HOW many Chinese yuan is an American dollar really worth? That question may not rank anywhere among your economic preoccupations.

Perhaps it should.

For the past decade, the answer has never wavered. At 8.28 yuan to the dollar, the exchange rate has been firmly pegged by the Beijing authorities in a conscious attempt to ease the path of the country's great economic leap forward. As China rapidly industrialised, that policy ensured ready access for increasing volumes of its manufactured goods into the American marketplace.

Exchange rate stability also encouraged more US corporations to relocate more of their productive capacity into China, to take advantage of much lower labour costs and fresh pools of skills.

As America's fiscal and current account deficits ballooned higher and higher in the Bush years, China used more and more of the money pouring into its coffers to buy up stocks of dollar-denominated securities, many of them government bonds paying very low rates of interest.

It was a very curious bargain. In the early years, the existence of the Chinese peg had helped defuse the Asian currency crisis and gained Beijing plenty of plaudits. But as attention has turned to China's emergence as a global manufacturing powerhouse and the increasing competitive threat that poses, perceptions have changed.

Chinese suppliers got to clobber great tracts of American industry as they grabbed a 10per cent and rising share of total US imports. But with that stick came a significant carrot.

The inexhaustible appetite of China's central bank forWashington paper took the heat off charges against the Bush administration, at home, of fiscal irresponsibility.

If China, and other Asian economies like Japan and Korea, were willing to lend so much back to the United States at such low rates of interest, sustaining the American housing boom and the consumption drive associated with it, where was the problem? It left the fiscal space for the Bush administration to push ahead with its radical tax-cutting agenda.

All that saw the American economy through the immediate aftermath of the tech slump, assorted corporate scandals and 9/11. It also helped get George W Bush re-elected. But now the cent is beginning to drop.

This double addiction to cheap Chinese imported goods and cheap Chinese loans comes at a significant price, in jobs and capacity, right across America's own manufacturing sector. A lot of companies don't like it. Or do workers and their families who have seen some three million manufacturing jobs lost across America since 2000.

So, rather belatedly, Washington is getting tough with Beijing. Last week, using the latest annual report to Congress on international economic and exchange rate policies, Treasury secretary John Snow launched the toughest assault yet on China's refusal to revalue the yuan. "China's rigid currency regime has become highly distortionary, " said Snow.

The report itself conceded that while China's 10-year pegged currency regime "may at times have contributed to stability, it no longer does." Now, it argued, current Chinese policies "pose a risk to China's economy, its trading partners, and global economic growth".

The extent of that risk was amplified over the weekend when a senior official in the Japanese finance ministry likened China today to Japan in 1988, just before its asset bubble burst. The yuan peg risks the kind of excess liquidity creation, asset price inf lation and large speculative capital f lows that sent Japan's equity markets plunging and ended in nearly a decade of price def lation.

"Just look at property prices in Shanghai, " said Hiroshi Watanabe, head of international affairs at the finance ministry in Tokyo. "We have an old Asian proverb: the higher the mountain, the deeper the valley." But China doesn't take kindly to being bullied into action.

The authorities have already said they will revalue the yuan. But they want to do it in their own time.

Being told by Snow their current system "is fuelling over-investment and excessive reliance on exportled growth while under-emphasising domestic consumption" is not what they want to hear, not on top of attempts in both Washington and Brussels to place tariffs on imports of textiles which threaten to wipe out domestic producers.

Then there is the very open question of how radical any change will be. A full f loat of the yuan risks a sharp rise in domestic Chinese inf lation and significant consequences for inefficient domestic sectors like agriculture.

Snow says he is not calling for that, just a smooth transition.

But if the Bush team thinks such "intermediate steps" would take the pressure off American manufacturers, they may be mistaken. Fed chairman Alan Greenspan has already dissented from that view, suggesting the imported goods would simply be sourced elsewhere.

With China currently accounting for around 10per cent of US imports, even a 10per cent revaluation of the yuan would only have a 1per cent impact on America's burgeoning external deficit. It hardly looks like salvation for American manufacturers or their workforces, a reality that may weigh heavily on the next Republican candidate for the White House in 2008.