The United States must "have a clear understanding of the dangerous nature of Taiwan independence and secessionist elements and their activities," Li told reporters, while taking "concrete measures to oppose such activities by not sending any wrong signals to those elements."

His remarks come ahead of Chinese president Hu Jintao's trip to Washington next month.

Taiwan's recent decision to scuttle a reunification council with the mainland has upset Beijing, which feels the island is making a move towards formal independence. The two countries have had separate governments since a civil war ended in 1949, but China still considers Taiwan part of its territory.

The question of Taiwan "is the biggest factor affecting Sino-U.S. relations," Li told reporters. "We're ready to work with the U.S. side to strengthen our mutual understanding."

When asked by an American reporter how China could claim to be "rising peacefully" while planning to boost defense spending by nearly 15 percent to over $35 billion dollars in the coming year, the foreign minister was dismissive.

"We should look at the basic facts instead of figures or percentages," Li said. "Since you represent an American agency, I don't know if you are aware of U.S. military spending; I suggest you look at a report by General Liao Xilong of the Chinese People's Liberation Army carried today by Xinhua."

Liao, a member of the Central Military Commission and head of the PLA's General Logistics Department told Chinese media "in terms of the ratio of defense budget to GDP, the percentages in major countries and regions are mostly between 2.5 percent and 5 percent, but China's defense spending is expected to be some 1.4 percent of its GDP this year."

The foreign minister noted military spending by China, "though increasing somewhat, is far less than other countries... In per capita terms, China's defense spending is 1/77th that of the U.S."

"China's national defense policy is transparent, and completely defensive in nature," Li asserted. He cited the country's explicit no-first use of nuclear weapons.

"Our development does not pose any threat to any country; on the contrary, it has provided more opportunities for the development of other countries in the world," Li continued.

Li noted two-way trade between China and the United States reached $211.6 billion dollars in 2005, a 24.8 percent year-on-year increase. He said China had become the fastest growing export market for the United States and claimed bilateral trade had created four to eight million U.S. jobs.

"Chinese commodities featuring low price and good quality have brought about real benefit to U.S. consumers, and have also eased inflationary pressure in the United States," Li added.

Li said "some American friends complain that they are suffering from a huge deficit in bilateral trade with China and the causes are complicated." The Chinese foreign minister attributed the problem to U.S. export controls on high technology that could be used for military purposes.

He asked that both sides avoid "politicizing" trade issues and abide by the laws of the World Trade Organization.

The foreign minister also shot back at U.S. criticisms of China's failure to strictly enforce Intellectual Property Rights, asserting that China has been a "victim" of infringement.

He stressed that China is taking "legal, judicial, law enforcement, and education to strengthen our IPR protection."

Li noted that in 2005 administrative authorities for industry and commerce "investigated and dealt with more 39,000 cases of trademark infringement and Chinese courts accepted and heard around 3,500 IPR related cases."

Li said China was pleased that presidents Hu and Bush reached "an important agreement on promoting a constructive and cooperative relationship" between the two sides, citing bilateral cooperation on trade, counterterrorism, nuclear non-proliferation, reform of the United Nations and efforts to combat the spread of the avian bird flu as "most successful."

With regards to the extended outlook on U.S.-Sino relations, Li was upbeat.

"China and the U.S. have extensive common ground. With concerted effort from both sides, strict adherence to the three joint communiqu�s, I believe that in 10 to 20 years time friendly relations will be even more fruitful."

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