BEIJING A bill passed by the House of Representatives that would penalize China for not letting the yuan rise faster violates the rules of the World Trade Organization, China's Ministry of Commerce said on Thursday.
The bill allows the U.S. Commerce Department to treat "fundamentally undervalued currencies" as an illegal export subsidy so that U.S. companies can request a countervailing duty to offset China's price advantage.
In response, the official Xinhua news agency quoted China's Commerce Ministry spokesman, Yao Jian, as saying: "Starting a countervailing investigation in the name of exchange rates does not conform with relevant WTO rules."
But Yao struck a conciliatory note, saying China was willing to work with the United States on concerted measures to promote more balanced bilateral trade.
"We hope that all sides in the U.S. can make an objective and comprehensive assessment of the facts to arrive at the correct decisions that are favorable for long-term Sino-U.S. economic and trade ties and America's own interests.
But Yao took issue with the contention of U.S. lawmakers that America's large bilateral trade deficit with China shows the yuan, also called the renminbi, is undervalued.
The yuan has risen 24 percent against the dollar since July 2005, when china scrapped a decade-old peg to the U.S. currency, but U.S. legislators say Chinese exporters still have an unfair currency advantage in global markets.
Beijing has consistently argued that the bilateral deficit reflects structural economic factors, first and foremost the fact that the United States saves too little.
And because China is the final link in a complex global production chain, its bilateral trade imbalance with the United States should not be viewed narrowly as "made in China."
"China has a trade surplus with the United States, but it has deficits with many Asian countries and regions," Yao said.
"The United States cannot say the yuan is undervalued simply because of the China-U.S. trade deficit, and can't take protectionist trade measures on that basis," Xinhua quoted him as saying.
Many economists agree that if costs rose too high in China, production would shift to cheaper developing countries, but probably not back to the United States.
"Leaving aside issues of sovereignty, the simple truth is that a stronger renminbi exchange rate will do little to reduce the U.S. trade deficit and U.S. unemployment when other low-cost nations are more than willing to take China's place," economists at ANZ said in a note to clients on Thursday.
The House bill would need to be passed by the Senate and signed by President Barack Obama for it to become law.
(Reporting by Zhou Xin and Alan Wheatley; Editing by Ken Wills)