I had been wondering what was going on with the currency report on China so was very interested to see this article reported in the New York Times. It seems that the Treasury Department has decided to delay its report though official statements continue to indicate that many do see China as a currency manipulator. From the article, it also seems there is a view this delay is partially the result of China being more cooperative on other issues.
Personally, while I think the costs of Chinese undervaluation are pretty substantial, I think the costs of trying to correct this remain greater still. There are many reasons for this, to discuss one more I think it is very important to draw China into multilateral institutions for dispute settlement rather than using unilateral actions. A big concern with China is that we want them to act as a responsible member of the international system. What this means in practice is that they don't go their own way and act according to the current rules of the game, rather than seeking to change them unilaterally. This of course restricts our own freedom of action since as the power that basically wrote the rules of the game whenever we violate them we give them precedent to do so themselves.
Similarities can be drawn with the rise of Germany after unification in the 19th century. These parallels shouldn't be pushed too far but the basic dynamic of a rising power still enamored with the potential of being a leader of the international system without being aware of the limits, responsibilities, and costs seems apt. China is at a phase where it does not feel fully integrated into the system but wants the advantages that it thinks comes with this integration. It has not been fully exposed to the costs and responsibilities. Also it has adopted a somewhat intransigent stance on too many issues since an outsize image of power arises from spoiling the plans of others, it has yet to fully realize how much more difficult and limited power is in building up new institutions and agreements rather than blocking them. The press aids in this misunderstanding since spoiling negotiations is always big news, even though it is probably the easiest international action to take.
Back on topic, this is relevant to US action since it is our response to China's rise that will largely determine if we will spend the next century dealing with a dissatisfied partner that will be seeking to rework the international system or if we can help China become invested in the current system so that they will work with us in maintaining an arrangement that has led to unprecedented peace and prosperity. We need to pressure China to take up the responsibilities that come with its position but need to do so in a way that emphasizes the power of the international institutions and rule of law we have built up with so much labor and sacrifice, not undermine them through reckless power politics. Taking unilateral action will not push China in this direction, it will instead reinforce the views they have of needing to build up their own power and capacity for independent action. Instead, we need to seek to build up the WTO and IMF to have greater powers to compel currency manipulators and act through rules established within these bodies. If we seek to compel China through our own actions even if this works it will simply encourage China to seek to manipulate us in the future through its unilateral policies. This doesn't help anyone in the long run.