Do not be fooled. Financial pressure for an appreciation of the renminbi may have eased, but the case for currency reform remains as strong as ever. Not because George W. Bush, US president, is about to visit China, although Beijing would be unwise to ignore the growing tide of protectionism in its largest export market. Rather, because China’s fixed exchange rate is complicating domestic economic management.

Economics textbooks tell us that undervalued exchange rates eventually result in inflation, because inflows of foreign capital add to the domestic money supply. But in China, indications are that speculation against the renminbi has eased in recent months.