The United States on Monday revoked China’s “currency manipulator” tag after five months, days before the world’s two largest economies are due to sign a preliminary trade agreement to ease an 18-month-old tariff war. In response, China said the move to drop the tag was consistent with facts and international consensus.
After the US’ announcement, the Chinese yuan currency strengthened to its highest level in more than five months, CNN reported.
The Treasury Department of the United States describes a country as a currency manipulator when it deliberately influences the exchange rate of its currency to gain unfair advantage in trade. When a country lets its currency weaken, it makes its goods and services become cheaper, and hence more competitive, in the international market.
In August 2019, the United States had officially designated China a currency manipulator for the first time since 1994 after Beijing let the yuan weaken below 7 per dollar to its lowest in 11 years. Giving China the label was an election campaign promise of President Donald Trump.
“China is never a currency manipulator,” Foreign Ministry spokesperson Geng Shuang said at the daily news briefing in Beijing. “The latest US conclusion is consistent with facts and international consensus. The IMF [International Monetary Fund] concludes in a most recent report that the RMB [renminbi or yuan, the Chinese currency] exchange rate level is broadly in line with fundamentals, essentially dismissing the view that China is a currency manipulator.”
Geng said China is a responsible major power and will not hold down the value of its yuan currency. “China has reiterated repeatedly that it will not resort to competitive devaluation or use exchange rate as a tool in dealing with external disturbances such as trade disputes,” he added.
“China will resolutely deepen market reform of the exchange rate regime, continue to improve the managed, floating regime based on market supply and demand and with reference to a basket of currencies, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level,” the spokesperson said in conclusion.
In its currency report, the Treasury said that as part of the Phase 1 trade deal, China had made “enforceable commitments to refrain from competitive devaluation” and agreed to publish relevant data on exchange rates and external balances.