American officials have proposed narrowing the focus of possible trade sanctions, targeting state-owned firms rather than all exporters if Beijing fails to improve its rights record by June.
The Foreign Ministry said that even this was unacceptable and would "seriously affect" relations.
Assistant Secretary of State Winston Lord, Washington's chief China adviser, indicated that the Clinton administration may be tempering its threat to cancel China's Most Favored Nation trade privileges outright on human rights grounds.
Lord proposed that MFN benefits might instead be withdrawn from some state-owned exporters so as to lessen the impact on the U.S. and "innocent bystanders" like Hong Kong and Taiwan.
A Foreign Ministry spokeswoman, asked to comment on the proposal, rejected a seeming U.S. bid to back down from a multibillion-dollar trade war.
MFN status "is the basis for the maintenance of normal economic and trade relations," she said. "Any move that damages this basis will seriously affect Sino-U.S. relations."
American businesses, which fear a trade war would drive them from one of the world's most promising markets, rejected Lord's targeted sanctions as unenforceable due to the difficulty of tracing corporate ownership in China.
Analysts said they were not surprised by Beijing's line. "The Chinese seem to be very confident that the Americans wouldn't dare revoke MFN, or it may be that they simply don't care," said a Western diplomat. "There is not much evidence that the Chinese have worked out the actual cost of losing MFN."
The diplomat cited a World Bank report saying loss of MFN would be catastrophic for China, halving economic growth to 6.5 percent from last year's 13 percent.
President Bill Clinton pledged last year that China could win renewal of MFN by showing significant progress in its human rights record before June 3.
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