The US treasury department dropped its designation of China as a “currency manipulator” shortly before officials from the two countries were due to sign a trade agreement, prompting Beijing to say on Tuesday that the move is in line with “facts” and the consensus of the international community.
The decision came in a currency report, rolling back a move made last August by US treasury secretary Steven Mnuchin amid heightened trade tensions between the US and China.
Mnuchin has previously accused China of holding down the value of its yuan to create an unfair trade advantage. US President Donald Trump, too, made similar accusations.
In its latest report, the US said that as part of the Phase 1 trade deal, China made “enforceable commitments to refrain from competitive devaluation” and agreed to publish relevant data on exchange rates and external balances.
The report said the Chinese yuan depreciated as far as 7.18 per US dollar in early September, but rebounded in October and was currently trading at about 6.93 per dollar.
“In this context, Treasury has determined that China should no longer be designated as a currency manipulator at this time,” it said.
Soon after the US announcement, the yuan soared on Tuesday morning, days ahead of the two countries signing the Phase 1 deal to resolve a tit-for-tat trade war.
Chinese vice-premier Liu He, heading the trade talk negotiations for China, is in Washington to sign the deal. Beijing didn’t release any additional information about the expected trade deal.
“For specific questions about the Sino-US economic and trade negotiations and the first-phase economic and trade agreements, I suggest you ask the ministry of commerce. In addition, please be patient, the situation may become clearer in two days,” foreign ministry spokesperson Geng Shuang said at the regular ministry briefing on Tuesday.
In its semi-annual report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the US, the treasury department said no major US trading partner at this time met the relevant legislative criteria for currency manipulation.
Noting that the department assessed developments over the last several months with China and its currency practices, Mnuchin said in a statement that “China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability”.
Reacting to the developments, Geng said: “China is not an exchange rate manipulator. The latest conclusion of the US is in line with the facts and the consensus of the international community.”
“A recent International Monetary Fund (IMF) assessment concluded that the level of the RMB exchange rate is generally in line with economic fundamentals, and objectively denied that China is a ‘currency manipulator’,” he added.
