(Adds dropped words "to the United States" in paragraph 9)
* Senate votes to open debate on China currency bill
* Lawmakers say bill will level playing field
* Opponents see trade war threat to sickly world economy
* White House reviewing bill but supports its goals (Recasts with Senate vote to open debate, paragraphs 1-3)
WASHINGTON, Oct 3 (Reuters) - The U.S. Senate on Monday took aim at one of China's core economic policies, voting to move forward with a bill designed to press Beijing to let its currency rise in value in the hope of creating U.S. jobs.
Senators voted 79-19 to open a week of Senate debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies.
The procedural vote sets the stage for a battle between lawmakers who say the bill will return to the United States many jobs lost to China and critics who warn it could spark a trade war and will fail to help American workers.
"My colleagues, both Democrats and Republicans, agree that China's deliberate actions to devalue its currency give its goods an unfair competitive advantage in the marketplace," said Senate Majority Leader Harry Reid.
"It hurts our economy. It costs American jobs," he said.
Monday's strong green light for debate on the bill bolsters prospects it will clear the Democrat-run Senate later this week, but prospects for action in the Republican-controlled House of Representatives are murky.
If the bill did clear both chambers, it would present President Barack Obama with a tough decision on whether to sign the popular legislation into law and risk a trade war with Beijing, or veto it to pursue a more diplomatic approach.
Many Democrats and some Republicans accuse Beijing of deliberately holding down the value of its yuan currency to give Chinese producers an edge in global markets.
In an argument that has gained traction with U.S. unemployment stuck above 9 percent as 2012 elections draw near, supporters of the bill say that if the yuan was allowed to rise, Chinese imports to the United States would fall and U.S. exports would increase, cutting an annual trade gap of more than $250 billion and creating jobs for American workers.
As with similar legislation in the past, the Obama administration has not taken a public stance on the bill, although White House spokesman Jay Carney said on Monday that the president shares "the goal it represents."
He said the White House was reviewing the bill to ensure it was "effective and consistent with our international obligations." For a Q&A on the bill, click on [ID:nN1E79108C]
NO TIME FOR A TRADE WAR
Passage of the bill by the Democratic-controlled Senate would send it to the House, which is run by traditionally free-trade-friendly Republicans.
A China currency bill passed the House last year with 99 Republican votes, but lapsed because the Senate took no action. This year, the bill already has more than 200 House co-sponsors and this week supporters expect to reach 218, the number needed to pass it.
However, House Republican leaders have not shown a great appetite to pursue currency legislation, and it is unclear if the bill would ever face a vote in that chamber.
House Majority Leader Eric Cantor, a key player in deciding whether the chamber will take up the bill, did not tip his hand on Monday, telling reporters he was watching the Senate debate and "curious, really, where the White House is on that."
Cantor, who voted against similar legislation a year ago, said he was "really interested to hear what impact that move will have and if there are any unintended consequences that may result."
Critics of the bill, including U.S. business groups, warn that the legislation, if enacted, would risk a trade war with China -- one of the fastest-growing markets for U.S. goods -- at a time when a sputtering global economy can least afford it.
The Emergency Committee for American Trade called the bill "a highly damaging unilateral approach that will undermine broader efforts to address China's currency undervaluation."
It also said the bill was unlikely to pass muster at the World Trade Organization and would open the door to Chinese retaliation "to the detriment of U.S. exports and jobs."
China rejects outside criticism of its yuan policies as interference in a sovereign decision and note that the currency has appreciated about 30 percent since 2005.
While similar bills have foundered in the past, jobs are such a hot topic heading into next year's U.S. elections that prospects may have shifted.
"On issue after issue, China is mercantilist, plain and simple," Democratic Senator Charles Schumer told the Senate. (Additional reporting by Matt Spetalnick and Susan Cornwell; Writing by Paul Eckert; Editing by Anthony Boadle and Eric Walsh)