But the two economies are encountering an economic slowdown due to the European debt crisis, and are committed to transforming their economic growth model.

Bilateral economic ties have also been challenged by friction over investment and trade in a wide range of issues ranging from solar panels to telecoms.

Li said the enhanced cooperation between local governments in China and states in the US will help stimulate economies of the two sides and promote two-way relations.

During a visit to the US early last year as vice-president, Xi Jinping, now China's president, called for new ways to be explored to strengthen Sino-US relations.

Vice-Minister of Commerce Wang Chao said on Wednesday during the signing of the trade and investment understanding that the Ministry of Commerce will help promote Chinese investment in the US — in infrastructure and new energy in particular — and business exchanges between China's local governments and states in the US.

Li also said California has a solid foundation to enhance cooperation with China's provinces and municipalities.

California enjoys strong advantages in innovation and education, he said.

It is a big agricultural state, while its iconic Silicon Valley is considered the largest concentration of top technology companies in not only the country, but globally. Brown said during the signing ceremony for the understanding that China's local governments and California can enhance cooperation in sectors including infrastructure, energy, agriculture, manufacturing, biological medicine and tourism.