‘Cur­rency ma­nip­u­la­tor’ la­bel of US ground­less

Global Times US Edition - - FRONT PAGE - By Li Qiaoyi, Wang Yi and Zhang Hong­pei

Fol­low­ing US Pres­i­dent Don­ald Trump’s se­ries ac­tions which are lead­ing to global trade and fi­nan­cial chaos, the US Trea­sury moved to name China a “cur­rency ma­nip­u­la­tor” on Monday, which was de­nounced by China’s cen­tral bank and Chi­nese economists as ground­less and self-de­struc­t­ing.

The un­war­ranted ac­cu­sa­tion, made after the yuan weak­ened against the green­back, sets the stage for the US to bran­dish its tar­iffs weapon, an­a­lysts said. They be­lieve China would stay un­af­fected by US ac­tions that would ob­struct bi­lat­eral trade talks, and push ahead with fi­nan­cial open­ing.

Both the on­shore and off­shore yuan breached the 7 mark against the US dol­lar for the first time in more than a decade on Monday.

The yuan’s

weak­ness con­tin­ued Tuesday.

The yuan’s daily fix­ing rate weak­ened by 458 ba­sis points to 6.9683 against the dol­lar Tuesday. In China’s spot for­eign ex­change mar­ket, the yuan is al­lowed to rise or fall by 2 per­cent from the cen­tral par­ity rate each trad­ing day.

A few hours after Trump tweeted, “China dropped the price of their cur­rency to an al­most his­toric low. It’s called ‘cur­rency ma­nip­u­la­tion,’” on Monday, Trea­sury Sec­re­tary Steven Mnuchin an­nounced the cur­rency ma­nip­u­la­tion des­ig­na­tion in a state­ment on the Trea­sury’s web­site.

Mnuchin will en­gage with the IMF to “elim­i­nate the un­fair com­pet­i­tive ad­van­tage cre­ated by China’s lat­est ac­tions,” ac­cord­ing to the state­ment. The IMF has yet to com­ment.

There is no such is­sue as ex­change rate ma­nip­u­la­tion, as the yuan ex­change rate is by na­ture deter­mined by mar­ket sup­ply and de­mand, the Peo­ple’s Bank of China (PBC), the coun­try’s cen­tral bank, said in a state­ment on Tuesday.

“A capri­cious act of uni­lat­er­al­ism and pro­tec­tion­ism, it will se­verely un­der­mine in­ter­na­tional rules and have ma­te­rial im­pacts on the global econ­omy and finance,” said the PBC.

US stocks plum­meted on Fri­day after the Trump ad­min­is­tra­tion an­nounced new tar­iffs on China. The Trump ad­min­is­tra­tion wanted to de­flect crit­i­cism against it by find­ing a scape­goat like China, la­bel­ing the lat­ter as a “cur­rency ma­nip­u­la­tor,” said Guan Tao, a for­mer se­nior of­fi­cial at the State Ad­min­is­tra­tion of For­eign Ex­change.

“The US move is ran­dom and ground­less, which will not be ap­proved by the IMF,” Guan told the Global Times Tuesday.

“China has never used and will not use the yuan ex­change rate as a tool to deal with the trade fric­tions,” said the state­ment, re­it­er­at­ing the stance of PBC gover­nor Yi Gang the pre­vi­ous day.

“La­bel­ing an­other coun­try a cur­rency ma­nip­u­la­tor is un­jus­ti­fied. The US doesn’t have the right to make such a wan­ton claim,” Dong Shaopeng, an ad­viser of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, told the Global Times.

The US has been us­ing this to dis­rupt China’s econ­omy and fi­nan­cial sys­tem since 2004. “It’s a ground­less frame-up and pure bul­ly­ing act,” Dong said.

“Such a la­bel is not con­sis­tent with the quan­ti­ta­tive cri­te­ria set by the US Trea­sury it­self for the so-called ‘cur­rency ma­nip­u­la­tor,’” PBC said Tuesday.

The US Trea­sury’s cri­te­ria to judge whether its trad­ing part­ners are en­gag­ing in cur­rency ma­nip­u­la­tion in­clude a ma­te­rial cur­rent ac­count sur­plus, which has been low­ered to 2 per­cent of GDP from the pre­vi­ous 3 per­cent.

China’s cur­rent ac­count sur­plus stood at 1.55 per­cent of its GDP in the first quar­ter, lower than the ratch­eted-down num­ber, ac­cord­ing to Wu Jin­duo, head of fixed in­come at the re­search in­sti­tute of Great Wall Se­cu­ri­ties, cit­ing data from China’s for­eign ex­change reg­u­la­tor.

The cri­te­ria, es­sen­tially sub­jec­tive and vague, have turned out to be an­other US weapon to­gether with its trade tar­iffs threats, but the ac­cu­sa­tion ap­pears to be fail­ing, said Wu.

Ul­te­rior mo­tive

In a note sent to the Global Times on Tuesday, strate­gists at DBS Group Re­search said, “Nam­ing China a cur­rency ma­nip­u­la­tor could open the door for US tar­iffs to even­tu­ally in­crease to more than 25 per­cent on Chi­nese goods.”

The Trea­sury an­nounce­ment on Tuesday will give rise to mar­ket volatil­ity, the PBC said Tuesday, adding it will cut into the re­cov­ery of the global econ­omy and ul­ti­mately hurt US in­ter­ests.

Global fi­nan­cial mar­kets have taken a hit from the US’ un­ruly moves.

Stock mar­kets across the Pa­cific recorded big losses. The Dow lost nearly 800 points to close be­low 26,000 points on Monday, suf­fer­ing its worst trad­ing day of the year.

China, for its part, was ad­vised not to over­re­act, Wu said, not­ing the nation should con­tinue on its re­form path.

In a fresh sign of China’s unswerv­ing push for fi­nan­cial open­ing-up, global fi­nan­cial mes­sag­ing sys­tem SWIFT launched a wholly for­eignowned en­tity in Beijing on Tuesday.

As China’s cap­i­tal mar­ket is about to be fully opened, the launch of the wholly owned en­tity is an in­evitable out­come which rep­re­sents a sig­nif­i­cant mile­stone in SWIFT’S global devel­op­ment, Daphne Huang, SWIFT’S head of China, told re­porters.

The new en­tity will de­nom­i­nate and pay prod­ucts and ser­vices in yuan, mark­ing the sys­tem’s ac­cep­tance of the yuan as the third global cur­rency fol­low­ing the US dol­lar and euro, ac­cord­ing to Huang, in a move that would help the yuan move a step fur­ther in in­ter­na­tion­al­iza­tion.

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