Group-think needed

Yuan: No-one shouts louder than American politicians over the value of China’s currency. But other countries may be ready to speak up too. Five G20 leaders this week called for a more “consistent” approach to exchange rates — with fingers implicitly pointing at China. The yuan is a matter of global concern. But widening the debate might not help the US cause.

The euro zone is China’s largest trading partner and the yuan is pegged to the dollar, so euro companies should have more reasons to complain than their American competitors. One dollar, and thus one yuan, is worth quarter less in euros now than in November 2008.

Yet euro zone leaders have grumbled only gently. Rising imports from China seem to be pretty low down the list for them. The issue needs to be kept in perspective. While the zone's deficit with China has grown, it does not have a US-style deficit problem. The euro zone ran an overall surplus in 2009.

What's more, a pricier yuan would be a mixed blessing for the euro zone. If Chinese goods get more expensive, big buyers like the UK and United States might have less to spend on goods from the euro zone. And foreign manufacturers in China would also get squeezed. About half of Germany's exports to China are machinery and electronics, often used in export industries. They would struggle if China's export boom came to an end.

China's Asian neighbours might be more enthusiastic about the US position. After all, they can't easily compete with China's huge, low-cost workforce. But that does not mean they would benefit from a revaluation. Many of them supply parts to Chinese factories, which are then reprocessed into exports. With a stronger yuan, they would have to find new export destinations. Chinese manufacturers might even try to share the pain by squeezing their foreign suppliers.

In a two-way spat, tempers rise easily. Bringing in more voices to the renminbi debate would depoliticise the negotiations, reducing the chance of trade wars. But a fully multilateral approach might reveal an uncomfortable truth for the United States: that not everyone hates the status quo.