Lower US rates causes pressure through two channels: losses to the People’s Bank of China, and the monetary stimulus they give to an economy where inflation is already a problem. Rises in core consumer prices may be moderate, but with food sending headline inflation up by 7.1 per cent in the year to January, the central bank still needs to keep the brakes on demand.

Because of China’s huge current account surplus, the PBoC has to sell renminbi and buy dollar assets to maintain the currency peg. It then mops up the renminbi by selling local currency bonds. But because it now earns less interest on its dollar bonds, and because the renminbi has been allowed to go up somewhat faster against the US currency in recent weeks, the PBoC is now losing billions of dollars a month on its new and accumulated reserves. That is an uncomfortable position for a central bank to be in.

While the renminbi may have appreciated somewhat faster, its rise has been against a dollar that was falling against other currencies, such as the euro and the yen. The weak US economy has slowed China’s exports somewhat but has not been a heavy drag on demand.

The PBoC needs to tighten monetary policy to keep a lid on inflation but its options are limited. It can raise reserve requirements for banks, but there is a limit to how far it can do so without undermining their profitability. It can raise interest rates, but that would make the dollar reserve problem even more acute. China’s best bet is to allow still faster appreciation of the renminbi, against a basket of currencies, and not just the dollar.

There is a danger that faster appreciation will attract speculators: if a currency is expected to rise, it makes sense to buy now. But China’s capital controls, and its past success in containing hot money flows, suggest it can keep control of the process. The alternative – a large, one-off revaluation – is unattractive given the disruption it would cause to an economy so heavily dependent on exports.

It has long been clear that the renminbi peg was storing up trouble and China needed to start rebalancing away from exports. Now it has a spur to do so. China needs to take this chance and let the renminbi’s rise accelerate.

In recent weeks, China has been pushing back quite effectively against some of the external pressure it faces to accelerate the appreciation of the renminbi. Government officials have joined the chorus of concern about the rapid drop in value of the dollar, which some countries believe is a cause of global inflationary pressure.

Yet this stance disguises the very real debate taking place within China about currency policy. In recent months, Chinese media have been full of stories about the difficulties that parts of the export sector are facing as a result of the rise in the renminbi - up by about 20 per cent against the dollar since the authorities abandoned the dollar peg in 2005.

With the currency currently trading at around Rmb6.85 to the dollar, Tan Yaling, a researcher at Beijing University, was quoted, in late June, saying a rate of Rmb6.5 would be "the line of life and death" for state-owned exporters.

However, with China still facing a relatively high level of consumer price inflation - 7.7 per cent in May - some economists believe that appreciating the currency is the most effective policy for containing inflation.

Moreover, the surge in capital inflows that China has received this year - some in hope of further currency appreciation - has started a discussion about whether the authorities should introduce a one-off increase in the renminbi to stem the tide.

"Policymakers need to weigh the beneficial impact of more rapid introduction of exchange- rate flexibility on containing speculative inflows against the potentially detrimental impact on the real economy," the World Bank said in a recent report.

On the environment, which will be one of the main topics of the summit, recent research has confirmed that China has now become the largest emitter of carbon dioxide in the world.

Until recently, the government's response to such suggestions was to point out that Chinese per capita emissions are well below levels in developed countries. China's leaders bristle at the idea that already wealthy countries will tell it to halt development.

However, the attitude has begun to change in Beijing - in part because of a recognition that climate change could have a potentially huge impact on China itself.

A report published last year by government scientists warned that global warming could have a huge effect on water supplies and agriculture, two of the most sensitive issues in China.

Just a fortnight before the summit, the Xinhua news agency released comments made in late June by President Hu Jintao at a special session of the Politburo held to discuss the environment. "How we cope with climate change is related to the country's economic development and people's practical benefits," he said.

As a result, the tone of China's diplomacy on the environment has begun to shift. Chinese leaders now talk about the need for partnerships with developed countries over climate change.

In a recent piece in the FT, vice-premier Wang Qishan called for the establishment of joint research laboratories between China and the US for new environmental technologies. The subtext of these statements seems clear: China is more willing to become involved in discussions about climate change but the price will be the transfer of technologies developed in the west.