By Leah Girard

WASHINGTON (MNI) - The clash over the value of the yuan heated up again this week with a move by the U.S. Congress that would force the U.S. Treasury to increase the pressure on China to reform its exchange rate policy, even while some economists dispute the charge that Beijing has manipulated its currency.

This push, led by Senator Schumer (D-NY), comes after months and years of debate over whether China is actively working to keep the currency undervalued and in a week when IMF chief Dominique Strauss-Kahn repeated that the "renminbi is very much undervalued," while China's Premier Wen Jiabao lashed out at the U.S. and rejected the accusation.

Schumer's bill, introduced Tuesday, aims to "provide less flexibility to the Treasury Department when it comes to citing countries for currency manipulation," according to the senator's website

The bill refers Treasury's currency report, set to come out April 15, that will decide whether to label China as a currency manipulator. It would be the first country to be considered "manipulative" since 1994.

Most economists agree with the IMF that China's currency is undervalued but there is some disagreement over whether that could be considered manipulation and if so what to do about it.

Albert Keidel, former fellow at the Carnegie Endowment for International Peace, said Wednesday he is "unconvinced" by assertions that China knowingly misused the market, dismissing what he called the "high school economic principles" the charges are based on.

"There is no easy way to tell if a currency is undervalued or not ... there is no hard and fast rule," he said at a Carnegie event Wednesday.

Pieter Bottelier, a visiting scholar at Carnegie, said even on a shallow level there is no proof that China was a manipulator.

"After the Lehman collapse, the dollar began to appreciate" as did the currency of the Chinese, "if they were a manipulator, it would have depreciated."

Saying China manipulated the system "makes no sense in my opinion," Bottelier said.

Keidel said he "would be surprised" if the Treasury caved to pressure to label China a manipulator because "this is such a highly political year" and President Barack Obama has supported keeping positive relations with China.

China has resisted pressure to change its pegged currency policy while denying the yuan is undervalued.

"I do not think the renminbi is undervalued," China's Wen said Sunday. He also questioned Obama's plan to boost U.S. exports and his call for China to move to a "market-oriented" exchange rate.

"What I don't understand is the practice of depreciating one's own currency and attempting to press other countries to appreciate their own currencies solely for the purpose of increasing one's own exports," Wen said. "This kind of practice I think is a kind of trade protectionism."

The yuan has remained effectively pegged to the dollar since the government halted the gradual appreciation in mid-2008 amid the global financial crisis, which slowed the economy's rapid growth to 8.7% last year from 13% in 2007.

Thomas Byrne, senior analyst at Moody's Investors Service, said China's recovery is sustainable and its economic outlook is positive for the coming years.

"Unless the Chinese make big policy mistakes" their economy should remain stable as it has "very low vulnerability to external credit markets and financial shock," Byrne said.

Some economists say the recovery is the result of China's post-Lehman-collapse stimulus package, which will need to end at some point, and is not more permanent as Byrne suggests. But he agreed China will need an effective exit strategy to prevent the economy from overheating, which could have a global impact.

** Market News International Washington Bureau: 202-371-2121 **