The United States will not list China as a “currency manipulator”

U.S. Treasury Secretary John Yellen will not list China as a “currency manipulator” in his first semi annual foreign exchange report after taking office, according to an unnamed source quoted by U.S. News Agency on the 13th, which “enables the United States to avoid new conflicts with Beijing”. The report is expected to be released on April 15. According to the report, during the trump administration, the US Treasury Department was accused of politicizing the report. In August 2019, the Ministry of Finance suddenly announced that China was listed as a “currency manipulator” when the report was issued unconventionally, but it cancelled the label five months later to reach a trade agreement with China. U.S. experts said the U.S. Treasury needed to rebuild the report’s “credibility.”. Chinese Foreign Ministry spokesman Zhao Lijian said in response to relevant questions on the 13th that China has not used the exchange rate as a tool to deal with external disturbances such as trade disputes.

The United States will not list China as a "currency manipulator"

The report has not yet been finalized, and a Treasury spokesman declined to comment on its content, according to the company. The three conditions for the United States to identify itself as a “currency manipulator” include: its annual trade surplus with the United States exceeds US $20 billion, the scale of its foreign exchange intervention exceeds 2% of GDP, and its current account surplus accounts for more than 2% of GDP (originally 3%, changed to 2% in 2019), Reuters said on the 13th. In August 2019, at the time of the most tense Sino US trade situation, the US Treasury Department announced that China would be listed as an “exchange rate manipulator”, which attracted China’s firm opposition. In January 2020, two days before the signing of the first phase trade agreement between the two countries, then US Treasury Secretary mu nuqin lifted the identification of China as a “currency manipulator”.


Some analysts believe that Yellen’s decision can be understood as that the exchange rate issue is no longer the core issue of Sino US conflict, and the game between China and the United States is more rational, according to Bloomberg. For the United States at present, it is meaningless to continue to challenge China unilaterally on the exchange rate issue. Now, the United States hopes to make a breakthrough on individual issues rather than a comprehensive confrontation. Liu Jie, head of China’s macro strategy at Standard Chartered Bank, believes that Yellen’s choice does not mean any improvement in Sino US relations, nor does it mean that bilateral tariffs will be reduced, but only reflects changes in the strategy of the new US government. Biden’s government is seeking to hold China responsible for its “unfair trade practices and human rights violations,” while reviewing the trump era tariff measures on billions of dollars of Chinese goods, the report said. People familiar with the matter said that although the Ministry of finance report will not list China as a “currency manipulator”, Ministry of finance officials are worried that “China is covering up its intervention in the RMB exchange rate through the activities of state-owned banks.”.


Lu Xiang, a researcher at the American Institute of the Chinese Academy of Social Sciences, told the global times on the 13th that Yellen has a very professional and rich resume in the financial field, and once served as the chairman of the Federal Reserve. Her professional background has made her clearly understand the problems in the domestic economy of the United States, and that China does not meet the conditions of “exchange rate manipulator” at all, so it is useless to list China as “exchange rate manipulator” It’s about solving America’s problems. Yellen’s decision also reflects that, unlike Trump’s arbitrary and unrestrained use of various policies to suppress China, Biden’s government pays more attention to weighing the pros and cons in its economic and trade policy towards China. However, this does not mean that the United States will stop its crackdown on China in economy and trade. Both the U.S. Department of Commerce and the U.S. trade representatives still release their tough attitude towards China in economy and trade. They will choose to use the tools left over by the previous government and continue to suppress China.


In the foreign exchange report released by the US Treasury at the end of 2020, Vietnam and Switzerland were listed as “exchange rate manipulators”, and India, Thailand and Taiwan of China were included in the “watch list”, which also included China, Japan, South Korea, Germany, Italy, Singapore and Malaysia. “Since then, officials in these countries have largely ignored the United States and continued to take positive action, which shows that the report is no longer as effective as it used to be,” said Bloomberg


The former US government used the label of “exchange rate manipulator” to suppress other countries, which seriously affected its international reputation. Eswar Prasad, an economist at Cornell University who worked in the China branch of the International Monetary Fund, said that during the trump administration, there was a “temporary” interpretation of the “exchange rate manipulator” standard. In 2017, munuchin listed China on the so-called “watch list”. According to the quantitative criteria set by the United States, the countries included in the “watch list” should meet two of the three criteria of “exchange rate manipulator”, but China only meets one. Now, instead of changing country specific processes, the Treasury needs to “rebuild the credibility of reporting using a more sensible set of standards that are applied consistently across countries,” Prasad said. People familiar with the matter also said that Yellen’s team also discussed the possibility of abolishing the trump administration’s measures to lower the threshold for identifying “exchange rate manipulators” in 2019, which will reduce the number of countries examined by the US Treasury Department by nearly half.


Lu Xiang said that during the trump administration, taking the “US priority” as the starting point of the policy, it launched wars all over the world and launched trade wars of different degrees against almost all its allies. To some extent, Yellen’s approach is to repair the damage of trump period, in order to restore the international credibility of the United States. This also reflects that the United States has given up the strategy of fighting alone on the issue of China and has once again won over its allies to deal with China. However, it is not easy or optimistic for the United States to restore its credibility and gain global trust. The world is still observing the future performance of the United States.