In an important step toward resolving an episode that brought Chinese-American relations to their lowest ebb in 20 years, the U.S. government agreed today to pay $4.5 million to the families of those killed and wounded in the U.S. bombing of the Chinese embassy in Belgrade on May 7.

The money will be given to the Chinese government, which will decide how to divide the funds among the families of the three people killed and the 27 injured, according to State Department legal adviser David Andrews, who led a team of U.S. negotiators in three days of talks with China's Foreign Ministry.

Andrews said the payment represents "President Clinton's express desire to relieve the suffering of those directly affected by this tragic event" and reflected "the critical importance of the U.S.-China relationship." In an effort to avoid a flood of similar demands for compensation from around the world, Andrews added that the "payment will be entirely voluntary and does not acknowledge any legal liability. This payment will not create any precedent."

The Chinese government continues to reject publicly the U.S. explanation that the embassy bombing was an accident caused by numerous intelligence failures. Several precision-guided missiles struck the Chinese mission which served as home as well as office for some staff members, in the midst of heavy NATO airstrikes against Yugoslavia.

But China's willingness to reach a deal on compensation is one of several indications over the past week that Chinese leaders are moving to put the bombing behind them.

On Thursday, China retracted a ban on U.S. military flights to Hong Kong, which had been imposed after the bombing. Senior trade negotiators resumed bilateral talks on July 26 after a 10-week hiatus. And last weekend, the Chinese foreign minister, Tang Jiaxuan, met Secretary of State Madeleine K. Albright. The secretary said the talks represented an "easing of tensions."

Some observers had feared that Beijing planned to drag its feet on the compensation talks in an attempt to exact some form of diplomatic advantage. Negotiations on the issue earlier this month failed. But Chinese sources said government leaders decided to seal an agreement so they could show they were being responsive to popular demands that the U.S. somehow pay for the bombing.

"The Chinese government is really concerned about the public reaction on this issue," said a Chinese foreign policy adviser.

The government organized massive anti-American protests around China when it declared that the embassy bombing was a deliberate act of retribution for China's opposition to NATO's bombing campaign. While the outpouring of nationalist sentiment served to deflect criticism from the central government, it also threatened to undercut the efforts of President Jiang Zemin and Premier Zhu Rongji to develop China by building strong ties with the United States. The country's leaders are now trying to improve relations with Washington gradually without appearing weak, government sources said.

The government has still not resumed talks on China's entry into the World Trade Organization, and high-level military exchanges and discussions on arms control also remain on hold.

The deal announced today did not address China's demand that the United States pay to rebuild China's embassy in Belgrade. The issue of property damage, which will be taken up again in talks late next month, remains contentious.