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Washington -Treasury Secretary Timothy Geithner laid out Washington's terms for rebalancing strained economic relations with China Wednesday, ahead of President Hu Jintao's US visit next week.
Describing Chinese currency policy as not "tenable" and saying the country was now "too large" to base growth on exports, Geithner said reform was in both countries' interests.
The United States has long complained that China's yuan currency is artificially undervalued, helping boost already swollen Chinese exports to the West.
With the US still recovering from a brutal recession, there is heightened sensitivity about China's perceived gouging of American economic growth.
"China presents enormous economic opportunities for the United States and for the world, but its size, the speed of its ascent, and its policies are a growing source of concern in the United States," Geithner said.
"China's economy and its financial system are still dominated by the government."
Geithner said that in return for reform, Washington was willing to offer better access to US high-tech products, greater investment opportunities in the country and preferential trade terms available to full-market economies.
Hu's January 19 state visit to Washington comes as President Barack Obama's administration tries to recalibrate its policy toward Beijing to reflect China's dramatic economic rise.
"(The) visit takes place at a time of important transition for the world economy, the Chinese economy, and the US economy," Geithner said, according to his prepared remarks for delivery to Johns Hopkins University's School of Advanced International Studies.
China has embarked on a "long period of very rapid economic growth" that will "fundamentally change the balance in the world economy, forcing changes in the architecture of the trade and financial systems," Geithner said.
While he pointed to progress toward protecting intellectual property, allowing foreign access to Chinese government procurement and stopping discrimination against US firms, he added further commitments were needed.
"China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country."
"This is not a tenable policy for China or for the world economy."
Chinese leaders, he said, had acknowledged that growth could no longer be based on exports and more domestic reforms were needed.
"China's principal economic challenge is how it will manage the next stage in its transition from a state-dominated developing economy, dependent on external demand and technology, to a more market-oriented economy, with growth powered by domestic demand and innovation."
