The United States criticizes the exchange practices of China, but does not add the designation of manipulator
The United States criticizes the exchange practices of China, but does not add the designation of manipulator
The US Treasury once again missed a formal opportunity to designate China as a "currency manipulator," but highlighted the nation's monetary practices as a source of "particular concern."
Treasury Secretary Steven Mnuchin criticized China for "the lack of transparency of the currency and the recent weakness of its currency," and said in a statement that this poses "great challenges to achieving fairer and more balanced trade, and We will continue to monitor and review China's exchange practices. "
Although it went on to call China a manipulator, the Treasury kept China and five other nations on a formal "monitoring list" in its semi-annual report on the exchange rate policies of the United States' main trading partners. The report is the official vehicle to make a statement that a country has manipulated its currency to obtain an unfair trade advantage.
This is now the fourth of the semi-annual reports in which the Trump administration has refused to apply the manipulator designation to Beijing. The reason for the moderation, said the Treasury, is that China has not intervened significantly in its currency markets in recent quarters. Real intervention is one of the key criteria to reach the manipulation threshold.
China, along with Germany, India, Japan, South Korea and Switzerland, remain on the formal monitoring list. The Treasury uses it to warn countries that their exchange practices have put the United States at an unfair disadvantage and could be close to triggering Treasury shares.
The result was widely expected. While President Trump has threatened to label China as a currency manipulator, the laws governing the report require countries to reach three thresholds to receive the designation: persistently intervene in currency markets; managing an important trade surplus with the United States; and in general a large current account surplus. No country currently meets all three criteria. China, for example, has a modest overall trade surplus, even though it has a large one with the United States.
If a country is blamed for currency manipulation, negotiations on its business practices are required and could be affected by tariffs.
The designation itself would be largely symbolic if applied against China, because the US They are already cracking down on their business practices. The United States has applied tariffs to around $ 250 billion in Chinese imports and threatens to roughly double that count.
Mr. Mnuchin said over the weekend that exchange issues would have to be part of any trade negotiations between the United States and China.
The People's Bank of China, for its part, promised during the weekend to refrain from any competitive devaluation of its currency. Lowering a currency helps the commercial position of a country by making its exports cheaper and increasing the cost of imports.
China has had a long history in the past of taking measures to depress its exchange rate, making its exports cheaper, undermining its international competitors and boosting its manufacturing industry. Since the adoption of a 2015 law that promoted the control of exchange practices in the US. UU., China has abstained from actively intervening in its currency market.
China has bought and sold currencies in the last 12 months. The Treasury estimates that net purchases of foreign currency in China represented less than 0.1% of its gross domestic product.
Of the other five countries on the list, none violate the three criteria of the Treasury. Germany, South Korea and Japan have not made large foreign exchange interventions. Switzerland intervenes, but does not have a large trade surplus with the US. UU
India does not have a trade surplus with the USA. UU And, although it had intervened in its currency markets in the past, this intervention has been largely reversed in the last 6 months. The Treasury said that India now only meets one of the three triggers of monetary actions and that India would be removed from the monitoring list in six months if that continues to be the case.
The designation occurs when Washington and Beijing begin to prepare for a meeting between President Trump and Chinese President Xi Jinping at the meeting of leaders of the Group of 20 in Buenos Aires at the end of November. It is not at all clear how important this meeting will be or if it will have any impact on the ongoing trade struggle in the United States and China.
United States has 10% taxes. in the last round of $ 200 billion of Chinese products affected by taxes, roughly equal to the amount that the yuan has devalued since March, when the United States began to seriously threaten tariffs. Those taxes will increase to 25% on January 1, a level at which US companies that depend on Chinese imports say they will begin to feel substantial pain. The G20 meeting is considered the last point on which Mr. Xi could convince Mr. Trump to delay the rate increase.
Write to Josh Zumbrun in Josh.Zumbrun@wsj.com
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