The banking panel's top Republican, Sen. Richard Shelby (Ala.), pressed Geithner to explain why the White House won't label China as a "currency manipulator" when "you know they are, we know they are and the whole world knows they are."
Geithner was cautious about treading in that direction, instead saying that China's currency is indeed “significantly undervalued” relative to its growth — about 8 percent in 2009.
In June, China announced it would renew the reform of its exchange rate and allow the rate to move higher in response to market forces.
But since then, Chinese currency has only appreciated against the dollar by 1.5 percent, and has depreciated against the weighted average of the currencies of its trading partners, Geithner said.
"We are concerned, as are many of China's trading partners, that the pace of appreciation has been too slow and the extent of appreciation too limited," he said.
"We need a more balanced economic relationship. This is imperative for us, but it is important to China as well."
Lawmakers remained skeptical that progress is being made.
"I’ve listened to every administration, Democrats and Republicans, from Ronald Reagan to the current administration, say virtually the same thing," Dodd said. "And China does basically whatever it wants, while we grow weaker and they grow stronger."
While China needs to allow significant, sustained appreciation over time to correct this undervaluation and allow the exchange rate to fully reflect market forces, Geithner said the move also "needs to be complemented with structural reforms to reduce the gap between saving and investment in China in order to bring about a durable rebalancing."
Top priorities for reforms include liberalizing interest rates, lifting energy price subsidies and removing barriers to investment in the service sector, Geithner said.