China says yuan rise can't solve trade imbalance with U.S.

BEIJING (Reuters) - Letting the yuan appreciate cannot solve the U.S. trade imbalance with China, the Foreign Ministry said on Friday, hitting back at planned U.S. Senate legislation aimed at forcing Beijing to loosen controls on its currency.

"China is unwilling to see an imbalance in trade between China and the United States, and China does not seek a trade surplus," Ministry spokesman Hong Lei told a regular news briefing.

"The Chinese government also has never aimed to benefit from global trade by so-called exchange rate manipulation," he added.

"The yuan's appreciation cannot solve the Sino-U.S. trade imbalance problem. We hope that relevant people in the United States can objectively and rationally view this issue and not politicize the renminbi's exchange rate because of U.S. domestic economic problems."

Renminbi, or "people's currency," is the yuan's formal name.

The Foreign Ministry has no say in China's currency policy, but it is typically the only government department that will regularly comment on the issue.

China has repeatedly rejected criticism that it deliberately undervalues its yuan currency to give its companies a price advantage in international markets.

It says it is committed to moving to a more flexible exchange rate but at its own pace.

"We will continue to promote the (yuan exchange rate) mechanism's reform, and we will take a gradualist approach, which is in line with the interests of both China and the world," Hong added.

The Senate bill, sure to worsen ties with China that are already strained over U.S. arms sales to Taiwan and a host of other issues, would still face many hurdles before becoming law.

U.S. business advocacy groups in China -- fearing such a bill could spark a trade war -- have called on Washington to focus more on other pressing issues, such as intellectual property protection and market access in China.

The legislation combines two earlier bipartisan measures -- one championed by Democratic Senator Charles Schumer and Republican Senator Lindsey Graham; the other by Brown, a Democrat, and Senator Olympia Snowe, a Republican.

Schumer said he expected the bill to pass "resoundingly" early in October when lawmakers return from a break.

Key Republicans in the House of Representatives have indicated a go-slow approach to the China currency issue, and Schumer has acknowledged President Barack Obama does not support the bill.

The bill's sponsors, which include Republican senators Jeff Sessions and Richard Burr and Democratic senators Robert Casey and Debbie Stabenow, argued an undervalued Chinese currency had created an unfair trade playing field for U.S. producers.

A main provision would direct the Commerce Department to treat currency undervaluation as a subsidy under U.S. trade law. That would allow companies to seek countervailing duties on Chinese goods on a case-by-case basis.

(Reporting by Michael Martina and Sabrina Mao; Writing by Ben Blanchard)