The House Vote Every Trader Must Know About; Potentially Negative Implications for Stocks & Bonds are Ahead, Caution ..

WASHINGTON (Dow Jones)--U.S. House lawmakers from both parties are expected on Wednesday to support legislation targeting China's currency policy, a move that could influence the tenor of sensitive discussions between Beijing and Washington.

The House of Representatives is scheduled to vote on a measure that targets imports from China and other countries with currencies that are perceived to be undervalued. Both Democrats and Republicans are likely to endorse the measure, producing a Washington rarity: a bipartisan vote on a substantive policy issue just weeks before key midterm elections.

The anticipated support for the legislation is the manifestation of years of frustration on Capitol Hill over Beijing's currency policy, which has been estimated by economists to keep the yuan between 20% and 40% undervalued. Mixed with the slow U.S. economic recovery, nearly 10% unemployment and the November elections, currency has become a popular target for lawmakers.

"By deliberately keeping the value of its currency low, China is able to sell its goods in the United States at an artificially low price, which helps put American manufacturers out of business," House Majority Leader Steny Hoyer (D., Md.) said in a statement Tuesday.

The Obama administration has declined to comment on specific legislative proposals, including the measure the House will vote on, and administration officials said it was unclear if they would weigh in ahead of Wednesday's vote.

House passage of legislation targeting China's currency policy could influence ongoing negotiations between Beijing and Washington on a range of economic and trade matters. Treasury Secretary Timothy Geithner, appearing on Capitol Hill earlier this month, said it is "very important" for China to hear from lawmakers on the yuan and other issues.

"It's important for them to understand that this is a serious issue for the American people, and we're serious about it," Geithner said before the House Ways and Means Committee.

Still, administration officials are wary of lawmakers being too aggressive with any legislative action and disrupting the delicate negotiations between the two economic powers.

Whether the House proposal will receive a vote in the Senate is also an open question. Sen. Charles Schumer (D., N.Y.), a frequent critic of China's currency policy, said in a statement Tuesday that he would push legislation dealing with undervalued currencies after the November elections.

"China is merely pretending to take significant steps on its currency. This suckers' game is never going to stop unless we call their bluff," Schumer said.

-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com
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September 28, 2010 17:26 ET (21:26 GMT)
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