It is a sure indication of China's importance for the world economy that yesterday's news of a possible shift away from the policy of pegging its currency to the dollar towards a more flexible basket of currencies should receive such international attention.
In an interview, the chief official responsible for its huge foreign exchange reserves, Mr Guo Shuqing, said Chinese preferences are changing. He spoke ahead of a meeting this weekend of the G7 Group and after considerable lobbying by the United States and other international players.
The renminbi has been pegged to the US dollar at a rate of 8.28 since 1997, having previously been spread more widely in a basket of currencies. In the years since then, China's extraordinary economic growth has taken firm root. The sheer scale of industrialisation, investment and new consumption involved, multiplied over these eight years when its economy has grown at an annual average of 8-9 per cent, together with its huge population, has made China a major factor in world economic performance. European, American and Asian firms and national economies have been stimulated in a period of otherwise indifferent performance and have every sign of continuing to do so as they crowd into the Chinese marketplace.
Chinese exports have flourished in line with this performance. Because they are priced in line with a falling dollar over recent years there have been more and more complaints that the renminbi is under-valued. In the US this is said to be responsible for the loss of three million jobs over the last four years, a factor feeding into the US election campaign. Consequently pressure on China to revalue has grown from there and elsewhere - although the US interest is served by the fact that Chinese external reserves are also held in dollars.
In recent months speculative funds have flowed to China, at a rate of $12 billion a month, in anticipation of a revaluation. Since the country's banking system is ill-adapted to deal with such speculation, its government has sensibly been reluctant to opt for a freely floating currency regime. The last thing China - or the world economy - needs at this time is a speculative frenzy similar to that which destabilised other Asian economies in 1997-8. The Chinese authorities are therefore considering changes to the banking system in tandem with possible currency reform. They need to prioritise macro-economic stability in doing so, given the hectic conditions such rapid growth has created elsewhere in the economy.
Mr Guo indicated that such changes will be introduced in the medium rather than the short term. China is gradually lifting capital controls in the expectation of having a basically convertible currency and open capital account in five or six years. It is likely that a basket approach to currency exchange rates would include a more prominent peg to the euro. This would be in line with China's desire for a more multipolar world less dependent on US power. Economics and politics are intertwined in its policy.