The non-market direction of China's economic development poses growing risks to its major trading partners and the long-term global growth outlook, the US has warned.
"The increasingly non-market direction of China's economic development poses growing risks to its major trading partners and the long-term global growth outlook," the US Department of Treasury said in a report to the Congress on 'Macroeconomic and Foreign Exchange Policies of Major Trading Partners' of the US.
Treasury places significant importance on China adhering to its G-20 commitments to refrain from engaging in competitive devaluation and to not target China's exchange rate for competitive purposes; and on greater transparency of China's exchange rate and reserve management operations and goals, it said.
China has an extremely large and persistent bilateral trade surplus with the US, by far the largest among any of the US' major trading partners, with the goods trade surplus standing at USD 375 billion over the four quarters through December 2017, an increase of USD 28 billion over 2016, the report said.
Over 2017, the Chinese currency generally moved against the dollar in a direction that should, all else equal, help reduce China's trade surplus with the US; however, on a broad, trade-weighted basis, the renminbi was broadly unchanged on net over 2017, it said.
The Trump administration in its report said it remains deeply concerned by the significant trade imbalances in the global economy, and is working actively across a broad range of areas to help ensure that trade expands in a way that is fair and reciprocal.
The US' bilateral trade deficits with China, Japan, Germany and Mexico are at very high levels, it said, adding that current account surpluses among several major trading partners over the last two decades have proven both large and persistent.
The global adjustment process has not worked effectively to promote a symmetric adjustment toward smaller imbalances in a manner that sustains, rather than inhibits, global growth.
Nor are there signs that currently point toward a narrowing of external imbalances, the report said.
Achieving stronger and more balanced global growth will require that domestic demand, including consumption and investment, become the sustained engine for economic expansion in key economies that have maintained large and persistent external surpluses, Treasury said.
"This could be supported by these economies putting in place more efficient tax systems with low rates and broad bases, regulatory frameworks that support domestic investment, and sound monetary policies," it said.
The International Monetary and Financial Committee (IMFC) last fall concluded that strong fundamentals, sound policies, and a resilient international monetary system are essential to the stability of exchange rates, contributing to strong and sustainable growth and investment.
In March, all G-20 members similarly endorsed this objective, the report said.
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