China has called America’s bluff in what is becoming a game of chicken between the world’s top two economies. On Thursday China’s foreign ministry responded officially to a statement from US Treasury secretary Tim Geithner by saying American pressure on China would not solve the problem.

In excerpts from Geithner’s planned statement at Congressional meetings Thursday, he had said the US would consider ways to push up China’s currency. Could the back-and-forth amount something more than a war of words?

Despite China’s strong assertion, the renminbi has been trading at its highest in more than two years - up 0.18 per cent against the dollar at 6.7259. This fact is being trumpeted by the Chinese media and some China watchers say it may be an indication that Beijing is quietly responding to America’s increasingly fiery rhetoric. However, this is likely to be met with scepticism from the US.