US Treasury Secretary Timothy Geithner testifies before the Senate Banking Committee during a hearing on international economic and exchange rate policies on Capitol Hill in Washington D.C., capital of the United States, Sept. 16, 2010. [Xinhua]

Amid an outcry in the United States to pressure China on its currency exchange rate, Treasury Secretary Timothy Geithner on Thursday cautioned against punishment measures.

Geithner indicated that such measures could backfire as China is the fastest-growing major overseas market for the United States. The two countries have "significant economic interests" in their relationship, he told the US Senate Committee on Banking, Housing and Urban Affairs.

At a testimony before the committee, Geithner contended that the pace of Chinese currency appreciation was too slow, alleging that China needs to allow significant and sustained appreciation of the yuan. However, he warned that the United States should not take actions that would hurt interests of U.S. companies and businesses.

"US merchandise exports to China this year surged 36 percent compared to 2009," Geithner noted.

The US Senate Banking Committee held a hearing on the Treasury Department's Report on International and Exchange Rate Policies. The committee heard from Geithner, and discussed the relationship between the two nations.

"US exports to China have grown much faster than our exports to the rest of the world, and they have recovered much more quickly following the global crisis," according to the department's report.

China responded early and aggressively with a massive stimulus program to cope with the financial crisis. "The resulting boom in China's imports supported the global economy and contributed substantially to recovery around the world," reads the report.

China's record of bringing hundreds of millions of people out of poverty, building a rapidly growing middle class, and now its efforts to encourage growth led by domestic demand ultimately mean more demand for American goods and services, Geithner said.

However, with the US unemployment rate still hovering at 10 percent and congressional elections approaching, some U.S. congressmen have recently ratcheted up pressure and are mulling a punishment action, demanding China steeply appreciate its currency.

In July, China announced a plan to further proceed with its reform of the yuan exchange rate regime to enhance the exchange rate flexibility.

Many US business leaders and experts believed that the United States should not blame its own trade deficit and the imbalance in the US economic growth on China's exchange rate.

A group of 36 leading US business and farm organizations, including the American Chamber of Commerce in China and the Business Roundtable, this week called for the exclusion of the proposed bill of prompting China to revalue its currency.

"We strongly oppose legislation that would allow the use of either the anti-dumping or countervailing duty law to address currency concerns," they said in a joint letter.

China's exchange rate appreciated nearly 20 percent between 2005 and 2008, but the US trade deficit with China grew during this time, John Frisbie, president of the US-China Business Council, told a Wednesday Congress hearing, adding that most trade lawyers held that addressing the exchange rate with countervailing duties would violate World Trade Organization rules.

Chinese Foreign Ministry spokeswoman Jiang Yu on Thursday rejected the US harsh stance on the Chinese currency, saying appreciation of the yuan cannot help solve the US trade deficit with China.

(Xinhua News Agency September 17, 2010)