China gets currency pass

Is it understood that China denies it is a currency manipulator? That seems like a fair question to ask.

China's response to the seemingly endless debate in the United States about China's currency policy included detailed explanations about how, if the yuan were allowed to seek its own level on the open market, it wouldn't make that much of a difference, anyway.

In China, so the story goes, there was a stronger yuan once upon a time and that didn't alter the economic imbalance between the United States and China by one iota. So, what's the fuss all about?

The U.S. Treasury Department is also walking a fine line here -- or trying to find a line where isn't one. In its semiannual report to Congress on currency rate policies, the department said the yuan was "significantly undervalued." But, hey, that doesn't make China a currency manipulator, the department said. At least, that does not make it a currency manipulator to the point that it needs to have a scarlet CM sewn onto its outer-garment.

The real question has nothing and everything to do with currency manipulation. That is to say, if it is more effective to skip the label and approach the trade imbalance crisis with a different strategy, then let's have a brainstorming session and make a decision pretty soon.

Frankly, however, rules are rules. They are there for a reason and failure to enforce them is puzzling at best. Further, the U.S. Trade Representative Office is clearly in pursuit of having China play by the rules as enforced by the World Trade Organization. So why go after the economic imbalance vigorously in one venue, the WTO, but then leaving the back door wide open, allowing the currency manipulation polices to go unchecked.

One possibility is that members of President Obama's team might be considering that slight gains are better than no gains at and that a flat out trade war would restrict access to the Chinese market place, which could hurt U.S. businesses, as well.

Frankly, there is nothing quite so valuable in business as getting in on the ground floor and if the next decade or more means Chinese consumers are more familiar with Japanese cars and Korean electronic devises than they are with U.S. goods, then declaring a trade war on China, just as the market is beginning to open up, could do damage that could take decades for U.S. companies to overcome.

In point of fact, what is forcing a reappraisal of U.S-Sino economic policy is exactly what the United States preached for years: China needs to continue to develop a middle class, which will increase a demand for imports and -- already under way -- create higher wages for workers in China.

All that said, labeling Obama a Chinese currency policy enabler is too simple and has to be weighed against the possibility of sparking a full-out trade war.

In the real world, it's not whether China is or isn't a currency manipulator. The question is when it's valuable to officially declare it to be one.

Yes, it is doubtful former Massachusetts Gov. Mitt Romney would have stuck to his pledge of declaring China a currency manipulator on his first day in office. That was one of his "if necessary" pledges that would have upset many of his cronies on Wall Street, who believe growth in the Chinese market is a fairly effective strategy unto itself

In international markets Wednesday, the Nikkei 225 index in Japan fell 1.22 percent while the Shanghai composite index in China dropped 0.89 percent. The Hang Seng index in Hong Kong shed 0.62 percent while the Sensex in India jumped 1.65 percent.

The S&P/ASX 200 in Australia slipped 0.21 percent.

In midday trading in Europe, the FTSE 100 index in Britain declined 0.39 percent while the DAX 30 in Germany gave up 0.53 percent. The CAC 40 in France fell 0.34 percent while the Stoxx Europe 600 lost 0.39 percent.