A sudden rise in the yuan would solve nothing
The main beneficiaries of a stronger yuan would not be American and European companies but the factories of Vietnam and Bangladesh.
Much of China’s inflation has been caused by rising food prices, in which the country is practically self-sufficient.
Before we start, let me make a full disclosure. I live in China, but unfortunately I am paid in pounds, not yuan.
When I arrived, three years ago, the arrangement seemed generous. At nearly 15 yuan to the pound, sociable expats could be seen on Shanghai’s Bund drinking £5 martinis with abandon. But it turns out that, according to the dry martini index, the pound was overvalued. A 28pc dip against the yuan since then has helped Shanghai sober up.
These days I may drink less, but my apartment is smaller. I have a nervous tic of scanning the foreign exchange rates for signs of trouble. And I get a queasy feeling in my wallet when economists and politicians start calling for China to revalue its currency.
So let me try to debunk the various arguments underpinning the non-stop nagging for China to have a stronger currency.
In the United States, politicians have been jumping up and down and threatening a trade war for years.