China accuses US of fomenting currency war as Fed stimulus looms

China's commerce ministry also said a weak U.S. dollar threatens to hit the profitability of its exporters, in a bid to blunt the long-held U.S. view that China's currency policy has tilted global trade in favor of Beijing.

The spiking of rhetoric from Beijing comes at a time when signs of increasing aggression, both economic and political, from the world's second largest economy is rattling many in the U.S. as well as the rest of the world.

The run-up to the U.S. mid-term elections has witnessed China emerging as the "hate figure" of choice as political campaigns are increasingly focusing on projecting China as the "bad guy" in view of its perceived role in roiling the currency markets and other glitches including its rare earths export policy.

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The Chinese commerce ministry's comment also came as Barack Obama is gearing up for his nine-day Asia tour in which the President will discuss politics, policy and economy with India, Indonesia, South Korea and Japan -- but not China.

Some view Obama's Asian tour as a stamp of approval to a burgeoning democratic alliance in Asia which puts together countries that feel the most heat in the face of China's increasing clout as a political, economic and military power.

Meanwhile, at home the 'Made in China' label invites wrath among people, and political campaigns are exploiting the anti-China sentiment. "The phrase "Made in China" is invoking anger in the US: China is portrayed as the "bad guys du jour" in countless political campaign ads for the 2010 midterm elections," news channel RT said in its website.

China's ascent in the world is becoming the popular perceived threat, it says.

"As the American economy stagnates, barely growing at all, and China celebrates the ten per cent plus rise in its economic growth, Beijing is increasingly vilified in the US media."

However, China is increasingly vocal about its side of the story, and has tried to put pressure on the U.S. as more stimulus from the Fed looks certain to reinvigorate the sagging economy. Chinese Commerce Minister Chen Deming came down heavily on the U.S. policies last week, saying the Federal Reserve's "uncontrolled" issuance of dollars was posing hazards to his country's export sector and that such a policy has caused inflation risks.

"In the mid-term, the U.S. dollar will continue to weaken and gaming between major currencies will escalate, increasing risks for businesses and affecting global trade development," the commerce ministry report said on Monday.

A slew of emerging Asian countries have tightened their capital control policies in recent weeks in the wake of higher inflows of liquidity into their markets, causing currencies to surge and putting inflationary pressures, posing threat to financial stability.

Thailand said on October 12 it was imposing a 15 percent withholding tax on interest and capital gains made by foreign investors on Thai bonds, accentuating the emerging economies' drive to put in place regulatory controls to curb capital inflows that contribute to a surge in currencies.