You can trust the Chinese Government to be as self-interested and blinkered as any on earth when confronted with a challenge to its authority.

No, it’s nothing to do with putting down dissent in Tibet or among Uyghurs, no it’s China’s dirty devaluation of its currency that is hurting its rivals in recovering Asia, such as Japan, South Korea and Taiwan.

It’s the Chinese manipulation of its currency’s value as the Yuan has been allowed to move in value with the fall in value as the US dollar in recent months.

With President Obama visiting China for the first time this week and due to raise this very sensitive issue with the Chinese Government, the administration has taken a pre-emptive hit at current monetary policy in the US with a rather juvenile attack:

The US Federal Reserve is fuelling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned on Sunday just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices/”

Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds – has become a trenchant critic of monetary and fiscal policy in the US.

Since the start of the financial crisis, Chinese officials have issued a number of warnings that the US should not inflate away its mounting debt burden. Before these latest comments, however, Beijing had generally been most critical of US fiscal policy, urging Washington to spend less.

But speaking at a conference in Beijing, Mr Liu said the Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery.

[It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,” said Mr Liu, who is chairman of the China Banking Regulatory Commission.

The situation has already encouraged a huge dollar carry trade and had a massive impact on global asset prices.

But China is the biggest beneficiary of that weak US dollar “policy”. The value of China’s currency should be much higher given the country’s improving economic performance, with low inflation, expanding growth, industrial production, retail sales, car sales, and huge foreign exchange reserves.

And China’s own monetary and fiscal policy is lax: the $US585 billion stimulus package a year ago has triggered an upturn in China’s economy, fuelled by 8 trillion yuan of bank loans, far more than the official 5 trillion limit set for this year.

Exports have recovered to be just down on a year ago and imports have risen as the stimulus has sucked in more raw materials from Australia and other commodity countries (and computer and other goods from Japan, South Korea and Taiwan.).

But a rising yuan would have made China’s exports more expensive, but made its imports cheaper and pressed further down on the already low level of inflation. That would have delayed the impact of the stimulus spending and allowed unemployment to remain high, thereby setting off fears of social disharmony and other anti-social (and political) pressures for the central Government.

Thereby it is easier to fix the yuan to the US dollar, allow it to fall as the greenback falls with the flood of cheap money in the US economy.

In effect China is accusing the US of doing what it is doing domestically with its own monetary and fiscal policy.

Logic and consistency has never been a long suit of the Chinese, this latest outburst is nothing but a pre-emptive smokescreen.

For America’s biggest creditor, China is acting strangely. A rate rise in the US would send the US economy lower and markets as well, and probably cost China billions of dollars in value on its US debt holdings by driving nervous investors back into the safe harbour of US Government bonds and forcing market rates even lower.

The cheap money policy has helped the US economy drag itself out of a recessionary rut, just as China’s economy hauled itself free earlier in the year under the same influence.

There is no difference between the current monetary and fiscal policy stances of both countries except the US is conducting its with a floating currency, and China’s is being done behind the wall of a fixed exchange rate, which has attracted huge hot money inflows which the central bank and government can’t control.

It’s much easier berating Americans than dealing with pointed questions about its exchange rate policy, which seems to be on a par with Tibet and the Uyghurs.