SHANGHAI: Two visiting US senators sponsoring a law that would punish China for its exchange rate mechanism were upbeat when they wrapped up their five-day China trip on Friday.

Senators Lindsey Graham of South Carolina and Charles Schumer of New York said they hadn't decided on whether to continue pushing the bill that would impose 27.5 per cent tariffs on Chinese imports if the currency dispute is not settled.

Some US politicians claim that China's exchange rate, which they say is seriously undervalued, has helped to drive up the US trade deficit with China.

Graham described the trip to China as "fruitful and productive," and Schumer said he was confident that Chinese officials recognized the need for currency reform.

Both said they expected China to take steps to allow the yuan to strengthen against the dollar.

The senators met earlier in the week with top Chinese officials, including central bank Governor Zhou Xiaochuan, Minister of Commerce Bo Xilai, and Vice-Premier Wu Yi, a former trade negotiator.

The US Senate faces a March 31 deadline to vote on Graham and Schumer's bill. The senators said they would meet with US officials and other congressmen over the coming days before deciding on whether to bring the issue to a vote.

The two senators said on Friday that they came to learn and inform, and both tasks were accomplished. "I'm optimistic that the Chinese Government's policy, at least recently, has shown their willingness to embrace reform," Graham said.

The reform refers to Beijing's efforts to improve its banking system.

"We are beginning to sniff the possibility of real results," Schumer said. "But the Chinese Government has convinced us that moving to a free floating currency has been a complicated matter."

Graham called the bill "tough medicine," saying the goal is to find a "middle ground."

The two senators said they were happy to find that in China's 11th Five-Year Plan (2006-10) for economic and social development, there is an emphasis on stimulating domestic consumption.

"China consumes too little and saves too much, while the opposite is true for the US," Schumer said.

He said they wanted to see "inexorable progress, a plan to be made so that the currency will float (freely) within a reasonable amount of time."

"We are not going to give up until we see that plan" from the Chinese Government, Schumer said.

Graham admitted that a lot of the US trade deficit comes from the United States' domestic policy, which over-emphasizes investment and consumption instead of exports.

Andrew Stoler, former deputy director of the World Trade Organization (WTO), told China Daily on Friday that the planned tariffs are inconsistent with WTO rules.

Agencies contributed to the story

(China Daily 03/25/2006 page1)