Wen Jiabao Barack Obama United Nations

China warns U.S. currency bill might hurt ties

By Joe McDonald-Associated Press

BEIJING | Beijing warned Washington Thursday that economic ties might be damaged after American lawmakers escalated the conflict over China‘s currency controls, inching the two economic giants closer to a trade war.

The Commerce Ministry said a measure approved Wednesday by Congress to allow Washington to penalize governments that manipulate exchange rates violated free-trade rules.

It gave no indication whether Beijing might retaliate, though it has imposed anti-dumping duties in recent months on imports of U.S. chicken, steel and nylon.

After years of friction, the bill is the first vote by American lawmakers for measures to respond to complaints Beijing keeps its yuan — also known as the renminbi — undervalued, giving China‘s exporters an unfair price advantage and costing U.S. jobs.

Passage by a 348-79 margin in the House of Representatives came ahead of November elections in which the economy and 9.6 percent unemployment are key voter concerns.

“This is a step toward a trade war,” said economist Dariusz Kowalczyk at Credit Agricole CIB in Hong Kong. “It’s just one step, but it increases the odds.”

Pressures over trade are mounting as the global recovery falters. Washington, Beijing and other governments have pledged to avoid protectionism that might hamper a revival of growth, but U.S. and Chinese authorities have imposed anti-dumping and other duties on a range of each other’s goods, including poultry, steel pipes and tires.

“Exercising protectionism against China under the excuse of the renminbi exchange rate will only severely damage Chinese-U.S. trade and economic ties,” Foreign Ministry spokeswoman Jiang Yu said at a news briefing.

To read more, visit: http://www.washingtontimes.com/news/2010/sep/30/china-warns-us-currency-bill-might-hurt-ties/

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