Despite strong opposition from China and many U.S. business groups, the U.S. Senate on Tuesday passed a controversial bill that threatens to punish China for alleged currency manipulation.

As countries around the world seek in collaboration to prevent a double-dip recession, experts worry the bill may spawn a trade war between the two nations and endanger global economic recovery.

The Currency Exchange Rate Oversight Reform Act was passed in a vote of 63 to 35 at the Senate on Tuesday.

The bill is especially directed at China's currency, the yuan, which the U.S. claims is undervalued to make Chinese exports cheaper.

The legislation's backers believe a boost in the yuan will make Chinese workers wealthier and more likely to buy American goods, thus creating jobs and narrowing the trade gap.

U.S. lawmakers have, for years, pressured China for a rapid appreciation of its yuan.

They argued China is creating a trade imbalance and stealing jobs of American people by undervaluing its yuan to make its exports cheaper.

Raymond W. So, professor from Hang Seng Management College, believes that current bilateral trade imbalance between the U.S. and China is related to export patterns, not exchange rate.

SOUNDBITE (English) RAYMOND W. SO, HANG SENG MANAGEMENT COLLEGE:
"It's all about exports, because this is a kind of differences in export patterns. Now, for China, they mainly exporting so called the products of medium to low technology, low-tech, medium technology products, not the high tech products to America. America is exporting so called high tech products, but if the Americans want to export high tech products, or the Chinese want to import high tech products from America, it will face a lot of problems, because they see that this is strategic value, the military won't allow it, then the government won't allow it. Even the American corporation, they want export, they cannot. It's about the hurdles that American government is creating. They think that some products are of strategic value, military use, they tend to not to export that kind of product. But America is having a competitive edge in that product, if they are not allowed to export it, what kind of American products they want to export? American shirts? American ties? But we can buy more cheaply in China, why buy the Americans'? So you got no competitive power for the American products."

So says that the bill, which comes ahead of the U.S. 2012 elections and at a time when the country is suffering sluggish growth and persistent high unemployment, is merely a political strategy.

SOUNDBITE (English) RAYMOND W. SO, HANG SENG MANAGEMENT COLLEGE:
"It's all about politics let me tell you. It's not about the appreciation of the RMB or not, because the Americans they understand very clearly, even though the RMB appreciated by 20% or 30%, it will not help the American economy that much. They all know that it's about productivity, it's all about relative pricing, it's all about so called factor pricing. The Americans' factor pricing are so high. The American labor cost are so high. In no way they can compete with China. They also understand a lot of so called products being produced in China nowadays are being produced in Vietnam, in Laos, in Cambodia, countries like that, Bangladesh, countries like that, they all know that. But in terms of voting, this bill is mainly to have some sort of reflection to people, the voters, so as a Senator, as a Congressman, I have done my homework, I discuss, I debate, I somehow criticized China in the parliament on your behalf. So that they have done the homework, so that when the election comes, they can always say that I am the guy who is for you, please vote for me next time."

Meanwhile, it is doubtful whether the bill will become a law, as it would have to clear the House of Representatives and then be signed by President Barack Obama before becoming law.

Both Obama and House Speaker John Boehner have expressed reservations regarding the legislation.

President Barack Obama last week declined to back the legislation and worried it could violate the rules of World Trade Organization (WTO).

Boehner noted it is "pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency."

Professor So suggests China to file complaint to WTO against the bill.

SOUNDBITE (English) RAYMOND W. SO, HANG SENG MANAGEMENT COLLEGE:
"These bills, the element is against the agreement of WTO, so China, if they are not happy, they can go to WTO and file a complaint against America. And that complain will be valid. So this bill won't have any impact on china at all. But it just become a gesture, you can say, it's a gesture, because if it's passed, then China can go to WTO and file a complaint, then the Americans got to withdraw it. Otherwise it's against WTO, they the Americans got to pay a fine on it."

Statistics indicate that China and the United States are each other's second-largest trading partners. Trade between the two nations accounts for a considerable share of total global trade.

Coping with its trade surplus, China has adopted a raft of measures to boost imports and reform its currency policies to create more flexibility.

The yuan has appreciated 23.3 percent against the U.S. dollar since a dollar peg was scrapped in July 2005.