Does China Expect the United States to Keep an Over-valued Currency?

That would seem to be the implication of a quote from China's former vice premier Zeng Peiyan, which appeared in the Washington Post today. According to the Post, Mr. Zeng wants the United States to guarantee the value of its currency. This is a bizarre request. The United States has publicly been pressing the Chinese government to reduce its purchases of dollars, which maintain the dollar at its current value relative to the yuan and other currencies. The implied threat in Mr. Zeng's comment, that China would stop buying dollars, is exactly what both the Bush and Obama administrations claim that they want China to do. The Post should have pointed out that China appears to be threatening to do exactly what the United States government has been pressuring it to do, stop "manipulating" its currency by depressing its value against the dollar.

--Dean Baker