Currency manipulator claim shot down by IMF report

The International Monetary Fund said in a report on Friday that the yuan’s exchange rate was “broadly in line with medium-term fundamentals” and China’s central bank has made few foreign exchange interventions in recent years, clarifying that China is not as the United States has claimed a currency manipulator.

The IMF said that the country’s external position in 2018 was “broadly in line with the level consistent with medium-term fundamentals and desirable policies”.

The organization also welcomed China’s efforts to reform its exchange rate regime to make the yuan more flexible, according to its report released after its latest Article IV consultation with China that concluded on July 31.

The clarification by the IMF indicates that the US Treasury’s claim on Aug 5 that China was engaging in currency manipulation was nothing but troublemaking.

As a developing and transitional economy, China has been reforming its currency exchange rate management regime in the past years, gradually liberalizing its currency so that its value can be increasingly determined by market forces.

Its currency stance has been consistent. It is committed to making the yuan more reflective of market forces. It is therefore normal for the yuan to experience two-way fluctuations.

China has vowed repeatedly that it will not use competitive devaluation to support its exports and as the IMF report shows, it has kept its promise.

In fact, the yuan had appreciated 38 percent

in nominal terms and by 47 percent in terms of the real effective exchange rate from early 2005 to this June, making it the strongest currency among those of the G20 members.

China’s efforts to liberalize the yuan cannot have escaped the notice of the US government. But with the motive of impeding China’s development in any way it can, the US government has used its Exchange Rate and International Economic Policy Coordination Act of 1988, which is deemed subjective and without quantitative standards, to nonetheless define China as a currency manipulator to pave the way for future anti-China moves.

That it has opted to shun its Trade Facilitation and Trade Enforcement Act of 2015, which at least has objective quantitative standards, just betrays the intentions behind it singling out China as a “currency manipulator”.

A variety of economists and experts, among them some from the US, have criticized the US government of failing to respect the facts by taking the yuan’s fluctuation in a very short period of time to define China as a currency manipulator regardless of the most recent criteria for currency manipulation set out in its 2015 act.

Such an arbitrary and politicized move sets a harmful precedent that will have a profound impact on the international economic and trade order. It disrupts the normal order of international competition and signals that the US will use any excuse to irresponsibly crack down on any country it considers a rival.

The international community should join hands and stand together to safeguard the international economic order.