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The article reports on the economic relationship between the U.S. and China. The U.S. has long been urging China to revalue the yuan, but the article argues that the change could be bad for the U.S. America has filed a complaint against Chinese export subsidies with the World Trade Organization. The Department of Commerce has put 10-20% tariffs on paper from China and is filing more complaints over pirated media. China could see its economy explode with a revalued yuan.

This article looks at how China has helped to finance America's vast current-account deficit. Until last year nobody seemed to care that the Chinese yuan was pegged to the dollar. But now China's exchange-rate regime has become one of the hottest topics in international finance-yet more evidence of China's growing influence on the world economy. Many economists argue that China's fixed exchange rate distorts trade and investment flows.By refusing to allow its exchange rate to rise against the dollar, China, they say, is hindering the adjustment in global exchange rates needed to reduce America's current-account deficit, which now stands at more than 5% of GDP. As a result of its pegged exchange rate and large capital inflows, China's foreign-exchange reserves have more than doubled since early 2002 to over $480 billion, most of it in American government securities. China is not alone: other Asian economies have also intervened heavily to prevent their currencies appreciating. But sooner or later, those economists say, China will lose its appetite for dollars, causing the greenback to tumble. However, Michael Dooley, David Folkerts-Landau and Peter Garber at Deutsche Bank reject this view. In a series of papers, they argue that America's current-account deficit will be happily financed by China and other Asian countries for at least another decade. This view of Asia's relationship with America helps to explain why in recent years it has proved possible to finance America's large current-account deficit without a bigger rise in American bond yields or a bigger fall in the dollar.

The article reports that the Chinese military has been keeping its weapons development programs secret. The U.S. has reported that it is concerned over China's continued military secrecy, saying that it should state its intentions more clearly. The Chinese defense department published a 105 page paper describing its military ambitions, but the paper is unclear and lacks details.

The article discusses a controversy involving auditor Deloitte. Its affiliate in Shanghai, China quit as auditor for software company Longtop after questions arose about Longtop's financial statements. The U.S. Securities and Exchange Commission has issued a subpoena for Deloitte's working papers for its May 2011 audit of Longtop. Deloitte says it can't comply without breaking Chinese laws.

The article reports on U.S. Defense Secretary Donald Rumsfeld's first visit to China. Chinese officials let him see their nuclear-missile command center and address Communist Party cadres about the need for more transparency. But military ties between the two countries are not about to blossom. Mr Rumsfeld made his misgivings clear in a speech at the Central Party School where mid-ranking cadres are groomed for leadership. Every society, he said, had to be "vigilant against another type of Great Wall" that limits speech, information or choices. And he claimed that other countries wondered why China was rapidly building up its armed forces without acknowledging it. The Chinese have long angled for a visit by Mr Rumsfeld, hoping that this would symbolise America's willingness to put aside the fracas that broke out between them in April 2001 when a reckless Chinese fighter bumped into an American reconnaissance plane, forcing it to make an emergency landing in China. In their first "white paper" on democracy-building, issued during Mr Rumsfeld's visit, China's leaders made it clear that they had no plans for significant political reform.