Rhetoric aside, the yuan peg is a benefit to both the mainland and the US
The media spotlight this week may have been on US Treasury Secretary John Snow's visit to Beijing and his call to revalue and float the yuan, but what has been overlooked is the implication for gold.
At the root of the international unhappiness with China's currency level is its rapidly growing trade surplus created by its 'rented economy', which applies since foreign investment controls much of China's low cost production. China is becoming the 'workshop/factory' of the world and is holding down global inflation.
China's senior leadership might still call themselves 'Communists', but in reality the country is run like a holding company along strict reporting lines with one clear objective, namely 7 to 8 per cent annual growth.
The peg between the yuan and the US dollar is facilitating this growth objective, while at the same time it results in lower interest rates in the US. This is because, in order to keep the yuan at the 8.3 level, China needs to buy up surplus dollars and re-invest them abroad, foremost in US treasury bonds.
The peg is beneficial to China's growth target and Alan Greenspan's need to keep long term interest rates and inflation low.