The US Treasury opted against calling China a currency manipulator, a decision that a Chinese government official said is “in line with common sense.”
It also shows a kind of “opinion split” in the US government, as the US President Donald Trump has repeatedly accused China of weakening the yuan to make exports more competitive while the trade disputes ferment.
Lu Kang, foreign ministry spokesperson, told the Global Times on Thursday that the US Treasury’s decision to shy away from calling China a currency manipulator is in line with common sense and international consensus.
“China, as a responsible country, has repeatedly stressed that it would not engage in competitive depreciation and wouldn’t use the yuan as a tool to cope with external disturbances like the trade disputes,” Lu said.
In a report published by the US Treasury on Wednesday, the Treasury concluded that “no major trading partner of the US met the standard in the 1988 Act of manipulating the rate of exchange between its currency and the US dollar.”
The US Treasury also stressed that direct intervention by the People’s Bank of China (PBC) (in the yuan) this year “has been limited,” according to a statement it released on the same day the report was published.
Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, said that since the yuan’s central parity exchange rate mechanism was reformed in mid-2015, there is now almost no government intervention in the currency fluctuation.
“Judging by the slightly decreasing foreign currency reserves in recent months, the government does not want the yuan to depreciate too much, even though depreciation will help offset negative effects from the trade disputes,” Zhou told the Global Times on Thursday.
The yuan has undergone a depreciation trend in recent months as the China -US trade disputes ferment.
On Thursday, the yuan’s central parity exchange rate against the US dollar weakened by 172 basis points to 6.9275, according to data provided by the PBC.
Experts also noted that the US Treasury’s decision in the currency report shows a kind of “split” with the Trump administration.
“In terms of the yuan, Trump is in the habit of shooting off his mouth as an excuse to blame and suppress China, but what he said is ungrounded, while the Treasury has technical norms to judge whether a certain country is a currency manipulator,” Zhou told the Global Times.
Lin Guijun, vice president of the University of International Business and Economics, told the Global Times on Thursday that Trump represents traditional US industries, while the Treasury speaks for the interests of Wall Street and new industries, which embrace cross-border cooperation.
Negative impact to come
The split judgment in the US on China’s currency system comes as the two countries are embroiled in a months-long trade dispute that shows no signs of abating so far.
The Sino-US trade talks are “on hiatus,” US Commerce Secretary Wilbur Ross said on Wednesday, CNBC reported. “I don’t know that I would call it a continued impasse. We are where we are,” Ross was quoted by CNBC as saying.
Lin cautioned that China should watch out for the launch of currency sanctions by the US against China, such as restricting US dollar-denominated payment.
Experts said that the US economy will be weighed down by the protectionist policies in the long term, though things still look promising for the country now.
A World Economic Forum (WEF) report on global competitiveness, which was published on Tuesday, has ranked the US at the top of the 140 countries listed.
According to Zhou, the tariff barriers would not only cut existing industrial chains, but would raise commodity prices. “Also, Trump can’t achieve his goal of directing companies back to the US, because the labor cost gap between China and the US is too huge,” Zhou said.
He predicted that the negative impact might appear in 2020, when the US exits its current business cycle.
SOURCE: GLOBAL TIMES