The President's decision comes despite allegations of Chinese espionage against US nuclear facilities and continuing concerns in Congress over Beijing's human rights record.

The extension of normal trade relations, formally known as most favoured nation status, gives China the same low tariff access to US markets enjoyed by most other countries in the world.

Charlene Barshefsky: We must take the long term view

The US imports more than $70bn of Chinese goods a year and exports more than $14.3bn of US goods to China.

President Clinton wants to keep things that way.

In a letter to Congress, he said the decision to renew China's trading privileges was not however a favour to Beijing but rather because of US security and economic interests.

He said it was a means of opening and reforming China's markets and a way, as he put it, of holding China to the rules of global trade.

The yearly presidential decision to grant China trade privileges has always been controversial since they were first granted in 1980 but this year's is more controversial than most.

It came on the eve of the tenth anniversary of the Tiananmen Square killings and just a week after a Congressional report accusing Beijing of wide-spread spying against American commercial and military targets.

The decision is certain to provoke opposition from Republicans in Congress, some of whom genuinely see China as a dangerous rival to the US and others who see it as a good issue on which to criticise the President.

Congress now has 90 days to overturn the President's decision, although that would require an unlikely two-thirds majority in both the Senate and the House of Representatives.

Tense climate

US Trade Representative Charlene Barshefsky said despite the tense political climate, the longer term benefits of the trade arrangement had to take priority.

She said: "Were we to revoke normal trade relations, we would in essence sever the economic relationship between the United States and China.

"This would devastate the Hong Kong economy, hurt significantly the Taiwan economy, render China less predictable, support hard liners in China which may wish to see increased friction between the US and China.

"It would thwart the ability to get China into the World Trade Organisation on commercial terms - moving it toward international norms.

"It would cost US jobs, it would be a terrible decision, the wrong thing to do and the wrong thing to do as we look again at the US interests in a stable relationship with China."