U.S. ambassador urges China to lower trade barriers

By Michael Martina

BEIJING (Reuters) - China must reduce barriers to foreign companies if it is to meet its own development goals, the U.S. ambassador said in Beijing on Tuesday in a speech that reflected foreign investors' growing frustration with the pace of economic reforms in the country.

Gary Locke, who took up his new post in August, targeted restrictions on China's financial services sector and on investments by foreigners, calling on Beijing to end "expansive government interference."

"These policies are ultimately counter-productive, preventing China from receiving the capital, technology, management expertise and jobs that would come with a more open investment environment," Locke said.

"The growth model China has relied on for the last 30 years -- one predicated on low-cost exports to the rest of the world and investment in resource-intensive heavy manufacturing -- cannot serve it well in the next 30 years," he said.

The speech, given before members of the American Chamber of Commerce in China and the U.S.-China Business Council, was Locke's second public address in China as ambassador.

Locke, formerly U.S. commerce secretary, had previously vowed to press for greater access for U.S. goods and services in China.

He took the place of Jon Huntsman, who stepped down as ambassador to join the U.S. presidential race.

Chinese leaders have said they will roll back "indigenous innovation" policies that Locke and other U.S. leaders had argued shut foreign companies out of industries or required technology transfers as a condition of operating in China.

But foreign companies, many of which depend on China for a growing share of their profits, say they still face discriminatory practices and regulations, particularly at the local level, where Beijing's policies aren't always closely enforced.

Locke's remarks expanded on an earlier September speech, when he struck a cooperative tone on U.S.-China relations before Chinese university students, but called for reduced trade and investment barriers.

On Tuesday, he said advocating for better intellectual property protection would be one of his top priorities.

"Despite some progress, American and other foreign companies in industries ranging from pharmaceuticals to biotechnology to advanced manufacturing to entertainment still lose billions of dollars every year from IP theft in China," Locke said.

The United States' trade deficit with China, which hit a record $273 billion in 2010 and could top that this year, is a major irritant in relations between the world's two largest economies.

U.S. leaders argue that China's undervalued currency contributes to the problem, since it gives Chinese companies an unfair price advantage in international markets.

China's Foreign Ministry last week urged U.S. lawmakers on not to resort to trade protectionism after U.S. Senate Democratic Leader Harry Reid pushed for legislation aimed at forcing China to loosen controls on its currency.

Beijing has also criticized what it says are barriers to investments by its own companies in the United States.

Locke urged Chinese companies to invest more in the U.S., where high unemployment rates continue to vex politicians.

"The United States is doing everything it can to make our investment and commercial environment as open and appealing as possible," Locke said. "Unlocking the full potential of the U.S.-China relationship requires China to take similar steps."

(Editing by Don Durfee and Ken Wills)