SEATTLE (AFP) - China's President Xi Jinping told United States business leaders on Tuesday (Sept 22) that foreign organisations in his country should "obey Chinese law", after draft legislation raised fears of a crackdown on overseas groups.

China is expected to pass a law this year covering foreign charities, business associations and academic institutions operating in the country.

It comes as Beijing clamps down on domestic civil society activists, prompting fears among charity workers that their actions in the country will be heavily curtailed.

Speaking to business leaders in the US city of Seattle, Mr Xi said of foreign non-governmental organisations (NGOs) that: "So long as their activities are beneficial to the Chinese people, we will not restrict or prohibit their operations.

"On their part, foreign NGOs in China need to obey Chinese law and carry out activities in accordance with the law," he added.

Chinese state-run media in recent months have accused foreign NGOs of undermining national security and trying to foment "colour revolution" against the ruling Communist party.

According to drafts of the law being considered by the Communist-controlled legislature, overseas NGOs will have to "partner" with at least one Chinese government department.

They will also have to submit "work plans" detailing their activities to Chinese police for approval, among other measures.

Overseas charities and business groups have said they believe the law will seriously restrict their operations in China, and the vague wording of its references to "security" has raised fears it could give police wide-ranging discretionary powers.

"The draft law is unfriendly to a whole range of activities and to the future of independent civil society," Ms Isabel Hilton, founder of environmental NGO China Dialogue, wrote in an online commentary in May.

The Communist party under Mr Xi has tightened controls on civil society, jailing dozens of activists and this year detaining five feminists affiliated with an anti-discrimination NGO, while also hauling in more than 130 lawyers for questioning, some of whom have been held for months.

Mr Xi also called for the United States and China to better understand each other's "strategic intentions" on Tuesday, asking for "a new model of major country relationship" with more understanding and less suspicion.

In the keynote speech in the Pacific coast commercial hub of Seattle on the first day of a state visit, Mr Xi insisted that Beijing does not seek conflict despite stressed relations in a number of areas.

"We want to see more understanding and trust and less estrangement and suspicion," he said.

"Should they enter into conflict and confrontation, it would lead to disaster for both countries and the world at large," he said.

Ahead of talks with the Obama administration later this week on hot-button issues like China's expanding presence in the South China Sea, cyber theft and human rights, Mr Xi sought to assuage an audience of mostly businessmen and US state officials that China was a positive force in the global economy and was pushing forward with reforms based on rule of law and market principles.

He promised to treat US investors in China fairly and to fight against commercial cyber theft, a growing complaint against China by American businesses.

"We respect the international business norms of non-discrimination," he told an audience that included the chief executives of some of the largest US businesses, including Boeing, Amazon, DuPont, IBM and Microsoft, all of whom have substantial business in China.

"We will address legitimate concerns of foreign investors in a timely fashion."

On the hacking issue, he said China itself is a victim and was ready to set up a "high-level" mechanism with the United States to discuss the problem.

"The Chinese government will not in whatever form engage in commercial theft or encourage or support such attempts by anyone."

At the same time, he suggested that US threats to sanction Chinese officials over the alleged hacking were out of line, saying cyber theft was a crime that had to be prosecuted "in accordance with law".

He also stressed that China's economic downturn was temporary and that the government was on top of recent market turmoil.

"At present all economies are facing difficulties and our economy is also under general pressure. But this is only a problem in the course of progress," Mr Xi said.

"China's stock market has reached the phase of self-recovery and self- adjustment," he added.

Mr Xi is spending two days in Seattle meeting the governors of US states with substantial trade and investment ties to China, and the businesses themselves, sending a message to the White House that US companies need China.

On Wednesday, he will visit Boeing's huge assembly facility and then Microsoft's huge campus.

He was introduced by legendary US diplomat Henry Kissinger, who made the first secretive effort in 1971 to restore long-broken relations with China and who praised Mr Xi as the man able to take the relationship to a new level.

The Chinese leader charmed his audience with quotes from Martin Luther King, recollections of former visits to Seattle and knowing references to popular US culture, including the romance comedy Sleepless In Seattle.

Defending his government's crackdown on corruption, he quipped: "This has nothing to do with power struggle. This is no House of Cards."

But he also took pains to remind Washington that China has been a responsible partner and team player in dealing with crises from Ebola to North Korea's nuclear threat to global warming, as well as acting to support the world economy in the 2008 financial crisis.

And, segueing from his comments on his government's anti-corruption fight, he pointed a direct finger at the US government's allowing Chinese wanted for corruption to hide in the United States. He called for Washington's cooperation "so that corrupt elements will be denied an overseas safe haven".

He also responded to criticisms that China's tough new security law will effectively outlaw foreign non-governmental organizations, saying the country welcomed and would protect those whose activities "are beneficial to the Chinese people".

But he also stressed they had to obey Chinese law.