UPDATE 1-No. 2 U.S. diplomat Sherman to visit China July 25-26 -State Dept.

(Adds trip details, background, quote)

WASHINGTON, July 21 (Reuters) - U.S. Deputy Secretary of State Wendy Sherman will visit China next week as part of a larger Asia trip, the State Department said on Wednesday, marking the highest-level visit by a U.S. official to China in months

Sherman, the State Department's second-ranked official, will meet with officials including State Councilor and Foreign Minister Wang Yi, as the two sides navigate a deeply troubled bilateral relationship.

Sherman's visit had been anticipated in foreign policy circles, and could help set the stage for additional exchanges and a potential meeting between President Joe Biden and Chinese leader Xi Jinping this year, possibly on the sidelines of the G20 summit in Italy in late October.

"These discussions are part of ongoing U.S. efforts to hold candid exchanges with PRC officials to advance U.S. interests and values and to responsibly manage the relationship," the State Department said in a statement.

"The Deputy Secretary will discuss areas where we have serious concerns about PRC actions, as well as areas where our interests align."

(Reporting by Reporting by Michael Martina and David Brunnstrom, Doina Chiacu; Editing by Toby Chopra and Chizu Nomiyama)

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