If the purchasing power parity (PPP) of Chinese currency is (let's say) three times its exchange rate with the U.S. dollar, then the renmibi can buy three times as much in China as the equivalent amount of USD can buy in the U.S. (I haven't followed the PPP in some years but it's been that before.) It seems reasonable at first glance to suppose that the Chinese must be engineering some sinister currency manipulations in that case. I believe that interpretation would be false; it's only our own national character flaws being reflected back on us.
We can't blame China for our loss of real value-creating jobs. We're the ones sending the jobs there! They're only agreeing to accept the jobs, and why not?
As with an individual's character flaws, this situation is allowed to stand because it serves a narrowly-conceived short-term interest. Here, I mean "narrow" from the perspective of the United States as a whole; mega-banks are hardly a "narrow" interest by most other measures.
Fundamentally, the problem is that the normal goods and services of our real economy compete with the financial goods and services of our meta-economy for buyers of USD. That's why our current account deficit is the mirror image of our capital account surplus: ultimately, USD bought and USD sold must balance, though some might be for stuff and some might be for meta-stuff.
China merely reflects back our excessively low taxes on capital and excessively high taxes on labor combined with severe power disparities in compensation negotations, with collectivized capital on one side and individual labor on the other. Those flaws result in excess capital sloshing around, because workers here can't afford to purchase the value that we produce. That excess capital is then used to invest in Chinese factories, where costs are externalized onto the community through environmental pollution, poor working conditions and (once again) pay scales determined by power, not productivity.
Those factories then produce goods that are taxed by the Chinese gov't to purchase U.S. Treasuries as a reliable store of long-term value, which incidentally makes Chinese products artificially cheap in our markets and makes our products artificially expensive elsewhere, since high volumes of USD are being purchased just to buy financial products for their central bank, instead of their workers using currency as a medium to fairly exchange with our workers. However, we're the ones driving that gutting of our own manufacturing economy! They could hardly react in any other way to our choices that spring from our flaws.
Tangentially, some conservative wingnuts would apparently like to use the Amercian Recovery and Reinvestment Plan to hurt American workers even more by eliminating taxation of repatriation of foreign-earned corporate profits. That is, once again, USD bought for no American goods, so creating no demand for American labor. Does no one bother to learn qualitative economic reasoning anymore?
I assert that we can restore the consumer economy and smooth the capital flows by passing the EFCA (to balance the negotiating leverage) and by raising taxes on capital to at least taxes on labor (plus a securities transaction microtax). We can also level the playing field between responsible employers and community-polluting worker-degrading employers -- whether here or abroad -- by imposing a "Negative Externality Tariff & Tax" (Pigovian tax).
Bottom line: the only way for us to stop exporting and re-importing our national character flaws is to fix them. It's painful, necessary and within our power.
This was originally posted as a comment that I've been too busy to convert until now.