"The aviation relationship lags far behind our overall economic relationship and also lags behind what you would expect between two great powers," said David Marchick, US deputy assistant secretary for transportation affairs.

A US delegation is in China this week for discussions with Chinese officials on the issue.

Limited aviation service, both passenger and cargo, had led to the loss of business to third country carriers, members of the delegation told Reuters in an interview.

Only three American cities had non-stop service to China and the United States hoped to expand air services both to and from the Asian nation, they said.

But industry officials have said China's airlines -- many of which were losing money -- feared competition, which had made Beijing reluctant to open the market further.

"We would like more direct service for the carriers that are in themarket," Marchick said. "We would also like new direct service for carriers that are not in the market."

"In addition, we would like our carriers to cooperate more with Chinese carriers, because we think it would benefit both."

Under existing agreements, three US carriers fly a total of 27 flights per week, both direct and indirect, US officials said.

The US carriers included Northwest Airlines Corp and UAL Corp's United Airlines, as well as FDX Corp's Federal Express, an air express carrier, they said.

AMR Corp's American Airlines, Delta Airlines Inc, United Parcel Service (UPS) and Polar Air Cargo had all expressed interest in services to China, US officials said.

"Our basic message is that expanded aviation services, both cargo and passenger, will increase investment, create jobs, develop tourism and strengthen ties between the US and China," Marchick said.

US officials said possible cooperation could also take the form of more code-sharing agreements.

American Airlines started a code-shareagreement with China Eastern Airlines in August, becoming the first US airline to fly with codes on a Chinese carrier.

Northwest Airlines started a code-sharing agreement with Air China, mainland China's largest airline, in October.

In Beijing, the US delegation met with officials from the ministry of foreign affairs and the general administration of civil aviation of China.

The two sides agreed to hold further discussions in December and the United States was hopeful of formal negotiations in spring next year, US officials said.

"Open skies is years away," one US official said, referring to an agreement that removes bilateral restrictions in aviation markets.

"The issue is what type of incremental progress we can make over the next few years."