But it appealed to two US senators who want to punish China over its currency regime to drop a planned bill that would slap punitive tariffs on Chinese imports.

Myron Brilliant, the Chamber's vice president for East Asia, said the bill sponsored by Democrat Charles Schumer and his Republican colleague Lindsey Graham would amount to a 200-billion-dollar tax on US consumers.

He said the bill, which would impose an across-the-board tariff of 27.5 percent on all of China's exports to the United States, would also "jeopardise" US economic interests.

In general, the Chamber report argued, US businesses continue to benefit from the breakneck growth being enjoyed by the world's most populous country.

But China must address specific areas of concern, not least intellectual property rights (IPR).

"Our report found troubling Chinese policies and practices, from resurgent industrial policies to intellectual property theft to growing investment restrictions," Brilliant said at the report's launch.

"For the US-China economic and commercial relationships to reach their full potential, China must do more to address these issues."

The Chamber of Commerce welcomed a new "strategic economic dialogue" between the United States and China announced during a visit to Beijing last week by US Treasury Secretary Henry Paulson.

After meeting Paulson Tuesday, Schumer and Graham said they would postpone a Senate vote on their tariffs bill for now.

The Chamber of Commerce said dialogue and not legislation was the right way forward. But troubling areas like IPR abuses need action now, it said.

Promises by Beijing to clamp down on copycat goods have created a "basis for optimism", it said. But at the same time, "China's failure to protect and enforce IPR remains the largest deficiency in its WTO implementation record".

"Without implementation of bolder measures that achieve tangible results, the Chamber is concerned that US policymakers will increasingly view China's remarkable economic development as posing an unfair and serious threat to US investments in research and development and economic competitiveness."

Likewise, China's reluctance to revalue its currency more risks fostering the climate of anger in Congress, the report argued.

China's legion of critics here argue that the yuan is undervalued against the dollar by up to 40 percent, lending an unfair boost to Chinese exports and driving thousands of US businesses to the wall.

The Chamber said China should reform its currency regime for its own good, to regain a vital tool of monetary control over its explosive economic growth.

But it added: "Concerns on this issue in the US Congress and among members of the public are real.

"Absent of demonstrable progress in the near term, this issue will almost certainly be the subject of legislation that will not be conducive to sustainable US-China economic relations."

The report also complained of new industrial planning policies by the communist government, alleging that they include direct subsidies in strategic sectors that would shut out foreign firms.

"These types of discriminatory policies move China in the wrong direction and, if continued, will result in a political and economic backlash," the Chamber of Commerce warned.

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