WASHINGTON (Reuters) - A congressional panel turned up the pressure on China over the yuan on Friday, approving a bill that would let the United States slap duties on goods from countries with undervalued currencies.

In a move likely to increase tension with China, the House of Representatives Ways and Means Committee sent the legislation to the full House for a vote next week. It may never become law, however, as it faces uncertain prospects in the Senate.
The vote was a first step to fulfilling long-standing threats to penalize Beijing for keeping its currency artificially weak, which critics claim creates an unfair trade advantage. It came one day after President Barack Obama pressed Chinese Premier Wen Jiabao on the issue in talks on the sidelines of the U.N. General Assembly meeting.
Top administration officials have stepped up criticism of China's currency practices, and Treasury Secretary Timothy Geithner said last week the issue would be a key agenda item at November's Group of 20 meeting.
The move came less than six weeks before U.S. congressional elections dominated by concerns over the struggling economy and persistently high unemployment, and some Republicans accused Democrats of forcing a vote now for political gain.
Critics inside and outside Congress claim that China has hurt U.S. exports and employment by undervaluing the yuan against the dollar by as much as 25 percent to 40 percent.
Since China's central bank in June said it would let the yuan fluctuate more freely, it has risen 1.8 percent.
House Ways and Means Committee Chairman Sander Levin, a Democrat, said the bill would give the United States new tools to address China's ""currency manipulation"" because diplomatic pressure has not yielded satisfactory results.
---------'A Distortion'
""China's persistent manipulation is a major distortion in the international marketplace,"" Levin said. China's undervalued currency ""has a major impact on American workers and therefore American jobs. That's what this is really all about.""
The Obama administration has performed a cautious balancing act over the legislation. Senior U.S. officials have not publicly embraced it but neither have they sought to block it, leaving the door open for lawmakers to press ahead.
There have been expectations that if currency legislation were passed, China would likely challenge the measure at the World Trade Organization, exposing U.S. exports to trade retaliation if Beijing won the case.
By conditioning its ultimate position on how well the bill stacks up with the WTO, the Obama administration left an escape route if it deems the legislation out of line with its diplomatic approach.
Photo: Yuan banknotes are seen in this illustrative photograph taken in Beijing September 19, 2010. (Photo: Reuters/Petar Kujundzic)