As the November mid-term elections in the United States approach, the Democrats and the Republicans have both found a new villain to run against. "China emerges as a scapegoat in campaign ads," as The New York Times recently put it.
As the U.S. dollar continues to depreciate, many other economies are being forced to intervene in the foreign exchange markets to devalue their own currencies. The world's main economies are trapped in a likely "currency war," which might hamper the recovery of the world economy.
China is increasing made a scapegoat to vilify during the U.S. mid-term electoral campaigns from both Democrats and Republicans, for a much-propagated phenomenon that tens of thousands of American jobs are outsourced abroad, typically the rising Asian economy.
International anxiety over China's currency exchange rate policy appears to be gathering momentum again, given that the yuan has risen only slightly since June 19 when the People's Bank of China (PBOC) made it more flexible.
The expansion of a pilot program aimed at settling cross-border trade deals using the yuan, and Saturday's announcement of a more flexible exchange rate regime, are early indications that efforts are underway to internationalize China's currency.
The plunge in the euro and threat of persistent economic instability has caused the Chinese government to take a more cautious approach to adjusting its exchange rate. But ironically, the collapse of the euro presents a golden opportunity for China to introduce greater exchange rate flexibility.