Washington refrains from calling China a currency manipulator

The US Treasury's semi-annual currency report criticised China for the "non-market direction" of its economy and warned of global risks.
The US Treasury's semi-annual currency report criticised China for the "non-market direction" of its economy and warned of global risks.PHOTO: REUTERS

WASHINGTON • The Trump administration has again refrained from naming any major trading partners as currency manipulators, but the US Treasury's semi-annual currency report criticised China for the "non-market direction" of its economy and warned of global risks.

The report on Friday comes as the Trump administration pursues potential tariffs, negotiations and other restrictions to try and cut a massive trade deficit with China.

In the report, the US Treasury said it has added India to a monitoring list for extra scrutiny, while keeping China, Japan, Germany, South Korea and Switzerland on the list started in 2016 by the Obama administration.

The report did not mention President Donald Trump's recent threats to impose billions of dollars worth of tariffs on Chinese goods over Beijing's intellectual property practices, or pending Treasury investment restrictions on Chinese investment in the United States.

It said China's yuan in 2017 on a trade-weighted basis was broadly unchanged against the dollar.

"The increasingly non-market direction of China's economic development poses growing risks to its major trading partners and the long-term global growth outlook," the Treasury said.

In the report, the US Treasury said it has added India to a monitoring list for extra scrutiny, while keeping China, Japan, Germany, South Korea and Switzerland on the list started in 2016 by the Obama administration.

The Treasury called for "further opening of the Chinese economy to US goods and services, as well as reducing the role of state intervention and allowing a greater role for market forces".

Mr Axel Merk, president and portfolio manager of Merk Hard Currency Fund in Palo Alto, California, said it was not surprising that the Treasury did not name China as a currency manipulator, saying that doing so is not in the administration's interest.

"What labelling someone a currency manipulator means is handing over control to Congress to study the topic," Mr Merk said. "By not labelling them a currency manipulator, they can continue pushing China through the Executive branch."

The Treasury said China should advance macroeconomic reforms that support greater household consumption growth and help rebalance the economy away from investment.

The Treasury also said it "places significant importance" on China adhering to its G-20 commitments to refrain from engaging in competitive devaluation of its yuan.

REUTERS

A version of this article appeared in the print edition of The Sunday Times on April 15, 2018, with the headline 'Washington refrains from calling China a currency manipulator'. Print Edition | Subscribe