US re­moves China as cur­rency ma­nip­u­la­tor ahead of deal

Muscat Daily - - FRONT PAGE -

Wash­ing­ton, US - The Trump ad­min­is­tra­tion on Mon­day lifted its des­ig­na­tion of China as a cur­rency cheat, say­ing the na­tion has made ‘en­force­able com­mit­ments’ not to de­value the yuan and has agreed to pub­lish ex­change-rate in­for­ma­tion.

The change in the US stance was out­lined in the US Trea­sury Depart­ment’s semi-an­nual for­eign-ex­change re­port to Congress. The doc­u­ment was re­leased two days be­fore Amer­ica and China are set to sign a phase-one trade agree­ment in the White House, ac­cord­ing to peo­ple fa­mil­iar with the plans.

The doc­u­ment listed no ma­jor US trad­ing part­ner as a cur­rency ma­nip­u­la­tor among the 20 economies it mon­i­tors for po­ten­tial ma­nip­u­la­tion. Switzer­land was added to the mon­i­tor­ing list, while China, Ja­pan, Korea, Ger­many, Italy, Ire­land, Sin­ga­pore, Malaysia, Viet­nam re­mained. “China has made en­force­able com­mit­ments to re­frain from com­pet­i­tive de­val­u­a­tion, while pro­mot­ing trans­parency and ac­count­abil­ity,“Trea­sury Sec­re­tary Steven Mnuchin said in a state­ment re­leased in Wash­ing­ton.

The Asian na­tion’s com­mit­ment was made as part of the first phase of a US-China trade deal, ac­cord­ing to the 45-page re­port. The US and China have been ne­go­ti­at­ing since the Au­gust 5 des­ig­na­tion on China, which came in re­sponse to what the US Trea­sury said was Bei­jing’s ‘con­crete steps to de­value its cur­rency’.

“China has never been a cur­rency ma­nip­u­la­tor and the US’ lat­est con­clu­sion is in line with the truth and in­ter­na­tional con­sen­sus,” Chi­nese for­eign min­istry spokesman Geng Shuang told re­porters in Bei­jing on Tues­day. “China will con­tinue to deepen the cur­rency mar­ket re­form, im­prove the cur­rency sys­tem and keep the rate ba­si­cally stable at an equi­lib­rium level.”

The des­ig­na­tion in Au­gust fur­ther es­ca­lated the trade war with Bei­jing af­ter the coun­try’s cen­tral bank al­lowed the yuan to fall in re­tal­i­a­tion to new US tar­iffs.

The re­port urges China to ‘in­crease pub­lic un­der­stand­ing’ be­tween the Peo­ple’s Bank of China (PBOC) and the ‘for­eignex­change ac­tiv­i­ties of the sta­te­owned banks, in­clud­ing in the off­shore RMB mar­ket’. Trea­sury said PBOC ‘ap­pears to have largely re­frained’ from in­ter­ven­tion in 2019.

Des­ig­na­tion as a cur­rency ma­nip­u­la­tor comes with no im­me­di­ate penal­ties but can rat­tle fi­nan­cial mar­kets. Cur­rency pol­icy has emerged as Trump’s lat­est tool to re­write global trade rules that he says have hurt Amer­i­can busi­nesses and con­sumers. He has made for­eignex­change pol­icy a key piece of trade deals with Mex­ico, Canada, South Korea and China.

With China on the verge of sign­ing a deal with Trump to at least tem­po­rar­ily defuse a nearly two-year trade war, Xi Jin­ping is pro­ject­ing con­fi­dence.

Af­ter he warned last year about threats to the Com­mu­nist Party’s rule and ‘changes un­seen in 100 years,’ Xi be­gan 2020 tout­ing ‘ex­tra­or­di­nary Chi­nese splen­dour and Chi­nese strength’. “In the face of se­vere and com­plex do­mes­tic and for­eign sit­u­a­tions and var­i­ous risks and challenges, we have been able to move for­ward firmly,” the Chi­nese Pres­i­dent told party lead­ers last week.

Prob­lems and challenges re­main for Xi, but the phase-one deal the world’s big­gest economies plan to sign on Wed­nes­day in Wash­ing­ton gives him rea­son to ac­cen­tu­ate the pos­i­tive.


A file photo shows US pres­i­dent Don­ald Trump and Chi­nese pres­i­dent Xi Jin­ping

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