WASHINGTON (CNNMoney.com) -- As debate over global trade heats up, the United States is considering cracking down on China's trade policies, the Treasury Secretary told lawmakers on Thursday.
In testimony before a Senate Banking panel, U.S. Treasury Secretary Tim Geithner criticized Chinese exchange rate policy, saying that the administration is looking at using "all tools available" to improve trade imbalances between the two countries.
While Geithner has, so far, stopped short of calling China a currency manipulator, he said the administration is urging China to allow appreciation of the yuan and "end discriminatory trade and investment measures."
"The only person in this room that believes China is not manipulating its currency is you," Sen. Charles Schumer, D-NY told Geithner.
Geithner responded by explaining that calling China a currency manipulator under U.S. law, isn't "consistent with our international obligations."
China is accused of keeping its currency artificially low, contributing to trade imbalances, as Chinese exports remain cheap. The low currency also encourages U.S. companies to move jobs and production to China.
In June, China pledged to let its currency float more freely, but the yuan has only appreciated 1% against the dollar since then. The movement has been so meager, lawmakers are irate.
Geithner was asked to appear at two hearings on Capitol Hill Thursday, as several lawmakers have filed bills that threaten more retaliatory action against China. Sen. Charles Schumer, D-NY, for example, has a bill to tax Chinese imports.
"For years the department has relied on a strategy of dialogue, which has yielded some reforms, but it's clearly not enough," said Sen. Christopher Dodd, D-Conn. "Year after year, administration after administration, Treasury has declined to declare currency manipulation."
Geithner's speech was measured but sharp, pointing out the administration considers the exchange rate policy a top priority.
"China needs to allow significant appreciation over time to correct this undervaluation and allow the exchange rate to fully reflect market forces," Geithner said.
The Chinese central bank has left interest rates unchanged since September 2008 when it cut rates in the face of the global financial meltdown.
There isn't an overnight lending rate in China comparable to the U.S. Federal Reserve's benchmark fed funds rate, which has been near 0% since December 2008.
By comparison, the People Bank of China's one-year lending rate has been at 5.31%, but that relatively lofty rate has done little to slow the economy overall.
China's gross domestic product, the broadest measure of the economy, was up 10.3% in the second quarter compared to a year earlier.
Puerto Rico's economy is spiraling out of control, heading towards a default. Here's what you need to know. More
The Facebook tool for turning profile photos into rainbows went viral over Pride weekend. More
Richard Branson picked these three businesses as his favorite in the final of the "Pitch to Rich" competition. More
The Supreme Court issued a landmark ruling Friday, extending the right to marry to same-sex couples nationwide. It's not only a civil rights victory, but a financial win for a lot of couples. More