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October 23, 2017

Treasury Department Refuses To Call China A Currency Manipulator

In its most recent report on foreign exchange rate practices, released last week, the U.S. Treasury Department once again declined to call the Chinese government a currency manipulator.

As Politico’s “Morning Trade” points out, “By not naming China a currency manipulator, the Trump administration is following in the footsteps of every administration since the WTO [World Trade Organization] was founded in 1994 – but it’s a divergence from Trump's promise to reverse that trend on day one of his presidency.” The Treasury Department did pledge to closely watch the Chinese government, along with four others (Japan, South Korea, Germany, and Switzerland).

Here are the Treasury Department’s full comments on China and currency manipulation:

“China has an extremely large and persistent bilateral trade surplus with the United States, by far the largest among any of the United States’ major trading partners, with the goods trade surplus standing at $357 billion over the four quarters through June 2017. Moreover, China continues to pursue a wide array of policies that limit market access for imported goods and services, and maintains a restrictive investment regime that adversely affects foreign investors.

"In comparison to the extremely large and persistent bilateral trade imbalance, China’s multilateral external position has undergone greater adjustment in recent years, with its current account surplus falling to 1.4 percent of GDP in the first half of 2017 from 1.8 percent of GDP in 2016, and down from 10 percent of GDP in 2007.

"Further, after engaging in one-way, large-scale intervention to resist appreciation of the renminbi (RMB) for a decade, China’s recent intervention in foreign exchange markets, tightened capital controls, and increased discretion over setting the daily fixing rate of the RMB have likely prevented a disorderly currency depreciation that would have had negative consequences for the United States, China, and the global economy.

"Treasury remains concerned by the lack of progress made in reducing the bilateral trade surplus with the United States. Further opening of China’s economy to U.S. goods and services as well as reducing the role of state intervention and allowing a greater role for market forces would provide more opportunities for American firms and workers to compete in Chinese markets and facilitate a more balanced economic relationship between the United States and China. 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 also places high importance on greater transparency of China’s exchange rate and reserve management operations and goals.”