HONOLULU, EAST-WEST WIRE — Tensions in U.S.-China relations have been rising recently. Trade spats, alleged Chinese hacking attacks, differences over Internet freedom standards, U.S. arms sales to Taiwan and the meeting between President Barack Obama and the Dalai Lama are all souring the world's most important bilateral relationship.
An old and especially intractable issue is now being added to this long list: the management of China's currency, the yuan or renminbi.
Although this issue has caused considerable friction in U.S.-China relations in the past, it promises to be even more inflammatory this year. China has emerged from the global financial crisis better than any other major economy, with its exports now growing again. Chinese officials want to sustain this upturn while creating as much stability as possible in China's external economic environment. A stable yuan-to-dollar exchange rate underpins this policy objective.