"China increased its efforts to monitor internet use, control content, restrict information, block access to foreign and domestic web sites, encourage self-censorship, and punish those who violated regulations"

US State Department report

"China increased its efforts to monitor internet use, control content, restrict information, block access to foreign and domestic web sites, encourage self-censorship, and punish those who violated regulations," it said.

The report added that the Chinese security services employed thousands of officials specifically to monitor and censor electronic communications.

Elsewhere it said China continued the repression of ethnic minorities in Xinjiang, the far western region which last year witnesses deadly rioting between indigenous ethnic Uighurs and Han Chinese.

In Tibet meanwhile it said China continued to impose "tight government controls" with Tibetans facing restrictions on practicing their religion and severe repercussions if they tried to escape to Nepal.

The report also increased incidents of "detention and harassment of human rights activists" while lawyers and legal firms that took on cases deemed sensitive by the government faced "harassment, disbarment and closure".

Strained ties

The release of the State Department report comes amid a period of increasingly strained ties between Beijing and Washington, following rows over US arms sales to Taiwan, a recent White House visit by the Dalai Lama, and a raft of trade disputes.

The US report placed particular attention on the suppression of online dissent in China [EPA]

In a further stab at China on Thursday, Barack Obama, the US president, called on Beijing to rebalance the global economy by moving to "a more market-oriented exchange rate".

The Obama administration has been urging China to allow its currency, the yuan, to rise in value against the dollar with US manufacturers accusing Beijing of unfairly manipulating exchange rates to gain trade advantages over the United States.

His comments, coinciding with the publication of the annual human rights report, are unlikely to go down well in Beijing.

The speech also comes amid mounting speculation that the US Treasury will soon formally label China a currency "manipulator" – a measure that would mandate punitive measures against China.

Beijing has held the value of the yuan steady against the dollar for 18 months to help Chinese exporters overcome the global downturn.

But it under intense pressure from Washington and other trading partners such as the European Union who say the policy is swelling China's trade surplus.

Responding to Obama's comments Wang Baodong, spokesman for the Chinese embassy in Washington, defended China's stand.

Beijing's economic and currency policies, he said, were "responsible and beneficial to the common interests of our two countries, particularly against the background of jointly facing up to the financial crisis."