Pelosi Says Congress Will Pass a China Currency Bill

June 14 (Bloomberg) -- The U.S. Congress will pass a measure to prod China to raise the value of its currency after the U.S. Treasury's refusal to label the export powerhouse a currency manipulator, House Speaker Nancy Pelosi (news, bio, voting record) predicted.

Pelosi, a California Democrat, said today that she has been warning about the U.S. trade deficit with China for the last 17 years and now the impact on U.S. manufacturers from the weak yuan is attracting the attention of her colleagues.

``Congress will step in,'' Pelosi said in an interview on Bloomberg Television's ``Political Capital with Al Hunt.''

Lawmakers have proposed a variety of pieces of legislation to address China's trade surplus with the U.S., which surged to a record $232.5 billion in 2006. The lawmakers, such as New York Democratic Senator Charles Schumer (news, bio, voting record), say that an undervalued yuan gives China's exports an unfair edge by making the country's exports cheaper.

The yuan ``is undervalued and market sentiment clearly favors appreciation,'' the Treasury said in its semi-annual review of currency policies released yesterday in Washington. China didn't meet the technical definition of manipulation, though, Treasury concluded.

Treasury Secretary Henry Paulson, who last year set up a new, twice-annual, negotiating forum with the China's economic leaders, said negotiations are a better a way to get the Chinese government to change its policies.

`More Effective'

``They, like me, would like to see China move faster,'' Paulson said in an interview with Fox News today, referring to the lawmakers pushing punitive legislation. ``We have differences in terms of motive, the right way to get there,'' he said, adding that his approach was ``more effective.''

Schumer and three other senators introduced legislation yesterday that would allow American companies to petition for steeper anti-dumping duties to counter the benefit of any undervalued currencies in China or other countries. The House Ways and Means Committee is also working to draft its own measure aimed at China.

Pelosi didn't say which particular approach she supports.

The top Democrat in the House has been a longtime critic of human rights in China, and she demonstrated in Tiananmen Square in 1991, according to the New Republic. In a meeting with Chinese Vice Premier Wu Yi on May 23rd Pelosi raised issues ranging from the value of China's currency to Chinese complicity in genocide in Darfur to human rights in Tibet, she said in a statement then.

The unhappiness over the weak currency has moved other lawmakers into her camp, Pelosi said today.

``It hasn't been a central focus for me, but others now are coming forward on it,'' Pelosi said. ``So I think you will see legislation.''

The yuan has risen 8.3 percent since China ended a strict peg to the dollar in July 2005. U.S. lawmakers say the currency is undervalued as much as 40 percent, and the Schumer legislation would require the Treasury Department to determine on its own how far off it is from a fair-market value.