U.S. Drops China Currency-Manipulator Label Ahead of Trade Deal
The change in the U.S. stance was outlined in the U.S. Treasury Department’s semiannual foreign-exchange report to Congress, released two days before America and China are set to sign a phase-one trade agreement in Washington.
The document listed no major U.S. trading partner among the 20 economies it monitors for potential manipulation. Switzerland was added to the monitoring list, while China, Japan, Korea, Germany, Italy, Ireland, Singapore, Malaysia, Vietnam remained.
“China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,“ Treasury Secretary Steven Mnuchin said in a statement released Monday in Washington.
The Asian nation’s commitment was made as part of the first phase of a U.S.-China trade deal, according to the 45-page report. The U.S. and China have been negotiating since the Aug. 5 designation on China, which came in response to what the Treasury said was Beijing’s “concrete steps to devalue its currency.”
The designation in August further escalated the trade war with Beijing after the country’s central bank allowed the yuan to fall in retaliation to new U.S. tariffs.
The report urges China to “increase public understanding” between the People’s Bank of China and the “foreign-exchange activities of the state-owned banks, including in the offshore RMB market.” Treasury said the PBOC “appears to have largely refrained” from intervention in 2019.
The report was officially due in mid-October but was delayed as the U.S. and China negotiated over trade.
Designation as a currency manipulator comes with no immediate penalties but can rattle financial markets. Currency policy has emerged as Trump’s latest tool to rewrite global trade rules that he says have hurt American businesses and consumers. He has made foreign-exchange policy a key piece of trade deals with Mexico, Canada, South Korea and China.
Treasury has also expanded the number of countries whose currency and economic policies are scrutinized to 20 from 12.
Countries with a current-account surplus with the U.S. equivalent to 2% of gross domestic product are now eligible for the list. Other thresholds include persistent intervention in markets for a nation’s currency, and a trade surplus of at least $20 billion. Countries that meet two of the three criteria are placed on a monitoring list.
The Treasury Department also said:
- Switzerland was returned to the monitoring list, as its foreign-exchange purchases have “increased markedly,” and the U.S. encouraged officials to publish intervention data more frequently.
- Ireland may be removed from the monitoring list in the next report, expected in April.
- Thailand and Taiwan are not officially on the monitoring list but are close to breaching key thresholds.
- Vietnam intervenes “frequently” but has “credibly conveyed” to Treasury that its foreign-exchange purchases are required for re-building reserves.