Senator says yuan must rise to ease imbalance and keep politics manageable A top United States lawmaker known as a 'friend of China' yesterday called on the mainland to cut its trade surplus with the US and hasten revaluation of the yuan. 'US politics on China will become unmanageable if the country's trade deficit with the US continues to grow,' Senator Max Baucus said in a speech to American businesspeople in Beijing. He said legislation for a 27.5 per cent tariff on Chinese goods could pass this year if China did not act quickly. Last year's US trade deficit with China topped US$200 billion, according to Washington's estimates, 25 per cent up from 2004 and 30 per cent of the total US deficit. Mainland figures, calculated differently, indicate China's overall trade surplus topped US$102 billion last year, more than triple 2004's US$32 billion. Senator Baucus, a Democrat, served as congressional leader on China joining the World Trade Organisation and was instrumental in halting legislation that would have removed China's 'most favoured nation' trade status in the 1990s. More recently, as a member of the Senate Finance Committee, he has been a vocal opponent of legislation proposed by Senator Charles Schumer and supported by Senator Lindsey Graham to levy tariffs on Chinese imports. 'I strongly oppose the Schumer bill - but, on the other hand, I can see why a good number of members of Congress ... would support it,' Senator Baucus said yesterday. The Chinese government is already trying to slow its fast-growing trade surplus by lowering import tariffs, reducing export tax rebates and implementing fiscal reforms in an attempt to stimulate domestic demand. Rural agricultural taxes have been abolished, the personal income tax exemption threshold has been doubled to 1,600 yuan and more money is being allocated to China's sclerotic social services. But the authorities are unlikely to allow the yuan to rapidly appreciate in order to appease US politicians, according to Citigroup economist Huang Yiping. 'Appreciation of the currency will have to be part of the package to reduce the trade surplus, but the government is very reluctant to move quickly,' he said. Mr Huang said there was some merit to Beijing's argument that the trade imbalance would be mitigated if Washington relaxed its stringent limits on exports to China of technology items it believes could be used for military applications. In yesterday's speech, Senator Baucus reiterated the US position on the need for China to address problems of piracy and counterfeiting, which he said had reached an 'unacceptable level'. 'Much more work needs to be done on enforcement of intellectual property rights, and I hope to see some progress soon,' he said. He also called for more democracy, respect for the rule of law and freedom of the press in China.