China isn’t a currency manipulator under US law, though the yuan “remains significantly undervalued” and needs to rise further, the US Treasury Department said.
China “has substantially reduced the level of official intervention in exchange markets since the third quarter of last year”, the Treasury said in a statement accompanying its semi- annual currency report to Congress on Tuesday. The yuan has gained 9.3 per cent in nominal terms and 12.6 per cent in real terms against the dollar since June 2010, the Treasury said.
“It appears that the strategy of the last two administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results,” William Reinsch, president of the National Foreign Trade Council, a Washington-based business group, said in an e-mail after the report. “There is clearly room for further appreciation, however.”
In declining to brand China a manipulator, the Treasury cited the reduced intervention and “steps to liberalise controls on capital movements, as part of a broader plan to move to a more flexible exchange-rate regime”. The US hasn’t designated another nation since 1994, when it named China.
Critics of China’s exchange-rate policies, including former Republican presidential candidate Mitt Romney, say the nation deliberately suppresses the value of its currency, making its goods cheaper in overseas markets and costing jobs in the US
“This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly,” US Senator Charles Schumer, a New York Democrat, said in a statement. “The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the Band-Aid, and force China to play by the same rules as all other countries.”