US Ambassador to China Jon Huntsman said Monday that Beijing's cautious pledge at the weekend to loosen its exchange rate policy "takes an irritant off the table in the US-China relationship".
Huntsman described it as a "genuine attempt" to address concerns from the US and other nations about the value of China's currency, the yuan.
Critics say the yuan's de facto peg against the US dollar makes Chinese exports unfairly cheaper, hurting rival trading nations.
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But the diplomat also said Sino-US military ties were "seriously lagging", several days after the US defence secretary defended arms sales to Taiwan.
"There are no signs of real progress on the military relationship," Huntsman said after a speech to the Hong Kong General Chamber of Commerce.
"It's the one end of our relationship that is seriously lagging and one we would like to see strengthened.
"I think it (strained ties) will continue as it is a bit longer and then I anticipate a pickup."
Last week, US Defense Secretary Robert Gates defended arms sales to Taiwan -- which China views as part of its territory awaiting reunification -- in light of Beijing's "extraordinary" deployment of cruise and ballistic missiles opposite the island.
