The U.S. Senate could vote next month on rival bills affecting trade and currency relations with China, a top U.S. senator said on Wednesday.

Senate Finance Committee Chairman Charles Grassley, an Iowa Republican, said he was prepared for the possibility Sen. Charles Schumer, a New York Democrat, and Sen. Lindsey Graham, a South Carolina Republican, might demand a long-promised vote on their bill threatening China with steep tariffs.

"If they bring up their China bill, we're going to bring up the Grassley-Baucus bill," Grassley said in an interview, referring to an alternative bill he has crafted with Montana Sen. Max Baucus, the top Democrat on the Senate Finance Committee.

Schumer and Graham have emerged as the Senate's most vocal critics of China's currency policy, which they consider an unfair trade practice that subsidizes China's huge and growing exports to the United States and other markets.

The senators contend China's currency is undervalued by 15 to 40 percent. Their bill directs the White House to impose a 27.5 percent tariff on goods from China if Beijing does not significantly raise the value of its currency within six months.

That punishment could be delayed for 12 more months if China has begun implementing a plan to revalue its currency.

Schumer and Graham first offered their bill as an amendment to other legislation in April 2004. In a sign of growing anger in Congress over the massive U.S. trade deficit with China, the Senate voted 67-33 against an attempt to kill the measure.

That won Schumer and Graham a promise from Senate leaders for another vote on their bill at later date. The two have repeatedly delayed that day of reckoning in response to signs that China was making progress on currency reform.

Last month, Schumer and Graham told reporters they would demand a vote before September 30 unless China take more steps toward revaluing soon. The yuan has appreciated about 4 percent since it was depegged from the dollar in July 2005.

The possible Senate vote has raised concerns of a Chinese backlash, especially if the House of Representatives were to approve a similar measure. Free traders argue the bill would also impose a huge tax on U.S. consumers.

The Grassley-Baucus bill is cast more broadly than the Graham-Schumer bill. Instead of specifically targeting China, it is aimed at all countries that refuse to adopt "appropriate" policies to value their currency fairly.

It directs the Treasury Department to engage the International Monetary Fund and other countries to resolve major currency imbalances with the dollar. It also threatens non-tariff sanctions if those talks are not successful.

For China, that could mean disapproval of U.S. government-backed insurance for projects in that country; denial of international financing; U.S. opposition to more Chinese voting power at the IMF; and continued designation as a "non-market economy" under U.S. anti-dumping laws.

Grassley acknowledged the Graham-Schumer bill had strong support, but said he hoped to defeat the measure by offering senators an alternative.

However, he warned that many lawmakers were frustrated China has taken just a "baby step" toward a freely floating currency.

"It's just not satisfactory and pretty soon there's going to be pressure for retaliation in Congress," he said.