Published: Wed, April 26, 2017
Finance | By Laverne Griffith

US Treasury says China does not manipulate its currency


On the campaign trail, Trump told voters that on his first day in the White House, he would label China a currency manipulator, a public shaming that could trigger trade sanctions.

Five other trading partners who were on last October's monitoring list - Japan, South Korea, Taiwan, Germany and Switzerland - also remain on the list, ensuring that the Treasury would apply extra scrutiny to their foreign exchange and economic policies.

According to the central bank, Taiwan only met one of the three criteria in the latest report as Taipei still enjoyed a large current account surplus, but did not meet the criterion which accused a trading partner of persistent one-sided currency intervention.

The US Department of Treasury yesterday concluded that no major trading partner of the US met the Congressional standards for currency manipulation in the second half of 2016.

In an interview with The Wall Street Journal on Wednesday, Trump said "they (the Chinese) are not currency manipulators".

"China now has an extremely large and persistent bilateral trade surplus with the United States, which underscores the need for further opening of the Chinese economy to American goods and services", as well as quicker reforms to boost household consumption, according to the Treasury report. He has retreated from that position after meeting with Chinese President Xi Jinping in Florida last weekend.

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The reversal on branding China a currency manipulator is among several changes in which Trump has softened tough stances he had taken during the campaign.

Earlier this week, U.S. President Donald Trump reversed course on a promise that he had made both on the campaign trail and from the White House: that he would designate China as violating worldwide exchange-rate rules, pushing down the yuan to gain a competitive advantage.

Trump hasn't named China a "currency manipulator".

Trump said during the WSJ interview that the USA and China would instead work on improving their trading relationship if Beijing will help with the nuclear threat in North Korea. "When the president fails to label them a currency manipulator, he gives them a green light to steal our jobs and wealth time and time again". In previous years, when China artificially lowered the value of its currency, it helped the country export products to the United States, and US industries and workers balked at what they saw as an unfair competitive edge.

The previous devaluation trend of RMB is ending, he said, adding that the RMB exchange rate is likely to maintain stable in the coming months.

The report also called on Japan to do more "to revive domestic demand and combat low inflation while avoiding a return to export-led growth". While China has been intervening to prevent a depreciation of the yuan, its selling of foreign currency reserves abated early this year, Treasury said. The Treasury Department continued to call for reforms to the labor market that would improve Japanese workers' productivity, along with fiscal and monetary support for the Japanese economy.

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