US says China, S. Korea should let cur­ren­cies rise

The China Post - - WORLD BUSINESS -

The U.S. Trea­sury said Thurs­day that the Chi­nese and South Korean gov­ern­ments should stop in­ter­ven­ing in mar­kets to pro­tect their un­der­val­ued cur­ren­cies and let them rise.

The Trea­sury said in a semi-an­nual re­port to Congress on cur­rency ma­nip­u­la­tion that no coun­try, in­clud­ing China, in­ter­venes enough to be of­fi­cially la­beled a ma­nip­u­la­tor, a charge that could re­sult in coun­ter­mea­sures to pro­tect U.S. trade com­pet­i­tive­ness.

It said Bei­jing had re­duced its for­eign ex­change mar­ket in­ter­ven­tion on be­half of the yuan, also known as the ren­minbi (RMB), con­sis­tent with prom­ises to Wash­ing­ton.

Even so, the Trea­sury said the yuan re­mains “sig­nif­i­cantly un­der­val­ued,” which helps the coun­try main­tain its mas­sive trade sur­plus with the United States.

The yuan de­pre­ci­ated against the dollar by 2.4 per­cent in 2014 and has been flat so far this year.

But on a trade-weighted ba­sis and ad­justed for in­fla­tion, the Trea­sury said, the cur­rency’s real ef­fec­tive ex­change rate against the dollar was up over 10 per­cent over the past six months.

Bei­jing has made “real progress” in let­ting its cur­rency move more freely, the Trea­sury said, but added that it re­mains ar­ti­fi­cially low.

“China’s cur­rency needs to ap- pre­ci­ate to bring about the nec­es­sary in­ter­nal re­bal­anc­ing to­ward house­hold con­sump­tion that is a key goal of the gov­ern­ment’s re­form plans and nec­es­sary for sus­tained, bal­anced global growth.”

The Trea­sury also said that while South Korea joined the rest of the G-20 lead­ing economies in 2013 in com­mit­ting to re­frain from com­pet­i­tive de­val­u­a­tions, it con­tin­ues to in­ter­vene to pro­tect the won and keep it low.

It said that de­spite the coun­try’s large cur­rent ac­count sur­plus and a sharp jump last year in its trade sur­plus with the United States, the won de­pre­ci­ated by nine per­cent against the dollar be­tween June 2014 and Fe­bru­ary 2015.

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