(chinadaily.com.cn)
Updated: 2007-09-11 15:12

US Treasury Secretary Henry M. Paulson Monday warned the Congress against making legislation aimed at punishing China over its economic policies, the News York Times reported.

The legislation could jeopardize future growth and unsettle markets already on edge over the severe difficulties in the American housing and mortgage sector, the report cited Paulson as saying.

"When we look at taking unilateral actions aimed at another nation, this can have enormous repercussions to our economic well-being, " Paulson said. "You know, we're playing with fire."

Mr. Paulson made no reference to any specific bill, but Treasury officials have been most concerned recently about a bill supported by Senator Max Baucus, who leads the Senate Finance Committee.

The bill requires increased tariffs and a ban on federal agencies purchasing Chinese products if China refuses to let the yuan float freely against the dollar.

Another bill, sponsored by Senator Christopher J. Dodd, would make it easier for the US government to brand China a currency manipulator and clear the way for legal challenges through the International Monetary Fund and the World Trade Organization.

While remaining confident about American economy, Paulson expressed fears about Chinese retaliation and a loss of China as a market for American exports if the legislation is passed, according to the report.

Exports to China grew 32 percent last year, official US figures show, and the Treasury Department says total exports contributed nearly a percentage point of the 4 percent growth of the second quarter of 2007.

Paulson has met with leading business officials who said they feared the legislation could lead to retaliation by China, the report said.

Given the current market conditions, it is dangerous to take a unilateral punitive action that could lead to a trade war or that would be unsettling to the markets, Paulson said.

However, senators Schumer and Baucus do not share the same view. They issued statements late Monday that indicated they would proceed with their bills.

"The only thing the currency bill threatens is a Chinese government that doesn't want to play by the rules," Schumer said, the New York Times report said.

Baucus said that he advocated "responsible and relevant policies that keep our economic relationship from veering off course," adding, "I've spent decades in the Senate working to build a sustainable economic relationship with China and I intend to continue to do so."