A crack has opened in China’s monolithic resistance to strengthening its undervalued currency. Zhou Xiaochuan, People’s Bank of China governor, called the dollar peg an anti-crisis policy which can “sooner or later” be modified.

Letting the renminbi appreciate from its current value of 6.83 per dollar would be good for the world. Not so much because shrinking China’s trade surplus would boost global demand much – it amounts to less than half of one per cent of world output – as because it would forestall a resurgence of the cheap credit tsunami that helped to cause the subprime bubble.

But much more importantly, it would be good for China. It is after all absurd that a poor country (national income per capita was some $3,000 last year) should be devoting its human and physical resources to producing gadgets for the enjoyment of consumers elsewhere when ordinary Chinese are not reaping the fruits from this effort. A large part of the proceeds is instead saved and recycled into lending to rich western countries.

A stronger currency would also help to lift some pressure off an economy running at dangerously high steam. Bank lending jumped to $1,400bn in 2009, which kept growth humming through the global recession. The cost was a red-hot real estate market whose turnover nearly doubled from 2008.

Chinese leaders are not oblivious to these arguments. They have allowed a gradual appreciation of the renminbi before: its value against the dollar rose by 21 per cent between 2005 and 2008. Politically, however, they cannot afford to be seen as caving in to foreign pressure. The point of Mr Zhou’s new tones – against a long-ringing chorus that appreciation is not on the cards– may be to prepare the political ground for allowing appreciation to resume.

If so, it is a development to be welcomed. But it is only a small part of the equation. Exchange rate adjustments cannot alter the underlying structure of this economy built for export without the political will to lower an extremely high savings rate, shift investment into activities that better match the needs of Chinese citizens, and start to run down bloated reserves. That is unlikely as long as mercantilist thinking continues to dominate the renminbi debate.

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