NEW YORK (TheStreet) -- An overlooked factor in China's economy is the rising strength of its currency. The markets have been focusing on the contraction in manufacturing activity for China for January. But with the Yuan increasing, China will benefit in a myriad of ways from having a more valuable currency. Investors can capitalize on publicly traded companies that gain from business with China such as Rio Tinto (RIO), Westpac Banking Corporation (WBK) and Cummins (CMI - Get Report). If the Yuan were weak, it would not be increasing in its role as a reserve currency in international trade. It has surpassed the Euro as the second most widely used settlement unit, behind only the U.S. dollar. China has not been shy about stating its objective of having the yuan replace the dollar as the global reserve currency unit.
A stronger yuan helps in that role. When a currency rises in value, items priced in other units become that much cheaper. A yuan that is worth more reduces the price of imports for Chinese consumers and companies.
That comports very well with Beijing's move to strengthen its consumer economy, as detailed in a previous article on TheStreet.It is also positive for the future of Rio Tinto.