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US again refuses to label China as currency manipulator


Press Trust of India Washington
The Trump administration once again refused to label China as a currency manipulator, even though on Tuesday it kept Beijing on a list of countries whose trade surpluses with the US and other indicators are closely tracked.
In its semi-annual report on macroeconomic and foreign exchange policies of major trading partners of the US, sent to the Congress, the Treasury department said that no country meets the criteria to be labelled as one seeking to gain unfair trade advantages over the US by manipulating its currency.
However, the report placed nine nations China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore and Vietnam on the monitoring list.
India and Switzerland that had been on the previous watch list issued in October were removed.
The Treasury said while China does not meet the standards to be declared a currency manipulator, it will carefully monitor and review this determination over the following 6-month period in light of the exceptionally large and growing bilateral trade imbalance and China's history of facilitating an undervalued currency.
In its report, the Treasury said that it continues to have significant concerns about China's currency practices, particularly in light of the misalignment and undervaluation of the renminbi (RMB) relative to the US dollars.
China should make a concerted effort to enhance transparency of its exchange rate and reserve management operations and goals, it said.
The Treasury said it will continue its enhanced bilateral engagement with China regarding exchange rate issues, given that the RMB has fallen against the dollar by 8 per cent over the last year in the context of an extremely large and widening bilateral trade surplus.
"Treasury continues to urge China to take the necessary steps to avoid a persistently weak currency, the report said.
China needs to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment, it said.
Improved economic fundamentals and structural policy settings would underpin a stronger RMB over time and help to reduce China's trade surplus with the United States, it added.
The Treasury alleged that China continues to run an extremely large, persistent, and growing bilateral trade surplus with the United States, by far the largest among any of the United States' major trading partners.
The Treasury Department is required to report to Congress every six months on whether any countries are manipulating their currencies to gain trade advantages over the US.
During the 2016 campaign, Trump vowed to declare China a currency manipulator as soon as he took office.
The opposition Democratic party immediately slammed the Trump administration for not designating China as a currency manipulator.
This is the fifth time in a row that the Trump administration has refused to label China a currency manipulator. I hope this does not portend the administration backing off on Huawei or trade; It would be a tragedy for American workers if they did, Senate Minority Leader Senator Chuck Schumer said.
China's goods trade surplus with US stands at USD 419 billion over the four quarters through December 2018. The outsized magnitude of the bilateral deficit is a result of China's persistent and widespread use of non-tariff barriers, non-market mechanisms, state subsidies, and other discriminatory measures that are increasingly distorting China's trading and investment relationships, it said.
These practices tend to limit Chinese demand and market access for imported goods and services, leading to a wider trade surplus, the report said, ruing that China's policies also inhibit foreign investment, contributing to weakness in the RMB.
Over the course of 2018, the RMB depreciated 5.4 per cent against the US dollar, and just under 2 per cent on a broad, trade-weighted basis.
If maintained, this depreciation would likely exacerbate China's large bilateral trade surplus with the United States, the report said.
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. Treasury continues to urge China to enhance the transparency of China's exchange rate and reserve management operations and goals, it said.
Treasury remains deeply disappointed that China continues to refrain from disclosing its foreign exchange intervention. Treasury is closely monitoring developments in the RMB and continues to have ongoing discussions with Chinese authorities, it said.
China should pursue more market-based economic reforms that would bolster growth and confidence in the RMB, the report said.
The US and China are locked in a bitter, year-long trade dispute which has seen the Trump administration recently boost tariffs on USD 250 billion of Chinese goods.
Trump is demanding China to reduce the massive trade deficit which last year climbed to over USD 539 billion. He is also pressing for verifiable measures for protection of intellectual property rights (IPR), technology transfer and more access to American goods to Chinese markets.

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First Published: May 29 2019 | 10:25 AM IST

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