UPDATE 1-China says U.S. yuan bill violates trade rules

Tue Oct 18, 2011 11:51pm EDT

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By Langi Chiang and Don Durfee

BEIJING, Oct 19 (Reuters) - China's Commerce Ministry urged the United States not to "politicise" economic issues on Wednesday and said that legislation aimed at pressing China to let the yuan rise faster violates international trade rules.

Last week, the U.S. Senate approved a bill to pressure China to raise the value of its yuan against the dollar by allowing U.S. companies on a case-by-case basis to seek countervailing duties on goods from countries with an undervalued currency.

"The U.S. Senate forcing its trade partner to appreciate currency via its bill seriously violates international rules and deviates from U.S. international responsibilities," said Commerce Ministry spokesman Shen Danyang, speaking at a monthly press conference in Beijing.

"If the United States insists on doing things in its own way, it will harm China-US relations and the long-term benefit of people from the two countries. China will have to take further actions," he added.

The currency bill is unlikely to become law, say analysts.

Still, President Barack Obama and key figures in his cabinet, while stopping short of endorsing the currency bill, have voiced clear sympathy with lawmakers' contention that China undervalues the yuan to give its companies a price advantage in global markets.

China will also keep the yuan "basically stable", Shen told reporters.

"China will keep export-related policies basically stable, including those governing tax rebate, trade credit, yuan currency rate, cross-border yuan trade settlement and trade facilitation."

Shen was cautious on China's exports, saying that the country faces a tough trade outlook for the remainder of the year and in 2012, a day after data showed economic expansion slowed in the third quarter to its weakest pace in more than two years.

"China will face a tough export and import outlook in the fourth quarter and next year, at least in the first quarter, as the domestic and global environment changes, particularly as unstable and uncertain factors increased in recent months," he said.

Chinese policy makers have watched the euro zone debt crisis warily, worried that developments in China's biggest export market could hurt its own economy.

Exports from China detracted from the economy's growth in the first three quarters of this year. That was underlined by September data showing exports growth to the euro zone more than halved from August.

At the weekend, the G20 group of leading nations urged euro zone leaders to resolve the debt crisis, which they said was endangering the world economy.

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