U.S. will suffer consequences of labeling China “currency manipulator”
By Jin Sheping
|
On August 5, both onshore
and offshore exchange rate of the Chinese yuan broke 7 against U.S.
dollar.
It was in fact a natural
market response to the changes in the international financial market and other
external factors such as the U.S. claim last week to impose an additional 10
percent tariff on $300 billion worth of Chinese imports.
However, some American
politicians are taking advantage of this and making hypes. On August 6, the U.S.
Department of the Treasury designated China as “a currency manipulator”.
Such act of the U.S.,
which harms others without benefiting itself, would not only wreak havoc on the
international financial order and cause turmoil in global financial market, but
also severely hinder international trade and the recovery of global economy. Eventually,
the U.S. itself will become a victim of the consequences.
It
is easy to find a stick to beat a dog just as the U.S. can always find faults
with China when it wants to smear the latter.
On
one hand, the U.S. is wielding the big stick of tariffs against global
countries, causing them to suffer drastic fluctuations in exchange rates; on
the other hand, it is willfully labeling countries “currency manipulators”,
forcing them to accept the so-called “reasonable exchange rates” designated by the
U.S.
These
evil actions of the U.S. revealed the country’s pursuit of unilateralism
and protectionism, reflecting the arrogance and arbitrariness of Washington.
Anyone sensible can
understand why the Chinese currency has broken the level of 7 yuan per U.S.
dollar.
On August 1, the U.S.
unilaterally announced that it would impose an additional 10 percent tariff on
$300 billion worth of Chinese goods, which seriously breached the consensus
reached by the heads of state of China and the U.S. in Osaka, Japan.
The move frustrated the
global market’s expectations toward the relieving of China-U.S. economic and
trade frictions, and became a blasting fuse of the fluctuation in yuan exchange
rate.
Economic and trade frictions
affect international trade which in turn has an impact on exchange rate. Such
fluctuation is driven and determined by market forces and will never be “manipulated”.
Some developed countries,
including the U.S., have constantly demanded China to make yuan exchange rate
more flexible since long ago. However, when the yuan exchange rate becomes
increasingly market-based and its frequency of fluctuation increases
accordingly, some Americans immediately flip-flopped and accused China of
“manipulating” exchange rate. It only reflected their absurdity.
Not able to find any
actual evidence for their false allegation against China, the U.S. Department
of the Treasury turned to the answers offered by the People’s Bank of China
(PBOC) during a regular news briefing on August 5.
The statement by the PBOC
“is an open acknowledgement by the PBOC that it has extensive experience
manipulating its currency and remains prepared to do so on an ongoing basis”,
said the U.S. Department of the Treasury.
The exchange rate of
currency is determined by the market, but it cannot be left completely unattended.
No country in the world today is adopting a laissez-faire attitude towards its
sovereign currency.
As a competent authority
of China’s foreign exchange policies, the PBOC has always been committed to
maintaining the basic stability of yuan exchange rate and keeping it stable at
a reasonable and balanced level.
In the face of
fluctuation in yuan exchange rate and the potential positive feedback in the foreign
exchange market, the PBOC would certainly take necessary and targeted measures
to resolutely crack down on the short-term speculation so as to guarantee the
stable running of the foreign exchange market. These measures have nothing to
do with the so-called “manipulating exchange rate.”
Not
just has China never manipulated exchange rate, in fact, the country has always
regarded marketization as a goal of its foreign exchange reforms.
What
China adheres to is a market-oriented and managed floating exchange rate system
which is formulated in reference to a basket of currencies. Therefore, market
supply and demand plays a decisive role in the formation of the yuan exchange
rate.
As
a responsible major country, China has reiterated on many occasions that it
will never pursue competitive devaluation or use yuan exchange rate as a tool
to deal with external disturbances including trade frictions.
Despite
the recent depreciation of the yuan against U.S. dollar, the value of yuan has
been generally rising from a historical perspective.
From
the beginning of 2005 to June 2019, the nominal effective exchange rate of yuan
appreciated by 38 percent and the real effective exchange rate of the currency
by 47 percent, which made yuan the strongest currency among those of the Group
of 20 (G20) economies.
Besides,
it is also the currency that witnessed one of the greatest appreciations around
the world, as revealed by the data from the Bank for International Settlements.
As
China enjoys a basic equilibrium in the balance of international payments and
has sufficient foreign exchange reserves, plus the country is seeing a
continuous momentum of sustainable and sound economic development, it is totally
able to maintain the stability of yuan exchange rate.
In
addition, it is hardly possible to label China a “currency manipulator” even it
is under the U.S. criteria, which is interesting.
According
to the present definition of a currency manipulator given by the U.S.
Department of the Treasury, a country needs to meet multiple quantitative
criteria at the same time before it is labeled a currency manipulator.
The
country’s current account surplus has to be equivalent to 2 percent of its GDP,
and its foreign exchange bought through exchange rate intervention shall exceed
2 percent of its GDP.
However,
China’s current account surplus in 2018 was only 0.37 percent of its GDP. Besides,
the country has neither made massive purchases of foreign exchange nor obtained
competitive advantages in trade via exchange depreciation.
Disregarding
the facts and calling white black, the U.S. just wants to see China cave in to
its extreme pressure and intimidation and make concessions in bilateral
economic and trade consultations with the U.S., so that it can gain more.
China,
though always advocates for resolving problems through dialogue and
consultation based on equality and mutual respect, is never afraid of any forms
of extreme pressure.
With
steady economic development and prudent financial development, China is strong
enough to handle any impact and attack.
The
attempts of some Americans to put a spoke in China’s wheel of development by
fabricating false accusations against the country such as labeling it “a
currency manipulator” could not, cannot, and will not succeed.
Such attempts would not
help solve any problems. The U.S. side had better respect the market rules and
facts, and return to the right track of rationality and objectivity, rather
than make troubles that would fan up the flames of the economic and trade
frictions with China.
U.S. will suffer consequences of labeling China “currency manipulator”
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