The US on Monday removed the currency manipulator label it imposed on China last summer, in a sign of easing tensions between the economic powers after nearly two years of conflict.
China on Tuesday said that it had never been a currency manipulator and the US’ decision to remove the label is “in line with the facts” as it claimed that the exchange rate of its currency is based on the “economic fundamentals” of the Chinese economy.
The US on Monday removed the currency manipulator label it imposed on China last summer, in a sign of easing tensions between the economic powers after nearly two years of conflict. Just two days before President Donald Trump is set to sign a Phase One trade deal with China, the US Treasury said in its semi-annual report to Congress that the Chinese yuan has strengthened and Beijing is no longer considered a currency manipulator.
The US said it made the change because China had agreed to refrain from devaluing its currency to make its own goods cheaper for foreign buyers. The “Phase One” pact is aimed at de-escalating the tit-for-tat tariff war the two countries have engaged in since 2018.
Reacting to the US’ decision to reverse its decision to declare China as currency manipulator, Chinese Foreign Ministry spokesman Geng Shuang during a media briefing here 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 IMF assessment concluded that the level of the RMB (renminbi) exchange rate is generally in line with economic fundamentals, and objectively denied that China is a currency manipulator,” he said.
China is a “responsible big country”, he said, adding that “we have repeatedly reiterated that we will not engage in competitive currency devaluation and do not use the exchange rate as a tool to deal with external disturbances such as trade disputes”. “Also China will unswervingly deepen the currency market reform and continue to improve the floating exchange rate system based on market supply and demand, adjust with reference to a basket of currencies, and keep the RMB exchange rate basically stable at a reasonable and balanced level,” he said.
Treasury Secretary Steven Mnuchin in a statement on Monday said China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability.
“In this context, treasury has determined that China should no longer be designated as a currency manipulator at this time,” the Treasury said. The US officially named China a currency manipulator in August when tensions were high between Beijing and Washington.
Trump has repeatedly accused China valuing RMB low to make Chinese goods cheaper. After the US announcement, the parity rate of the Chinese currency renminbi or the yuan strengthened to a five-month high on Tuesday.
The central parity rate strengthened 309 pips to 6.8954 against the US dollar, which was its strongest since August 1 last year, according to the China Foreign Exchange Trade System. Trump had launched the trade war with China last year, demanding Beijing to reduce massive trade deficit amounting to USD 539 billion in China-US bilateral trade.
Trump is also demanding an intrusive verification mechanism to supervise Beijing’s promise to protect intellectual property rights (IPR) technology transfer and more access to American goods to Chinese markets.
The Chinese government earlier said that the text agreed by both sides includes nine chapters: the preface, intellectual property rights, technology transfer, food and agricultural products, financial services, exchange rate and transparency, trade expansion, bilateral assessment and dispute settlement, and the final terms.