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US Official: US-China Economic Relations at Turning Point

U.S. Commerce Secretary Gary Locke says the U.S.- China economic relationship is at a turning point and the two countries need to do more to cooperate and ease gross trade imbalances that in his view threaten global stability and prosperity.

Locke says that over the past 20 years, China and the United States have seen tremendous progress in their trade relationship. The United States, he notes, is the top destination for Chinese exports and last year American exports to China grew by 34 percent compared to the year previous.

But more is needed, he says, to unlock the full potential of the U.S. - China commercial relationship. "We are at a turning point in the U.S. - China economic partnership. The policies and practices that have shaped our relationship over the past few decades will not suffice to overcome the economic challenges facing the United States, China and indeed the global community," he said.

Locke's remarks Thursday to members of the U.S. - China Business Council come just days before Chinese President Hu Jintao arrives for a state visit.

Locke says the United States wants a more equitable commercial relationship with China and for Beijing to do more to follow-through on trade agreements between the two countries.

He says that while the United States and China are seeing examples of how cooperation can benefit both countries, there is still frustration with China's commercial policies and its handling of intellectual property and other hurdles to market access.

"When I talk to business leaders across America they continue to express significant concerns - shared by businesses all around the world - about the commercial environment in China - especially China's lax intellectual property protection and enforcement, lack of transparency in government decision making and numerous indigenous innovation policies that often preclude foreign companies from vying for Chinese government contracts," he said.

As the Chinese government focuses on strategic and emerging industries, it has put in place policies such as indigenous innovation, which mandates that products be made, conceived and designed in China.

Locke says that since China joined the World Trade Organization - the body that works globally to promote the free flow of goods, ideas and services - conditions on a whole have become fairer for foreign firms operating there.

But in some cases, he notes that there is still a big difference between China's public statements condemning problems such as intellectual property violations and the reality on the ground. "American and other foreign companies, in industries ranging from pharmaceuticals and biotechnology to entertainment, still lose billions of dollars from counterfiting and IP [intellectual property]-theft in China every single year."

As Locke urged China to not repeat the protectionist "folly" Western countries pursued in the wake of World War II using policies to protect native industries, he also acknowledged that doing so would mean making some tough choices and that moving toward a more market-oriented economy would take time.

Analysts note that both sides face increasing political pressure. China needs to be careful that the policy changes maintain social and economic stability.

As the United States looks to boost exports and create more jobs, administration officials here are under increasing political pressure to promote change and to push China harder.

Trade figures released Thursday show the U.S. trade deficit with China alone totaled $252 billion during the first 11 months of 2010. Those figures will keep it on track to surpass the annual record of $268 billion in 2008.