U.S. pressures China on currency issue, wants free-floating Yuan.

During the first week of September, Treasury Secretary John W. Snow visited China to encourage leaders to allow the country's currency to float freely. Free-floating currency, as opposed to currency targeted to the U.S. dollar, will help appease the damage Chinese exports cause to American manufacturers.

For nearly a decade, China's exchange rate of the Yuan has been fixed at about 8.3 to the dollar, fearing that raising the value will slow the country's steady export surge. During Snow's visit, he met with China's central bank Governor Zhou Xiaochuan, who said that he was open to discussion on a tie to more than one currency in China. Snow responded with encouragement to "interim policy steps" toward a feely traded Yuan, Suggestion also has been made that China may agree in compromise instead of floating the Yuan by reducing currently offered export subsidies, such as tax rebates to manufacturers who export of by purchasing larger quantities of U.S. Treasury bills to help manage the U.S.'s massive budget deficit.

Though Snow's discussions with Chinese policymakers were allegedly "frank and encouraging," the Chinese government has not yet agreed to conform on the current Issue.

Ultimately, Snow is expected to take what he can get as U.S. defense interests area higher priority for the administration than economic policy, and China is playing a key role in discouraging North Korea from developing nuclear weapons.