It does not compute. Global economics, but not as we know it, Jim

Analysts saw Geithner's visit to China as a last-ditch effort to make some progress on the yuan issue because the Obama administration was coming under mounting pressure from Congress and businesses, which argue an undervalued yuan is undermining the US economy.

SCMP, April 8

Let's review how this 'undermining' supposedly works. What we have, says the accepted story book, is China rigging the yuan by fixing it at an unjustifiably weak level against the United States dollar.

This renders wages in China very low in US dollar terms and therefore allows China to export goods to the US at low prices for American consumers. Conversely, imports from the US are very expensive in China because they cost so much in those artificially cheap yuan. The result is a huge trade imbalance with the US.

If only we could tell Beijing to revalue the yuan to a stronger level then China's exports would have to be priced higher and its unfair advantage would be gone. Trade would then come back into balance and we would all live happily ever after. Have I got the story about right?

Good. Then look at the first chart. The blue line on top tells you that average wages in China have gone from the equivalent of US$66 a month 12 years ago to US$400 a month now, an increase of more than 500 per cent. I won't absolutely swear by these official statistics but we are talking such a huge scale of movement that the story they tell can't be far wrong.