An employee arranges yuan notes at a branch of the China Minsheng Bank in Nanjing, capital of east China's Jiangsu province in this April 28, 2006 file photo. [Reuters]

China fired a warning shot at U.S. lawmakers on Tuesday, saying that proposed legislation to pressure Beijing to step up exchange rate reform risked politicizing trade and would not sway its priorities.

With U.S. Congress members increasingly riled by their nation's trade deficit, a group of senators is expected to unveil legislation this week seeking to pressure Beijing to revalue its yuan currency more quickly and so make its exports more costly.

China's Foreign Ministry, reluctant in the past to wade into trade disputes, told the U.S. lawmakers to back off.

"As for whether the renminbi exchange rate is high or low, the U.S. Congress believes it is too low," ministry spokesman Qin Gang told a news conference, referring to the yuan by its official name.

"But whose standard is this? It's the United States'. But ultimately China's renminbi exchange rate must suit Chinese realities, and it must benefit China's and the world's economic development."

"The US Congress could pass this legislation which will lead to the problem of higher tariffs on Chinese goods... If this happens then the Chinese departments concerned will make a response."

China's warning over the U.S. legislative moves comes as the two countries' trade-sparring risks turning into a shoving match that could spill over into next year's presidential contest.

Many U.S. lawmakers and manufacturers blame Beijing's exchange rate controls for holding down the value of the yuan and fuelling the large U.S. trade deficit with China.

A number of U.S. politicians are preparing legislation that would penalize imports from China to counter what they say is a yuan currency unfairly undervalued by as much as 40 percent.

The Bush administration has also urged Beijing to accelerate exchange rate reforms, including at a high-level economic dialogue last month. But on Monday the Treasury Department said no more legislation was needed to prod China to move faster.

Alan Holmer, the Treasury department's special envoy to China, would not say whether Treasury would formally label China a currency manipulator in a semi-annual report on foreign exchange practices of key trade partners also due out on Wednesday.

Beijing says Washington's lax economic policies are to blame for the trade gap.

"Economic and trade issues should not be politicized, and related problems, especially ones arising from the U.S. domestically, should not be dragged into China-U.S. economics and trade," Qin said.

Qin said that Beijing and Washington would hold a "strategic dialogue" in Washington on June 20-21 to discuss security relations.