The United States is losing patience with China as the Chinese move slowly on their currency policy. Many in the US believe correctly that the Chinese are propping up their exports, and hurting US imports, by undervaluing their currency. Larry Summers visited China but no progress has been made . . . at least in public statements.

China rejected pressure over currency Tuesday amid a visit by two high-level U.S. envoys, saying Beijing will set the pace of exchange rate reforms.

Currency has re-emerged as an irritant in U.S.-Chinese relations as American leaders face pressure to create jobs ahead of November elections. Lawmakers who want possible trade sanctions on China set aside complaints as the two governments worked together to end the global crisis but are renewing their demands.

“Exchange rate reform can’t be pressed ahead under external pressure,” said Jiang Yu, a foreign ministry spokesman.

The Chinese don’t want to ;look like they are bowing to pressure, so we all need to go through this diplomatic song and dance. Eventually, a change has to be made.

Many financial experts have been worried about China for quite a while. Specifically, many have been concerned that a real estate bubble has emerged in China, as local governments have spent like mad as they pushed for more economic development for their region.

Concerns are also growing in the Chinese government, and Bloomberg reports that Chinese banks will now be subjected to even more rigorous stress tests.

China’s stress tests of banks will assess the risk that a possible slump in property prices may strain developers’ finances and cause homebuyers to default, a person with knowledge of the matter said.

The banking regulator told lenders to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.

That’s a staggering assumption, but when you read about what’s been going on in China, this shouldn’t be a surprise.

Short-seller Jim Chanos was sounding the alarm back in April.

CHARLIE ROSE

It’s going to be that bad for China?

JAMES CHANOS

I think it’s going to be that bad for the property market in China. Let’s be clear: What we’re talking about is a world-class—if not the world-class—property bubble.

What makes it a bubble?

What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself—a rental property, office building, condo—does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price. We’re seeing behavior [we saw] in 2005 in Miami or ‘06 or ‘07 in Dubai.

You have said it’s a thousand times worse than Dubai.

Well, we said that [with tongue] firmly planted in cheek. But then again, according to a news report this week, there’s a developer that’s going to put in a new Times Square in suburban Beijing, replete with 32 Broadway theaters. You’re beginning to hear about these bizarre developments in China, indoor ski resorts similar to what we saw in Dubai.

There’s plenty more projects like that one. Let’s see if the government can create a soft landing here.

Tensions continue to ease between China and Taiwan.

Taiwan is to open its first office in mainland China since the two sides split at the end of civil war in 1949.

The office – known as the Taiwan Strait Tourism Association’s Beijing Office – will try to encourage more Chinese tourists to visit the island.

The opening of the office is a further sign of improving cross-strait ties.

Taiwan’s President Ma Ying-jeou came into office in 2008 focusing on reducing tensions between the two former rivals.

Since Mr Ma opened up Taiwan to Chinese tourists in mid-2008, the number of Chinese visitors to the island has skyrocketed.

The photo above shows Chinese tourists leaving a duty-free shop in Taipei, Taiwan. Taiwan opened its first tourism office in Beijing to promote tourism and handle tourists’ problems, but will not issue visas.

Taiwan and China split at the end of a civil war in 1949. Tension eased in the late 1980s when Taiwan allowed its citizens to visit China. Last year, some 4 million Taiwanese visited China, while 970,000 mainlanders visited Taiwan.

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