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In the good old days, the problem and the solution were clear. Now, when the US and China discuss long-term economic issues, there are more elephants in the room than advisers. Prior to the financial crisis, the US trade deficit with China was marked as one of the big global “imbalances”. American consumers were buying too many goods from a fast-growing China, which kept its exchange rate low. A jump in the renminbi, therefore, would help the US deficit while helping China reduce its dependence on cheap exports and move up the economic value chain.

That China let its currency appreciate from above eight yuan to the dollar in 2005 to below seven on Thursday reflected a consensus on rebalancing the world economy. Still, the onus was very much on China to act. Now that the US has plunged into recession, however, and now that China, too, is slowing, there are pleas for help from both sides.

But this week’s Strategic Economic Dialogue revealed muddled thinking. Zhou Xiaochuan, governor of the Chinese central bank, for example, blamed “overconsumption” for America’s travails and urged a higher savings rate. His call not only stands in contrast to the US government’s desperation to get its citizens spending again but would lead to thousands of Chinese toy factories standing idle this Christmas if Mr Zhou’s wish was granted.

Equally, if the surprise depreciation of the renminbi against the dollar this month is a policy shift, China is deluding itself. As Bank of America notes, net capital outflows in the third quarter were a paltry $11bn versus a trade surplus plus foreign direct investment of $108bn. The renminbi is only going one way. Besides, the health of the US consumer is far more important to China’s growth prospects than a small move down in its currency. Ignore the elephants – the old imbalances should remain the focus of these talks.

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