While communist China is busy smashing protests in occupied Tibet, the country’s currency, the renminbi, is making record gains agains the US dollar.

The renminbi has broken through the psychological barrier of seven yuan to the dollar, the first time the Chinese currency has done so in 14 years.

The Financial Times reports that the Chinese currency is up more than 4% against the greenback so far this year.

China’s communist leadership is under pressure from the US to allow the renminbi to climb. However, the pressure on the currency to rise might be abating, according to the FT. Today, China recorded the first drop in its quarterly trade surplus in three years.

“China’s growing middle classes is where the money is to be made in China,” says Greg Guenthner.

“As China’s working and middle classes grow, so too does the country’s purchasing power. Naturally, retail sales have experienced a dramatic surge. Domestic retail sales skyrocketed 20.2% for the first two months of 2008, to more than 1.74 trillion yuan, or about $248.1 billion. That’s more than 5% higher than last year.

“One of the true hallmarks of middle-class growth is the sale of these non-essential and luxury items. Even the poorest working members of a society will spend money on food staples. However, the working poor, especially in nations with less-developed economies, won’t be dropping big chunks of their paychecks at the Gap.”