When – not IF – China revalues its currency more than just the United States will feel the ripples of global economic re balancing. Last time China released its peg from the dollar to a basket of currencies that included the yen, the euro and the dollar the RMB increased 20% in value from 2005 until the global economic downturn in 2008. This time, the world is different, with China far more cash-rich than it was five years ago and exporters in developing counties feeling the squeeze from China artificially holding down the value of its currency. With a release of the dollar-peg countries that import goods into China should benefit, according to an article in the Financial Times. That means countries that export natural resource minerals and foodstuffs into China should see growth in their export industries as the Chinese renew their spending sprees with a stronger Yuan. Countries like Australia, New Zealand and Brazil may see their currencies strengthening as a result of greater demand for their exports.

If the dollar continues its long-term slide the Chinese may diversify further from the US currency into the euro and yen, to protect the value of its reserves. Ultimately, the key to avoiding the dollar from being orphaned as a reserve currency is for America to clean up its balance sheet and force through structural reforms that increase the value of the American worker on the world market and maintain United States’ preeminence as an innovative culture; manufacturing more accountants and lawyers is not the answer to America remaining a world economic leader.

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