China off US list of ‘cur­rency ma­nip­u­la­tors’

Spokesman says Wash­ing­ton’s con­clu­sion in line with facts, in­ter­na­tional con­sen­sus

China Daily (Hong Kong) - - FRONT PAGE - By ZHAO HUANXIN in Wash­ing­ton, SCOTT REEVES in New York and CHEN JIA in Bei­jing

The United States re­moved the la­bel of “cur­rency ma­nip­u­la­tor” from China on Mon­day, a move that a lead­ing US ex­pert called “just rec­og­niz­ing re­al­ity” and will be wel­comed by in­vestors.

The US Trea­sury Depart­ment said in a re­port to Congress that no ma­jor US trad­ing part­ner cur­rently meets the rel­e­vant leg­isla­tive cri­te­ria for cur­rency ma­nip­u­la­tion.

Not­ing that the depart­ment as­sessed de­vel­op­ments over the last few months with China and its cur­rency prac­tices, Trea­sury Sec­re­tary Steven Mnuchin said that “China has made en­force­able com­mit­ments to re­frain from com­pet­i­tive de­val­u­a­tion, while pro­mot­ing trans­parency and ac­count­abil­ity”.

The an­nounce­ment came af­ter the Trump ad­min­is­tra­tion des­ig­nated China a “cur­rency ma­nip­u­la­tor” in Au­gust.

China has never used and will not use the cur­rency ex­change rate as a tool to deal with ex­ter­nal dis­rup­tions such as trade dis­putes, For­eign Min­istry spokesman Geng Shuang said at a news con­fer­ence on Tues­day, af­ter the US re­versed its de­ci­sion to la­bel China a cur­rency ma­nip­u­la­tor.

China has never ma­nip­u­lated its cur­rency, Geng said, adding that the con­clu­sion reached by the US on Mon­day is in line with the facts as well as in­ter­na­tional con­sen­sus.

China has clar­i­fied many times that it will not en­gage in com­pet­i­tive cur­rency de­val­u­a­tion, he said.

China re­mains com­mit­ted to deep­en­ing ex­change rate mar­ke­ti­za­tion and im­prov­ing its ex­change rate sys­tem to keep the RMB ex­change rate “ba­si­cally sta­ble at a rea­son­able and equi­lib­rium level”, he added.

“China has not been ma­nip­u­lat­ing its cur­rency, so this is just rec­og­niz­ing re­al­ity,” said David Dol­lar, se­nior fel­low at the John L. Thorn­ton China Cen­ter at the Brook­ings In­sti­tu­tion.

Sheng Songcheng, a for­mer of­fi­cial at the Peo­ple’s Bank of China, the na­tion’s cen­tral bank, said that the US Trea­sury’s re­moval of the la­bel will con­trib­ute to eas­ing of trade and eco­nomic re­la­tions be­tween the coun­tries.

“China has never re­sorted to com­pet­i­tive de­val­u­a­tion,” said Sheng, deputy head of Shang­haibased CEIBS Lu­ji­azui In­sti­tute of In­ter­na­tional Fi­nance. “The mar­ket plays the main role in de­ter­min­ing the ex­change rate of the RMB.”

In early Au­gust, the RMB de­pre­ci­ated to be­yond 7 per dol­lar, but that was be­cause of the es­ca­la­tion of Sino-US trade fric­tions, which trig­gered mar­ket panic, and it was not the re­sult of any ma­nip­u­la­tion, he told China Daily.

Even when the Chi­nese econ­omy soured in the third quar­ter, the coun­try had not re­sorted to cur­rency de­val­u­a­tion to boost ex­ports and growth and the RMB re­mained quite sta­ble at that time, he said.

Sheng sug­gested that a cur­rency ex­change rate co­or­di­na­tion mech­a­nism should be es­tab­lished.

“While a float­ing ex­change rate regime helps off­set ex­ter­nal shocks, ex­ces­sive ex­change rate fluc­tu­a­tions will hurt the cor­po­rate sec­tor and sta­ble eco­nomic de­vel­op­ment.”

The US dropped the cur­rency ma­nip­u­la­tor des­ig­na­tion the same day that a Chi­nese trade del­e­ga­tion, led by Vice-Premier Liu He, ar­rived in Wash­ing­ton for the sign­ing of a phase-one trade deal at the White House, sched­uled for Wed­nes­day.

An­drew Karolyi, a pro­fes­sor of fi­nance at Cor­nell Univer­sity, said in­vestors will wel­come the ac­tion largely be­cause it ap­pears to be tied to an im­pend­ing agree­ment set to nor­mal­ize trade re­la­tions be­tween the two ma­jor economies.

“Th­ese steps in­di­vid­u­ally and to­gether help to re­duce global trade pol­icy un­cer­tainty, some­thing mar­kets have been crav­ing for months,” Karolyi told China Daily.

“It is more than just sym­bolic, as lower trade pol­icy un­cer­tainty likely means more trade flows and greater cross-border port­fo­lio and cor­po­rate in­vest­ment flows, all of which stim­u­lates more eco­nomic growth,” he said.

Mark So­bel, US chair­man of the Of­fi­cial Mon­e­tary and Fi­nan­cial In­sti­tu­tions Fo­rum, an in­de­pen­dent think tank, said China should never have been des­ig­nated as a cur­rency ma­nip­u­la­tor. “Des­ig­na­tion was a bla­tant/ er­rant po­lit­i­cal act,” So­bel said on so­cial me­dia on Mon­day.

On Tues­day, the RMB rose to around 6.87 per dol­lar, the strong­est in five months. “It is dif­fi­cult for the RMB to de­pre­ci­ate back to 7 and be­yond, given the weaker US dol­lar in­dex af­ter the peak in the third quar­ter last year. But the room for RMB ap­pre­ci­a­tion is lim­ited,” said Huang Jun, chief China an­a­lyst at Forex.com, a global for­eign ex­change plat­form.

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