A worker stands on oil well pipes at a factory in Huaibei, in central China's Anhui province. If China lets its currency rise, the entire world economy will face a shakeup. (Associated Press)

America is cracking down on China. Maybe.

The word is they've had enough and aren't going to take it any more.

China is cheating, "manipulating" its currency.

As I have discussed before, there is no question that China has been manipulating its currency. A lot of other countries have been trying to manipulate their currencies, too. It just happens that China has the clout to actually do it.

Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC.

But all this could soon change.

The United States may be about to have a hissy fit. Within the next two weeks, the U.S. Treasury Department has to decide if it will officially call China a "manipulator" to its face.

If the U.S. does, or if China is afraid it will and lets its currency rise, the entire world economy will face a shakeup. And despite all the intemperate China-bashing on the internet, the results may not be as good as the complainers hope.

The way the conventional story goes is that China is to blame for the current U.S. — and maybe world — downturn. China has been playing tricks.

Free-floating currencies have a sort of balancing effect on any country's sudden surge of economic strength. If a country A, say the United States, buys a lot of stuff from country B, say China, the increased demand for currency B pushes its value up.

But China didn't let that happen.

Instead, the Chinese central bank went into the market and used the people's currency — the renminbi — to buy lots of U.S.-denominated securities, equalizing the effect and holding the renminbi down.

The U.S. argument is that China is distorting the world marketplace, making sweated Chinese goods cheaper for Americans, and preventing the increasingly wealthy Chinese from blowing out on sweated U.S. goods.

According to the sophisticated high-finance measure of relative currency value, the Economist magazine's Big Mac index, the renminbi, also called the Chinese yuan, is worth about half what it should be.

Country C — Canada

But let's get to what I really want to talk about, country C. Canada.

Canada sells a lot of oil to the world market, and we sell it in U.S. dollars. As I write we are selling that oil at almost $85 dollars a barrel.

China, because of its undervalued currency, is paying a lot more than that. According to the Big Mac Index, China is paying double. That means for every barrel of oil we sell to the Chinese, we get two barrels of oil worth of Chinese labour.

Which brings us to the question, "What does that have to do with the price of eggs in China?" And of course in this case that answer is, "Everything."

Eggs aren't fancy international goods like Big Macs, so the comparison is even more striking.

If we assume my internet sources are correct, in China, eggs cost about 50 cents a dozen. Here in Canada, it is hard to get a dozen eggs for less that $2.50. So while we pay about 400 eggs for a barrel of oil, Chinese people have to pay more than 2,000 eggs for the same barrel.

When we buy things made in China — whether clothing, or garden tools or electronics or millions of other things that are partly or wholly made in that country — we are paying the Chinese price for eggs. We are paying the Chinese price for shelter and transportation and leather and thread.

That's why a pair of leather gloves is cheaper now in Canada than it has ever been.

But when Chinese people buy oil, they are paying world prices, the same prices we are. That's a very good deal for Canadians. Not so good for Chinese oil consumers, or egg producers, but they can hardly blame us for that.

What if China's currency rises?

The next question is, what happens if China does actually raise the value of its currency to the "true" level?

If China did double the value of its currency, it could buy more manufactured goods from Canada. But they are unlikely to buy that much more from us. Chinese industry can make just about everything we can. Besides we don't have any glove factories any more.

The specialist things we manufacture they buy anyway. Maybe China will buy a few more of those.

We can sell them some fancy Canadian agricultural produce, but even after a "correction" of the currency according to the Big Mac Index, Chinese eggs — and many other products - will still be cheaper than ours.

But there is one huge change that will happen.

Suddenly, for the Chinese, the price of oil and other resources will become a bargain. And at the same time the relative purchasing power of our dollar will fall.

Resource exports are a gigantic share of our economy, so Canada will benefit more than our southern neighbour. But if you think China is sucking up a lot of the world's resources now, just wait till the people's currency completes its long march to the free float. That sucking sound will be oil pouring out of the world economy and into the Chinese industrial machine.

It seems clear to me that the renminbi is bound to rise eventually. Even if it happens gradually, it will transform the world economy in ways we can hardly begin to understand.

The more gradual that rise, the easier it will be for the world to adjust to the growing power of the Chinese people and the Chinese consumer.

Just to be safe, this year at the spring sales, go out and buy yourself a nice pair of good quality Chinese-made leather gloves. Maybe you should buy two pairs and tuck one away.

The second pair at least will likely still be around when the renminbi has reached the zero-point on the Big Mac Index.

But what do you bet by then the name will have changed? I am betting on the Pork-filled Steam Bun index. But that's just a personal preference.