China’s economic policy has been stable for a decade. With the pegged renminbi exchange rate at its heart, China has pursued growth based on exports and the investment to support them. But with the downturn in the US economy, cuts in Federal Reserve interest rates, and falls in the dollar, the need to rebalance is more urgent than ever before.

Lower US rates causes pressure through two channels: losses to the People’s Bank of China, and the monetary stimulus they give to an economy where inflation is already a problem. Rises in core consumer prices may be moderate, but with food sending headline inflation up by 7.1 per cent in the year to January, the central bank still needs to keep the brakes on demand.