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China warns US of 'trade war'

China warns US of 'trade war'
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China on Tuesday warned the United States of a trade war if it passes a bill aimed at punishing Beijing for allegedly undervaluing its currency.

The Chinese foreign ministry criticised the proposals as “protectionist” after the US Senate agreed to debate the bill later this week.

“By using the excuse of a so-called ‘currency imbalance’, this will escalate the exchange rate issue, adopting a protectionist measure that gravely violates WTO rules and seriously upsets Sino-U.S. trade and economic relations,” said foreign ministry spokesman Ma Zhaoxu.

China’s central bank said the bill “may seriously affect the entire progress of China’s reform of its yuan exchange rate regime and also lead to a trade war”.

The yuan has appreciated by seven percent since June 2010 when China abandoned its peg to the dollar.

US lawmakers and businesses say China’s currency is undervalued, giving their products an unfair advantage on world markets.

They also argue a higher yuan would boost US exports to China and create thousands of jobs.

If passed, the bill would allow Washington to impose so-called anti-dumping measures on Chinese goods.

Beijing denies its currency policy is the cause of China-US trade imbalances and America’s high unemployment rate.

It says structural problems with the US economy are to blame.