China's excess production in sectors including steel has a "distorting and damaging effect" on international markets, US Treasury Secretary Jack Lew said on Monday.
"Consistent with China’s reform agenda, the United States supports efforts to reduce excess capacity and leverage in the economy and allow market forces to determine the allocation of resources," Lew said on the first day of high-level meetings in Beijing between US and Chinese officials.
Lew also criticized new Chinese legislation that put stricter controls on NGOs.
"NGOs have served to strengthen our bilateral relationship and have made new forms of cooperation possible," he said.
"We are very concerned that China’s recently passed Foreign NGO Management Law will weaken that foundation by creating an unwelcome environment for foreign NGOs," Lew said.
Diplomatic sources speaking anonymously earlier expressed concerns about the "sweeping powers" of the law, which allow police to detain foreign NGO staff without formal charge for up to 15 days.
The eighth China-US Strategic and Economic Dialogue and the seventh China-US High-Level Consultation on People-to-People Exchange are taking place until Tuesday afternoon.
The South China Sea dispute is expected to overshadow the meetings.
Tensions between US and China have risen as China has sought to assert its control in the face of competing territorial claims from countries in the region.
Xi said at the opening ceremony that some differences between the two sides "are quite normal," as long as both "tackle differences and sensitive issues in the principle of mutual respect and quality,” Xinhua news agency reported.
"The broad Pacific Ocean should not become an arena for rivalry, but a big platform for inclusive cooperation," Xi was quoted as telling delegates.
China claims most of the South China Sea, which includes overlapping claims with Vietnam, Taiwan, the Philippines, Malaysia and Brunei.
Several Chinese military deployments to the region have been reported in recent months, while the US has sent naval ships to conduct freedom of navigation operations through the Spratlys, where China has reclaimed land for island-building.
Washington takes no position over the competing claims, but says the issue should be resolved diplomatically and asserts the US right to freedom of the seas.