"Remaining shortcomings in four broad areas, which affect the conduct of anti-dumping investigations, mean that it is not possible to grant MES at this stage," the statement said.

The commission said the finding only concerned trade defence investigations, covering anti-dumping and anti-subsidy cases.

In 2003 only 0.5% of Chinese exports of goods to the EU were subject to anti-dumping measures.

"MES does not have an impact on the number of anti-dumping/anti-subsidised cases; it is simply a method to calculate AD (anti-dumping) duties," the Commission said.

China had asked the Commission for MES last June and provided follow-up information in September and again this year, and the Commission had agreed to give a preliminary assessment by the end of June.

The four conditions which must be met before the bloc will grant MES are:

• State influence - ensuring equal treatment of all companies by reducing state interference, either on an ad hoc basis or as a result of industrial policies, as well as through export and pricing restrictions on raw materials.

• Corporate governance - increasing compliance with the existing Accounting Law to ensure the usability of accounting information for trade defence investigations.

• Property and bankruptcy law - ensuring equal treatment of all companies in bankruptcy procedures and in respect of property and intellectual property rights.

• Financial sector - bringing the banking sector under market rules.

"This preliminary assessment is not an overall judgment on the state of development of the Chinese economy, but a technical analysis linked exclusively to the determination of companies' costs and prices in trade defence investigations," the Commission said.