A congressional advisory panel is recommending that lawmakers prod the Obama administration into tougher action against what it calls China's policy of keeping its currency undervalued.

With a wary eye on the United States' enormous trade gap with China, the U.S.-China Economic and Security Review Commission said Wednesday that China is creating global imbalances and using "market access-limiting practices" that fall outside its World Trade Organization commitments.

Tensions have arisen between the United States and China over what the commission describes as China's reluctance to revalue its currency for fear of how that might damage its export-driven economy. At the same time, the Chinese government, which wants its yuan to serve as a more international currency, has continued buying up U.S. debt and has become the single biggest foreign buyer of Treasury securities, the commission reported.

"Although the size of China's holdings has raised concerns about the degree of influence China has on the U.S. economy, the lack of alternatives and the potential detrimental impacts on China's economy make it unlikely that China would stop buying U.S. debt or liquidate its holdings altogether," its report said.

Beijing has repeatedly rejected U.S. accusations that its currency is undervalued, and it contends that a stronger yuan will not ease America's yawning trade deficit. Chinese officials say globalization of production also has contributed to trade imbalances and the United States must solve its problems of unemployment, overspending and low savings.

The commission also said in its annual report that lawmakers should require a Pentagon assessment of the military's capacity to withstand a Chinese air and missile assault on American regional bases and the implications of a similar assault on Taiwan's air defenses.

Wang Baodong, spokesman for the Chinese Embassy in Washington, said the commission's report seemed based on false assertions that hark back to the Cold War era.

"I'd say China's peaceful development has helped enhance regional security and global stability," Wang said in an e-mail. "Its responsible economic and currency policy and its sound (World Trade Organization)-related records have contributed greatly to world economic recovery and more balanced and sustainable global development."

The commission's report comes one year to the day after President Barack Obama's first visit to China, where he had extensive talks with President Hu Jintao. The commission recommends a tougher stance on China than either Obama or his predecessor, George W. Bush, has taken.

China overtook Japan as the world's second-largest economy this year, behind the United States. Obama wants to nurture ties with a country the United States must deal with to face some of the world's toughest crises, including nuclear standoffs with Iran and North Korea, climate change and global economic recovery.

The politically sensitive deficit with China, the country with the largest trade imbalance with the United States, hit a monthly record of $28 billion in August and is running 21 percent higher than in 2009.

The commission said China's ability to sell the United States four times as many goods as it imports from the U.S. is "a major drag" on the U.S. economy.

Another focus of the report was on what it called China's "well-developed, long-term strategy for investment in the green technology manufacturing sector," which has given it a competitive advantage.

"As a result of China's comprehensive programs of subsidies and domestic market protections, many U.S. companies are at a strategic disadvantage in the global alternative and renewable energy markets," the commission said.

The commission was set up by Congress in 2000 to advise, investigate and report on U.S.-China affairs. Its report was based on briefings, eight hearings and visits to China, Hong Kong, Taiwan and Vietnam.