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The widely-held belief among both Chinese and Western observers that China is growing increasingly assertive has the potential to create significant challenges for Sino-U.S. relations.
Although China could easily avoid a banking collapse in the face of rising non-performing loans, that effort would place even more pressure on low-consuming Chinese households and make economic rebalancing more difficult.
Chinese production continues to rise faster than domestic consumption, and even if China allows the renminbi to appreciate against the dollar, a rising trade surplus could lead to another increase in tensions.
The recent flare-up in China’s diplomatic posture towards the United States was not in synch with official policy and ran counter to China’s national interests.
The debate over China's currency propagates dangerous myths about both the Chinese economy and the potential benefits of a more expensive renminbi for the United States.
The risk of economic overheating in China now outweighs that of an economic downturn, and government leaders should be able to withdraw stimulus while maintaining strong growth for the several few years.
The dispute between the United States and China over the value of China's renminbi distracts both countries from more important reforms. Policy makers should prioritize maintaining a collaborative relationship over staging another fruitless debate.
Despite China's extraordinary recovery, the debate over its economic prospects has intensified as new questions have emerged about China's exit strategy and its relationship with the United States.
Although China's National People's Congress functions more as a political theater than a policymaking body, it still forces the ruling party to account for its actions and thus represents the best hope for future political liberalization.
If China allows its yuan to appreciate, it will reduce pressure on the Obama administration to officially label China a currency manipulator and would establish a more constructive atmosphere for future cooperation between the two nations.