China isn't a currency manipulator under U.S. law, though theyuan “remains significantly undervalued” and needs to rise further,the Treasury Department said.

China “has substantially reduced the level of officialintervention in exchange markets since the third quarter of 2011,”the Treasury said in a statement accompanying its semi-annualcurrency report to Congress yesterday. The yuan has gained 9.3percent in nominal terms and 12.6 percent in real terms against thedollar since June 2010, the Treasury said.

“It appears that the strategy of the last two administrations touse diplomacy rather than confrontation in dealing with the yuan'svalue is having some positive results,” William Reinsch, presidentof the National Foreign Trade Council, a Washington-based businessgroup, said in an e-mail after the report. “There is clearly roomfor further appreciation, however.”