Beijing urges Washington not to politicize foreign exchange rates during trade talks

China’s Ministry of Foreign Affairs is urging the US not to “politicize” foreign exchange rate matters, responding to questions on US pressure for China to keep value of the yuan stable as part of their bilateral trade negotiations.

“We won’t use the yuan’s exchange rate as a tool to cope with trade friction... we hope the US can respect market rules and comply with the facts,” Geng Shuang, spokesperson for the ministry, said during a press conference held on Wednesday.

Geng made the comments right after reports said that the US is urging China to keep the yuan stable as part of trade negotiations between the two countries. The matter was reported by Bloomberg on Wednesday.

Zhou Yu, an economist at the Shanghai Academy of Social Sciences, said that the US is “losing all reason” to ask that the yuan’s exchange rate fluctuates according to US interests.

“The US is using double standards for China’s exchange rate system, in that it wants the exchange rate mechanism to be market-oriented and free of outside interference when the yuan is rising, while asking the Chinese government to intervene when the yuan is depreciating. This is ridiculous,” Zhou told the Global Times on Wednesday.

A slumping yuan is beneficial for exports, while a rising yuan helps imports.

According to Zhou, since China reformed the yuan’s central parity exchange rate mechanism in mid-2015, the authorities have undertaken very little intervention in the yuan’s exchange rate.

Geng further noted that China is a responsible country and has repeatedly claimed that it has no intention to engage in competitive currency depreciation.

According to Zhou, the US government is making requests about the yuan’s exchange rate for fear that a depreciating yuan would offset US gains in its trade talks with China.

But he stressed that China won’t make big compromises, like fixing the exchange rate around a certain point, because of the trade talks. “Besides, it is not the Chinese government’s position to utterly reverse the yuan’s trend, whether that’s up or down.” Zhou said.

He added that the Chinese government’s policy direction toward a flexible, market-oriented yuan won’t change.

The yuan’s reference rate against the US dollar rose by 84 basis points on Wednesday, central bank figures showed.