and Television, controls most of the 20 foreign-film import licenses granted each year, allowing those 20 pics to be released on a revenue-sharing basis. Another 40 are imported for a flat fee.

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