Two senators sponsoring legislation aimed at forcing China to revalue its currency said Thursday they would hold off pressing for a vote at the urging of Federal Reserve Chairman Alan Greenspan (search) and Treasury Secretary John Snow (search).

Sens. Charles Schumer (search), D-N.Y., and Lindsey Graham, R-S.C., announced the delay after meeting with Greenspan and Snow at the Capitol. The lawmakers said they had received indications from the officials that the Chinese were on the verge of moving voluntarily to a new currency system.

U.S. manufacturers contend that China's practice of linking its currency to the dollar has undervalued the yuan (search) by as much as 40 percent, making Chinese goods cheaper in America and U.S. products more expensive in China.

The proposed legislation would impose across-the-board penalty tariffs of 27.5 percent on goods imported from China.

Schumer told reporters after meeting with Snow and Greenspan that "they have convinced us that the likelihood of real progress with China on currency valuation is very real and could very well occur in a very short while, in the next few months."

Schumer said that because of these assurances, he and Graham had agreed with Senate leaders to delay a vote until at least September.

The senators said that would give both countries time to negotiate further on the currency issue.

Graham said Greenspan had convinced him that China was likely to act because it would be in the best interests of the Chinese economy. Beijing could face serious inflation pressures from the amount of money China is spending to keep its currency from rising in value against the dollar.

"By showing flexibility by delaying this vote, we are hopeful that the progress we have seen so far will continue and we will get a resolution that is a win-win for both countries," Graham said.

Greenspan and Snow did not talk to reporters after the meeting, but Snow issued a statement thanking the lawmakers for agreeing to delay.

"I believe that our longstanding efforts are beginning to come to fruition, and we are making progress toward achieving this goal" of a more flexible Chinese currency, Snow said.

U.S. business groups also applauded the delay. John Engler, president of the National Association of Manufacturers, said his organization supports the "agreement because it boosts the prospects for Chinese action by October."

Tracy Mullin, president of the National Retail Federation, said the delay would save American consumers "from the potentially destructive effects of a 27.5 percent tax on consumer goods."

Last week, Greenspan told the Senate Finance Committee that new tariff penalties on Chinese goods would save few if any U.S. jobs while punishing American consumers. Imports from Asia, Latin America and elsewhere, he said, would replace the Chinese products shut out from the U.S. market.

The Schumer-Graham legislation began attracting a good deal of notice after it gained 67 votes — two-thirds of the Senate — on a test vote this year.

After that, the administration took a tougher line, saying China had taken all the steps necessary and could move immediately to a more flexible currency system.

Snow has said if China does not act by October, the administration probably would brand it a "currency manipulator" in a report sent twice a year to Congress on currency practices.

Chinese officials insist they must take more steps so their financial system can withstand the volatility that such a change would bring.

Most experts believe China will not move to a free floating currency, in which the value is set by financial markets. Instead, they predict an interim step, such as linking the yuan to a marketbasket of currencies.