China, US agree to keep yuan exchange rate stable as part of trade deal, Beijing confirms
- Chinese economic official confirms trade deal between Washington and Beijing will include currency clause to keep the yuan ‘basically stable’
- Currency agreement could pave the way for the US to remove its designation of China as a currency manipulator
The trade truce that China and the United States are expected to finalise next month will include a currency clause in which Beijing will promise to keep the yuan’s exchange rate “basically stable” in relation to a basket of currencies, a Chinese foreign exchange official said Friday.
Wang Chunying, a spokeswoman for the State Administration of Foreign Exchange, said at a press conference in Beijing that China will stick to its “floating exchange rate system with adjustments and management,” indicating there will be no major depreciation or appreciation of the yuan in the near future.
Wang also said there was no set timetable for opening up China’s capital account, with the government continuing the liberalisation in a gradual manner.
The comments from Wang confirm that Beijing and Washington have reached an agreement on a section of the trade truce to avoid currency devaluations being used to gain competitive trade advantages. After US President Donald Trump announced on October 11 that Chinese and US negotiators had agreed on the outline of a trade truce, US Treasury Secretary Steven Mnuchin said the two sides were close to agreement on currency language that would be included.
A currency agreement could pave the way for the US to remove its designation of China as a currency manipulator. When Beijing allowed the yuan to fall below 7 to the US dollar in early August, Trump alleged China was deliberately making its currency cheaper to offset the impact of US trade tariffs. The US Treasury Department then followed with an official designation.