UPDATE 1-China urges responsible U.S. policy, stable dollar

* China puts down marker for high-level Washington talks

* Beijing urges U.S. to protect its vast U.S. investments

* Seeks "responsible" policies, "basically stable" dollar

(Adds quotes)

By Simon Rabinovitch

BEIJING, July 22 (Reuters) - China will again press the United States at high-level talks next week to protect Beijing's extensive U.S. investments by pursuing sound policies and keeping the dollar stable, a senior official said on Wednesday.

China holds an estimated 70 percent of its $2.13 trillion in currency reserves in dollar assets, mainly government bonds, and officials have expressed worries that massive U.S. pump-priming to revive the economy could sow the seeds of inflation.

"As an important investor in U.S. debt, we of course are concerned about the state of the U.S. economy," Assistant Finance Minister Zhu Guangyao told a news conference.

"We hope that U.S. economic policies will yield more effective results as soon as possible, that the U.S. government's fiscal deficit will gradually come down and that the balance sheet of the U.S. Federal Reserve will be improved," he added.

Zhu was briefing reporters ahead of the inaugural session in Washington of the China-U.S. Strategic and Economic Dialogue, a cabinet-level forum for the two countries to thrash out critical long-range economic and political issues.

Vice Premier Wang Qishan and State Councillor Dai Bingguo will lead the Chinese team to the talks next Monday and Tuesday, which are an extension of the Strategic Economic Dialogue pioneered by former U.S. Treasury Secretary Henry Paulson.

"In the discussions, the Chinese delegation, especially Vice Premier Wang Qishan, will clearly put forward that the U.S. should adopt responsible economic policies, including fiscal and monetary policies, maintain a basically stable dollar exchange rate and protect the safety of China's investments in the U.S.," Zhu said.

China recognised the need for policies that stimulate the U.S. economy and counter the financial crisis but would discuss with the United States how those policy settings must be conducive to securing sustainable growth, Zhu added.

He described as extremely important Fed Chairman Ben Bernanke's outline to Congress on Tuesday of how the U.S. central bank could withdraw the monetary stimulus it has injected into the economy.

"China will study it carefully," Zhu said of Bernanke's testimony. (Reporting by Simon Rabinovitch; Writing by Alan Wheatley; Editing by Jacqueline Wong)