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Last Updated: Wednesday, 10 May 2006, 22:39 GMT 23:39 UK
US attacks China over yuan reform
Person counting yuan notes
China began its forex reforms in July last year
The US Treasury has criticised China for making "too little progress" in reforming its exchange rate.

But its latest bi-annual report did stop short of accusing Beijing of manipulating its currency.

Last year, China revalued its currency allowing it to float against a basket of currencies, rather than linking it at a fixed rate to the dollar.

But, some US politicians claim the yuan is artificially undervalued, allowing China to keep its export prices low.

As a result, critics in the US argue that the country is being flooded with cheap Chinese exports, leaving domestic rivals unable to compete and threatening jobs in America's industrial heartlands.

Although he stopped short of accusing Beijing of illegal practices, Treasury Secretary John Snow did say he was "extremely dissatisfied" with the pace of China's currency reform.

"We are not satisfied with the progress made on China's exchange rate regime and we will monitor closely China's progress every step of the way," he added.

'Flexibility essential'

Despite the warning, the Treasury report did welcome technical steps taken to restructure the yuan under measures to lessen the country's reliance on exports.

"A flexible exchange rate is an essential component of this rebalancing programme, and China's leaders recognise that flexibility is essential," it said.

But it did add: "While these developments suggest that progress is being made, China's advances are far too slow and hesitant given China's own needs, and its responsibilities to the international financial community."

The currency report, which is presented to Congress twice a year had been delayed by six weeks until after a visit to the US by China's President Hu Jintao.

It had been hoped that Mr Hu would hint at plans to speed up currency reform during talks about the yuan dispute with President Bush.

Following the report, two US senators said they would delay plans to seek punitive measures against China until September.

Republican Senator Lindsey Graham and Democrat Charles Schumer said they would had decided to give Beijing "a chance".

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