US, China closer to trade war

US lawmakers say they are pushing for a legislation that would punish China for allegedly manipulating its currency.

The draft bill, which is to be submitted on Thursday, is to address what the US senators describe as the unlawful practice of currency manipulation, according to the AP.

Both Republican and Democratic senators had informed US Treasury Secretary Timothy Geithner about the draft bill a month ago.

Relations between Beijing and Washington have been strained over the issues of currency and trade. 

Washington accuses Beijing of manipulating the value of the Yuan to help boost Chinese exports.

Their bill, which could lead to counteract duties on Chinese exports, revives one that cleared the House of Representatives by a 348-79 vote in September but was stalled in the Senate.

China states that it will allow Yuan to gain value at a measured pace.

US Federal Reserve Chairman Ben Bernanke, however, voiced one of Washington's key complaints against China on Wednesday and claimed Beijing would be better off letting the Yuan appreciate by loosening its tie to the dollar.

"The Renminbi is undervalued," Bernanke told a hearing of the House of Representatives budget committee. Renminbi is the official term for the Yuan.

"It would be both in our interest and in the Chinese interest for them to raise the value of their currency. And it would help them with their inflation problem," he said.

Bernanke went on to openly fault Chinese financial policy makers and suggesting that they do not take China's interests into consideration.

"One of the things that's happening, which is a little surprising in a way, is that they have an inflation problem, and the way they are addressing it is not by raising their currency value, which would reduce the demand for their exports," added the US official.

"A better strategy would be to let domestic demand be what it is and let people enjoy higher standards of living," he claimed.

His comments represent a rare criticism of another central bank's policies by a central bank.

Beijing's third straight interest rate rise in four months was aimed at slowing down inflation in what some economists have described as an overheating economy growing at a 10-percent rate annually.
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