In a recent speech the Chinese Premier has criticized America and has claimed that Chinese currency, yuan, is not too low while around same time, The New York Times exposed how China was using rules of global trade to its advantage. It is time for American and European leaders to realize that China only understands and respects power play. Thus America’s earlier weapon sale to Taiwan was a move in the right direction and despite all the whining by China, its message was well understood by the Chinese dictators.
America and the West must force China to float its currency at the market rate. It is ridiculous that despite a $2 trillion dollars of foreign currency reserve, Chinese currency is still allowed to be pegged to US dollar at an artificially low rate determined by China. There will a lot of support for this action in the world as by keeping its currency artificially low, China is hurting the economies of many other countries.
America should stop worrying that China may retaliate by liquidating its dollar assets. China is smart enough to know that any large scale withdrawal from American bond market will cause a run on dollar and will significantly reduce the value of their dollar assets. After all they are also in a quandary as they have sold real products to America for American paper money.
If China refuses to cooperate and does not agree to float its currency at the market rate, there should be a world wide boycott of products made in China.