As its fiscal deficits continue to balloon and challenge the revival of the economy, which is battered by the worst recession since the Great Depression of the 1930s, Washington DC is in no mood to soften its stand on a quick and meaningful devaluation of yuan by Beijing in a determined effort to shore up exports, though the latter has so far not shown any signs to oblige. With two of the world's powerful economies unwilling to budge from their respective stands, the tension is only escalating, as the rest of the world watches with bated breath and looks to an early end to the Yuan-Dollar duel. Could China soften its stand? What would be the possible scenario in case China allows yuan to strengthen against the dollar? What are the options before the US? To find answers to these questions and many more, The Analyst invited eminent experts like David Wyss, Chief Economist, Standard & Poor's, DAR Wong, CEO & Principal Consultant, PWForex.com, and Lynn E Dellenbarger, Assistant Professor, Dellenbarger & Associates, to share their thoughts on the issue.

Today, America owes huge trade deficits to China totaling at US$227 bn in 2009. Besides the trade imbalance, China helps to support the US economy by buying its treasury instruments whenever the greenback loses its value. By doing this, China aims to set its yuan value to be lying in the targeted range of US dollar but always lower than par value. Unfortunately, this makes the Chinese goods cheap and savored by the US consumer market thus forming a vicious circle. As the US government continues to incur higher trade deficits and public debts to China, it further deepens their red figures, unless China agrees to increase its currency value that could expedite the debt recovery.

One needs to remember that before the current Global Financial Crisis, the US was after China to correct their currency valuation. With the onset of the global meltdown, the situation turned worse as the US economy was in the doldrums with rising job losses that hovered around 10%. The only way Uncle Sam could bring back the economy to normal was to request China to revaluate its yuan. Right now the US consumer is buying a lot of cheaper overseas products as budgets are tight. However, if China revaluates its currency vis-à-vis dollar, then it will have adverse impact on its economy, as its goods would become costlier and unaffordable for the American middle-class, who have less purchasing power. One has to remember that during the Global Financial Crisis, the US economy contracted while the economies of China and India grew at 10% annually. The US is trying hard to re-stimulate its economy.

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