Geithner comments revive China currency bill hopes

WASHINGTON Jan 23 (Reuters) - A U.S. manufacturers group urged Congress on Friday to quickly pass legislation to curb imports from China after a top member of President Barack Obama's team said Asia's largest economy was manipulating its currency.

U.S. Treasury Secretary-designate Timothy Geithner's remarks on Thursday were "a clear signal to Congress to send the new president a strong currency manipulation bill during his first 100 days in office," Kevin Kearns, president of the U.S. Business and Industry Council said in a statement.

Geithner, who is expected to win Senate confirmation next week, told the Senate Finance Committee on Thursday that Obama "believes that China is manipulating its currency," -- using a term the Bush administration deliberately avoided.

China's Commerce Ministry, in a statement faxed to Agence France Presse on Friday, said the Beijing government "has never used so-called currency manipulation" to gain an unfair trade advantage and lashed out at what it called "unsubstantiated criticism." For details, see [ID:nN23357068]

Still, Geithner's blunt language has revived hopes for a bill that both Obama and U.S. Secretary of State Hillary Clinton co-sponsored in the Senate last year, Kearns said.

That proposal would define currency manipulation as a subsidy under U.S. trade law, opening the door for the Commerce Department to impose countervailing duties on an array of Chinese goods.

Kearns' group, which represents mainly small and family-owned manufacturers, lacks the political clout of the National Association of Manufacturers, which because of a split in its membership is neutral on whether Congress should pass China currency legislation.

However, NAM has long urged the Treasury Department to identify China as a currency manipulator in a semi-annual report due out each April and October.

Given Geithner's statement on Thursday, "it seems to me it would be difficult for the administration not to cite China" in the next report unless Beijing quickly begins raising the value of its currency again, said Frank Vargo, vice president for international economic affairs at NAM.

China's yuan CNY= did strengthen about 21 percent against the dollar between July 2005 and July 2008, but it has not budged since then, Vargo said.

Citing Beijing would require the Obama administration under U.S. law to begin intensive talks to pressure China to move more quickly to a market-based exchange rate, Vargo said.

"I would expect them to turn to the IMF (International Monetary Fund) and maybe the Europeans and others who are feeling the effects of China's currency," Vargo said.

Meanwhile, Key Democrats in the House of Representatives have called in the past for a World Trade Organization case against China for currency manipulation.

House Ways and Means Committee Chairman Chairman Charles Rangel and other panel Democrats told President George W. Bush last March there was "a growing consensus" that China's currency practices violate at least three WTO provisions.

That letter reflected the work of senior Rangel aide Tim Reif, who many believe Obama will nominate for the top litigator job in the U.S. trade representative's office. (Reporting by Doug Palmer; editing by Gary Crosse)