Mr Greenspan and Mr Snow do not see China as a threat to the US

During testimony to the Senate Finance Committee, the two key policymakers said that sanctions would be a mistake and may put the US economy at risk.

The comments come amid accusations that China is manipulating its currency, the yuan, to keep it low and boost exports.

Calls have increased within the US for the administration to take action.

US policymakers are considering legislation that would slap tariffs of as much as 27.5% on many Chinese products should Beijing not take steps to realign its currency.

China has held the yuan at close to 8.28 per dollar for the best part of a decade, refusing to allow it to appreciate even as the country's economy has boomed.

US critics have also complained about a $18.5bn bid from Chinese oil company CNOOC for US crude firm Unocal, announced on Thursday.

'Extraordinarily negative'

Mr Greenspan and Mr Snow, two of the financial world's most watched people, said that while they shared many of the politicians' frustrations, higher tariffs may do more harm than good.

Should the legislation, called the China Free Trade Act, ever be passed, the effects would be "extraordinarily negative", Mr Greenspan said.

There is no crisis at this particular stage Alan Greenspan

Instead, the US would be better served by turning to the World Trade Organization and working to get China to open up its domestic markets.

Congress should avoid "actions based on frustration which don't address the real problem", Mr Greenspan said.

Mr Snow followed a similar line.

"I cannot overstate my firm belief that resorting to isolationist trade policies would be ineffective, disruptive to markets and damaging to America's special role as the world's leading advocate for open markets and fair trade," he said.

Imposing penalties on China would only lead to retaliation and probably prompt Beijing to delay any changes to its currency policy, he said.

Patience was called for, Mr Greenspan said, adding that "there is no crisis at this particular stage".

'Sabre rattling'

Members of the finance committee seemed less willing to wait, and voiced concerns about trade imbalances and the record size of the US current account deficit.

They said there had been a "sea change" in the attitude towards China and its trade policies, and questioned whether the administration of President George W Bush was doing enough to bring about change.

"No more sabre-rattling; we want results," said Senator Lindsey Graham, a South Carolina Republican and a co-sponsor of the tariff legislation.

"We're willing to work [with China], but we're not going to ignore the problem," he said