China's exchange rate policy is once again the topic of the day in foreign circles. Pressure is mounting on Beijing to stop alleged currency manipulation and allow the yuan to strengthen. Thank goodness Beijing isn't paying heed. There is little doubt what would happen if the Western critics were obeyed. While they can't agree on how much they believe the yuan is undervalued by, figures can range up to 50 per cent. American Nobel Prize-winning economist Paul Krugman this week put the value at between 20 and 40 per cent. Were the central government to act on such claims, it would have serious implications for the nation and the world. China's exports would drop, leading to factory closures and unemployment. The burgeoning domestic market would be hit. Global trade would be sent into a spin. Foreign companies with manufacturing operations based in China would suffer. So, too, would foreign consumers, who would have to pay more for goods. Sensibly, Premier Wen Jiabao on Sunday rejected the latest calls, which are mostly being made by American lawmakers. He said the yuan was not being manipulated and pledged to ensure its value remained stable. As a concession to critics, he recommitted to pushing ahead with reform of the exchange rate mechanism. This was a wise move; with the possibility of trade tension with the US looming, there has to be a willingness to at least listen. American legislators do not seem to understand the delicacy of the situation - or if they do, they certainly aren't speaking with any degree of nuance. They demanded at the weekend that US President Barack Obama get tough with Beijing, telling him they want the US Treasury Department to designate China a currency manipulator. If it makes that ruling at a meeting on April 15, Washington would be required in principle to promptly begin negotiations on the issue. That, in turn, would strain trading relations. There is no argument that Beijing has maintained its currency at a level that helps exporters. Since July 2008, it has pegged the yuan to US dollar at a rate of about 6.83. China's weathering of the global financial crisis indicates that it has worked, at least for now. The reality is that if Beijing is forced to revalue the yuan, it is going to do so at a rate that has minimal impact on trade. It is not in the interests of the nation that changes are made at a dramatic rate. China simply can't afford it. And neither can the world afford a damaged Chinese economy. Nor does the region want a trade crisis between Beijing and Washington. Such tension has political consequences that will be destabilising. China's neighbours are already concerned about its ambitions and intentions. They do not need a rift that forces a choosing of sides. It would also put pressure on the global trading regime. There is no denying the value of the free trade and its benefits to the global economy. The true value of the yuan is a matter of conjecture. It is impossible to put a percentage mark-up on it against other leading currencies; no one can truthfully be sure of what it should be. Ultimately, market forces are the only genuine indicator. But turning to such a process shouldn't take place until imbalances in the mainland's economy have been resolved. It is wrong for other nations to expect otherwise.