China is progressing toward receiving the European Union's coveted market economy status, something that would help the Asian export powerhouse avoid punitive anti-dumping duties, an EU document showed.

China has long complained that it is treated unfairly in trade disputes with Europe, the United States and other big economies alarmed by its swift emergence as a manufacturing giant.

Beijing has been seeking such status from the EU since 2004 to reduce the risk of punitive duties for its exporters and as a recognition of its economic reforms.

The European Commission said in its latest assessment - prepared before the EU's trade commissioner, Peter Mandelson, visits Beijing next week and obtained by Reuters on Wednesday - that China still had met only one of five criteria used to gauge the influence of state intervention on prices and costs. But Beijing had made "considerable progress" on the four others, it said, providing a "clear platform" for reaching the target.

The report also described the Chinese economy as "an increasingly modern and market-based system.

"The conclusion of this report is that China now has in place almost all the legislation which is necessary for granting of Market Economy Status," it said.

"That is a considerable achievement. The focus has now switched to the effective implementation of these laws which are crucial for the functioning of any market economy."

The next report is due before the summer of 2009.

Mandelson is under pressure from some European capitals to take more measures against surging Chinese imports. He wants China to open up more to foreign investment and trade to reduce that pressure on him.

China had a trade surplus of €160 billion, or $227 billion, with the EU last year, European data show.

In Beijing, Mandelson is likely to raise concerns about copyright protection, restrictions on foreign investment and other issues that the two sides began discussing under a new negotiating mechanism last year.

"We started a process to rebalance business opportunities and market access," he told reporters this week. "Now we have got to advance it and look for results. We need deliverables."

If China gets market economy status in the EU, its exporters would probably face lower duties in anti-dumping fights or avoid them altogether.

Because China is not classed as a market economy, Brussels considers price data from other countries like Brazil when assessing whether Chinese goods are being dumped, or sold below cost, in the EU.

Costs in so-called analog countries are routinely higher than in China, resulting in findings of high dumping margins and high EU anti-dumping duties for Chinese goods under dispute.

The one criterion that China has met - as determined by Brussels in 2004 - relates to the absence of nonmarket payment forms like barter. The criteria it has yet to meet include the use of modern accounting standards, on which China had made "remarkable progress," and bankruptcy, intellectual property and property laws where progress was "substantial," the report said.

There was less progress in reducing the state's role in price-setting in sectors like energy, a key component for manufacturers, and China was slow in improving the independence of its financial system, the Commission said.
EU prepared to sue India

The European Union is poised to sue India again at the World Trade Organization saying the country was still keeping European wine and spirits out of its huge market via high taxes, trade diplomats said Thursday, Reuters reported from Brussels.

India's government agreed in July 2007 to scale back special taxes on foreign wine and spirit imports after the EU ran out of patience in slow-moving negotiations and turned to the WTO. But some Indian states have tax levels that impede imports.