US Treasury staff finds ‘China is not manipulating yuan’

President Donald Trump has publicly and privately pressured Mnuchin to declare China a currency manipulator, but Treasury staff have not found grounds to do so, according to sources

PUBLISHED : Friday, 12 October, 2018, 5:51am
UPDATED : Friday, 12 October, 2018, 6:25am

The US Treasury Department’s staff has advised Secretary Steven Mnuchin that China is not manipulating the yuan as the Trump administration prepares to issue a closely watched report on foreign currencies, according to two people familiar with the matter.

The conclusion, if accepted by Mnuchin, would avert an escalation of the US-China trade war and remove a source of anxiety for emerging markets. Mnuchin could issue a different finding.

President Donald Trump has publicly and privately pressured Mnuchin to declare China a currency manipulator, but Treasury staff have not found grounds to do so, according to the people, who spoke on the condition of anonymity.

Formally accusing China of manipulating the renminbi would not trigger any sanctions or retribution, but the move would heighten tensions between the world’s two biggest economies.

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The Treasury Department’s congressionally mandated twice-a-year report assessing whether trade partners are manipulating their currencies is on track for release next week, the people said.

We are concerned about the depreciation [of the yuan]
Steven Mnuchin, US Treasury secretary

China will remain on a monitoring list for currency manipulation because of its significant trade surplus with the US, the people said. A draft report ratchets up criticism of Beijing for failing to rectify its trade imbalance, and also singles out several other countries for eroding the US’ competitive edge, the people said.

In an interview on Thursday, Mnuchin declined to comment on the report.

“We are concerned about the depreciation” of the yuan, he said, “and want to make sure that it’s not being used as a competitive devaluation.”

Mnuchin has said since July that Treasury is concerned about the yuan’s recent drop. The currency has slid more than 9 per cent against the dollar in the last six months, raising speculation that China has been deliberately weakening its currency as tensions with the US escalate.

The Trump administration has pivoted to a more aggressive stance toward China since the president said the country is interfering in US elections last month.

Vice-President Mike Pence delivered a speech last week in Washington signalling a firmer US push-back against Beijing as trade anxiety weighs on the looming midterm congressional elections.

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If the US labels a country a currency manipulator, Treasury must enter direct talks with the country, and also seek redress through the International Monetary Fund. The last country declared a manipulator was China, in 1994.