Beijing: China on Friday said it was sending an envoy to the United States to try to ease trade frictions as its currency regime comes under fire, but cautioned that pressure from US legislators would complicate talks.

The announcement, and comments by China’s commerce ministry, appeared aimed at lowering the temperature in an increasingly heated dispute, with US senators threatening to slap duties on Chinese products if Beijing does not allow the yuan to rise.

“Channels of communication between our two sides are open. All issues of concern to either side can be discussed through these channels," He Ning, head of the commerce ministry’s North American division, told a media briefing.

But China gave no indication that it was ready to abandon its commitment to a stable yuan exchange rate and market expectations of an appreciation remained muted.

China said vice commerce minister Zhong Shan will visit the United States from 24-26 March for discussions focused on the “Sino-US trade balance and trade frictions".

But demands by the US Congress that Beijing revalue the yuan, which it has held near 6.83 per dollar since the global credit crunch struck in mid-2008, will stand in the way of dialogue, the commerce ministry’s He said.

“This will make the whole situation more complex, imposing an external disturbance on our normal channels of communication. That’s a trend that we do not want to see," He said.

Beijing says this currency stability has benefited the global economic recovery.

US lawmakers say it is an unfair subsidy for made-in-China goods that has stolen American jobs.

A semi-annual US Treasury report due on 15 April could label China a “currency manipulator", adding to pressure on Beijing and threatening a deepening rift between the world’s biggest and third-biggest economies.

Gradual appreciation?

Just last week, market expectations were growing that a solid recovery in Chinese exports and a build-up in inflationary pressure might prod the government to permit yuan appreciation.

Investors have scaled back their bets on any imminent move this week on the view that Beijing will find it politically unpalatable to appear to cave into US pressure.

The yuan was bid just a touch above a three-week low in offshore forwards on Friday, implying expectations of 2.5% appreciation over the next 12 months.

The burst of rancour with the United States has grabbed headlines over the past week, but China is the world’s largest exporter and the yuan’s exchange rate is an issue that affects virtually all countries.

Visiting Washington, Indian commerce and industry minister Anand Sharma said China’s exchange rate policy created problems for Indian exporters.

“We feel that the policy should be such that exporters should not be disadvantaged," he told Reuters after a speech.

But Kaushik Basu, chief economic adviser in India’s finance ministry, said New Delhi was unlikely to join other states in putting pressure on China to revalue the yuan.

A Japanese deputy finance minister told reporters China should understand global calls for a more flexible yuan but it would be “wrong" for Washington to resort to sanctions.

In a discussion paper for a meeting of officials from the Group of 20 industrialised and emerging nations, Canada said that stalling on economic and financial reforms agreed at a G20 summit in Pittsburgh last year would bring unsustainable debt levels, higher interest rates and another crisis.

The Canadian discussion paper did not mention China by name, but said in a scenario where rich countries cut deficits, but emerging markets neither let their currencies float, nor encouraged their own consumers to spend more, “by 2011, deflation would occur in advanced countries, real interest rates would increase sharply, and growth would stall".