US and China near currency deal, but provisions may not be new

Governor of China's central bank Yi Gang said at a news conference in Beijing that during trade talks last month in Washington, "the two sides reached consensus on many key and important issues" about currency markets.
Governor of China's central bank Yi Gang said at a news conference in Beijing that during trade talks last month in Washington, "the two sides reached consensus on many key and important issues" about currency markets.PHOTO: AFP

BEIJING (NYTIMES) - A pending trade agreement between the United States and China could put few restrictions on Beijing's control over the strength of its currency, potentially inflaming trade hawks in Congress and within the Trump administration itself.

Lawmakers and officials in other countries have contended that Beijing has unfairly weakened China's currency, the yuan, compared with the US dollar and other currencies, giving Chinese companies and factories an advantage when selling goods abroad.

China has long denied the accusation.

Mr Yi Gang, the governor of China's central bank, said at a news conference on Sunday morning (March 10) in Beijing that during trade talks last month in Washington, "the two sides reached consensus on many key and important issues" about currency markets.

The consensus included an understanding that both countries would avoid devaluing their currencies to achieve a competitive advantage for their exports, Mr Yi said.

Both countries would also continue to comply with previous currency agreements among the Group of 20 economies, he said.

Both countries would also maintain close communication about currency markets and would disclose detailed information in accordance with International Monetary Fund standards, he added.

 
 
 

US officials have taken varying stances on the currency provisions. President Donald Trump and Treasury Secretary Steven Mnuchin have expressed satisfaction with them.

But Mr Robert Lighthizer, the US Trade Representative, cautioned Congress in testimony two weeks ago that nothing was fully resolved in the trade negotiations until everything had been settled.

The yuan fell 10 per cent against the US dollar between February and October last year.

In effect, that partly offset the 25 per cent tariffs the Trump administration imposed over the summer on US$50 billion (S$68 billion) a year in Chinese goods.

It fully offset, at least temporarily, the 10 per cent tariffs that Mr Trump imposed last fall on an additional US$200 billion a year in Chinese goods.

But the yuan's fall corresponded to a credit crunch in China and the precipitous slowing of the Chinese economy. Chinese officials contend that the yuan's fall reflected the strength of the dollar, not currency manipulation on their part.

The currency provisions of the evolving trade agreement are essentially a reaffirmation of the statement that the G-20 economies, including China, issued when the group's finance ministers gathered in Shanghai in February 2016.