US Stops Short Of Labelling China Currency Manipulator But Issues Warning

The US Treasury Department said in its currency report on Wednesday it intended to keep China on the watch list. Following the determination the Treasury urged Beijing to improve transparency in its currency management, The report noted that while the PBOC has refrained from intervening, state banks have sold the yuan, potentially acting as a proxy for the PBOC.

• Special attention was given to discrepancies in balance of payments data, goods and services surplus rose to $132bn in Q2, while foreign reserves added just $18bn.
• "While intervention proxies do not provide definitive evidence that the PBOC intervened in foreign exchange markets over the review period, this issue warrants further investigation," said the report. "In particular, the small scale of foreign reserve accumulation relative to China's substantial trade and portfolio inflows in the second quarter of 2020, coupled with the RMB's relative stability over the same time period, raises concerns."
• Last year, the US labeled China a currency manipulator but quickly reversed the decision after the two nations reached an initial agreement on a phase one trade deal. The US previously contended China had artificially weakened the yuan, the currency to strengthen significantly this year as the country recovered from the COVID-19 pandemic.