Top US, China trade negotiators unlikely to meet during IMF/World Bank talks, US official says

A potential meeting of US Treasury Secretary Steven Mnuchin and China’s vice-premier, Liu He, will not happen, since Liu will skip the international financial gatherings and a G20 finance ministers and central bank governors’ conference

PUBLISHED : Tuesday, 09 October, 2018, 1:52am
UPDATED : Tuesday, 09 October, 2018, 3:58pm

It is unlikely that top US and Chinese trade negotiators will meet this week during a major gathering of international finance officials taking place in Bali, Indonesia, a senior US Treasury official said on Monday.

US Treasury Secretary Steven Mnuchin will not meet top Chinese trade negotiator Liu He, since Liu is not expected to attend the annual meetings of the International Monetary Fund (IMF) and World Bank this week or the meeting of the Group of 20 (G20) finance ministers and central bank governors to be held on Friday, the official said.

Mnuchin may hold bilateral meetings with officials of the Chinese finance ministry and central bank, but such meetings would not focus on trade issues, the senior official said.

A second US official, who spoke on condition he not be identified, said “nothing has changed” in the ongoing trade dispute between the US and China.

“Our view is that when they are ready to have meaningful discussions about correcting the trade imbalances and the structural issues we have in the relationship, we’re willing to talk,” the official said.

The senior official expressed concern about the depreciation of the Chinese currency, the yuan – officially called the renminbi or RMB – as well as recent moves by Beijing to strengthen government control over the exchange rate.

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“We continue to closely monitor developments in the RMB; we remain concerned about the recent depreciation of the RMB,” the official said.

“More broadly, we’re concerned about China’s turn away from more market-oriented policies and continued reliance on non-market mechanisms that impact the macroeconomic and trade environment,” he said.

In late August, with the yuan depreciating rapidly owing to rising trade tensions, the People’s Bank of China (PBOC), China’s central bank, reintroduced the use of a “countercyclical factor” in the calculation of the yuan’s daily trading range. The move gave the PBOC more control over the yuan’s exchange rate and allowed it to halt the currency’s slide.

The official noted that questions about the yuan would be addressed in the Treasury’s next Foreign Exchange Report, which he said would likely be released during the week of October 15. The official gave no clue as to what the report might conclude about Chinese foreign exchange policies.

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US President Donald Trump has frequently accused China of manipulating its currency, though the Treasury Department has never determined that China meets the criteria to be labelled a currency manipulator.

However, amid Washington’s hardening attitude toward China, there is speculation that stance could change with this month’s Foreign Exchange Report.

The report is governed by two separate trade laws: the Omnibus Trade and Competitiveness Act of 1988 and the Trade Facilitation and Trade Enforcement Act of 2015.

Whether China is formally labelled a currency manipulator by the Treasury will depend on the extent of the standards and criteria used from the two sets of laws.

Under the 2015 act, China meets only one of the three criteria to be considered a currency manipulator, namely that a country runs a significant bilateral trade surplus with the US of at least US$20 billion.

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It does not meet the second condition that it runs a current account surplus of at least 3 per cent of its gross domestic product.

Nor does it meet the third criterion of engaging in persistent, one-sided intervention in the foreign exchange market, which the US Treasury defines as occurring when “net purchases of foreign currency are conducted repeatedly and total at least 2 per cent of an economy’s GDP over a 12-month period”.

China, however, could still get labelled a currency manipulator if the US Treasury decides to rely more heavily on the older 1988 act, which allows for a more subjective assessment of whether a currency is being manipulated to provide an unfair competitive advantage in trade.

The Treasury currency report will be released only a few weeks after US currency manipulation guidelines were included in the new United States-Mexico-Canada Agreement.

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The inclusion of currency language in the trade deal, even though exchange rates are not an issue between the three countries, was interpreted as the first step in a US effort to have such language put into all new trade deals, such as those negotiated between the European Union and Japan.

The non-meeting of US and China trade negotiators comes with relations between the world’s two largest economies hitting new lows after frosty talks between US Secretary of State Mike Pompeo and China’s foreign minister Wang Yi on Monday, and US Vice-President Mike Pence's strident criticism of China last week.

In Beijing on Monday, Pompeo declared the two powers were stuck in “fundamental disagreement” over a range of issues from trade to China’s domestic and foreign policies.

Wang, who is also a state councillor, accused Washington of escalating the trade conflict, interfering with Taiwan, and levelling false accusations about China’s domestic and foreign policies, according to a readout posted on China’s foreign ministry website.

“These actions have damaged our mutual trust, cast a shadow over the future of China-US relations, and go against the interests of the people of the two countries,” Wang told Pompeo.

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“We demand that the US side immediately stop its wrong actions and words.”

Pence launched a series of allegations at every aspect of China-US relations.

He accused Chinese student and scholar associations of being part of the Communist Party’s effort to foster a culture of censorship, blamed China for conducting programmes of military aggression in the South China Sea, and claimed Beijing was interfering in the upcoming US midterm elections, among other things.