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"Our previous legislation got China's attention," Schumer boasted at a June 13 press conference. "The purpose of this legislation is to require them to change."

Schumer's "elegant solution" to the China conundrum involves identifying "fundamentally misaligned currencies" for "priority action" in 180 and 360 days if the misaligned country fails to adopt "appropriate policies" to realign itself. The final step would require the Treasury and Federal Reserve Board to consult with other central banks and consider "remedial intervention in currency markets."

As a practical matter, how would that work? Schumer's elegant solution seems to have some inelegant operational difficulties. For example, how exactly would the Fed sell dollars and buy yuan, a currency that isn't freely traded in the open market?

Policy or Politics?

Graham's protectionist motivations derive from the fact that South Carolina competes, so to speak, with China in textile and apparel manufacturing. At the top echelons of that competition is billionaire Roger Milliken, head of a multinational textile empire based in Spartanburg and a major Graham supporter. It wouldn't be a huge leap to assume a connection between Milliken's contributions and Graham's trade positions.

Critics of China's currency-management policy claim the yuan is undervalued by as much as 40 percent, giving the country's exports a competitive advantage.

You never hear much about the disadvantages, about China paying artificially inflated prices for the capital goods and intermediate materials it imports. It overpays for vast amounts of raw materials, everything from oil to copper to steel.

At the same time, do American consumers want to pay 40 percent more for underwear and other low-end apparel from China? (China's lost market share would be other emerging countries' gain, but it would still mean higher import prices for Americans.)

League of Its Own

China still has a long way to go to reform its domestic financial system and move from a managed to a flexible exchange rate. Because it lacks developed capital markets and a monetary policy of its own, China has to resort to various administrative measures to manage its booming economy.

Special coverage: RMB in Spotlight Related readings:  US pass on China currency stirs Senate action  China: Don't press us on yuan  Bush administration: China not currency manipulator  China warns US Congress on trade bill

The People's Bank of China raised its one-year benchmark rate by 100 basis points in the last two years, hardly an onerous increase in an economy that continues to barrel ahead at 11 percent. It increased reserve requirements five times this year.

In addition, China cut tax breaks for exporters, imposed limits on real-estate investment and land use, implemented environmental controls and tripled the stock transfer tax.

Change doesn't happen overnight, especially in a country impoverished by decades of state control of the economy. Congress seems to have run out of time.

Schumer said there's broad bipartisan support for the currency bill in the House and the Senate, and he expects it to pass with a veto-proof majority.

"A large number of people in both parties got the China issue wrong," Griswold said. "To intentionally weaken the dollar to gain some illusory trade advantage is a fool's errand."

Now there's a challenge Congress won't be able to resist.

(Special courtesy to Bloomberg News)

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