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By Glenn Somerville
WASHINGTON, Oct 15 (Reuters) - The U.S. Treasury Department declined on Thursday to label China a currency manipulator but repeated that it considers China's yuan undervalued and will keep trying to persuade Beijing to let it rise.
In a semiannual report to Congress on currency practices of key trade partners, Treasury said global financial conditions "have improved dramatically and signs of an economic recovery have begun to emerge." It said none of its trade partners were manipulating their currency rates for trade advantage.
Treasury said that China, which pumped stimulus into its economy during the recession, had played an important role in anchoring the global economy this year.
But it also said that lack of flexibility in the exchange
rate for the yuan
Treasury suggested Beijing should let the yuan rise.
"The stability of the renminbi against the dollar over the past year, the real effective depreciation that has taken place during the reporting period, continuing productivity growth in the Chinese economy, and the acceleration of foreign reserve accumulation this year all suggest that the renminbi remains undervalued," Treasury said.
President Barack Obama, while campaigning for the presidency last year, said he believed China did manipulate its currency deliberately -- keeping it undervalued so that its goods are cheap in American and other foreign markets.
But Thursday's report was the second one by the Obama administration that declined to formally call China a manipulator, which might trigger trade actions against it.
Treasury Secretary Timothy Geithner has praised China in the past for its actions in stimulating its economy during the severe economic downturn and has tempered prior U.S. calls for Beijing to let the yuan rise more freely.
Under the 1988 U.S. law that requires semiannual reports to Congress, Treasury is required to "initiate negotiations ... on an expedited basis, in the International Monetary Fund or bilaterally" if it actually cites a country for currency manipulation.
China was cited in five reports between May 1992 and July 1994 but no country has been cited since then. (Editing by James Dalgleish)