U.S. business group urges gradual change in China yuan

WASHINGTON (Reuters) – The United States should not press China for an immediate sharp rise in the value of its yuan currency because that could be bad for both countries, the leader of a top U.S. business group said on Tuesday.

"While the currency thing is a real challenge, if we were to force the Chinese to adjust, they would simply drop the price of the products and that would have a more negative effect," U.S. Chamber of Commerce President Thomas Donohue said in an interview with Reuters Insider.

"The issue on the currency should be done in an evolutionary way. It should continue to happen, but a revolutionary change in currency will probably not help either party," Donohue said.

U.S. concern over China's currency practices are expected to be high on the agenda when Chinese President Hu Jintao visits Washington next week.

Many U.S. lawmakers believe China keeps the yuan undervalued by 15 percent to 40 percent to give its companies an unfair price advantage in international trade.

Beijing has argued that a rapid rise in the value of the yuan could create economic instability without having a major effect toward reducing the huge U.S. trade deficit with China. It has urged patience, while letting the yuan rise about 3 percent in value since mid-June.

The U.S. Chamber of Commerce has opposed efforts in the U.S. Congress to pass legislation to deal with the issue, fearing it could spur Chinese retaliation.

In a speech earlier on Tuesday, Donohue said China needed to make more progress soon on the currency issue and a number of other trade concerns.

"But starting a trade war with one of our fastest growing exports markets is not the answer," Dohohue said.

Donohue said other trade concerns are "in many ways more important" than China's currency practices.

Those include China's lax intellectual property protections and discriminatory indigenous innovation policies that favor domestic companies at the expense of foreign ones, he said.

(Reporting by Doug Palmer; editing by Mohammad Zargham)