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US Treasury Secretary Opposes Legislation Against Chinese Currency

The U.S. Treasury Secretary says he opposes legislation that seeks to force China to liberalize its currency exchange policies. Daniel Schearf reports for VOA from Beijing that Henry Paulson is visiting to discuss plans for the next round of high-level economic dialogue between the United States and China.

The U.S. Treasury chief told China's official Xinhua news agency that legislation is not the proper way to deal with the currency dispute and that bilateral talks are much more productive.

Secretary Henry Paulson was referring to a bill approved by a Senate committee last week that would allow the U.S. government to pressure China with sanctions if it does not allow market forces to determine the value of its currency, the yuan. A separate bill will push the Treasury to define China as having a "misaligned" currency.

Paulson joined the U.S. commerce secretary and trade representative in writing a letter to the Senate this week opposing both pieces of legislation. The letter said the bills would not persuade China to implement economic reforms or move more quickly to a market-oriented exchange rate.

James Zimmerman, is the chairman of the American Chamber of Commerce in China. He agrees the legislation is not constructive and, if it becomes law, could lead to a backlash from China.

"It is not going to result in any major change or support U.S. companies with their efforts to sell goods to China. What will make a difference is market access. And, that is something we are encouraging the Chinese to do," he said.

Many American business people say the United States needs to focus on pushing China to grant foreigners full access to its markets.

Paulson is in China on a four-day trip to discuss the currency and other trade issues before the next round of the U.S.-China strategic economic dialogue in December.

On this trip, the Treasury chief is expected to repeat his calls for China to allow greater flexibility in its exchange-rate movement. China has allowed the yuan to appreciate by about nine-percent since 2005.

But some U.S. legislators and manufacturers say the yuan is undervalued by as much as 40 percent, giving Chinese products an unfair trade advantage. They blame the currency regime for part of the U.S. trade deficit with China, which reached a record $233 billion last year.

China is reluctant to allow a rapid fluctuation of the currency, fearing it could cause unemployment and market instability.