US lifts currency manipulator label on China ahead of signing trade pact

China allowed the yuan to fall below seven to the US dollar in August, sending shudders through stock markets at the time.
China allowed the yuan to fall below seven to the US dollar in August, sending shudders through stock markets at the time.PHOTO: EPA-EFE

WASHINGTON • The United States has removed the currency manipulator label it imposed on China last summer, in a sign of easing tensions between the economic powers after nearly two years of conflict.

Just two days before President Donald Trump was set to sign a "phase one" trade agreement with China, the US Treasury said in its semi-annual report to Congress on Monday that the yuan has strengthened and Beijing is no longer considered a currency manipulator.

The currency report had nine other countries on the "monitoring list" due to concerns about their currency practices: Singapore, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Switzerland and Vietnam.

Although the Treasury refrained from slapping the label on China in its report last May, Mr Trump in August angrily accused Beijing of weakening its currency "to steal our business and factories", restating a longstanding grievance.

The Chinese authorities in August allowed the yuan to fall below seven to the US dollar, sending shudders through stock markets at the time and stoking Mr Trump's ire.

"Over the summer, China took concrete steps to devalue its currency", and those moves left the yuan "at its weakest level against the dollar in over 11 years", the Treasury said.

However, more recently it strengthened to 6.93 to the dollar.

Treasury said the new trade pact addresses currency issues. "In this agreement, China has made enforceable commitments to refrain from competitive devaluation and not target its exchange rate for competitive purposes," Treasury Secretary Steven Mnuchin said in a statement.

China's Foreign Ministry yesterday said it had "never been a currency manipulator", and the US decision was "in line with the facts".

 
 
 

"We have not and never will use currency exchange rate as a tool to address trade conflict," the ministry's spokesman Geng Shuang said at a regular press briefing, adding that the International Monetary Fund had found the yuan's exchange rate "in line with the economy's fundamentals".

Though the semi-annual currency report always gains attention, the currency manipulator designation was largely symbolic.

Top Chinese trade envoy Liu He arrived in Washington on Monday ahead of today's expected signing of the pact.

AGENCE FRANCE-PRESSE

 
A version of this article appeared in the print edition of The Straits Times on January 15, 2020, with the headline 'US lifts currency manipulator label on China ahead of signing trade pact'. Print Edition | Subscribe