The top Chinese officials in their sharpest reaction on trade relations with Washington warned that the recent US complaints to the World Trade Organization over product piracy and media market barriers could harm relations on trade issues. Chinese vice Premier Wu Yi has alleged that Washington was ignoring Chinese advancement in combating product piracy and said the US move violated an agreement by leaders of the countries to resolve such disputes through dialogue. This is the third time the Bush administration, facing Congressional pressure in this particular sphere of trade. Earlier this month, Washington had launched two cases at the WTO claiming that Beijing was not doing enough to punish illegal copiers of films and music and that its restrictions on entertainment imports violated trade rules. China condemned Washington’s move and Wu, who heads the country’s economic dialogue with Washington, bluntly warned that the complaints would damage bilateral trade ties. ‘It’s unprecedented for a WTO member to file two complaints against another in such a short time,’ Wu said in the Chinese Commerce Ministry’s conference on intellectual property rights in Beijing. This has been Beijing’s strongest reaction since the US launched two complaints in early April at the WTO alleging that China was not doing enough to punish illegal copiers of films and music, and that its restrictions on entertainment imports violated trade rules. The Chinese vice premier further added that the Chinese government will proactively respond to the US move in accordance with WTO rules and ‘see it through to the end’. Chinese officials argue that China has been isolated from the world, and its economic system has been entirely dissimilar from the rest of the world. As a result, the pricing system of China differs greatly. Before coming into process of linking its economy to the market driven economy it operated independently from the global economy and its people received low wages. Since prices were also low, the purchasing power of yuan was actually higher than the official exchange rate would indicate. As china opened to the global economy its price system has been challenged by the outside world and as a result is being transformed. As a matter of fact, the cheap Chinese labor force has been an attraction for foreign outsourcing. At the same time, most Chinese consumers cannot afford Western goods under IPR protection. Consequently, consumers are some times compelled to choose between not using these products at all in order to respect intellectual property rights or use the products without adequate respect for such rights. At the moment, like other developing economies, the Chinese government is facing a dilemma either rigorously implement its commitment to IPR protection while restraining domestic demand or meet consumer demand while incrementally enforcing protection. However, this has been evident that in recent times the Chinese government has made a few strategic decisions to launch economic reform, to join international regimes of intellectual property rights, and to eventually accede to WTO. According to official figures China impounded more than 73 million pirated products, including 18 million books, 1.1 million periodicals, 48 million audio-visual products, 2.01 million electronic publications and 3.79 million software discs. Recently in another significant effort, China’s Supreme Court has further reduced the upper limit for prosecuting manufacturers and vendors of counterfeit intellectual property products. The latest rules state that anyone who manufactures 500 or more counterfeit copies (discs) of certain products can be put on trial and face a prison term of up to three years. The new set of rules has replaced the 2004 regulation which only applied to those who produced 1,000 pirated discs.