Many hope the G20 summit can reach an agreement in which large countries co-ordinate their currencies, staving off a full-fledged “currency war”. The US Treasury secretary Tim Geithner proposed a cap of 4 per cent for a country’s current account surplus/deficit in the preparatory meeting of finance ministers and central bank governors. Much of it is geared toward the renminbi. Ideas of a Plaza Accord 2.0 have been floated in American policy circles for a while, in a bid to force the renminbi to revalue, just as the Plaza Accord of 1985 forced the Japanese yen to revalue. But such an idea is more hope than reality. At the summit, China will stand firm against any attempts to force fast appreciation.

To most analysts inside China, officials and academics alike, the row has been largely caused by the US’s loose monetary policy. The Fed’s launch of a second round of quantitative easing (QE2) of $600bn has reinforced this view. Taking advantage of the dollar’s status as an international reserve currency, the US has decided to send its domestic problems to other countries, through aggressive devaluation. In this the US is treating the value of its currency as if it were a pure domestic issue, leading many in China to see a double standard.

The debate is also not helping to convince China’s leaders. It has been framed as a zero-sum game between China and the world. China is blamed for making undue gains by keeping its currency artificially low. But it is conveniently forgotten that China is also contributing to the world, by providing cheap goods and credit.