US Undersecretary of Commerce Franklin Lavin said danger signs included a growing debate on the need for investment caps and suggestions China might be better off with its own standards in areas such as telecommunications.

"There is potentially a shift in the climate which is just not propitious," Lavin told US businesspeople on the final day of a five-day visit to the Chinese capital.

"(There is a risk of) an atmosphere where not only is the sense of reform fading a bit, but there's even potential for retrogression."

Overconfidence brought about by high economic growth has contributed to the looming shift in Chinese attitudes, Lavin said.

"The sustained economic performance of China... I think it starts to inure policy leaders from the need to reform," he said.

Lavin said China may now also lack the impetus for further reform as a sweeping series of liberalization measures promised in order to gain access to the World Trade Organization in late 2001 have almost been implemented.

"We're at the end of a formal set of undertakings that helped China move through a reform process," Lavin said.

What has come instead is a debate about curbing foreign investment in some sectors, along with arguments that China is better off developing its own proprietary technology.

Lavin warned that "substantially mistaken but very seductive philosophical paths" threaten to cut China off from necessary interaction with the outside world.

"China has got one of the strongest economic cards in the world to play, and that's the attractiveness of its market," he said.