A weak dollar  

Vance at BTD writes that it's a mistake for the Bush administration to call for the revaluation of the yuan because it will weaken the dollar and make it harder for the US to finance debt:

For years we have been able to fund any budget deficit cheaply because there was a large demand internationally for the dollar. The Bush administration appears to not worry about us giving up that status, and that will impact the U.S. economy for a much longer time than any short term currency fluctuations.

The problem is that financing our debt with China isn't a sustainable policy; China's ability to buy up dollars isn't infinite, and eventually what they get out of it (better terms of trade for Chinese manufacturing) won't be worth the financial risk. In such a scenario, they'll end up dumping their dollars anyway, which will throw the dollar into freefall. Meanwhile, as Paul Musgrave explains, "a large part of U.S. dollar policy is being made by Beijing." No, as opaque as the Bush admin's policy on this seems, it's about right: the dollar needs a correction, and the only way that can happen gently is with China's cooperation.