The U.S. and Chinese economies have great potential to grow together and the two sides need to make concrete progress in bilateral cooperation, said a senior official of the U.S. Treasury Department on Wednesday.

"The Chinese and U.S. economies have tremendous capacity to grow together, tremendous complementarities between our strengths," Lael Brainard, undersecretary for international affaris of the Treasury Department, told Xinhua.

The upcoming Strategic and Economic Dialogue (S&ED) will "reflect the very positive tone of mutual cooperation" that was struck at the state visit by Chinese President Hu Jintao and U.S. President Barack Obama in January, she said.

The third meeting of S&ED, which will be held on May 9-10 in Washington DC, will see some concrete further progress on a deepening and broadening economic engagement between China and the U.S., said Brainard.

"China's growth depends very much on the good relationship with the U.S. and our ability to continue growing and generating jobs also depends on very strong bilateral relationship with China," Brainard said. "We have very strong mutual interests."

She noted that the U.S. will focus on the improvement of business environment, including some of China's industry policy -- the indigenous innovation, the intellectual property protection and currency issue. She also said that the two sides expect to see more progress in the two-way investment.

She emphasized that the U.S. welcomes more foreign direct investment from China.

In a speech delivered earlier Wednesday, U.S. Commerce Secretary Gary Locke also stressed the importance of China's direct investment in the U.S., which will benefit the American workers and businesses.

Brainard said that the S&ED is the highest level of mechanism for bilateral cooperation between the two key players of world economy that brings together senior political leadership from both economic and the strategic -- security sides of the government.

Still, the bilateral cooperation is also growing in the multilateral arena, such as the Group of Twenty (G20) platforms.

She said there are varieties of ways that the two countries collaborate multilaterally. But S&ED helps identify common interests and common priorities that they can pursue together in multilateral forum.

Talking about the U.S. economic situation, Brainard said that "U.S. recovery is in a much stronger place today than we were even one year ago when we had the second S&ED and certainly than at the first S&ED."

However, high unemployment rate, currently at 8.8 percent, remains the biggest challenge.

Regarding the deficit challenge, in which the market has increasing concern, Brainard argued that most of the Obama administration's deficit is temporary and is associated very specifically with programs that they put in place for the great recession and which will naturally expire.

She said that both the two parties of the U.S. political arena have the willingness to reduce deficit quickly even though there are some debate on where to cut. She believes that there will be political compromise in the end.

The U.S. and China have to build a foundation of mutual trust to be able to pursue mutual interests and also work on areas where there are underline frictions in order to cooperate more effectively, Brainard concluded.