Selling US dollars at a lower price than the exchange rate would do much more to balance trade than pressuring Beijing.
As a candidate, Barack Obama said he would "insist that China stop manipulating its currency because it's not fair to American manufacturers." As president, Mr. Obama could have fulfilled that campaign pledge well before his visit to China this week.
But swaying China's yuan is easier said than done.
For years, Bush officials accused China of "manipulating" its currency by keeping the value of the yuan down against the dollar. They made little progress.
A cheap yuan lowers the cost of Chinese goods in the United States, while raising the price of US goods in China. In short, it's a major cause of the huge US trade deficit with China.
China desires to keep the yuan pegged to the US dollar at a low value because it believes this is the best way to boost Chinese manufacturing and create millions of job. Such domestic concerns explain why Beijing largely rebuffed efforts by the Bush administration, and now the Obama administration, to raise the value of its currency.
How could Obama break the impasse?
The first step is to get clarity on the problem.
First, there is no issue of "manipulation" with China's currency. The Chinese government is not sneaking around in the middle of the night trying to influence currency prices. China has an official exchange rate that puts the value of its currency well below the market exchange rate. This official exchange rate is widely publicized. We don't have to catch them acting improperly in the dark; anyone can just look in the paper or call the Chinese embassy to ask what the exchange rate target is.
Second, the US doesn't have to "pressure" China to boost the yuan. Contrary to what you may have read in the paper, Washington is not helpless in this story.