China faces important negotiations over its exchange rate in coming weeks, the U.S. ambassador to China said on Thursday, adding that it was not just the United States that wanted action on the Chinese yuan.

The currency debate has become increasingly acrimonious, with U.S. lawmakers and quite a few economists saying Beijing holds the yuan so low that Chinese goods enjoy an artificial competitive edge that is distorting the global economy.

A semiannual U.S. Treasury report due in mid-April could label China a currency manipulator, triggering greater pressure on Beijing.

We need to show real progress this year in creating new jobs and rebalancing our relationship, U.S. Ambassador Jon Huntsman told an audience of students at Tsinghua University, an elite school in Beijing.

We hope to see more flexibility on the exchange rate, Huntsman said, adding that Washington also hoped to see China lean more on domestic consumption to drive its growth.

I suspect there will be many important negotiations in the weeks ahead, he said in response to a question from a student on the exchange rate issue. The negotiations ahead will be very, very important.

This isn't just an American issue, he added. There are many countries that feel the same way.

DEEPENING RIFT

A bipartisan bill introduced in the U.S. Senate on Tuesday aims to press Beijing to let the yuan rise, threatening a deepening rift between the world's biggest and third biggest economies.

Chinese officials have given no ground, saying they will not waver in sticking to a stable exchange rate while asserting that their nation is being made a scapegoat for the United States' own economic woes ahead of Congressional mid-term elections.

China says its stable yuan has been a boon to global economic recovery.

The rising currency friction has come after two months of quarrels between Beijing and Washington over human rights, China's restrictions on the Internet, U.S. arms sales to Taiwan, and President Barack Obama's meeting with the Dalai Lama.

Taiwan is a self-ruled island that China regards as a renegade province. Beijing reviles the Dalai Lama, Tibet's exiled Buddhist leader, as a separatist.

Huntsman said he was confident that Beijing and Washington could overcome those bilateral strains to focus on solving broader global worries, including the economy, climate change and Iran's disputed nuclear program.

This year we're putting the relationship to the test in trying to take it to a new level, he said. Differences on Taiwan and Tibet cannot prevent us from working together.

(Editing by Ken Wills and Alex Richardson)

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