The Bush administration on Monday criticized China's record on opening its markets and said the U.S. would not hesitate to seek economic sanctions as Treasury Secretary Henry Paulson prepared to visit Beijing for talks on currency.

Calling China's record "decidedly mixed," U.S. Trade Representative Susan Schwab released a 100-page report that accused it of failing to live up to commitments it made five years ago when it joined the World Trade Organization.

The annual report, required by Congress, said stronger action was needed on the part of the Chinese government to crack down on widespread copyright piracy.

It said China also should work harder to eliminate government policies that unfairly discriminate in favor of Chinese companies and block U.S. exports and hinder American financial and other service companies seeking to do business in China.

"Certain industries face frustrating barriers to doing business in China and there are worrisome signs that China's market liberalization efforts have slowed in the last year," Schwab said in a statement.

The administration said it would not hesitate to use all the tools available including bringing cases against China before the WTO if the country did not do more to lower barriers to American exports and U.S. companies seeking to operate in China.

Paulson is leading a high-level administration team that includes seven members of Bush's Cabinet as well as Federal Reserve Chairman Ben Bernanke to China for talks Thursday and Friday on various trade issues including China's currency system.

American manufacturers see China's undervalued currency as a major culprit in a U..S. trade deficit with China that is on track to surpass last year's $202 billion record.

Paulson said the new talks, dubbed the Strategic Economic Dialogue, would "lay the groundwork for important progress down the line."

"Rather than going issue by issue, we can look at all the items on the agenda and have conversations that really try to move the ball forward in many different areas," Paulson said in a speech in Washington.

In an opinion piece published Monday in the Financial Times, Schwab said, "We will clearly convey our view that a slowdown in reform hinders China's development and undermines the health of our bilateral ties."

Democratic Sen. Max Baucus, who will become chairman of the Senate Finance Committee when Democrats take control of Congress in January, said it was important for Congress to have a role in the new dialogue with China.

"Done without Congress and without addressing the toughest issues, this dialogue will be just another lost opportunity," Baucus said in a statement.

Democratic Rep. Sander Levin said Democrats, who will control both the House and Senate next year, will insist on tougher congressional oversight of the administration's approach to China.

"Too often the administration has been on the wrong track in its trade policies with China," Levin said in a statement. He contended the administration had failed to address China's manipulation of its currency or various other unfair trade practices.

"It is the obligation of the new Congress to tackle these issues vigorously," he said.