U.S. re­moves China from cur­rency ma­nip­u­la­tor list

Richmond Times-Dispatch - - NATION & WORLD - By The Wash­ing­ton Post

WASH­ING­TON — The Trea­sury Depart­ment on Mon­day dropped China from a list of na­tions it al­leges ma­nip­u­late their cur­rency val­ues to gain an un­fair trade ad­van­tage, greas­ing the wheels for the sched­uled sign­ing of a U.S.Chi­nese trade deal on Wed­nes­day.

In a semi­an­nual re­port, Trea­sury of­fi­cials said no coun­tries met the stan­dards set by Congress for the “ma­nip­u­la­tor” la­bel. But the po­lit­i­cal con­text for the de­ci­sion was hard to miss.

“The Trea­sury Depart­ment has helped se­cure a sig­nif­i­cant phase one agree­ment with China that will lead to greater eco­nomic growth and op­por­tu­nity for Amer­i­can work­ers and busi­nesses,” said Trea­sury Sec­re­tary Steven Mnuchin. “China has made en­force­able com­mit­ments to re­frain from com­pet­i­tive de­val­u­a­tion, while pro­mot­ing trans­parency and ac­count­abil­ity.”

The move re­versed the depart­ment’s de­ci­sion in Au­gust to add China to the list. It also came two days be­fore Pres­i­dent Donald Trump is sched­uled to sign a par­tial trade deal with China in a White House cer­e­mony that is ex­pected to dis­close the de­tails of Chi­nese prom­ises on cur­rency and other trade mat­ters.

Scott Kennedy, a specialist on the Chi­nese econ­omy at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies, said putting China on the list last year had been a po­lit­i­cal step de­signed to pres­sure Bei­jing in the mid­dle of trade talks.

“China has not been ma­nip­u­lat­ing its cur­rency, so this is just rec­og­niz­ing re­al­ity,” said David Dol­lar of the Brook­ings In­sti­tu­tion, a for­mer Bei­jing-based Trea­sury of­fi­cial. “The phase 1 deal con­firms this so it would have been in­con­sis­tent for the U.S. to sign the deal and con­tinue to call China a ma­nip­u­la­tor.”

Still, the ad­min­is­tra­tion shift was de­nounced by some law­mak­ers.

“China is a cur­rency ma­nip­u­la­tor — that is a fact,” in­sisted Se­nate Mi­nor­ity Leader Chuck Schumer, D-N.Y. “Un­for­tu­nately, Pres­i­dent Trump would rather cave to Pres­i­dent Xi [Jin­ping] than stay tough on China.”

The Trea­sury re­port crit­i­cized Bei­jing for turn­ing away from eco­nomic lib­er­al­iza­tion to a more state-di­rected ap­proach and “in­creas­ing re­liance on non-mar­ket mech­a­nisms.”

China’s grow­ing use of govern­ment sub­si­dies and co­er­cive trade prac­tices was “dis­tort­ing” its re­la­tion­ships with key trad­ing part­ners, the re­port added.

The pres­i­dent has long ac­cused China of de­press­ing the yuan’s value to make its prod­ucts more af­ford­able for for­eign cus­tomers, thus con­tribut­ing to the chronic trade im­bal­ance with the U.S.

One dol­lar now buys about 6.9 yuan, lit­tle changed from Au­gust and up about 2% over the past year.

De­spite Trump’s pre­vi­ous claims, the In­ter­na­tional Mon­e­tary Fund has said re­peat­edly that the yuan is fairly val­ued.

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