MUMBAI: China‘s appeal against a ruling that it must stop forcing US content owners to use state-owned companies to distribute movies and books has been rejected by the World Trade Organization (WTO).

The ruling effectively breaks the monopoly that China Film Group Corporation and Huaxia Film Distribution currently have on the distribution of foreign films in China. Under the current rules, the US studios usually take around 17 per cent of the box-office of revenue-sharing films.

However the WTO ruling does not address China‘s import quota of 20 revenue-sharing foreign films a year.

"With the rejection of China‘s appeal, the WTO has taken a major step forward in leveling the playing field for America‘s creative industries seeking to do business in China," said Motion Picture Association chairman Dan Glickman, in a statement.

"In spite of all the restrictions we face, there is no shortage of US filmed entertainment in China. Unfortunately, far too much of it is pirated," Glickman added.

In its argument, China had argued that it needed to impose controls on the market that are in line with the country‘s stage of economic development and also to protect public morals.

The WTO judges agreed that China has the right to ban foreign films and books that government censors deem objectionable.

The ruling comes at a time when China‘s theatrical market is expanding rapidly - box office is expected to grow by 40 per cent to $882m this year. US movies such as Transformers 2 and 2012 have seen big numbers in China this year, grossing around $60 million apiece.

Meanwhile Avatar is due to open in China in the beginning of January - a time that is usually reserved for local productions.