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Washington, October 18
US Treasury Secretary Steven Mnuchin has expressed concern over China’s lack of currency transparency, but declined to label it a currency manipulator in his report to Congress, bringing in disappointment for some lawmakers.
The Department of Treasury said that no country meets the criteria to be labelled a currency manipulator.
“The Treasury Department is working vigorously to ensure that our trading partners dismantle unfair barriers that stand in the way of free, fair and reciprocal trade. Of particular concern are China’s lack of currency transparency and the recent weakness in its currency,” Mnuchin said in a statement the Treasury sent in its semi-annual report on currency manipulations to Congress.
“These pose major challenges to achieving fairer and more balanced trade, and we will continue to monitor and review China’s currency practices, including through ongoing discussions with the People’s Bank of China,” he said as he explained the reason for refraining from labelling China as a currency manipulator.
While China’s exchange rate practices continue to lack transparency, Treasury estimates that direct intervention by the People’s Bank of China this year has been limited.
However, recent depreciation of the renminbi will likely exacerbate China’s large bilateral trade surplus with the US, it said.
Treasury places significant importance on China adhering to its commitments to refrain from engaging in competitive devaluation and to not target China’s exchange rate for competitive purposes. China could pursue more market-based economic reforms that would bolster confidence in the renminbi, it said.
Treasury found that six major trading partners continue to warrant placement on the ‘monitoring list’ of major trading partners that merit close attention to their currency practices: China, Germany, India, Japan, South Korea and Switzerland.
While China’s exchange rate practices continue to lack transparency, including its intervention in foreign exchange markets and its management of daily central parity settings to influence the value of the RMB, Treasury estimates that direct intervention by the People’s Bank of China (PBOC) this year has been limited, the report said.
Since the summer, the Chinese authorities have reportedly employed limited tools to stem depreciation pressures, including implementing administrative measures and influencing daily central parity exchange rate levels, it said.
“Broader proxies for intervention indicate there have been modest foreign exchange sales recently by state banks, helping stem depreciation pressure, though it is clear that China is not resisting depreciation through intervention as it had in the recent past,” the Treasury said.
According to the report, China continues to run an extremely large and persistent bilateral trade surplus with the US, by far the largest among any of the United States’ major trading partners, with the goods trade surplus standing at USD 390 billion over the four quarters through June 2018.
Noting that the recent depreciation of the RMB will likely exacerbate China’s large bilateral trade surplus with the US, as well as its overall trade surplus, 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.
Observing that China could pursue more market-based economic reforms that would bolster confidence in the RMB, the report said Treasury continues to urge Beijing to enhance the transparency of its exchange rate and reserve management operations and goals.
“Treasury is deeply disappointed that China continues to refrain from disclosing its foreign exchange intervention. Finally, to enhance the sustainability of both Chinese and global growth, China needs to aggressively advance reforms that support greater household consumption growth and rebalance the economy away from investment,” the report added. PTI
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