China stabilizes yuan after stock sell- off
BEIJING — Tensions between the U. S. and China over trade subsided a bit, giving U. S. investors a reason to wade back into stocks after a big sell- off a day earlier. Still, experts worried that recent actions taken by the two sides presage a prolonged battle over trade that could slow global economic growth.
China stabilized its currency Tuesday, suggesting it might hold off from aggressively letting the yuan weaken as a way to respond to U. S. tariffs on Chinese goods. That came a day after Beijing sent financial markets tumbling by allowing the currency to fall to an 11year low against the dollar.
A weaker yuan can help neutralize U. S. tariffs on Chinese goods by making them more price- competitive on international markets. The Chinese currency declined to 7.0562 to the dollar before strengthening back to 7.0264.
The U. S. Treasury Department on Monday officially declared that China improperly manipulates the yuan’s value just hours after President Donald Trump accused China of currency manipulation. American officials have long complained that a weak yuan makes China’s export prices unfairly low, hurting foreign competitors and swelling Beijing’s trade surplus.
The designation could open the way to possible new penalties on top of tariff hikes already imposed on Chinese goods in a fight over Beijing’s trade surplus and technology policies.
Things were calmer Tuesday. After falling 3% Monday, the S& P 500 index rose 1.3% — its first gain in seven days.
The Chinese central bank governor, Yi Gang, had tried to reassure markets, promising “not to use exchange rates for competitive purposes.”
The central bank is “committed to maintaining the basic stability” of the yuan “at a reasonable and balanced level,” Mr. Yi said.
In the U. S., Mr. Trump and economic adviser Larry Kudlow made the case that the U. S. economy is in a better position to withstand a trade war.
“I think China is getting hurt significantly [ by the trade dispute], much more than we are,” Mr. Kudlow said on financial network CNBC.
But relations remain tense between the two countries.
China’s official news media continued to strike a strident tone, taking a broad swipe at the U. S.
The People’s Daily berated Washington — though stopped short of naming Mr. Trump — for “its obsession with American privileges” and called the U. S. “extremely irresponsible.” The Global Times, known for its bluntness, said “Mr. Trump’s capricious administration could push things too far, which would lead to severe consequences the U. S. never anticipated.”
The Chinese central bank continued to defend its handling of the currency. On Tuesday, it cited the pressure the yuan has faced to depreciate by investors, who have been motivated by China’s slowing economic growth and rising pressure from the trade war with the U. S.
The exchange rate “is determined by market supply and demand, and there is no problem of ‘ currency manipulation,’” the bank said in a statement.
The Chinese central bank Tuesday also called Mr. Trump’s currency- manipulator declaration “wayward unilateralism and protectionist behavior that seriously undermines international rules and will have a major impact on global economic finance.”
And China’s foreign ministry confirmed Tuesday that China had stopped buying U. S. agricultural products after Mr. Trump on Thursday announced plans to raise tariffs on Chinese goods, stunning Beijing amid a week of negotiations.