US senators for tough stand on yuan
Call echoes previous moves to pressure China to stop what they see as currency "manipulation".
Last Modified: 18 Jan 2011 09:33 GMT
Beijing has responded to US criticism by saying it as taken steps towards flexible exchange rate policy [AFP]

US senators have pressed Congress to get tough on China over what it sees as its continued policy of "manipulating" its currency, ahead of a scheduled visit to Washington by president Hu Jintao.

The latest sparring over the yuan (RMB) underlines tensions over trade before Hu arrives in Washington on Tuesday for talks expected to focus on a host of sensitive issues, from rebalancing the global economy to dealing with North Korea.

On Monday, a group of senators, held talks over a proposed bill to pressure China on the yuan. 

They said it was vital for the US to pass legislation to punish China if it fails to allow its currency to rise in value rather than manage the rate, giving it an unfair advantage in global trade.

"There's no bigger step we can take to preserve the American dream and promote job creation, particularly in the manufacturing sector ... than to confront China's manipulation of its currency," Charles Schumer, a Democratic senator, said on Monday.

The message to Hu is "we are fed up with your government's intransigence on currency manipulation. If you refuse to play by the same rules, we will force you to do so."

Any significant progress in Congress on passing a currency bill, however, may prove difficult given the White House preference to negotiate and Republican leaders who have voted against it in the past.

Both the Senate and the House of Representatives would have to approve the bill, and Obama sign it, for it to become law.

Congressional supporters claim wide support for the measure, but previous efforts to pass currency legislation directed at China have failed over concerns it could trigger retaliation by Beijing, the biggest foreign holder of US government debt.

According to analysts, Hu's visit to Washington is the most important by a Chinese leader in 30 years given China's growing military and diplomatic clout and its emergence as the world's second largest economy after the United States.

In a written interview with The Washington Post and The Wall Street Journal, Hu responded to US criticism by saying the country had taken steps toward a more flexible exchange rate policy and appeared to reject arguments that Beijing should let its currency appreciate faster to help rein in domestic inflationary pressure.

The yuan has risen nearly 3.5 per cent against the dollar since Beijing ended its peg to the dollar in June, much less than demanded by critics in the United States.

US concerns over China's huge trade surplus, a high US unemployment rate and Obama's goal to double exports - which could be fostered by a stronger yuan - indicate anger over the yuan is likely to linger long after Hu's visit.

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