‘Currency manipulation’ accusation latest weapon in US arsenal against China
By Li
Qiaoyi and Wang Yi
Following
US President’s reckless steps creating global trade and finance chaos, the US
Treasury moved to name China as a “currency manipulator on August 5, in a move
denounced by Chinese economists as utterly groundless and hegemonic.
The
unwarranted accusation, made after the yuan weakened past a key mark of 7
against the greenback, was to set the stage for the US to brandish its tariffs
weapon, they said on August 6.
Treasury
Secretary Steven Mnuchin announced the
currency manipulation designation in a statement on the Treasury’s website.
Mnuchin will engage with the IMF to “eliminate the unfair competitive advantage
created by China’s latest actions,” according to the statement. The IMF has yet
to publicly comment on the situation.
“Labeling
another country as a currency manipulator is unjustified. The US doesn’t have
the right to make such a labeling wantonly,” said Dong Shaopeng, an adviser for
the China Securities Regulatory Commission.
The US
has been using this to disrupt China’s economy and financial system since 2004.
“It’s a groundless frame-up and pure bullying act,” Dong said.
The US
Treasury statement cited a portion of a post by China’s central bank on the
same day to substantiate its allegation that China is experienced in
manipulating its currency.
The portion
it quoted narrates the central bank’s push for continued innovation and the
enrichment of China’s policy toolbox to fight against short-term speculative
bets and stabilize market expectations, which was nonetheless claimed by the US
Treasury to be an open acknowledgement of the central bank’s currency
manipulating moves.
The
statement by the People’s Bank of China, China’s central bank, highlights its
belief that the yuan, which weakened past 7 due to multiple factors including
market expectations of the US imposition of tariffs on Chinese products, will
be kept basically stable at a reasonable and equilibrium level.
Both
onshore and offshore yuan breached the 7 mark against the US dollar for the
first time in more than a decade on August 5. .
A
separate statement by PBC governor Yi Gang said China will not resort to yuan
depreciation for competitive purposes, nor will it use currency as a tool to
deal with external disturbances such as the trade conflict. The nation will
stick to a market-determined foreign exchange-rate system, according to Yi.
“The US
labels China as a currency manipulator on Monday because China’s central bank
didn’t intervene and defend China’s currency, how interesting!” Mei Xinyu, a
veteran analyst close to the Ministry of Commerce, told the Global Times.
Most
absurdly, the latest move couldn't hold water even by the US’ own rules,
analysts noted.
Per the
Treasury’s most recent report in May concerning the foreign exchange polices of
its major trading partners, its criteria to judge whether its trading partners
amount to currency manipulation include a material current account surplus,
which has been lowered to 2 percent of GDP from the previous 3 percent. China’s
current account surplus stood at about 1.55 percent of its GDP for the first
quarter of the year, lower than the ratcheted-down number, according to Wu
Jinduo, head of fixed income at the research institute of Great Wall
Securities, citing data from China’s foreign exchange regulator.
The
criterion, essentially subjective and vague, has turned out to be another US
weapon alongside trade tariffs threats, but the accusation appears to be
failing, Wu told the Global Times on
August 6.
Apparently,
as Chinese experts pointed out, the US intends to add currency manipulation
designation to its trade war ammunition.
This is
the US’ latest pressure-tactic move in the ongoing trade talks, which gives the
US new excuses to impose more tariffs or other sanctioning steps on China, Tan
Xiaofen, deputy head at the School of Finance at the Central University of
Finance and Economics, told the Global
Times. “The US has extended the trade war to the financial and currency
sector,” Tan said.
The
ultimate purpose of the US’ latest drastic action is to maximize the impacts of
its tariffs on China’s economy. It's the US’ new means in the escalating trade
war between the two largest economies, said Sang Baichuan, director of the
Institute of International Business at the University of International Business
and Economics.
Global
financial markets have taken a hit from the US’ unruly moves. Stock markets
across the Pacific recorded big losses. The Dow lost nearly 800 points to close
below 26,000 points on August 5.
“Over
the short term, the global market would be mired in panics about an extension
of the trade war into a currency war,” Wu said, adding that the market would
gradually calm down although yields are set to be in decline and fluctuations
would grow.
China,
for its part, is advised not to overreact, she believes, noting the nation
should continue on its reform path.
If the
US perceives the depreciation as China’s “manipulation,” and expects to magnify
the impacts of its tariffs through yuan appreciation, its moves would end up
being self-defeating, Sang said.
“The US
is the only super-power and core country of the international currency system.
When a major economic crisis and expectation is formed, international capital
will flow to the US dollar, pushing up its exchange rate,” Mei said.
Source:Global Times
(Photo from CFP)
‘Currency manipulation’ accusation latest weapon in US arsenal against China
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