Calls for revaluing the RMB are becoming shriller in Washington DC, with a group of Congressmen sending President Obama a letter asking that the Treasury Department declare the China’s currency, the RMB, manipulated. (FT)

The volume in international media, as well, is getting louder, as scholars and editorials are calling on America to consider playing hardball against China’s policy, which the Economist Magazine considers in its latest Big Mac Index to be as much as 50% under-valued. The Big Mac Index measures the cost of a McDonalds Big Mac across a basket of countries: the most expensive Big Macs are to be found in Norway, while the cheapest are in China.

Paul Krugman, Nobel Prize laureate, advocates in an editorial an import surcharge on Chinese imports of as much as 25%. He makes the point that China would not dump its Treasury holdings in retaliation because the holdings would be lose a great deal of value very quickly – the Chinese would lose money, which they hate. A New York Times editorial instead considers America should take a multilateral approach, since the RMB is not just damaging the export strength of America – which is costing jobs in the States – but in other export regions as well, like the European Union, South Asian, South American and African countries. I prefer the multi-lateral approach as well, at least by having the International Monetary Fund weigh in on the issue the same way the World Trade Organization weighs in on trade disputes.

Whatever the approach, the time has come to begin drawing lines on China’s behavior in a world trade and financial system that has been in place for seventy years, and that China is the new kid on the block. In the same way that Google finally said enough is enough, countries need to say the same, or risk election results politicians will regret.

Related posts:

Pulling a “Google” on China

RMB Revaluation: Not So Fast

Poking the Dragon

The “Yuan Trap”