US v China will soon be the dominant fault line of global politics
Ever since 9/11, the US and China have been rubbing along nicely. The US needed China’s support in the war against terror and China is anxious to create the best conditions for its economic growth. But how long will this latest honeymoon last? A string of recent announcements coming out of Washington suggest that the Bush administration may be adopting a rather more abrasive position.
First, China was attacked for the huge wave of textile imports that followed the lifting of the global quota agreement at the beginning of the year, a decision the US had 10 years to prepare for. The US has now imposed quotas on Chinese textiles, as has the EU. Meanwhile the US treasury has demanded that China revalue the yuan within the next six months, describing its currency policies as “highly distortionary”. In fact, even if China does revalue the yuan, it will make precious little difference to America’s huge current account deficit; moreover China’s own current account is broadly in balance, suggesting that the case for revaluation is hardly overwhelming.