'Globalisation phenomenon'

"The trade surplus is an outcome and phenomenon of globalisation. It will exist for a time," he said.

"The impact of China's currency manipulation on the US economy cannot be overstated"

US legislators' letter to treasury and commerce officials

He said that China hoped Washington would be "an advocate of free trade, not an obstructor".

Wen Jiabao, the Chinese president, said over the weekend that his nation would not submit to foreign pressure on the issue and that other nations should stop "finger pointing".

According to some US economists the yuan is undervalued by 25 per cent or more.

The US and the EU, key trade partners for China, have said that Beijing has intentionally kept the currency low to boost its exports, key in helping the country emerge from the global economic crisis.

The US legislators said on Monday that Beijing was in effect subsidising exports via their yuan policy.


"The impact of China's currency manipulation on the US economy cannot be overstated," they said in the letter submitted to Geithner and Gary Locke, the US commerce secretary.

"Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors."

The letter stated that Beijing's exchange rate policy threatens the stability of the global financial system.

Barack Obama, the US president, last week called on Beijing to adopt a "market-oriented" exchange rate policy, increasing pressure on China to allow the yuan to appreciate.

The US' trade deficit with China was at $226.8 bn in 2009, a reduction from a record $268.0 bn in 2008.

But Washington wants to raise exports and employment in the recesion-hit US, and the deficit is a point consternation.

Beijing and Washington have also disagreed recently over the issues of Tibet, human rights, and US arms sales to Taiwan.