PUBLISHED : Friday, 28 May, 1999, 12:00am
UPDATED : Friday, 28 May, 1999, 12:00am

An arms race could happen in Asia if the United States and China fail to repair their strained relations, the head of America's biggest bi-partisan group on promoting Sino-US relations said yesterday.

The president of the National Committee on United States-China Relations, John Holden, warned it was in no one's interest to allow ties to deteriorate.

'The most urgent task is for damage control and to rebuild trust by working together and listening to one another,' Mr Holden told a Hong Kong luncheon organised by the American Chamber of Commerce.

'If we fail to do this we risk an arms race in Asia, with less security at a higher cost.' Mr Holden acknowledged that trust between Beijing and Washington had dropped to the lowest level following the bombing of the Chinese Embassy in Belgrade and the growing hostility towards China in the US Congress.

The US had to meet the four demands set by China over the embassy attack if relations were to move forward.

'I think that was a good sign that they want to put this behind us,' Mr Holden said. 'They didn't issue 17 demands, did they? They have set down markers that are very achievable.

'The US needs to meet the reasonable demands of the Chinese. Beyond that, there has to be a gradual rebuilding of the relationship that will imply a lot of visits and a lot of frank discussions and possible sponsoring of efforts that are beneficial to both sides.' DANIEL KWAN