For much of the past two years, pressure by advanced and emerging economies alike has been piling up on China, accused of forcefully keeping the yuan undervalued to make its exports unfairly competitive. Leaders, particularly in Washington, have maligned Beijing for manipulating the system and hindering the recovery of the global economy.
Well, the latest review of global economic outlook and exchange rate regimes of major trading partners has revealed a rather uncomforting truth. Required by a 1988 law to publish an outlook twice a year, the US Treasury found that China was not in fact manipulating its currency.
Interestingly, the review was supposed to be published in October last year. Perhaps the fear of a rebuke, just before President Obamas now-famous sales trip to the emerging world and the recent visit of President Hu Jin Tao led to delay.
While in the US, the Chinese Premier assured his biggest trading partner that his government would continue to promote exchange rate flexibility.
In nominal terms, the RMB has appreciated against the dollar by 3.7 percent since the June 2010 announcement by China to encourage slow but steady exchange rate flexibility. And if inflation is factored in, the real appreciation stands at 10 percent per year.
Despite the assurances, US lawmakers termed the progress on yuan appreciation inadequate. Falling short of labelling China a currency manipulator, the report released last week called the yuan substantially undervalued - ostensibly turning up the heat on China.
The report suggests that future economic growth in China could be threatened on inflationary fears if the exchange rate issue isn addressed rapidly. In contrast, research at the Peterson Institute of International Economics suggests that the current account surplus China enjoys is declining which "makes it difficult to argue that they need to accelerate the pace".
Recent developments are not being projected in the same light by world media. While western media organisations are pointing to the pressures on the Chinese economy, China Daily, a leading publication from Beijing boasted its clean sheet on charges of currency manipulation.
The demand-led growth model entails a long gestation period, given the slow pace of change of a traditionally savings-dominated society. From the time being, the bulging reserves are being diverted towards investments in international companies in both the developing and advanced economies.
Having dominated the global economic landscape for many decades, Uncle Sam is finding it hard to come to terms with the new economic reality and the might of the Big Red.