WASHINGTON — China's decision to loosen some restrictions on its currency, permitting the yuan more daily fluctuation, came amid growing pressure from Congress to remedy the record U.S. trade deficit.

The announcement by China's central bank on Friday, just before the U.S. and China are to begin two days of meetings on economic policy in Washington starting Tuesday, may have been an effort to defuse the argument of lawmakers that the yuan has been kept artificially low to make China's exports cheaper.

The yuan will be allowed to fluctuate by as much as 0.5 percent each business day, up from 0.3 percent. The currency has appreciated by 7.9 percent since July 2005, when it was decoupled from the dollar and pegged to a basket of currencies.

Alan Holmer, U.S. special envoy for China, said the yuan has not moved fast enough, but welcomed the widening of the daily trading range.

"This is a useful step toward greater flexibility and an eventual float of the currency," said Holmer, briefing reporters on the U.S.-China Strategic Economic Dialogue. "It's important now that Chinese authorities use the wider band and allow greater currency movement within each day and over time."

Some experts, however, say the policy change will have little, if any, impact on the fast-rising exports from China.

By restraining the value of its currency, China also makes it more expensive for foreign firms to tap into the growing consumer class in the country of 1.3 billion. That, along with a record trade deficit of $232.5 billion with China last year, has had U.S. textile producers and others crying foul.

In response, a bipartisan group of 42 House members on Thursday filed an unfair trade practices case, known as a Section 301 petition, keeping the heat on the Bush administration to be tough with China. The petition is an effort to pressure the White House to file a case with the World Trade Organization and take a more aggressive approach against an undervalued yuan. It is the third time House lawmakers have filed such a case. Two others were rejected by the administration.

Signed by 22 Democrats and 20 Republicans, the petition alleges that China undervalues its yuan by 15 to 40 percent and acts as an export subsidy, which is prohibited under WTO rules."We must now act to end this unfair trade practice that cripples American industries and contributes to a staggering trade deficit between the U.S. and China," said Rep. Charles Rangel (D., N.Y.), chairman of the House Ways and Means Committee, in a statement accompanying the petition and a letter to U.S. Trade Representative Susan Schwab.

Democrats have been building a consensus for moving legislation this year against China's currency practices.

Currency is sure to be a focus during talks this week led by Treasury Secretary Henry Paulson Jr. Leading the Chinese will be Vice Premier Wu Yi, whom Paulson described as a "force of nature."

"As two of the leading economies in the world, it's critical that we and China get our economic relationship right," Holmer said at the briefing. "This may be one of the most important economic questions of the 21st century."

— With contributions from Kristi Ellis

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