Hu Jintao and Barack Obama talked for an hour on the phone yesterday.
That’s a surprisingly long phone call, although, as one of my colleagues remarked, the conversation probably doesn’t flow smoothly on those calls.
The two men seem to have cut some sort of deal on Iran, but also probably agreed that the rhetoric about the yuan-dollar exchange rate seems to have become a bit too overblown recently. Both sides will probably start dialling down the issue.
And it is about time. Obviously President Obama is under a lot of pressure from American companies, and therefore Congress and the American media, but the issue has received an astonishing amount of coverage.
With China likely to record a trade deficit in March, according to Wen Jiabao, the yuan cannot be that much undervalued. While Chinese exports have recovered since the economic crisis, the real story is that Chinese imports have been rocketing. According to Jim O’Neill, an economist at Goldman Sachs, China’s imports from Germany are growing so quickly that it may eclipse France as a destination market by next spring.
Mr O’Neill reckons that China’s current account surplus, which was 5.8% last year, could be 3% this year, which is below the 4% level that the Peterson Institute for International Economics deems as "equilibrium".
Meanwhile, there is every sign that Chinese consumer spending is growing rapidly, indeed, if the looming inflationary problems are anything to judge by, perhaps too rapidly.