Analysis | How the US stopped complaining about China’s exchange rate policy

The United States’ loud complaints about the Chinese currency’s exchange rate, a thorny issue in the two nations ties over the past decade, have quietly faded away since Donald Trump became US president.

Washington has regularly complained over the years that China’s government has manipulated its currency’s value to give it an unfair advantage against other trading nations, with Trump frequently repeating the allegations during his election campaign.

The issue, however, barely surfaced during Trump’ trip to China earlier this month.

A less bellicose stance from the US over the yuan also received fresh impetus this month with the publication of two Federal Reserve research papers.

John Clark, an official at the Federal Reserve Bank of New York, wrote in a paper on the bank’s website last week that the yuan exchange rate has “evolved to more closely resemble behaviour generally observed in freely floating currencies”.

Meanwhile, J. Scott Davis, an economist at the Federal Reserve Bank of Dallas, wrote in a separate research note that China’s capital account controls to shore up the value of the yuan “may have been a key factor that averted a full-blown financial crisis in the country”.