CHINA yesterday stepped up its campaign to improve relations with the United States, with its ambassador to Washington issuing a plea for the renewal of Most Favoured Nation trading status. In a speech to the Asia Society which was markedly free of any of the rhetoric which normally marks Chinese statements on the US, Ambassador Li Daoyu said Beijing and Washington should push for friendlier ties. The only ominous note in the speech, which was clearly intended as a goodwill gesture, came when Mr Li said: ''Removing MFN status will cause damage to both sides and can only harm our overall relations. We hope the US administration will make a sensibledecision on the question and handle the matter properly so as to keep the momentum for more fruitful trade and economic relations between the two countries.'' But he added: ''We hope that . . . the two countries can make joint efforts to overcome the difficulties and move this relationship forward. We also want to see more and more American companies expanding business relations with China and turn the vast potential of China-US co-operation into reality.'' President Bill Clinton has to decide in June whether to extend MFN, and his officials have said that if the decision were taken today, Beijing would still not have made enough progress on human rights to warrant renewal. The envoy urged Washington to take a longer-term view of Sino-US relations, and repeated Beijing's views that each country should not interfere in the other's ''internal affairs'' - meaning human rights. The US has recently embarked on an ''engagement'' policy, trying to win Beijing's co-operation by increasing ties and discussion rather than confrontation. Welcoming this initiative, Mr Li added: ''We want to work with the US side to overcome the existing difficulties and give new impetus to the development of our bilateral ties.'' Mr Li also sought to quell fears over China's military role in the region. ''China does not want confrontation with the US, nor does it want to involve [itself] in arms races or military blocs,'' he said. ''[China] will never be a threat to the US or any other country.'' US Attorney-General Janet Reno has reaffirmed the administration's stance that people fleeing China's one-child policy have no guaranteed right to asylum in America. Her latest ruling, a reflection of the White House's tough line on illegal immigrants, could clear the way for thousands of Chinese aliens to be deported back to China.