WASHINGTON: The United States on Tuesday declined to name China as a currency manipulator although it remained critical of the Chinese government’s economic policies ahead of a planned visit to Beijing by President Donald Trump.
The semi-annual US Treasury currency report said no countries deserved the currency manipulator label, but it kept China on a currency “monitoring list” despite a fall in China’s global current account surplus since 2016. China’s currency, the renminbi or yuan, also has strengthened sharply against the dollar this year, reversing three straight years of weakening.
The Treasury cited China’s unusually large, bilateral trade surplus with the United States.
“Treasury remains concerned by the lack of progress made in reducing the bilateral trade surplus,” the department said in the report. “China continues to pursue a wide array of policies that limit market access for imported goods and services.”
The US-China trade deficit stood at $34.9 billion in August, near a two-year high.
Four other trading partners which were on the monitoring list in April – Japan, South Korea, Germany and Switzerland – remained on the list. The administration said it was removing Taiwan from the list because it had reduced the scale of its foreign exchange interventions.
Deputy governor Ching-Long Yang said Taiwan’s central bank will continue the currency dialogue with Washington.
South Korea’s finance ministry official in charge of currency markets said Washington’s decision was as expected, noting the shrinking trade surplus with the United States helped his country avoid the “currency manipulator” label.
“Currency markets should be market-oriented, and we conduct smoothing operations only in cases of sharp volatility,” Kim Yoon-kyung, director general at the ministry’s International Finance Bureau, told Reuters by phone.
Trump, who on the campaign trail blamed China for “stealing” US jobs and prosperity by cheapening its currency, had repeatedly promised to label the country as a currency manipulator on “day one” of a Trump administration – a move that would trigger special negotiations and could lead to punitive duties and other action.
But the president’s comments on China have been less harsh since he took office in January. Trump has said he would like Beijing’s help in pressuring North Korea to abandon a nuclear weapons program, and plans to meet Chinese President Xi Jinping on a trip to Beijing in November.
Currency market analysts by and large had not expected the Trump administration to take a hard line on the currency issue now in the context of the North Korea tensions.
“There’s a necessity for the best possible cooperation we can get out of China on the North Korea issue, and labeling them a currency manipulator is probably not the best way to go about that,” said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.”In addition, there are very specific criteria at the Treasury for labeling someone a currency manipulator and over the past year and a half China simply does not fit those categories.”
As in its previous report on currencies in April, the Treasury criticized China’s past efforts to hold down the yuan’s value. But it said more recent efforts by Beijing to prevent a sudden depreciation of the yuan had probably helped the United States.
“A disorderly currency depreciation … would have had negative consequences for the United States, China and the global economy,” the Treasury said.