Trump administration again declines to brand China a currency manipulator
But US Treasury department keeps country on ‘monitoring list’
The United States has declined to brand China a currency manipulator but remains critical of the Chinese government’s economic policies ahead of a planned visit to Beijing by US President Donald Trump.
A US Treasury department currency report released on Tuesday said no countries deserved the currency manipulator label, but kept China on a currency “monitoring list” despite a fall in China’s global current account surplus. China’s currency, the yuan, has also strengthened sharply against the US dollar this year, reversing three straight years of weakening.
The semi-annual report highlighted China’s unusually large bilateral trade surplus with the US.
“Treasury remains concerned by the lack of progress made in reducing the bilateral trade surplus,” it said. “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 US$34.9 billion in August, near a two-year high.
Four other trading partners on the monitoring list in April – Japan, South Korea, Germany and Switzerland – remained on the list. The report said Taiwan was removed from the list because it had reduced the scale of its foreign exchange interventions.
Trump, who on the campaign trail blamed China for “stealing” US jobs and prosperity by cheapening its currency, repeatedly promised to label the country 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 his 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 its nuclear weapons programme, and plans to meet President Xi Jinping on a trip to Beijing next month.
Currency market analysts had, by and large, not expected the Trump administration to take a hard line on the currency issue now due to 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 labelling them a currency manipulator is probably not the best way to go about that,” said Joseph Trevisani, chief market strategist at New Jersey-based Worldwide Markets.
“In addition, there are very specific criteria at the Treasury for labelling 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 department criticised 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 US.
“A disorderly currency depreciation ... would have had negative consequences for the United States, China and the global economy,” it said.
In fact, after three years of depreciating against the US dollar, in which it weakened by more than 12 per cent, the yuan has strengthened by nearly 5 per cent this year.
The Treasury department did not alter its three major thresholds for identifying currency manipulation put in place last year by the Obama administration: a bilateral trade surplus with the US of US$20 billion or more; a global current account surplus of at least 3 per cent of gross domestic product, and persistent foreign exchange purchases equal to 2 per cent of GDP over 12 months.
No countries were determined to have met all three criteria. The department said a country would be put on the monitoring list if it met two of the criteria or if it accounted for a large and disproportionate share of the overall US trade deficit.