The Chinese yuan. China has signalled it is ok with a rising currency

Your move, folks. That's the message from China's surprise decision to allow a more flexible yuan.

China, in signalling it's OK with a rising currency, voiced a strong vote of confidence in its economic outlook. It also shifted the onus to the developed world in a crafty and unambiguous way.

Timothy Geithner and his team at the US Treasury should keep on ice the champagne they're tempted to open. Now it's time to start getting their own imbalances in order. The debt explosion of the past two years isn't just unsustainable, it's a growing threat to global stability.

Chess games are won by those who can think and plan the farthest ahead. China, at least at the moment, appears to have a better sense of how the board is laid out. The question now is what Geithner and his partners in history's greatest debt orgy do.

It's wrong to conclude China was browbeaten into acting. A rising yuan will make it easier to tame asset bubbles and reduce inflation risks. It also increases the purchasing power for the nation's 1.3 billion people. Efforts to kick China's addiction to exports are now under way. That will require some adjustments for the outside world.

A stronger yuan is reflationary. The Chinese will, over time, be able to buy more goods from other countries. Increased import activity coincides with a sudden militancy among Chinese workers demanding higher wages.

While good developments in the long run, both phenomena will affect global inflation rates and require considerable nimbleness on the part of multinational companies. The infinite sea of cheap, docile Chinese labour is evaporating.

In addition, while China's role in global imbalances is indisputable, officials in Beijing didn't put the US where it is. It was the administration of Bill Clinton that decided to remove Depression-era banking system safeguards and fight efforts to regulate derivatives. It was George W Bush who removed every financial regulation in view, squandered a budget surplus through tax cuts for the ultra-rich and put a pointless war in Iraq on a credit card.

China didn't tell Americans to buy homes they couldn't afford. It didn't encourage bankers to take on enough leverage to topple Wall Street's mightiest names. It didn't ask the US to flood global markets with treasuries because it wanted to own a mountain of them. China didn't lobby against reforms that might protect the US from another financial crisis. That will be on President Barack Obama.

Now, US lawmakers who thought China provided the perfect scapegoat for all that ails their supporters need a new bogeyman. Or, they could just look into the mirror and opt to move the United States onto a more sustainable economic course.

This weekend's G20 meeting is such an opportunity. It will be quite a spectacle to see developing-world policy-makers wagging fingers at G7 members.

That's indeed where we find ourselves. The crisis didn't come from the periphery of the global economy, but its core. It's the irresponsible policies of the US, the eurozone, Japan and the UK that are imperiling markets, not those of China, India or Brazil.

Japan is a fascinating case in point. Barely three weeks into his premiership, Naoto Kan is raising many an eyebrow by warning that Japan risks going the way of Greece. Such hyperbole is needed to wake Japanese politicians out of their two-decade slumber. While they snoozed and saved their jobs, Japan amassed the biggest debt in the developed world and failed to find an exit strategy from 0% interest rates.

There's been considerable soul-searching about the US, Britain or the eurozone becoming the next Japan. In many ways, other industrialised powers wish they would be that lucky. Japan hasn't unravelled because its households have $15 trillion of savings and more than 90% of public debt is held domestically. A run on the yen was never a huge risk.

The same can't be said about the dollar, euro or pound. Those much-coveted AAA credit ratings mean less with every passing day as the biggest economies issue more and more IOUs.

William Pesek is a Bloomberg News columnist