``The rapid growth of Chinese manufactured exports, with an increasingly high-tech orientation, presents a major challenge to US competitiveness,'' said the report by Ernest Preeg, a senior fellow at the Manufacturers Alliance in Arlington, Virginia, an association that represents companies such as Caterpillar Inc. and Motorola Inc.

In 2001 China exported half the amount of factory goods the US did. Since then, Chinese exports of those goods -- including auto parts, toys and semiconductors -- have grown by more than 25 percent a year to $713 billion in 2005. Assuming an ``unlikely'' slowing in export growth to 20 percent, China still would pass the US in those exports this year, the 15-page report said.

China is increasingly competing with the US in such areas as information technology, aerospace, biotechnology and electronics. The US, with a trade surplus of $29.7 billion in those products in 1998, ran a $44.4 billion deficit in 2005.