MNI POLICY: US Tsy Does Not Label China Currency Manipulator

By Kevin Kastner

     WASHINGTON (MNI) - The US Treasury released its biannual foreign exchange

report Wednesday, where it once again did not label China as a currency

manipulator. Here are the key takeaways from the report:

     - Treasury said that none of the major trading partner met all three of the

criteria for "enhanced analysis," but did single out the same six countries for

continued watch that it did in the April report: China, Germany, India, Japan,

Korea, and Switzerland. Japan, Germany, and Korea met two of the criteria (large

bilateral trade surplus with the US and high current account balance relative to

GDP). The other three countries met only one criteria, but the trade surplus

China holds with the US was singled out and many times larger than any other

country on the watch list. 

     - Of those six countries, Treasury, as expected, had the most to say about

China. Treasury said "while China does not meet the standards identified in

Section 3004 of the 1988 Act at this time, Treasury is concerned about the

depreciation of the RMB and will carefully monitor and review this determination

over the following 6-month period, including ongoing discussions with the PBOX."

     - Treasury Secretary Mnuchin noted China's lack of currency transparency as

well as the recent depreciation of the RMB "pose major challenges to achieving

fairer and more balanced trade, and we will continue to monitor and review

China's currency practices," including discussions with the PBOC. Treasury said

it is "committed to working toward a fairer and more reciprocal trading

relationship with China."

     - Even with the lack of transparency, Treasury noted that direct exchange

rate intervention by the PBOC "has been limited," but noted the weakening of the

RMB is likely to make the bilateral surplus with the US worse. Treasury said it

expects China to adhere to its commitments to refrain from "competitive

devaluation." It suggested that "China could pursue more market-based economic

reforms that would bolster confidence in the renminbi."

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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