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Tensions are rising over China's economic policy. China's reluctance to allow the value of the Yuan to rise is causing great concern to both the US and other trading partners.

Since mid-2008 China has set an exchange rate of 6.83 yuan to the dollar, giving its exports a competitive edge.

But there are widespread complaints that the Chinese government is deliberatly undervaluing its currency, and critics say its policy is damaging efforts for global economy recovery.

Critics also say China is protecting its trade by keeping the price of its goods down, which harms US exports.
 
Both the International Monetary Fund and the World Bank have urged the Chinese government to let the yuan assume a flexible exchange rate.

Pressure is now growing for the US treasury department to officially declare China a currency manipulator, leaving the door open for retaliatory measures.
 
Just what can be done? And could it lead to a trade war?
 
Inside Story, with presenter Shiulie Ghosh, discusses with guests Andrew Leung, an economist and a specialist on Chinese affairs, Ian Begg, a professorial research fellow at the London School of Economics, and Robert Scott, a senior international economist at the Economic Policy Institute in Washington.

This episode of Inside Story aired from Monday, March 22, 2010.

Source: Al Jazeera