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With the prospect of tough US economic sanctions for not cutting back on Iranian oil imports looming large over China, the Washington continues to hold talks with Beijing on the issue.

"We have had discussions with China. We continue to have discussions with China," a senior Obama Administration official said on condition of anonymity.

China is Iran's biggest oil importer. The US yesterday said it would exempt India and six other countries from financial sanctions because they have "significantly" cut purchases of Iranian oil, leaving China.

"I have made the determination that seven economies--India, Malaysia, Republic of Korea, South Africa, Sri Lanka, Turkey and Taiwan--have all significantly reduced their volume of crude oil purchases from Iran," Secretary of State Hillary Clinton said in a statement yesterday.

"As we indicated, we are in discussions with China. It would be premature to comment further on where those discussions might lead," the official said.

"But as with China and with every other country that has been an importer of Iranian crude oil, we continue to outline what the legislation says, and we are engaged in a good faith dialogue to be able to work toward a solution that, in our view, addresses the fundamental point here which we have to address which is, how do we reduce the volume of purchases of Iranian crude oil? That's one of the critical issues of a law that we have to keep in front of us at all times," he said.

The official emphasised that China has been a very important partner in the P-5-plus-one process.

"It's been committed to working with us to help Iran from acquiring a nuclear weapon. It has shown that it's committed to a dual-track approach of both engagement and pressure, including sanctions.

"China itself has voted on four different occasions to impose sanctions on Iran," the administration official said.

"We may have different perceptions of sanctions at different times, but one of the things that has been very important is that China has agreed to this dual-track process of pressure as well as persuasion.

"What we have seen is that the pressure that is increasingly applied to Iran, we believe, has been critical to bringing Iran to the negotiating table," the official said.