Top US Democrat candidates back China currency bill

WASHINGTON, July 5 (Reuters) Two leading Democratic contenders for the US presidency have joined a congressional push to punish countries that undervalue their currencies as legislators seek to turn up the heat over China's currency.

Sen Barack Obama of Illinois and Sen Hillary Clinton of New York, Democratic front-runners in the November 2008 presidential race, signed on last week as co-sponsors of bipartisan legislation that was unveiled on June 13, Senate aides said.

The bill's sponsors include Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and the ranking Republican, Iowa's Charles Grassley. It would force expedited action against nations seen as manipulating their currency, such as exclusion from some contracts and a fast track for new challenges at the World Trade Organization court.

While the proposed measures would apply to any country, the lawmakers have set their sights on China. Members of Congress say the Bush administration is doing too little to pressure Beijing to revalue the yuan, which some believe it undervalues by up to 40 per cent to make its exports more competitive.

''China has manipulated its currency for years in order to gain an unfair advantage over the United States in trade.

Unfortunately, the Administration has failed to effectively challenge or change China's behavior,'' Obama told Treasury Secretary Henry Paulson in a letter last month.

Clinton, meanwhile, believes the next US president will be forced to face a dramatically empowered China.

''We should neither fear a stronger China nor ignore it. That means engagement and understanding, but also frank dialogue on issues ranging from trade to currency manipulation to human rights abuses and the environment,'' she said in a speech last month at the Center for a New American Security.

REUTERS DKS RAI0557