China has long contested its status as a non-market economy for the purposes of international trade relations; a statement posted on the Chinese Ministry of Commerce's website in response to the European Court of Justice ruling said that "[f]or a long time, the European Commission has been abusing the discretionary power and misusing relevant laws in its trade investigations, which have led to unjustified trade remedy measures".

Recent EU trade defense investigations, which cover anti-dumping, anti-subsidy and safeguard cases, have levied duties against Chinese exporters on the basis of, among other things: a State shareholding, allegations that the State controls the banks that lend to them, the utility companies that supply them with water or electricity, the rent for the land they lease and the price they pay for raw materials.

The impact of the court ruling on these commonplace allegations leveled against China remains to be seen, but there can be little doubt that this judgment will dramatically alter the way in which the EU treats State-owned companies in China in general, and will thus have far-reaching effects beyond the factual remit that was being considered in the Xinanchem case.

At a time when trade relations between China and the EU have become increasingly hostile, the decision represents a significant step toward international recognition of China's market liberalization and will thus pave the way for the future of trade relations with China on a more even playing field.

The author is a partner and EU trade disputes expert at Holman Fenwick Willan, a London-based international law firm. The views do not necessarily reflect those of China Daily.