From the London Telegraph:
Is China’s Politburo spoiling for a showdown with America?
The long-simmering clash between the world’s two great powers is coming to a head, with dangerous implications for the international system.
China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand.
There are a lot more gory details in the piece…it’s not cheerful reading.
A part of the overall problem is this:
China opposes US and EU demands for yuan revaluation
Premier Wen Jiabao made it clear during a press conference marking the end of the country’s parliamentary meetings that he did not think the yuan was undervalued and blamed the US for the deterioration in relations between the two superpowers.
He made a renewed call for the US to take concrete action to reassure investors about the security of the dollar, declaring he was still worried about China’s considerable holdings of US Treasury securities, currently standing at just under $900bn (£596bn).
The premier’s comments offered little comfort for US President Barack Obama as he considers growing demands from US businesses and unions to impose trade sanctions against cheap Chinese products. He has urged China to adopt a more “market related exchange rate” and is considering whether to go a stage further and name China as a “currency manipulator.”
An increase in tension has been fuelled by US arms sales to Taiwan and the visit of the Dalai Lama, the exiled Tibetan leader, to Washington along with the attacks on Google which has threatened to withdraw from China unless it can be assured it can run its search engine without interference.
There had been hopes that Premier Wen’s press conference, the Chinese leadership’s traditional platform for sending coded signals to the rest of the world about policy shifts, would provide some pointers to change but economists saw no sign of any movement on the crucial currency question.
So far the deterioration in relations has been reflected by an increase in the level of rhetoric but economists fear President Obama may be forced into tougher action.
Stay tuned.