China Not A ‘Currency Manipulator’ In Latest US Treasury Report

U.S. President Donald Trump’s administration did not choose to name China as a currency manipulator in a recent Treasury report which came as a surprise to some in light of the President’s sharp criticism of China during the election campaign.

The semi-annual US Treasury currency report which examines exchange rate fluctuations worldwide was released last week. The is the first currency report from the new administration and the report has retained China in the list of countries whose currency needs to be monitored but it stopped short of labeling China as a currency manipulator.

The watch list contains six countries which are the same as those named by the Obama administration in its final assessment. The countries included in the list are Germany, China, Korea, Japan, Taiwan and Switzerland.

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Trump had made several statements during the election campaign demanding that China be labelled as a currency manipulator. He accused China of deliberately undervaluing its currency to ensure its exports remained attractive and to widen its existing trade deficit with the United States. He had also taken a hard line during first few weeks of his administration.

However Trump changed his stance after a recent meeting with Chinese President Xi Jinping in Florida.

Speaking to media after the meeting, Trump stated that China was not a currency manipulator, adding that U.S. would work with China on improving trade relations if it helped the U.S. with regards to the nuclear threat posed by North Korea. The Treasury report has nonetheless referred to Chinese authorities actively taking steps to hold down the value of yuan.

The report has made reference to the regular interventions done by China’s central bank and highlighted the fact that such actions created a long term distortion in the global trading system that caused hardship to American businesses and workers. The Treasury has warned that it would be carefully scrutinizing China’s currency practices.

In a statement, Treasury Secretary Steven Mnuchin said

Expanding trade in a way that is freer and fairer for all Americans requires that other economies avoid unfair currency practices, and we will continue to monitor this carefully

The latest report has also not made any changes to the three conditions considered as thresholds for identifying trading partners as currency manipulators. The criteria are: a bilateral trade surplus of $US20 billion or more, a foreign exchange purchases equivalent to 2 percent of GDP over 12 months and a current account surplus of more than 3 per cent of GDP globally.

While none of the countries in the watch list meet all the three conditions, five countries-South Korea, Japan, Germany, Taiwan and Switzerland- meet two of them.