U.S. president says China is not a currency manipulator
The value of China's currency, the yuan, gained on Thursday after U.S. President Donald Trump reversed his campaign rhetoric that he would label China a currency manipulator.
The yuan's reference rate against the U.S. dollar stood at 6.8651 on Thursday, up 289 basis points compared to Wednesday's, the biggest gain since January 18.
In an interview with the Wall Street Journal on Wednesday, Trump stressed that "they [China] are not currency manipulators," a change in tone from accusations he made during last year's election campaign.
The Wall Street Journal reported that Trump said one of the reasons why he had changed his mind was because China hasn't been manipulating its currency for months.
A U.S. Treasury spokesperson also confirmed that the department's semi-annual report on currency practices of the country's major trading partners will not name China a currency manipulator, Reuters reported on Wednesday.
China's customs spokesperson Huang Songping said at a press conference on Thursday that China and the U.S. have win-win economic and trade ties.
"Currency management is a domestic policy. How can the U.S. blame its own financial and economic problems on other countries' currency policies?" Tan Yaling, head of the Beijing-based China Forex Investment Research Institute, told the Global Times on Thursday.
Six nations, including China, were put by the U.S. Treasury on a watch list of countries at risk of engaging in unfair foreign exchange practices in its October 2016 currency report, Bloomberg reported on Thursday.
Under U.S. law, branding a country a currency manipulator can trigger an investigation and negotiations on tariffs and trade. The U.S. last branded China a currency manipulator in 1994.
Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, said that for the U.S., the criterion for deciding whether a country is a currency manipulator is if the U.S. can benefit from trade with that country.
'Unimpeachable' policies
Zhou said China does not need to pay attention to the so-called currency manipulation accusations, as China's recent currency policies have been "unimpeachable."
"If China wants to boost exports by deliberately devaluing the yuan, the Chinese government would have encouraged it. But what the Chinese government has done is the opposite. It has been trying to support the yuan by using its foreign currencies," Zhou said, adding that it was one reason why Trump backed away from his campaign promise. "He has no proof to support his accusation," Zhou said.
China's foreign currency reserves stood at about $3.009 trillion by the end of March, down from $3.21 trillion a year ago.
Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, said that China's currency policies are market-oriented with an appropriate level of government management, which suits the domestic economy very well.
Tan also noted that a market economy is still developing in China, and the U.S. shouldn't force China to adopt currency management methods used by completely market-oriented economies.
Mutual efforts
Zhou said another reason why Trump had changed his mind was because he no longer needs to use the currency manipulation threat as a bargaining chip to solve its trade gap with China, as the two countries have started to work together on this issue through negotiations.
Trump made the comment days after he and Chinese President Xi Jinping met in Florida. At that meeting, the two sides agreed to carry out 100-day commercial trade talks. U.S. Commerce Secretary Wilbur Ross said the talks are targeted at lowering U.S. trade deficit with China.
Trump also said at a Wednesday press conference that he and Xi had "very good bonding" and "very good chemistry," the Guardian reported on Thursday.
"This is not a concession from China. This should be efforts made by both countries to develop close, mutually-beneficial trade relations," Bai noted.
Bai also said the two countries' trade friction will remain, but only on a case-to-case basis.
"The two governments have reached a consensus not to allow individual disputes to severely impact the two countries' trade status," he noted.
