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In 2007, China's current account surplus (mainly trade) reached 11 percent of its economy (gross domestic product). But as China has moved up the value chain - from toys to telecommunications equipment - and as the world economy weakened, its surpluses have become more threatening to more countries.

China embraced an investment-led and export-led economic model, explains economist Eswar Prasad of Cornell University. Manufacturers receive subsidized land and energy; the exchange rate of the renminbi is controlled and kept depressed, making Chinese exports more competitive on world markets and making imports into China more expensive.

It's not just Americans who resent the unfair export advantage of an undervalued currency; Europeans, Japanese, Mexicans and others are also unhappy.

Savings normally go toward new factories, machinery and offices. But China's domestic needs for these aren't large enough to absorb all that saving.

That's why it needs more consumer spending, lest it export more to compensate for lack of domestic demand

The Chinese know this. They even embrace the goal of stimulating consumer spending and are trying to do so. But until they succeed, they won't relinquish the crutch of an undervalued exchange rate.

The United States has let the dollar depreciate to cut its trade deficit. Because the renminbi is pegged to the dollar, the depreciation actually improves China's export competitiveness against some countries. All this looks less like rebalancing than a dogfight - among China, the United States and others - for competitive advantage.

Some Chinese economists warn that the benefits to America from yuan revaluation are much exaggerated. In particular, a stronger yuan would not significantly reduce America’s trade deficit. There is little overlap between American and Chinese production, so American goods cannot replace Chinese imports. Instead, consumers would simply end up paying more for imports either from China or other producers, such as Vietnam. This would be like imposing a tax on American consumers.