US-Chinese relations are in jeopardy because Beijing is slowing the pace of reform and putting the global economy at risk, Washington's chief trade negotiator said on the eve of a high-level delegation to China.

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The Bush administration has identified "troubling indications that China's momentum towards reform has begun to slow" in the last year, according to Susan Schwab, the US trade representative.

The negotiator said the US was ready to initiate new trade disputes and retaliate against China if reforms were not stepped up following this week's strategic economic dialogue led by Hank Paulson, Treasury secretary.

The warnings reflect pressure on the administration from the US Congress to be more aggressive with China over the value of its currency and the growing trade imbalance between the two countries.

Ms Schwab, writing in the Financial Times, said the administration would use this week's talks "to clearly convey our view that a slowdown in reform hinders China's development and undermines the health of our bilateral ties."

The trade representative added that "incomplete" reforms were "creating massive distortions that could leave the Chinese and global economies at risk."

The warnings are detailed in a 100-page report due to be submitted to Congress to mark the end of China's five-year accession to the World Trade Organisation on Monday.

Senior administration officials made clear in interviews and briefings that relations with China were entering an uncertain and perilous phase with the expiry of the WTO road map, which has underpinned relations for more than a decade.

This week's economic dialogue is intended to focus on "fundamental long-term strategy" and provide a fresh context for negotiations, Ms Schwab said in an interview.

A key goal of the talks is to persuade China to throw open its doors to US financial services groups, while an official indicated the Beijing leadership might be enticed with the offer of sought-after market economy trade status.

The dialogue has been carefully choreographed by Mr Paulson, who has a close personal relationship with the Chinese leadership, formed when he was head of Goldman Sachs, the investment bank.

The talks are supposed to project profound respect for the emerging superpower.

However, Ms Schwab said that behind the scenes she would meet her Chinese counterpart and discuss the threat of trade litigation.

The US trade representative said that "voices in China resisting further market liberalisation have grown louder."

Ms Schwab is also being squeezed by a threat from Democrats in Congress that they will impose unilateral punitive tariffs on China in the wake of their victory in mid-term elections.

The trip to Beijing will be a chance for Ms Schwab and Mr Paulson to work together closely. The Treasury secretary is seen as a skilled communicator and persuader, while Ms Schwab is regarded as a tough negotiator.

"You always want to work together in a manner where you are leveraging each other's strengths," Ms Schwab said, indicating she retains overall control of the wider trade agenda while accepting the Treasury secretary's leadership on financial services negotiations.

Observers said there was a delicate dynamic between the two arising from Mr Paulson's leadership on economic policy.

There have been contrasting messages from the two on issues such as the Doha world trade talks, which collapsed in July.

Ms Schwab yesterday linked US movement on Doha to financial services reforms by China, but remains very downbeat about the multilateral talks. Mr Paulson in contrast has called for urgent action to reach a deal on Doha.

Larry Summers said that as Treasury secretary in the Clinton administration he had at times stepped in when trade issues needed to be "elevated," citing his role in WTO negotiations with China. A senior Washington lobbyist said tensions be-tween Ms Schwab and Mr Paulson on trade strategy would ultimately be resolved by Josh Bolten, White House chief of staff.

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