President Barack Obama, on his first visit to China this week, urged the government to allow its currency to rise. President Hu Jintao politely chose to ignore him. In recent weeks Jean-Claude Trichet, the president of the European Central Bank, and Dominique Strauss-Kahn, the managing director of the International Monetary Fund, have also called for a stronger yuan. But China will adjust its currency only when it sees fit, not in response to foreign pressure.

China allowed the yuan to rise by 21 per cent against the dollar in the three years to July 2008, but since then it has more or less kept the rate fixed. As a result, the yuan’s trade-weighted value has been dragged down this year by the sickly dollar, while many other currencies have soared. Since March the Brazilian real and the South Korean won have gained 42 per cent and 36 per cent respectively against the yuan, seriously eroding those countries’ competitiveness.

Speculation about a change in China’s currency policy increased in the week before Mr Obama’s visit, after the People’s Bank of China tweaked the usual wording in its quarterly monetary-policy report. It dropped a phrase about keeping the yuan “basically stable” and added that foreign-exchange policy would take into account “international capital flows and changes in major currencies”. But exchange-rate policy is decided by the State Council, not the central bank. And many policymakers, notably in the Ministry of Commerce, do not favour a revaluation right now.

Indeed, Chinese officials have become bolder in standing up to America. “We don’t think that it’s good for the world economic recovery that you ask others to appreciate while you depreciate your own currency…It’s also unfair,” said a spokesman for the Ministry of Commerce on November 16th. The previous day Liu Mingkang, China’s chief banking regulator, blasted America for its low interest rates and for the falling dollar, which, he suggested, might be encouraging a dollar carry trade and, in turn, global asset-price bubbles. He strangely ignored the fact that China’s own overly lax monetary policy, partly the result of its fixed exchange rate, risks fuelling bubbles in its domestic property and equity markets.

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