Yuan is not ma­nip­u­lated: econ­o­mist

Fred Berg­sten of Peterson In­sti­tute says fact that in­ter­ven­tion not over 2% of GDP is one ex­am­ple

China Daily (USA) - - ACROSS AMERICA - By CHEN WEIHUA in Wash­ing­ton chen­wei­hua@chi­nadai­lyusa.com

A top US econ­o­mist has dis­missed two US pres­i­den­tial can­di­dates’ ac­cu­sa­tions that China ma­nip­u­lates its cur­rency.

Fred Berg­sten, a se­nior fel­low and direc­tor emer­i­tus of the Peterson In­sti­tute for In­ter­na­tional Eco­nom­ics, was the cham­pion years ago talk­ing and writ­ing about the gross un­der­val­u­a­tion of Chi­nese cur­rency and cur­rency ma­nip­u­la­tion in China.

But he told a sem­i­nar on Wed­nes­day that “there is no Chi­nese cur­rency ma­nip­u­la­tion.”

“In­deed, if there is any ma­nip­u­la­tion, it is what I will call pos­i­tive ma­nip­u­la­tion,” he told a fo­rum on the Chi­nese econ­omy at the Peterson In­sti­tute.

Berg­sten ex­plained that for the last cou­ple of years, China has not in­ter­vened to limit the ap­pre­ci­a­tion of its cur­rency, known as ren­minbi (RMB) or yuan, as it did in some ear­lier years. In­stead, China sold a half tril­lion dol­lars of its for­eign cur­rency re­serves to keep its cur­rency from weak­en­ing fur­ther.

He said Repub­li­can pres­i­den­tial can­di­date Don­ald Trump does not have much ba­sis for la­bel­ing China a cur­rency ma­nip­u­la­tor and rais­ing the is­sue again.

Trump has called China “the sin­gle great­est cur­rency ma­nip­u­la­tor that’s ever been on this planet” and he ac­cused China of de­valu­ing its cur­rency in his open­ing re­marks dur­ing the first US pres­i­den­tial de­bate on Sept 26.

Trump is not alone. Demo­crat pres­i­den­tial nom­i­nee Hil­lary Clin­ton also vowed re­peat­edly to con­front China on cur­rency ma­nip­u­la­tion.

Berg­sten said Trump is just tak­ing the talk­ing points from 2012 Repub­li­can pres­i­den­tial can­di­date Mitt Rom­ney by swear­ing to la­bel China a cur­rency ma­nip­u­la­tor on his first day in of­fice.

He ex­pressed that Pres­i­dent Barack Obama, Trea­sury Sec­re­tary Jack Lew and thought­ful mem­bers of Congress are aware of the facts.

“But there is still a lot of pol­i­tics around this,” he said, adding that Clin­ton and her peo­ple also know bet­ter about this.

For­mer US Trea­sury Sec­re­tary Larry Sum­mers noted months ago that it was a mis­take for the US to push for China’s ex­change-rate lib­er­al­iza­tion in the hope that the yuan ap­pre­ci­ates while mar­ket forces are push­ing down the cur­rency.

A US Trea­sury re­port in April did not ac­cuse China of cur­rency ma­nip­u­la­tion.

Berg­sten, who is serv­ing his sec­ond term as a mem­ber of the Pres­i­dent’s Ad­vi­sory Com­mit­tee for Trade Pol­icy and Ne­go­ti­a­tions, de­scribed the is­sue of cur­rency ma­nip­u­la­tion as “in re­mis­sion”. He warned of any pos­si­bil­ity of re­newal by China or any other coun­try.

He be­lieves part of the rea­son for the con­cern among US law­mak­ers is that the prob­lem has not been sat­is­fac­to­rily re­solved for a long time.

Congress passed leg­is­la­tion on a new cur­rency pol­icy early this year. Un­der the law, a coun­try will be des­ig­nated a cur­rency ma­nip­u­la­tor if it meets three cri­te­ria.

The cri­te­ria are: a large bilateral sur­plus with the US, a large global cur­rent ac­count sur­plus and a per­sis­tent one-sided in­ter­ven­tion in the cur­rency mar­kets.

Berg­sten in­di­cated that China may meet the first two cri­te­ria but it does not meet the third one of per­sis­tent one-sided in­ter­ven­tion in the mar­ket ex­ceed­ing 2 per­cent of the GDP.

“So the sit­u­a­tion is now clear. China is now not ma­nip­u­lat­ing,” he said.

Berg­sten in­di­cated that this is why there is no US-China cur­rency con­flict at the mo­ment, but if the prob­lem comes back, the do­mes­tic pres­sure will rise.

“I think we have a clear path for­ward to avoid new US-China cur­rency con­flict. It’s now in re­mis­sion; let’s keep it that way,” he said.

Fred Berg­sten, direc­tor emer­i­tus of the Peterson In­sti­tute for In­ter­na­tional Eco­nom­ics

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