China's largest chipmaker is being propped up by the government in a move which could get it into hot water with the International Trade Organisations.

Semiconductor Manufacturing International is set to receive millions allocated by China to fund its 11th five-year plan, which runs from 2006-2010. According to Reuters the money should  appear on the balance sheet of the third or fourth quarter," the source said, who declined to be named because the information was not yet public.

However, overt subsidises of the chip industry have caused some problems for Asian computer companies in the past. While it helps establish an industry, there are allegations that it makes it harder for non-subsidised countries to compete.

In the past the WTO has allowed countries to bring in taxes on some companies so that the prices were more or less the same.