Don Evans (left) meets Chinese commerce minister Bo Xilai

Speaking during a visit to Beijing, Mr Evans also criticised China's policy of maintaining a low yuan-dollar exchange rate, seen as a barrier to US imports.

"US industry feels that many of China's policies place American companies at a competitive disadvantage," he said.

Mr Evans warned that without reforms, China's economic boom may falter.

He said China must tackle the bad loans crisis facing the country's banks as a matter of urgency.

Trade tensions

"China's leaders realise that treating the symptoms may buy time, but it won't cure the structural flaws that are inviting insolvency, and only grow worse with time," he told the American Chamber of Commerce in Beijing.

"China must significantly reduce government micromanagement of its economy and introduce a far higher level of transparency before it can achieve a full transition to a market-driven economy."

The US government is under pressure to win better access to the country's fast-growing markets for American firms.

Washington claims China's exchange rate policy has contributed to America's burgeoning trade deficit with China, estimated at $124bn last year.

Separately, US trade unions have accused China of luring manufacturing jobs from the rest of the world by neglecting workers' rights so as to keep labour costs low.