Rise of the Dragon

The currency struggle between China and the US went way over its head. The decision of Tim Geithner, America’s Treasury secretary to postpone the potential Chinese label of a currency manipulator was a wise call. An ancient Chinese proverb says: “to fight with people face to face over advantages is the hardest thing in the world”. The decision of Tim Geithner is strategic; this bilateral currency row will now be on the agenda of future multilateral meetings, which will ease the tension between both parties.



The sought after advantages from China of keeping a low Yuan are to maximise exports employment and offer a competitive production cost.

The latter advantage for China is one reason why the US requires the revaluation of the Yuan; Chinese exports are being unfairly subsidised.

China argues that this demand is for self American protectionism. They also threat that the revaluation of the Yuan will compromise its competitive edge with other Asian countries.

The US is trying to spread its optimistic vision and show the silver lining to China: if the Yuan is stronger, China’s local consumer spending will rise, thus the country can grow its domestic market.

This currency row has an impact on the crucial recession recovery, it is important for both parties to look beyond a single short term advantage.