The Chinese are playing grandmaster chess against an amateur America that can’t see beyond the second move. In a bipartisan display of geopolitical obtuseness, America continues its historic trade policy: It’s free trade, except occasional lapses into protectionism when a whinging constituent must be placated, with a reliance on the World Trade Organization to settle disputes (and believing it has won something of significance when the WTO sides with it in a dispute over such a key product as cheap tires). Occasional public complaints about China’s persistent undervaluation of the renminbi, but refusal to declare the regime a currency manipulator. And conferences, conferences, conferences. All very 20^th century.

China is doing a very different thing. The Communist regime sees trade policy as merely one weapon in a war aimed at overtaking the United States as the world’s preeminent economic and, by extension, military power. The undervaluation of the renminbi is a necessary means of keeping China’s export machine running at full tilt so as to create jobs for the millions who are moving from the country to the nation’s cities. Lacking democratic legitimacy, the regime’s principal claim to the loyalty, or at least the submission of its people, is its ability to provide jobs and a rising standard of living, doubly important in this period of transition to a new generation of leaders in 2012. Americans chortle: that mercantilist program of subsidizing exports cannot be sustained forever, as the inflow of dollars will sooner or later trigger inflation. Right: indeed, that is already happening, and forcing the regime to adopt a variety of measures to curb credit and inflation.