TRADE frictions lead nowhere - only to a lose-lose situation, China's metals association said in response to US complaints about the country's exports.

US trade groups have raised product dumping and subsidy allegations against three types of Chinese steel products in the past two months, according to Chen Haoran, chairman of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers.

"If confrontations lead to acute steel price fluctuation, no one will benefit from it," Chen said.

In early June, the American Iron and Steel Institute, the Specialty Steel Industry of North America and the Steel Manufacturers Association claimed that the Chinese government provided huge subsidies to steel producers.

The subsidies resulted in China's skyrocketing steel output and threatened US steel producers, the American associations said.

"Indeed, China's only advantage is a cheap work force, which makes products cheap," said Zhang Yansheng, director of the International Economic Research Institute.

China is still working through the process of industrialization, so its prices are lower compared with those in the US, Zhang said.

"In an office of 10 square meters, two US programmers can develop software worth much more than the steel produced by 100 Chinese workers toiling in a mill of 100 square meters," Zhang said.

China is advancing social welfare and insurance reforms to safeguard workers' interests, which will raise production costs over time, Zhang said.

The price gap between US and Chinese steel products expanded from about US$100 to more than US$200 a ton from 2005 to 2007, which stimulated China's steel exports, the CCCMC said.

"In a market-oriented economy, business people, both in state-owned or privately owned companies, strive to pursue profits. They keep producing steel as long as the prices are lucrative," said an industry insider.