Thursday, 27 April, 2017

US Treasury says China does not manipulate its currency

Trump waves as he and China's President Xi Jinping walk along the front patio of the Mar-a Lago estate after a bilateral meeting in Palm Beach Florida U.S Trump: I'll Make 'Not as Good a Trade Deal' if China Helps with North Korea
Nellie Chapman | 21 April, 2017, 19:54

US President Donald Trump and Chinese President Xi Jinping shake hands during a dinner at Mar-a-Lago, Thursday, April 6, 2017, in Palm Beach, Fla.

U.S. Treasury Department on Friday declared that no major trading partner of the U.S., including China, met the standard of manipulating its currency, while six economies were listed on its Monitoring List as their foreign exchange polices bear close monitoring. The reversal by the Treasury department was one of the nearly half-a-dozen instances when Donald Trump or his administration have gone back on his poll campaign promises. But this week he said North Atlantic Treaty Organisation was no longer obsolete.

He referred to the USA bombing of a Syrian air base on April 7 to punish the Bashar al-Assad regime for a suspected use of chemical weapons.

The last report released in October found that six countries - China, Japan, Korea, Germany, Taiwan and Switzerland - met two of the three criteria.

No major trading partner of the USA was named a currency manipulator in a latest Treasury report on the foreign exchange policies of these countries, though a list including six countries whose polices were deemed to require close monitoring was left unchanged.

Trump has softened his rhetoric against China's trade practices as Beijing has intervened in foreign exchange markets to prop up the value of its yuan, and as he looks to China for help dealing with rising tension on the Korean peninsula.

"The US can not and will not bear the burden of an worldwide trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates", it said. "The fact that that has been going on for so long is emblematic of the imbalance in the way we negotiate and deal with each other", said James McGregor, Chairman of APCO Worldwide in Greater China.China has purchased hardly any American beef since it conditionally lifted an import ban a year ago that was imposed in 2003 due to a case of mad cow disease in Washington state.Despite initial media reports suggesting Xi may have offered access for U.S. beef as a concession to stave off rising trade tensions, China's Premier Li Keqiang this week appeared to link progress on the issue to U.S. restrictions on imports of some Chinese poultry products for food safety reasons."China is willing to import market-competitive U.S. beef that meets quality and health standards", Li told a U.S. Congressional delegation in Beijing on Monday, according to the state-run Beijing News.

The Opposition Democratic party leaders slammed Trump Administration for going back on its poll promise. Economists say the USA currency could rise further as the Federal Reserve raises interest rates.

"China now has an extremely large and persistent bilateral trade surplus with the United States, which underscores the need for further opening of the Chinese economy to American goods and services, " as well as quicker reforms to boost household consumption, according to the Treasury report.

Designating a country as a currency manipulator doesn't immediately trigger any penalties, but it is seen by other governments as a provocation.

The decision not to name China a currency manipulator has marked one of the sharpest major reversals of Trump's young presidency.

The president also has a developing perspective on North Korea.

Even though China has not moved to keep its currency weak in recent years, the country "has a long track record of engaging in persistent, large-scale, one-way foreign exchange intervention, doing so for roughly a decade", the report said. It said it will scrutinise China's trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the US.

Now, China needed to show that its lack of intervention in the currency markets "to resist appreciation" over the past three years was a "durable" policy by allowing the yuan to strengthen "once appreciation pressures resume", the Treasury said.