China "is not making significant efforts" to stop human trafficking, the US says, claiming that fewer people are now being prosecuted than before.
The US Department of State released its annual Trafficking in Persons Report on Thursday, and downgraded China to one of the worst offenders.
The reports highlights the forced labour of Uighur people in China's restive Xinjiang province.
There has been no response from China, which could now face sanctions.
Countries placed in the third tier of three in the report - including North Korea, Sudan and Venezuela - can lose non-humanitarian aid. But Associated Press reports that presidential waivers mean Tier Three countries do not always get punished.
Afghanistan, Qatar and Malaysia were upgraded to Tier Two as they were seen to be making efforts to crack down on the practice, and improve conditions for those who have been trafficked.
US Secretary of State Rex Tillerson said China was downgraded "in part because it has not taken serious steps to end its own complicity in trafficking, including forced labourers from North Korea that are located in China".
Too often, the report says, China sends North Koreans home without having screened them for signs of human trafficking - even though they could face torture or execution on their return.
Mr Tillerson said an estimated 50-80,000 North Koreans were working overseas in forced labour, often up to 20 hours a day, with their salaries going directly to the government in Pyongyang.
While the report comes from the Department of State rather than the White House, it is nevertheless the most significant rebuke against the Chinese government by the US since President Donald Trump took office in January.
However, Reuters reported that Mr Trump was becoming "increasingly frustrated" over Chinese inaction on North Korea, and that he was considering trade actions in response.
Among the other findings on China highlighted in the report:
- reports continue to emerge from Xinjiang that say Uighur Muslims are being put into forced labour by officials "despite the local government issuing a notice in early 2017 that the practice had been completely abolished";
- fewer sex and labour traffickers were prosecuted in the past year than the year before;
- the government did increase co-operation with foreign governments over trafficking, and to investigate cases of trafficked Chinese nationals abroad.
The report, which covers 180 countries, is billed as the most comprehensive resource of efforts being done to stop trafficking.
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