US Senate approves China yuan bill, House fate unclear

The US Senate on Tuesday approved a controversial bill to punish China over its currency in an effort to save US jobs, sending it to the House of Representatives where its fate is uncertain.

Beijing has warned the legislation could spark a trade war but it has advanced further than similar US bills in the past, reflecting widespread frustration with China's trade policies and how US lawmakers have seized on voter anxiety about high unemployment ahead of elections in 2012.

Democratic Senator Charles Schumer, one of the bill's co-sponsors, said the vote "has put the Chinese on notice: Stop your cheating that is costing our country jobs, or you will face the consequences."

China was quick to respond. The Foreign Ministry in Beijing warned that the bill could disrupt joint efforts by world's two biggest economies to prop up the global recovery and urged the Obama administration to oppose the legislation. Many US economists say China holds down the value of its yuan to give its exporters an edge in global markets. China says it is committed to gradual currency reform and notes that the yuan has risen 30 percent against the dollar since 2005.

The bill would allow the US government to slap duties on products from countries found to be subsidizing their exports by undervaluing their currencies.

The Senate's 63-35 vote puts the bill in the hands of the Republican-controlled House, which may never vote on the bill despite rank-and-file support.

House Speaker John Boehner last week said it would be "dangerous" for Congress to get involved with a foreign country's exchange rate.

That stance prompted House Democratic Leader Nancy Pelosi to accuse Boehner of "thwarting the will of the House."

If the House were to pass the bill, Obama would face a dilemma. Signing it would anger China, whose cooperation the United States needs both on the economic front and in global hot spots such as North Korea and Iran.

But vetoing the bill would not play well in industrial heartland states like Ohio and Michigan, and could undercut Obama's bid for second term.