China is not manipulating its currency to gain unfair trade advantage, the US Treasury Department said Wednesday in a semiannual report to Congress. 

"Treasury concluded that neither China nor any other major trading partner of the US met the requirements for designation" as a manipulator of their currency, the report said. 

However, the report said the Chinese yuan remains severely undervalued against the US dollar, claiming the recent movement of the yuan had been "too limited and modest."

The Treasury issues the report twice a year according to a 1988 law, which requires the department to analyze trading partners' foreign exchange policies and determine whether currency manipulation to gain unfair trade advantage is occurring.

Under the law, economic sanctions can be imposed on countries found in violation.

China modified its currency system in July 2005. Since then, the yuan has risen in value by 12.1 percent.  Chinese officials said a slow revaluation of the yuan was the best way to keep from destabilizing the Chinese economy.