(Recasts, adds vote tally, Treasury comment)

By Doug Palmer and Paul Eckert

WASHINGTON (Reuters) - The House
stepped up pressure on China to let its
currency rise faster, passing a bill on Wednesday that could
penalize Chinese goods, as lawmakers blamed it for lost jobs in
America.

The bill is likely to fan the flames of a long-running
dispute with China over trade and jobs, even though passage in
the Senate remains far from a sure bet.

The bill passed with solid bipartisan support just over a
month ahead of mid-term elections as voters focus on the
still-struggling U.S. economy and persistently high
unemployment. Many lawmakers both in the House and the Senate
have complained for years that China's policies create an
unfair trade advantage, but this is strongest step taken yet.

The bill treats China's exchange rate as a subsidy, opening
the door to extra duties on Chinese goods entering the United
States, some of which are already subject to special levies.

It passed by a vote of 348-79, with 99 Republicans joining
249 Democrats to pass the bill. Five Democrats and 74
Republicans voted no.

Any vote in the Senate, however, won't come until after
congressional elections on Nov. 2 when the U.S. political
landscape could be greatly changed.

"China's persistent manipulation of its currency
contributes to the outsourcing of American jobs and poses a
very serious problem that requires real action," said House
Ways and Means Committee Chairman Sander Levin.

House Speaker Nancy Pelosi said the bill would give
President Barack Obama leverage in talks with China and "make
it clear that if China wants a strong trading relationship with
the United States, it must play by the rules."

The Obama administration has not taken a stance on the bill
bill. But after the vote, a Treasury Department spokeswoman
said the legislation reflected the "serious concerns" in
Congress about China's currency practices.

"The president and Secretary Geithner share those concerns.
They both have said repeatedly that China needs to allow a
significant, sustained appreciation over time," she said.

Before the House vote, China's central bank reaffirmed its
pledge to increase the flexibility of the yuan and improve the
way it manages the exchange rate.

Obama and Chinese Premier Wen Jiabao talked about China's
currency and huge trade surplus with the United States on the
sidelines of the U.N. General Assembly last week.

Despite the yuan's modest gains against the dollar since
Beijing allowed more movement in June, International Monetary
Fund economists estimate the yuan is 5 percent to 27 percent
undervalued.

Representative Dave Camp, the top Republican on the Ways
and Means Committee, said he voted for the bill "because it
sends a clear signal to China that Congress's patience is
wearing out."

On the opposing side, Representative Jeb Hensarling, a
Texas Republican, said he feared China could retaliate against
the bill by shutting its market to U.S. farm exports,
offsetting any gains in U.S. manufacturing jobs.

U.S. retailers, who source heavily from China, also
expressed concern about being caught in the cross-fire.

Many lawmakers said the United States was already in a
trade war with China and needed new tools to fight it.

Senator Charles Schumer, a Democrat who has been one of the
loudest critics in Congress of China's trade policy, said after
the vote that he was ready to take up the cause in the Senate.
"We plan to push our bill in the Senate when we return later
this year," he said.

GLOBAL CURRENCY WAR?

China's tight leash on the yuan is under intense scrutiny
as countries around the world look to export their way back to
economic health, raising concerns they will intentionally
weaken their currencies to gain an edge.

Japan intervened this month to weaken the yen for the first
time in six years.

The House move is certain to further roil relations with
Beijing, which resents the criticism and says the decision
about the speed of currency reforms is its alone.

China, the largest foreign buyer of U.S. government debt
with holdings of nearly $847 billion as of July, also says its
big trade surplus with the United States is due to Americans
saving too little and no longer making the goods China sells.

While Obama has not taken a position on the legislation,
House Majority Leader Steny Hoyer said lawmakers worked with
the White House to ensure the bill did not violate WTO rules.

Treasury Secretary Timothy Geithner told Congress two weeks
ago that Washington would work with Group of 20 nations to push
China for faster appreciation but several allies expressed
reluctance to join the effort. G20 leaders are set to meet in
Seoul on Nov. 10-11.

ECONOMISTS DOUBT BILL WILL WORK

The House bill allows the 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.

That is expected to encourage steel, paper and other
import-sensitive U.S. industries to file more cases. The United
States now has countervailing duties on less than 3 percent of
its imports from China, which totaled $296 billion in 2009.

Some economists said they understood the politics of the
debate but questioned whether the bill would bring back
American jobs or prod China to move faster on currency reform.

"We consume a lot. The Chinese save a lot. We're going to
run a trade imbalance with them," said Derek Scissors of the
Heritage Foundation.

China and the United States have a difficult but vital
diplomatic relationship, not least in dealing with nuclear
threats from Iran and North Korea.

In recent months, Washington and Beijing have also sparred
over Chinese government procurement policies, Internet
censorship, U.S. arms sales to Taiwan and U.S. sympathy for the
Dalai Lama, the exiled Tibetan spiritual leader.
(Additional reporting by Matt Spetalnick in Des Moines, Iowa,
and Susan Cornwell and Emily Kaiser in Washington; Editing by
Leslie Adler)