Wiggle Room

Wiggle room may be what Romney needs. Indeed, his plan to issue a Presidential order on his first day in office could create that room if he merely directs the US Treasury to list China as a currency manipulator in its bi-annual report - effectively delaying action until its April 15 scheduled release.

His campaign literature says the Treasury will use the designation if China fails to bring its currency to fair value. Some academics argue the yuan is close to that point already, based a steady level of foreign exchange reserves, recent capital outflows and its current account balance relative to GDP.

One of Romney's main economic advisers and a top candidate for Treasury Secretary, Glenn Hubbard - a former senior Treasury official and chairman of the President's Council of Economic Advisers from 2001 to 2003 - has said he does not expect the United States and China to get into a trade war.

There's plenty at stake with analysts estimating China could spend $2 trillion globally on FDI in the next 10 years, a salivating proposition for many of the world's top economies struggling for growth and employment opportunities.

Research in September from consultancy Rhodium Group analysed 600 Chinese direct investment transactions in the United States between 2000 and 2012 and concluded that US subsidiaries of Chinese majority owned firms directly supported 27,000 jobs.

Assuming a steady investment trend, Rhodium reckons that number would jump to 200,000-400,000 by 2020.

Meanwhile surveys of US businesses by the likes of the US-China Business Council or the American Chamber of Commerce in China do not rate the value of the yuan particularly high on the list of corporate concerns. Fresh disruption to market access and other corporate complaints are bigger fears.

US executives worried about a business backlash to a diplomatic row have a live example playing out before them in the shape of a festering territorial dispute between China and Japan, that flared in anti-Japanese violence in September.

Boycotts of Japanese goods by Chinese buyers has seen some firms, especially car makers, report sales sinking up to 40 per cent in the aftermath of the most recent flare-up.

Kenneth Jarrett, Greater China Chairman of consulting firm APCO Worldwide and a former US diplomat, most recently as consul general in Shanghai, says the currency manipulator label is not a China-Japan moment, but it would be damaging should a Romney administration apply it.

"It could be corrosive to the bilateral relationship. That's what I would see as the biggest danger," Jarrett said.

"The benefit of declaring the intent to (apply the label) at this stage is quite different to the benefit of doing so when you are sitting in the Oval Office," he said. "I'm not convinced he would do it when push came to shove."

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