NEW YORK ( TheStreet) -- iShares MSCI Hong Kong ( EWH) will be a direct beneficiary of a rising yuan.

Real estate, already a favorite of wealthy Chinese investors, will become relatively cheaper as the Hong Kong dollar remains pegged to the U.S. dollar. The stronger yuan will also allow Chinese consumers to purchase more luxury goods on their Hong Kong excursions.

Although the Chinese government rebuffs American pressure to revalue the yuan every chance it gets, many economists still expect the Chinese currency to rise in the coming months.

Forget China, Look at Sales (Forbes)

Most economists are focused on the economic arguments (naturally). The Asian Development Bank recently increased its GDP growth forecast for 2010 to 9.6%, and inflation reached its highest level since 2008 back in February.

However, not all economists believe that allowing the currency to rise is a viable solution to inflation. China has other tools at its disposal such as raising interest rates and tightening monetary policy. In March, lending growth was about 30% below analyst estimates and also down the same amount from February.

More importantly, the Chinese have steadfastly refused U.S. demands for a stronger currency, pointing out that it is in neither country's economic interests. Chinese exporters would lose out, but unfortunately for American politicians, other developing nations would pick up the slack and leave the U.S. trade deficit relatively unchanged. At worst, it could increase the U.S. trade deficit if the country cannot find cheaper substitutes for current imports.

Finally, a counterpoint in the economic data has hardened the Chinese position: China had a trade deficit in March for the first time since 2004. Therefore, short of a political decision to placate American politicians, the Chinese will not adjust the currency until they believe it is in their best interest and only after they've exhausted other policy tools.

If you expect a change soon, however, and want a way to play a rising yuan, your best strategy is to bypass the currency and aim to buy what the Chinese buy.

Back in 2007 and 2008 when the yuan was rising amid rising oil prices. The price of oil advanced to $150 per barrel as the Chinese government stockpiled fuel ahead of the Olympics, and it was likely joined by Chinese speculators who could now engage in a carry trade with the U.S. dollar. The yuan stopped appreciating in July and so did oil.

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