US Treasury removes currency manipulator label on China
Washington DC: The United States has removed the currency manipulator label it imposed on China last summer, in a sign of easing tensions between the two economic powers after nearly two years of conflict.
Just two days before President Donald Trump is set to sign a "phase one" trade agreement with China, the US Treasury said in its semi-annual report to Congress that the yuan has strengthened and Beijing is no longer considered a currency manipulator.
Although Treasury refrained from slapping the label on China in its report last May, Trump in August angrily accused Beijing of weakening its currency "to steal our business and factories," re-stating a long-standing grievance. Chinese authorities in August allowed the yuan to fall below 7 to the dollar, sending shudders through stock markets at the time and stoking Trump's ire.
"Over the summer, China took concrete steps to devalue its currency," also known as the renminbi (RMB), and those moves "left the RMB at its weakest level against the dollar in over 11 years," Treasury said on Monday.
However, more recently it strengthened to 6.93 to the dollar. Treasury said the new trade pact addresses currency issues.
"In this agreement, China has made enforceable commitments to refrain from competitive devaluation and not target its exchange rate for competitive purposes," Treasury Secretary Steven Mnuchin said in a statement.
However that commitment is identical to the one Beijing has long made as part of the Group of 20 major global economies.
Though the semi-annual currency report always gains attention as a key sign of relations between the powers, the currency manipulator designation was largely symbolic.
The label calls for the US Treasury committed to work with the International Monetary Fund to "eliminate the unfair competitive advantage" created by China's alleged actions and to consult with Beijing about the matter. As part of the trade deal, "China has also agreed to publish relevant information related to exchange rates and external balances." However, many economists questioned the decision to label China a manipulator in the first place. "China shouldn't have been designated to start with. Small current account surplus/GDP; scant intervention," Mark Sobel, a former Treasury official, said on Twitter.