In Washington, politicians and pundits have settled on a single magical solution for the country's economic ills: getting China to revalue its currency, the RMB. By any reasonable economic measure, however, the RMB is not undervalued. China does have a trade surplus with the United States, but it has a trade deficit with the rest of the world. And China 's accumulation of dollar reserves is not the result of trade surpluses, but of large investment inflows caused in part by speculators' betting that China will yield to U.S. pressure. Focusing on China 's currency is a distraction. If the United States wants to improve its economy for the long haul, it had best look elsewhere, beginning with raising the productivity of American workers.

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About the Author
Albert Keidel is a senior associate at the Carnegie Endowment for International Peace in Washington, D.C. Through August 2004, he was Deputy Director of the Office of East Asian Nations in the U.S. Treasury Department, where he supervised its China desk and was its principal specialist on China exchange rate issues. Through the end of 2000 he served as senior economist in the World Bank's Beijing office. Since the latter 1980s he has taught graduate courses on China's economy variously at Johns Hopkins University School of Advance International Studies, George Washington University, and Georgetown University. His recent writings include Exchange-Rate Regimes and Capital Flows in East Asia, Prospects for Continued High Economic Growth in China, China 's G8 Impact, and The Economic Basis for Social Unrest in China. His Ph.D. in Economics is from Harvard University. He speaks and reads Mandarin Chinese.