Foreign firms are at a disadvantage, the US insists

In its annual report, the US Trade Representative conceded that China had made great strides since joining the World Trade Organisation (WTO) in 2001.

But deregulation has stopped and some Chinese officials are actively seeking ways to block trade, the report says.

Last year, the US had a trade deficit of $124bn (�67bn) with to China, an issue of mounting political importance.

US politicians say China has been competing unfairly on global markets, and has effectively been destroying American jobs.

Culture of obstruction

China presents obstacles to commerce in many direct and indirect ways, the USTR charged.

"In many sectors, import barriers, opaque and inconsistently applied legal provisions and limitations on foreign direct investment often combine to make it difficult for foreign firms to operate in China," the report said.

The problem, the USTR said, was cultural: Chinese bureaucrats cannot rid themselves of the habit of interfering in the economy.

In practical terms, this has often meant sheltering domestic firms from foreign competition, according to the report.

US lobbyists are also concerned that the Chinese yuan is pegged against the dollar at a rate highly favourable to China's exporters.

Tariffs and beyond

The USTR said China had made serious progress on reducing tariffs, the most obvious barrier to trade.

But most of this activity was concentrated in 2001-02, and current barriers are more subtle, the report added.

The USTR faulted China for failing to give trading rights to all joint ventures with foreign investors.

Officials are accused of tweaking technical standards - on issues such as safety, or packaging - to the detriment of foreign firms.

Intellectual property rights, one of the most glaring omissions in Chinese practice before WTO entry, still remained "seriously inadequate" the report said.