Two US senators pressing China to loosen its currency controls said on Thursday they were more optimistic about resolving the dispute over the yuan's value.
But as an official Chinese newspaper said their visit to China was unlikely to have much impact, Charles Schumer and Lindsey Graham said they were leaving their options open on how to proceed with their bill on the issue.
Schumer, a New York Democrat, and Graham, a South Carolina Republican, are authors of a bill that threatens China with a 27.5 percent tariff on exports to the United States unless Beijing lets the yuan rise significantly against the dollar.
"We believe that there is a very real possibility that the Chinese government and the Chinese people see it in their interest to let the yuan float," Schumer told a news briefing.
He was speaking at the end of the Beijing leg of the senators' visit to China, during which they met central bank governor Zhou Xiaochuan and other senior officials.
"We still need some concrete signs of movement," Schumer said.
"It doesn't have to be the way that we propose, we've always said that. But we need to know over a discrete and reasonable period of time that the goal of having the Chinese currency float and market forces control it ... should occur."
Senate leaders have promised Schumer and Graham a vote by March 31 on their bill. Their comments shed no further light on whether they would go ahead with the vote or wait until after Chinese President Hu Jintao visits Washington in late April.
BETTER UNDERSTANDING Schumer and Graham said Beijing's efforts to steer economic growth more towards domestic consumption, as spelled out in the new five-year plan for development, showed there was some convergence between China and the United States over the yuan.
They had also been made aware of the problems China needs to keep in mind in setting currency policy, including unemployment and a fragile banking system that would be vulnerable to major shifts in the yuan's value, they said.
"I'm more sensitive now than I was before to how hard it will be to move toward a floating currency," Graham said.
On the question of how long it might take to get to the right answer, he said "I am very flexible because I now understand the dynamics of revaluation as how it affects the Chinese economy much better."
But Graham stressed that while the recent rises in the yuan represented progress, the three percent rise the currency has seen since the beginning of last year was "nowhere near" enough. "I am more committed than ever to make sure (a floating currency) occurs," he said.
The Bush administration opposes the Schumer-Graham bill, but many US lawmakers and manufacturers believe the yuan is significantly undervalued, giving China's exports an unfair advantage that has cost millions of American jobs.
Schumer and Graham contend the yuan is undervalued by 15 to 40 percent, bloating the US trade deficit with China, which the United States says stood at about $202 billion last year.
China maintains that it is doing what it can to effect greater flexibility in the yuan, but that it needs to proceed cautiously to avoid shocks to its economy and banking system.
"It is unlikely that the differences will be settled during the visit of the two senators," the official China Daily said in an editorial on Thursday.
The central bank reiterated in a statement on Thursday that it would keep the yuan's exchange rate basically stable, while pushing ahead with plans to allow for further flexibility.
A spokesman for China's Foreign Ministry said the confrontation was not the way to change its currency policy.
"They should be addressed with a positive attitude, which is to resolve them through equal negotiations, not by imposing pressure or politicising and exacerbating them," spokesman Qin Gang said of economic disputes with the United States.
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