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Congress begins 2nd day of hearings in China currency debate

By the CNN Wire Staff
STORY HIGHLIGHTS
  • Lawmakers say China has manipulated its currency
  • China's action has cost America jobs, they say
  • Beijing says the United States is making it a scapegoat

(CNN) -- Congress begins a second day of hearings Thursday on the China currency issue, with Treasury Secretary Timothy Geithner expected to present the Obama administration's position.

In a hearing on Capitol Hill on Wednesday, two Democratic representatives from Ohio argued that China has manipulated its currency for years to gain a competitive advantage over U.S. manufacturers. That violated trade laws, said Congressmen , Tim Ryan and Jon Boccieri.

China's currency policy has cost thousands of American jobs, hindered the U.S. economy and resulted in a massive trade deficit, they said.

"Of all of the unfair trade practices driving the loss of jobs in my district and the Midwest, China's currency policy is among the worst," Boccieri told the House Ways and Means Committee.

He said the policy has led to the loss of 1.5 million to 3 million U.S. manufacturing jobs, while the nation's trade deficit with China has grown to more than $220 billion a year.

The Democrats called on Congress to pass the Currency Reform for Fair Trade Act. The bill, sponsored by Ryan, would direct the Commerce Department to treat undervalued currencies as a prohibited subsidy under World Trade

Organization guidelines. The goal is to encourage China to allow its currency to float freely, according to market forces.

The United States is using China as a scapegoat, said a spokeswoman for China's Foreign Ministry.

"Appreciation of the rmb [Chinese yuan renminbi] cannot resolve the U.S trade deficit against China and can't solve U.S. domestic unemployment," said spokeswoman Jiang Yu. "Exerting pressure cannot solve the issue. Rather, it may lead to the contrary."

In the United States, two Republican lawmakers called for a more measured approach, saying overly aggressive legislation could endanger the nation's agriculture industry.

"Any legislative proposal must be given the utmost attention so that we do not disrupt our current growing exports to China, particularly those from the U.S. agriculture industry," said Rep. Adrian Smith, R-Nebraska.

According to Smith, food and agriculture exports to China more than doubled, to nearly $16 billion in 2009 from $6.8 billion in 2008, and the growth is expected to continue this year.

Rep. Lynn Jenkins, R-Kansas, said it's clear that China has undervalued its currency. But she blamed deficit spending and the nation's $2.5 trillion debt to China for worsening the imbalance that is hurting U.S. manufacturers.

"Our willingness to operate in deficit allows the Chinese government to remove dollars from their domestic economy and use them to purchase U.S.-dollar-denominated securities," she said.

Ben Rooney of CNNMoney.com contributed to this report.