In July the government started a 100-day campaign against vendors of pirated goods and hundreds of market stalls and street sellers shut down. However, many have since returned to business.

The focus of the latest campaign is on producers and distributors.

'Billions lost'

US officials say China is the world's leading source of pirated goods – ranging from copies of designer watches to Hollywood films and even medicines.

They say the scale of counterfeit production in China accounts for potentially billions of dollars in lost revenue for US firms.

Aside from the issue of piracy, other topics for discussion in the US-China talks will be Washington's calls for China to speed up the process of economic reform and market liberalisation.

On Monday, a report by Susan Schwab, the US trade representative, accused Beijing of dragging its feet on reforms and said China was failing to live up to commitments it made five years ago when it joined the World Trade Organisation (WTO).

She said China needed to do more to tackle widespread copyright piracy and needed to work harder to eliminate policies that unfairly discriminate in favour of Chinese companies.

Responding to the criticism, a Chinese foreign ministry spokesman said China had "implemented our obligations and commitments earnestly" and had abided by the rules of the WTO.

The Bush administration has said that it would use all the tools available, including bringing cases against China before the WTO, if Beijing does not do more to lower barriers to American exports and US companies.