http://www.businessweek.com/ap/financialnews/D9EK84CG0.htmWe may have reached the point where the Chinese have stimulated their own economy so much that it has offset the undervaluation of their currency. I think if China is running trade deficits or very small surpluses, it undercuts the argument that the RMB is undervalued. It bolsters the argument that they have been contributing their share to the global economy by increasing imports. Of course, if this is true, China has nothing to fear from a float, because it's not like the yuan would rise by very much anyway.
The US policy of restricting exports of technology to China is also exacerbating the bidirectional trade imbalance while many aspects of this policy are going to be less and less effective over time as China imports technologies from other countries anyway.
There may be no way for the US to reduce our own trade deficit short of an "internal devaluation", which in the the best case scenario is a prolonged period of deflated wages, prices, and consumption while corporate and government investment lead the recovery.
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