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This commentary originally appeared in Forbes.

During separate trips to China this week, President Barack Obama and Dominique Strauss-Kahn, the managing director of the International Monetary Fund, both pushed for a stronger renminbi, the Chinese currency, whose principal unit is the yuan. Although the yuan has appreciated 20% against the dollar over the last several years, Obama and Strauss-Kahn both agree with Paul Krugman, the Nobel Prize-winning New York Times columnist, who wrote on Nov. 15 that China severely undervalues its currency. Krugman believes that to reduce America's trade deficit and spur worldwide recovery, China needs to strengthen the yuan.

But would appreciating the yuan in the short term be the smart thing to do? No. Revaluing it right now would jeopardize the world's fledgling economic recovery. It is better for American businesses for China to maintain current yuan rates until the worldwide recovery is on a firmer footing.

Here are three reasons why Paul Krugman is wrong and why President Obama should ignore him:

First, with the holiday season coming, the last thing American retailers like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) can afford is costlier products on their shelves. Costco (NASDAQ:COST) is refusing to sell Coca-Cola (NYSE:KO) products because Coke wants to charge too much. If customers are balking at price increases for sodas, what do you think will happen if iPhones (NASDAQ:AAPL), Dell (NASDAQ:DELL) computers and Mattel (NASDAQ:MAT) toys--all made in China--rise in price?

Some analysts have observed that if Wal-Mart were a country it would be China's eighth-largest trading partner. Some 70% of the products sold in Wal-Mart have Chinese components. Billions of dollars of purchasing power would be taken from American consumers if the renminbi were to appreciate. The holidays would not be such a merry time.

With unemployment at 10.2%, American consumers are already stretching their shopping dollars farther than they have in a long time. The last thing they need is more expensive goods. Price increases would stop any thaw in consumer spending.

Second, while China's economy enjoyed 8.9% growth in the gross domestic product in the third quarter of this year, the country's continued economic strength is not guaranteed if the American consumer stays in a funk. Although China is no longer an export-led economy, as I wrote in "Three Myths About Business in China," exports still account for a very significant 20% of its economy. Already 10,000 factories have shut in export hubs like Guangdong. The ones that remain often exist on paper-thin margins of 2% to 3%. Even a small currency appreciation would cause thousands more factories to shut and leave millions more unemployed. That wouldn't be good for China or anybody else.

Krugman believes appreciation would allow the Chinese people to buy more American exports. But what American exports? Everything is already made in China. America exported its manufacturing jobs years ago. Even if China's currency were to appreciate, production would just move to cheaper countries like Vietnam, not back to America.

Unless there are structural reforms to America's economy, a stronger renminbi will not lower the trade surplus in any meaningful way.

Finally, the biggest currency problem in the world is not a weak yuan but a weak dollar. That is the issue President Obama should focus on. Foreign governments hold the dollar in vast quantities because it has been seen as stable. China and Japan alone hold over $3 trillion worth. As the dollar plummets, many nations are abandoning it, fearing further erosion in their portfolios. They have done so as quickly as possible but carefully as well, knowing that if they move too fast the dollar will fall even faster.

As nations rebalance their holdings towards euros, Australian dollars, Brazilian real and Japanese yen, the dollar continues to weaken. Even retail investors are jumping on the bandwagon. This flight will not end until the dollar reverses course or, at the very least, remains stable, and it's dangerous because it means countries will be less likely to buy Treasury bills and finance America's recovery.

A weaker dollar won't help create more exports. It will just make things more expensive for Americans. Foreign companies will produce elsewhere, because it is still cheaper to produce in low-cost labor markets like Vietnam.

Rather than wasting time pushing China to strengthen the yuan, the president and Krugman should figure out how to strengthen the dollar by paying down our debts. A strong dollar, not a strong yuan, is what's important for America's future.

Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, marketing and China. For more from Shaun Rein, click here.

Disclosure: none

Source: Why Krugman Is Wrong About the Yuan