China expressed its willingness to discuss the sensitive issue in a letter sent to the United States via the Chinese representative at the World Trade Organization (WTO), the ministry said in a statement.

The US challenge lodged last week was the first WTO complaint filed against China by any member of the global trade body since Beijing joined the organization in December 2001.

International chip makers such as Intel and Micron Technologies complain that Chinese government tax rebates of up to 14 percent for its 19-billion-dollar chip industry give domestic companies an unfair advantage.

China has flouted WTO rules by providing the preferential tax treatment for chips produced in China, thereby disadvantaging US and other imports, US Trade Representative Robert Zoellick said recently.

The Chinese announcement followed a day of talks in Beijing between Chinese officials and a US delegation headed by Commerce Undersecretary Grant Aldonas and Deputy Trade Representative Josette Sheeran Shiner.

A spokeswoman for the US embassy in Beijing said she was not aware if the chip dispute was on the agenda of the talks.

Chinese chip makers have expressed regret over the dispute, pledging to work toward a viable solution but also faulting US refusals to recognize that international chip makers in China were entitled to the same rebates.

Meanwhile, the United States appeared to be ratcheting up its pressure on China over what it considered flawed compliance with WTO rules.