US–China Trade War?

Beijing on Wednesday slammed a currency bill passed by the US Senate targeting China's yuan policy, saying the "protectionist" legislation would harm Sino-US ties and the global economy as a whole.
"The bill cannot solve unemployment or other economic problems in the US. It is essentially practicing trade protectionism by making an accusation of currency manipulation, which is a serious violation of World Trade Organization (WTO) rules," China's Ministry of Foreign Affairs spokesman Ma Zhaoxu said.
In defiance of China's repeated warnings, the Democrat-led Senate passed the Currency Exchange Rate Oversight Reform Act with a 63-35 majority Tuesday.
The legislation is now two steps away from being signed into law, including an approval in the House of Representatives where some Republican leaders had called it "dangerous" and refused to schedule a vote on it.
Ma on Wednesday called on the US government, Congress and various committees to oppose the legislation and to tackle trade protectionism.
If signed into law, the act would make it easier for the US government to slap retaliatory tariffs on imports from countries that are deemed currency manipulators.
Some US officials and trade groups have been accusing China of deliberately keeping the yuan low to gain an advantage in bilateral trade. The Alliance for American Manufacturing, which supported the legislation, said before that a 28.5 percent appreciation of the yuan would create 2.25 million jobs in the US and reduce the annual trade deficit by $190.5 billion. However, Beijing firmly rejects such claims. Since 2005, the yuan has appreciated 23.3 percent against the US dollar. It strengthened by 103 basis points to reach a record high of 6.3483 against the dollar Tuesday ahead of the Senate vote, according to figures from the China Foreign Exchange Trading System.
The People's Bank of China, the country's central bank, said on Wednesday the US is only looking to blame its own problems on outsiders "China's interest rate reform has achieved clear results," the bank said. "Making groundless accusations about the yuan could seriously disrupt the exchange rate reforms that China is undertaking."
The American Chamber of Commerce in Beijing expressed its regret over the Senate vote on Wednesday, saying that the provisions of the bill are unnecessary and would be counterproductive to the goal of protecting US employment.  "The Senate would damage the bilateral trade and investment relationship, weaken our standing in the WTO, and damage our national interest," the chamber's chairman, Ted Dean, said in a statement to the Global Times. Calling on the House of Representatives to refrain from taking further action on the bill, the chamber advised increasing exports to China, Washington's third largest market, to support US employment. The US National Retail Federation also expressed its disappointment at the vote, saying "to force China's hand isn't likely to work and could open the door to retaliation against US goods that would threaten American jobs at companies who do business with China."
Zhou Shijian, a senior researcher at the Institute of Sino-US Relations at Tsinghua University, told the Global Times that the Senate vote was another publicity stunt to divert the public's attention from thorny domestic problems in the US.
"Some US politicians lost their senses in unilaterally stipulating such an act that totally disregards under the WTO. It won't stimulate either the US economy or employment given that the majority of US imports from China are labor-intensive products," Zhou said.
Barclays Capital said in a client note that the Senate's passage is already "sufficient to sour the atmosphere for bilateral cooperation at a time when it is most needed to maintain global growth and stability."   
"In the unlikely scenario that the bill becomes law and the US penalizes Chinese exports, China might retaliate, for instance, by taxing US MNCs (multinationals) in China," Reuters quoted the note as saying.
However, Yi Xianrong, an economist at the Chinese Academy of Social Sciences, downplayed the possibility of a trade war.
"Many people have called for payback by selling off (Chinese holdings of) US debt. That would be utterly foolish," he told Reuters.
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