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October 22, 2018

U.S. Treasury Report Doesn’t Address China Currency Manipulation

On Oct. 17, the U.S. Treasury Department released its semi-annual report on foreign exchange policies and, once again, the department declined to name the Chinese government as a currency manipulator.

The report instead put China on a monitoring list with Germany, India, Japan, Korea, and Switzerland. Bloomberg noted the Treasury Department did include “sharpened language” about China, devoting a section of the report to “outlining concerns with China’s bilateral trade surplus” and noting it will monitor “whether countries resist depreciation pressure in the same manner as appreciation pressure.” The report, which can be found here, said China’s “extremely large and persistent bilateral trade surplus” with the United States is evidence of China’s pursuit of policies “facilitating the undervaluation of” it currency to gain trade advantages.”

In press statement accompanying the report, Treasury Secretary Steve Mnuchin said, “Of particular concern are China’s lack of currency transparency and the recent weakness in its currency. 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.”

Also last week: according to Reuters, Secretary Mnuchin told reporters that the Trump administration wants to include a currency manipulation deterrent provision in future bilateral free trade agreements, including a potential agreement with Japan, modeled after language that was included in the recently-announced pact with Canada and Mexico. That language states the three countries will “avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage.”