Jan. 12 (Bloomberg) -- President-elect Barack Obama should press China to allow the yuan to appreciate because weakness in the currency is hurting U.S. jobs and manufacturing, according to Professor Peter Morici.

The U.S. dollar is “too strong” against the yuan, yen and other Asian currencies, Morici, from the University of Maryland’s Robert H. Smith School of Business, said in a commentary posted on the Web site of the Kiplinger Business Resource Center.

U.S. Treasury Secretary Henry Paulson and other U.S. lawmakers have urged China to loosen controls on the yuan exchange rate. They say the currency is undervalued, which gives an unfair trade advantage to manufacturers in the Asian nation. Since scrapping a fixed rate to the dollar in 2005 the yuan has strengthened almost 19 percent, while the U.S. currency dropped 10 percent against the euro and 19 percent versus the yen.

“The Chinese government intervenes in foreign-exchange markets to suppress the value of the yuan to gain competitive advantages for Chinese exports, and the yuan sets the pattern for other Asian currencies,” said Morici, former chief economist at the U.S. International Trade Commission. “Obama must get behind a policy to reverse the trade imbalance with China or preside over the wholesale destruction of many more U.S. manufacturing jobs.”

China’s government has shifted focus from stemming inflation to sustaining growth, after the world’s fourth-biggest economy expanded at the weakest pace since 2003 in the third quarter. The yuan’s advance against the dollar has stalled since the two governments last held trade talks in mid June, after it advanced 6.6 percent in the first half of 2008.

Ending Chinese currency market manipulation and other mercantilist practices are “critical” to reducing the U.S. trade deficit and creating jobs in the U.S., Morici said.

“Obama must address the huge cost of imported oil and the trade deficit with China,” he said. “Otherwise, any effort to resurrect the economy is doomed to create massive foreign borrowing, another round of excessive consumer borrowing, and a second banking crisis that the Treasury and Federal Reserve will not be able to reverse.”

To contact the reporter on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;

Last Updated: January 11, 2009 21:32 EST