China Not A ‘Currency Manipulator’ In Latest US Treasury Report

April 17, 2017
China Not A ‘Currency Manipulator’ In Latest US Treasury Report April 21, 2017 Clive Nelson

U.S. President Donald Trump’s administration did not choose to name China as a currency manipulator in a recent Treasury report which came as a surprise to some in light of the President’s sharp criticism of China during the election campaign.

The semi-annual US Treasury currency report which examines exchange rate fluctuations worldwide was released last week. The is the first currency report from the new administration and the report has retained China in the list of countries whose currency needs to be monitored but it stopped short of labeling China as a currency manipulator.

The watch list contains six countries which are the same as those named by the Obama administration in its final assessment. The countries included in the list are Germany, China, Korea, Japan, Taiwan and Switzerland.

Bloomberg Politics

Trump had made several statements during the election campaign demanding that China be labelled as a currency manipulator. He accused China of deliberately undervaluing its currency to ensure its exports remained attractive and to widen its existing trade deficit with the United States. He had also taken a hard line during first few weeks of his administration.

However Trump changed his stance after a recent meeting with Chinese President Xi Jinping in Florida.

Speaking to media after the meeting, Trump stated that China was not a currency manipulator, adding that U.S. would work with China on improving trade relations if it helped the U.S. with regards to the nuclear threat posed by North Korea. The Treasury report has nonetheless referred to Chinese authorities actively taking steps to hold down the value of yuan.

The report has made reference to the regular interventions done by China’s central bank and highlighted the fact that such actions created a long term distortion in the global trading system that caused hardship to American businesses and workers. The Treasury has warned that it would be carefully scrutinizing China’s currency practices.

In a statement, Treasury Secretary Steven Mnuchin said

Expanding trade in a way that is freer and fairer for all Americans requires that other economies avoid unfair currency practices, and we will continue to monitor this carefully

The latest report has also not made any changes to the three conditions considered as thresholds for identifying trading partners as currency manipulators. The criteria are: a bilateral trade surplus of $US20 billion or more, a foreign exchange purchases equivalent to 2 percent of GDP over 12 months and a current account surplus of more than 3 per cent of GDP globally.

While none of the countries in the watch list meet all the three conditions, five countries-South Korea, Japan, Germany, Taiwan and Switzerland- meet two of them.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

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