The global trade imbalance continues unabated. The West is sated with debt, the East with manufacturing plant. Are the scaremongerers right about the potential problems?

Last week, finance ministers from the Asia-Pacific Economic Cooperation (APEC) forum called for greater exchange rate flexibility, in what is widely seen as code for China to allow the yuan to strengthen against the dollar.

And in today’s Telegraph Ambrose Evans-Pritchard claims that far from taking over as the engine of growth from an exhausted West, China is making matters worse with its currency manipulation. Its “beggar-thy-neighbour” policies continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.

So will Obama’s trip to the East solve the problem? Hmmm. Even if China chooses to allow its currency to rise, it would take several years to re-adjust itself from an export-led economy to a private demand driven economy.

However, the doom scenario may be going a little too far. As western economies gradually splutter back to life and China faces even more pressure over the Yuan-Dollar peg, we can probably expect a slow shuffling of policies.

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