Before we dismiss China's change of policy on currency revaluation as a pre-G20 public relations stunt, let's focus on something else. The salient fact here is that China reversed its policy under foreign pressure.
 
Conventional wisdom is that confronting China -- pressuring China -- doesn't work. China apologists tell us that foreign pressure is counterproductive. It only, they say, makes the Chinese dig in their heels.

Bullshit. As China's flip-flop on currency manipulation shows, its dictators only understand one language -- force. For over a week, they insisted that they would not revise their currency policy. A government official said that foreign leaders at the G-20 summit should not even bring up the matter. Other officials belittled the U.S. Congress for warning that it would pass trade sanctions unless China starts revaluing its currency. But Congress hung tough, and the Chinese decided to think it over more carefully. Even if their policy reversal is largely symbolic -- even if they don't revalue the yuan as dramatically as the 30-40 percent necessary -- they have already done something remarkable. They blinked. 

This shows that pressure works with China. To get China to change its policies, there needs to be foreign pressure, but not just haranguing. That pressure needs to be backed up with credible threats that will hurt China's interests, such as Senator Schumer's threat to impose tariffs on Chinese imports.

Pressure works. That is the point to remember. China's leaders will back down when put under severe pressure.

The next time some China apologist tells you pressuring the Chinese leadership doesn't achieve results, point to this week's policy reversal as proof to the contrary. And tell them their claims are bullshit. Especially if that apologist is Secretary of State Clinton, and you run into her at a reception, or you get to ask her a question in a public forum,  and she says pressuring China about human rights doesn't work.

Pressuring China is the ONLY thing that works.        

That's the question Congress-watchers are asking. For over a year now, support has been building in the U.S. Congress for punitive trade sanctions against China. The chief proponent of sanctions, in the form of tariffs levied on Chinese imports into the U.S., is U.S. Senator Charles Schumer (D-NY.) Our of deference to the Obama White House, Schumer has held off from pushing legislation, to give Geithner and Clinton time to negotiate with China about its currency manipulation. But patience has run out. China's recent $19 billion monthly trade surplus with the U.S. was the final straw. Schumer and two hundred other legislators are demanding concrete action from China. If they don't see results at the G-20 meeting, Congress will take the action into its own hands. 

Schumer is incensed by China's currency manipulation. China's decision to peg the value of the Yuan to the dollar in 2008, after a period of steady upward revisions to its currency, is a "beggar-thy-neighbor" policy. Its effect is to make Chinese imports lower-priced, so that China can mantain its share of the U.S. import market -- but it comes at a price to the U.S. That price is a loss of U.S. exports, which means Americans lose jobs so that Chinese workers can keep them. Now, China's economy grew at almost 10% last year, while America's growth was flat. China ran trade surpluses while the U.S. ran trade deficits. China has budget surpluses, while the U.S. is digging deeper into the deficit hole to try to create jobs through stimulus spending.

In a world of free financial markets and currency exchanges, these factors mean that China's currency should be rising against the U.S. dollar. But China's dictatorship doesn't want to play by the rules of the free market. They manipulate their currency to keep their exports cheap. The Yuan, credible economists think, is undervalued by 30-40%.

For years, U.S. officials, starting with Bush's Treasury Secretary Hank Paulson and continuing with Obama's Treasury Secretary Tim Geithner, have tried to jawbone the Chinese into letting their currency rise. But China not only isn't budging, it has warned every other member of the G-20 not to raise the issue at next week's meeting.

Who will blink? China, or the G-20? Or neither? There is every prospect that China won't budge on its refusal to allow its currency to float, and that the G-20 will make ineffective demands. If that happens, world tensions over trade will continue to rise. 

But if the G-20 blinks, there will be fury in the U.S. Congress. There is already enough support for trade sanctions to pass, although perhaps not even to override a presidential veto. But no one knows whether Obama would risk a veto, and the use of precious political capital, to spare China sanctions. He may actually want Congress to take action, so that he can then argue with the Chinese that currency revaluation is in China's best interests. Put simply, Obama offers the carrots, but Congress wields the big stick.

China has already made a huge mistake by authorizing an official spokesman to castigate and ridicule American politicians for threatening sanctions. This is very foolish and shows a complete misreading of American representatives and senators. As anyone who has ever worked with Congress knows (and by the way, I have worked as a registered trade lobbyist so I know what I'm saying here) our elected officials have huge egos. Ridiculing them is no way to win their support. To the contrary, China's insulting remarks about our Congress are probably all that is needed to guarantee punitive legislation if China doesn't act unilaterally to let its currency rise in value.

So keep your eyes on the news coming out of the G-20. The impasse over trade and currency is likely to explode, with major legislation coming out of the U.S. Congress. That legislation will put a severe crimp in the plans of China's dictatorship to grow their economy at the expense of jobs in the rest of the world. The days of China's free ride are coming to an end. And that is good news for Tibet.