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China warned Sunday it may retaliate if the United States imposes trade sanctions and other penalties over its exchange rate policy, state media reported.

"We will not turn a blind eye," People's Daily quoted Commerce Minister Chen Deming as saying in response to a US threat to impose sanctions on China if the US Treasury department deems it to be a currency manipulator.

Chen also again denied the yuan was undervalued and accused the United States of "politicising" the currency issue.

His remarks at a closed-door economic forum in Beijing follow US lawmakers' demand that US President Barack Obama label China a currency manipulator, a move that could trigger tough penalties.

Treasury Secretary Timothy Geithner has to decide on the issue next month.

Beijing has effectively pegged the yuan to the US dollar since mid-2008, which critics say keeps the currency's value artificially low, making its exports cheaper and thus more competitive on overseas markets.

China, the world's biggest exporter, has repeatedly defended its exchange rate policy as necessary for the survival of Chinese manufacturers and supporting jobs growth in the economy.

Premier Wen Jiabao said last Sunday China would not be bullied into changing its exchange rate policy.

"We are opposed to the practice of engaging in mutual finger-pointing among countries or taking strong measures to force other countries to appreciate their currencies," he told reporters at the end of China's annual session of parliament.

Amid the growing trade tensions between China and the US, Beijing said Friday Vice Commerce Minister Zhong Shan will visit Washington from March 24 to 26.

Zhong will meet US lawmakers and officials at the US Commerce and Treasury departments as well as at the US Trade Representative's Office.

"This visit is an effort to consult and exchange views on the Sino-US trade balance, trade frictions and other concerned trade issues," a ministry statement said.

Criticism over its forex policy has risen as China's trade surplus and foreign exchange reserves have skyrocketed.

In 2005, international pressure led China to adopt a managed float of the yuan, which led to a 21 percent increase in its value against the dollar by 2008, when the global financial crisis struck.

Since then, China has effectively pegged the yuan to the dollar, a move that has helped its exporters weather the global crisis, but also triggered a fresh round of foreign pressure.

China said this month the exchange rate policy was temporary and would be withdrawn "sooner or later" along with other stimulus measures.

AFP