BEIJING : China warned on Tuesday of unspecified counter-measures if the US Congress adopts a bill on Beijing's foreign exchange regime that could lead to higher US tariffs on Chinese imports.

"China has all along held that the development of Sino-US bilateral trade is in the interest of both sides," foreign ministry spokesman Qin Gang told reporters.

But "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."

US lawmakers are to unveil a proposed law this week that could address concerns China is keeping its currency undervalued, Congressional staff said on Monday.

US lawmakers say China grossly undervalues the yuan, making US-bound exports cheaper and fuelling a ballooning US-China trade deficit which hit US$232.5 billion last year.

Despite heavy US dependence on imports from China, some lawmakers want trade sanctions, including a possible 20 percent across-the-board tariff on Chinese goods.

"Fundamentally misaligned currencies distort global markets and put US manufacturers and farmers at a competitive disadvantage," said a statement by the Senate finance panel, which has jurisdiction over US trade policy.

Qin disputed this on Tuesday, asking: "Is the yuan high or low? The US Congress says it is high, but whose standard is this? It is the US standard," he said.

He said that China would listen to US complaints on the yuan and seek to appropriately resolve trade disputes but insisted that Washington had no right to determine the value of the Chinese currency.

"The (yuan) exchange rate should be conducive to China's current conditions and should be in the interests of China's economic development and global economic development," Qin said.

"The reform of the yuan exchange rate is ongoing and is dependent on market demand and supply."

He said trade disputes needed to be solved as Sino-US economic and trade cooperation continued to develop, "by taking into consideration the concerns of the other."

"We must especially not politicise economic and trade issues. We also must not take the concerned issues, especially American domestic issues and transfer them into the Sino-US bilateral economic and trade relationship," he said.

Qin made the announcement a day after China announced its May trade surplus surged nearly 73 percent from a year earlier to US$22.45 billion.

It set China on course for a massive surplus for all of 2007 despite a series of measures by the government to cool exports and thereby ease tensions with the United States and its other major trading partners.

Based on current trends, the surplus could this year surpass US$320 billion, 10 times more than the level in 2004, London-based Capital Economics said. - AFP/de