Europe’s economic conflagration is generating more than just horrified fascination from the world’s policymakers. The weakness radiating from the eurozone has the potential to inflame existing tensions elsewhere. In the US, though the administration and Congress are casting an increasingly worried eye on the region, the continued irritation of China’s actions on currency and trade remains one of their main preoccupations.

If the American economy stalls and unemployment remains high as the US heads into an election year, Capitol Hill’s patience is likely to wear thin, and fears of an all-out international trade war will rise.

Several potential flashpoints remain. Although Beijing unpegged the renminbi from the dollar in June 2010, it has allowed only a small appreciation this year. And despite some reform of its “indigenous innovation” policy, aimed at creating high value-added industries, China retains an array of domestic interventions including subsidies, procurement controls and the compulsory transfer of technology by foreign companies.