Yuan is 'significantly undervalued'
The Obama administration has said China's currency remained "significantly undervalued," but has stopped short of labelling the world's second-biggest economy a currency manipulator.
Although Beijing controls the pace at which the yuan can rise, the US Treasury said in a congressionally mandated semi-annual report that China did not meet the legal requirements to be deemed a currency manipulator.
The label is largely symbolic, but would require Washington to open discussions with Beijing on adjusting the yuan's value.
It has been 18 years since the US Treasury has designated any country a manipulator. China was labelled a manipulator between 1992 and 1994.
The latest report reflected both the administration's desire to maintain good relations with its top creditor and an attempt to keep up pressure for changes in China that could benefit the US economy and mollify domestic critics.
The report noted that the yuan, also known as the renminbi, had risen 12.6 per cent against the US dollar in inflation-adjusted terms since June 2010.
An official said it was up 9.7 per cent on a nominal basis to yesterday, when it closed at a record high.
The Treasury also said China had "substantially" reduced its intervention in foreign exchange markets since the third quarter of 2011 and had loosened capital controls.
"In light of these developments, Treasury has concluded that the standards ... have not been met with respect to China," it said.
"Nonetheless, the available evidence suggests the renminbi remains significantly undervalued," the report added, echoing the Treasury's last assessment in May.
Chinese Foreign Ministry spokesman Hong Lei denied the currency was undervalued.
"In recent years, the ratio between China's GDP and the current account surplus has decreased on a daily basis. The renminbi's exchange rate is in equilibrium. There is no so-called problem that the exchange rate is undervalued," he told reporters in Beijing.
"We hope that the US side can appropriately deal with trade and economic issues, including the renminbi exchange rate," Mr Hong added.
Ted Truman, a Treasury official under former President Bill Clinton, said it was important to keep a watchful eye on China's currency policy.
"We have the aftermath of 10 years of misbehavior," said Mr Truman, who is now with the Peterson Institute for International Economics.
"It would probably be unwise and too soon to declare victory."
During the US presidential campaign, Republican candidate Mitt Romney pledged to label China a manipulator on his first day in office to show he would be tougher on the chief US economic competitor than President Barack Obama.
Many US businesses and lawmakers complain that Beijing keeps the value of its currency artificially low to gain an advantage in trade at the expense of American jobs.
But an international consensus is growing that the yuan is closing in on its fair value after about a decade at an artificially weak level. The International Monetary Fund softened its language on the yuan in July.