China to let Yuan Rise 5% against the US Dollar in 2011

According to a Chinese newspaper, China will let the yuan rise about 5 percent against the dollar in 2011 as it needs a stronger currency to combat inflation and avert asset bubbles.  I have favored Ben Bernanke's QE approach as it did help prevent a double dip, but more importantly, it pressured China to strengthen its currency.  When the US increased its money supply, through measures such as QE2, it also exported some inflation to China by forcing China to print more of its currency to purchase the new dollars created by QE2. 

Among other manipulative measures China has taken (hoarding precious metals and limiting the export of these metals), China has held an unfair advantage against the US with an extremely under-appreciated currency.  China has barely budged to appreciate its currency over the last 3 years and the Fed's QE2 decision has been the most successful method of forcing China to appreciate its currency.  The US can now focus on the bigger picture: Provide an accommodating environment for businesses to innovate and start planning for some fiscal discipline once the private sector has taken back the reigns.