UPDATE 2-US to press China next week on "innovation" policy

* China "indigenous innovation" policy a problem for U.S.

* Obama administration still mulling Senate currency bill

* Commerce also still weighing trade remedy action (Adds more detail from speech, Commerce official comments)

By Doug Palmer

WASHINGTON, April 7 (Reuters) - A top U.S. trade official said on Wednesday he will press Chinese officials next week in Beijing to roll back an "indigenous innovation" policy that threatens U.S. intellectual property rights.

"What we're trying to do with the Chinese is address the very serious concerns that have been raised," Deputy U.S. Trade Representative Demetrios Marantis said in remarks to the Washington International Trade Association.

U.S. manufacturers, computer technology and other business groups are alarmed about a Chinese policy that requires companies to develop their intellectual property in China if they want to qualify for preferences under that country's government procurement program.

"That's a problem and we are going to be working very closely with our Chinese counterparts to address that problem" this year, Marantis said.

He stopped short of threatening to bring a World Trade Organization case against China, but said the issue would be high on the U.S. agenda at the bilateral Strategic and Economic Dialogue meeting in late May in Beijing.

Another high-level meeting later this year, the U.S.-China Joint Commission on Commerce and Trade, is a second opportunity to press on the issue, Marantis said.

Marantis said he would also raise concerns next week about a number of other trade irritants.

Those include Chinese piracy of U.S. movies, software and music, barriers to U.S. farm goods, restrictions on foreign investment and obstacles faced by U.S. services companies.

President Barack Obama has said he wants "to develop a comprehensive, constructive and positive relationship with China and part of that means addressing the challenges that we see in our relationship," Marantis said.

"The U.S.-China relationship is critical to the global economy and making sure that relationship remains as smooth and as functional as possible is an overwhelming priority," he added.

CURRENCY CONCERNS

Many U.S. lawmakers believe China's currency is undervalued by as much as 40 percent, giving it an unfair trade advantage.

Marantis repeated the U.S. desire for China move to "a more market-oriented exchange rate," and said the Obama administration had not yet taken a position on a Senate bill threatening China with tariffs if it does not significantly raise the value of its currency.

"We are taking a close look at it administration-wide and don't yet have a view," Marantis said.

Meanwhile, U.S. Commerce Undersecretary for International Trade Francisco Sanchez told reporters at separate event the Commerce Department was still mulling whether it had the authority to impose countervailing duties on Chinese goods to offset China's exchange rate practices.

Many lawmakers want the Commerce Department to take that step, and the issue is before the department in a specific case involving coated paper imports from China.

Sanchez said he expected the department to make that decision in a timely fashion, but couldn't give an exact date.

(Reporting by Doug Palmer; Editing by Vicki Allen)