WASHINGTON - The main backers of a controversial Senate bill aimed at forcing China to revalue its currency said on Thursday they would abandon that legislation in favor of a new bill they plan to develop early next year.

Sen. Charles Schumer, a New York Democrat, and Sen. Lindsey Graham, a South Carolina Republican, told reporters they had accomplished their goal of focusing more attention on China's strict exchange rate controls, which they believe gives Chinese companies an unfair trade advantage.

Treasury Secretary Henry Paulson, center, meets with Sens. Lindsey Graham, R-S.C., left, and Charles Schumer, D-N.Y., right,, in Graham's office on Capitol Hill in Washington, Tuesday, Sept. 26, 2006. Paulson briefed the Senators on his recent trip to China. [AP]

At a news conference with the Senate Finance Committee Chairman Charles Grassley, and Sen. Max Baucus, a Montana Democrat, the four senators said they would work together to develop tough new legislation early next year.

Schumer credited their bill threatening China with tariffs for a rise of more than 4 percent in the value of the yuan since July 2005, but said it was time to change tactics.

"Frankly, Lindsey and I felt it is now time to try, instead of using a blunt instrument, to refine our instrument and pass some legislation that will force the Chinese to go the rest of the way," Schumer said.

The Graham-Schumer bill, which was strongly opposed by the Bush administration and most business groups, threatened to impose a 27.5 percent tariff on China's exports to the United States unless Beijing significantly raises the value of its currency within six months.

It was motivated by a widespread U.S. view that China's currency is undervalued by 15 to 40 percent, giving Chinese companies an unfair advantage by effectively subsidizing their exports and taxing imports from the United States.

The Senate voted 67-33 in favor of the Graham-Schumer legislation last year, when it was offered as an amendment to another bill. In exchange for dropping the issue at the time, the two senators were promised another vote on their legislation at a later date.

That vote had been delayed several times, but the latest deadline was September 30. The bill was unlikely to pass the House of Representatives and become law, but opponents worried even Senate approval alone would worsen trade relations with China.

Graham said President George W. Bush personally asked him and Schumer on Thursday "not to take a vote, but to work with (Treasury) Secretary (Henry) Paulson to give him a chance" to persuade China to move further on currency reform.

All four senators vowed to develop new legislation that would be consistent with World Trade Organization rules.

Grassley, whose committee has jurisdiction over trade, also said the bill would not be narrowly focused on China but look broadly at the issue of how the United States should respond to countries that do not fairly value their currency.

Grassley and Baucus, the top Democrat on the Senate Finance Committee, introduced legislation with those same general goals earlier this year. It would give the Treasury Department several new tools to press countries on currency reform.