The United States has told China to get serious about relaxing the restraints, in a letter that could represent a final warning before the US asks the WTO to intervene in the matter, the Associated Press learned on Wednesday.

In the letter to Chinese trade officials, the office of the US Trade Representative signaled it has run out of patience with China's refusal to change rules introduced two years ago that appeared to boost the official Xinhua News Agency at the expense of news and financial information companies such as Reuters Group PLC and Bloomberg LP.

The World Trade Organisation said it has yet to receive a formal complaint from the US, which is also accusing China of providing a safe haven for product piracy and hindering sales of US-made auto parts, CDs, DVDs and books, in separate cases.

Washington stopped short of saying it would launch a new WTO dispute, said trade officials, who saw the US letter dated Jan 25 but demanded anonymity because of the sensitivity of the issue. The USTR in Washington refused to confirm the letter or to outline its plans. The Chinese Commerce Ministry could not immediately be reached for comment.

The press restrictions announced in 2006 were seen as part of the effort to transform China's Xinhua agency from the ruling Communist Party's propaganda mouthpiece into a modern, profitable entity.

The Chinese government targeted the rapidly expanding domestic market for financial information by setting the rule that data be funnelled through a Cabinet-level agency, which censors reports, and then through Xinhua for distribution to clients.

This upset Reuters and Bloomberg, which previously sold their services directly to Chinese banks, government agencies and other institutions. Already severe restrictions were also tightened on foreign agencies such as The Associated Press, that have sought wider access to the Chinese market ahead of this year's Beijing Olympics.

In a letter to the WTO on Nov 12, the US questioned how Xinhua could be 'both a major market competitor of, and the regulator of, foreign financial information service providers in China.'

Independent regulator
It urged Beijing to set up an independent regulator and to restore conditions under which news agencies operated from 1996-2006, allowing direct business relations with clients.

The US, the 27-nation European Union and human rights groups have criticised the restrictions as an effort to restrict free expression.

But China has defended them by pledging that Xinhua will not abuse its new monopoly.

Xinhua has said it 'seeks no economic gains' from the regulations. The agency has sought to reassure Chinese banks and securities firms, which worry about losing access to foreign economic news that they need for trading and making investments.

It has said the rules are meant to promote the 'sound and orderly' distribution of news, and that reports damaging China's social stability and national unity, or violating other taboos, are banned. -- AP