Pressure From U.S.

Permitting the yuan to trade more freely would also answer criticism from the Bush administration and some members of the U.S. Congress that blame China's currency policy for a record trade deficit and the loss of 2.8 million manufacturing jobs.

The Treasury Department's twice-yearly review of exchange rate policies said last month that China needs to make the yuan more flexible or risk being branded a currency manipulator.

``China is now ready and should move without delay in a manner and magnitude that is sufficiently reflective of underlying market conditions,'' Snow told the Senate Finance Committee in Washington on June 23. ``Implementation of trade sanctions would lead to retaliatory policies against our exports, damaging the U.S. and global economy.''

The U.S. trade gap with China rose to a record $162 billion last year and the National Association of Manufacturers, a lobby group, expects it to grow to $225 billion this year.

Indiana Democratic Senator Evan Bayh and Maine Republican Senator Susan Collins presented legislation on June 23 that would let companies petition for duties on Chinese goods to compensate for government subsidies. The bill is one of more than a half- dozen in Congress that address what some lawmakers call China's unfair trade practices.

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