By Henry Hoyle

Last week, Jim O'Neill, head of Goldman Sachs Asset Management and a longtime China expert, made the bold claim that China's allowing the yuan to appreciate is part of a "grand bargain" with the United States to win support for enlarging Beijing's clout at the International Monetary Fund (IMF). (The yuan has gained about 3 percent against the dollar since June.) O'Neill's assertion echoes others who have argued that IMF governance reform should be made contingent on concessions from China to revalue its currency. The theory may be entertaining to discuss, but there's no real evidence of a quid-pro-quo here.

The United States has long supported giving China more power at the IMF -- even in the face of the yuan's painfully slow pace of revaluation. The United States backed China's bid to expand its influence at the IMF as early as 2006, and then did so again at the G-20 summits in 2009, when China was refusing to let its currency budge.

If a deal was indeed struck, as O'Neill claims, it raises a couple of questions. First, why would China abandon its longstanding refusal to negotiate the value of its currency? And second, why would Washington believe Beijing even if the Chinese promised to let the yuan rise? China has strengthened its currency this year only when foreign pressure was nearly over the boiling point, and even reversed appreciation when international attention temporarily dwindled over the summer.

To O'Neill's credit, the concept of a "grand bargain" did factor into the original U.S. rationale for backing IMF reform that favored China. According to what a senior Treasury Department official said in 2006, granting China more voting rights at the IMF would encourage Beijing to abide by international rules and accept best economic practices. But for the past few years, Chinese policymakers seem to have operated under the assumption that once China's economy grew large enough, the West would support the expansion of China's IMF voting rights regardless of whether they made concessions. In light of the IMF's recent decision to approve China as its third most powerful member, that assumption appears to have been correct.

If, despite all this evidence, O'Neill is still right, one thing is certain: The West certainly didn't strike a very good deal. China secured its expanded voting rights in the IMF without falling into line with international norms on currency rates, export subsidies, or market access. Calling the G-20 deal a grand bargain puts too positive a spin on it. We might as well call it a giveaway.