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Rebalancing the yuan needs nerve and skill

First published: The Times, 14/10/2010

The recent tension between China and Japan over the Senkaku Islands prompted Japan’s Foreign Minister Seiji Maehara to wonder whether not a few countries are starting to glimpse “the essence of China”. He is not alone. Military analysts fret about China’s naval build-up in the South China Sea and beyond. Political strategists are losing count of China’s acquisition of resources across the world. This year alone these include the acquisition of stakes in Canada’s oil sands, Australia’s largest methane gas company and, most recently, Brazil’s oil and gas industry.
The sharpest caricature of China’s essence resides in the controversy over the yuan and US-Chinese trade. It lies at the heart of the eruption of concerns about global “currency wars” and the failure at the IMF annual meeting in Washington to devise an acceptable strategy to reverse this form of protectionism. Yet, while the focus on the value of the yuan exchange rate is relevant, it is also too risky and too narrow……… more