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US Treasury Cancels Recognition Of China'S "Currency Manipulator"

2020/1/15 20:45:00 0
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Exchange Rate ManipulatorCancellation

At 13 local time, the US Treasury issued a statement to remove China from the list of currency manipulator countries. After two days, the Sino US high-level trade negotiators will sign the first stage trade agreement between the United States and China.

Earlier reports:
Article 1 reads "currency manipulation state": What are the criteria? What's the impact? How does the central bank respond?

In August 6, 2019, the US Treasury listed China as a "currency manipulator" in Beijing. This is the first time in the past 25 years that the United States has identified China as a currency manipulator.
The Central Bank of China said in a statement that China deeply regrets this. This label does not conform to the quantitative standard of the so-called "currency manipulation state" formulated by the US Treasury itself. It is a willful unilateralism and protectionism, which seriously undermines international rules and will have a significant impact on global economic and financial affairs. The Chinese side firmly opposes the fact that the United States ignores the fact that it is unreasonable to label China as a currency manipulator country.
The central bank points out that China has implemented a regulated floating exchange rate system based on market supply and demand and reference to a basket of currencies. In terms of mechanism, the RMB exchange rate is determined by market supply and demand, and there is no question of "currency manipulation".
The central bank points out that the United States ignores the facts and unreasonably label China as a "currency manipulator", which is a behavior of hurting others and harming others. China firmly opposes this. This will not only seriously disrupt the international financial order, cause financial market turbulence, but also will greatly impede international trade and global economic recovery, and will eventually bear fruit.
What is a currency manipulator?
The manipulation of exchange rate means that a country manipulates the exchange rate artificially, making it relatively low, making its export price seem cheap, or causing its importing partners to criticize it as a currency manipulator. Because products are cheaper, people like their products and reduce their purchases of local products. This will lead to the loss of employment in the importing countries. The manipulating countries are sacrificing the interests of other countries to create more employment opportunities and enjoy higher GDP.
What are the criteria for "currency manipulator"?
According to the latest US foreign exchange policy report on major trading partners released in April 2018, there are three criteria for currency manipulation.
1, a significant bilateral trade surplus of at least US $20 billion.
2, the substantive current account surplus is at least 3% of GDP;
3, long-term unilateral intervention in the foreign exchange market, in the past 12 months, repeated net purchases of foreign currencies and total GDP of 2%
If three standards of an economy are met, it is regarded as a "currency manipulator"; if only two indicators are met, it will be included in the list of observations; if only the first criterion is met, the economy will make a greater contribution to the overall trade deficit of the United States and may also be included in the list of observers.
In the history, what economies were included in the "currency manipulator"? How did the United States sanction it?
Historically, the US Treasury has identified China, Korea and Taiwan as currency manipulation. Neither South Korea nor Taiwan region have been subject to severe trade sanctions. However, under the request of the US government, the exchange rate management system has been adjusted in South Korea and Taiwan in China. The core is to relax the capital controls so that the won and the new Taiwan dollar will appreciate against the US dollar and reduce the current account balance.
In May 1992, December, May 1993 and November, China was listed on the list of currency manipulator 5 times in July 1994. In the early days of reform and opening up, China's foreign trade was not developed. The main demand of the United States was to ask China to relax restrictions on foreign exchange purchases so as to facilitate the repatriation of foreign capital. Under the circumstances of the Chinese government's continuous promotion of foreign exchange reform and the restriction of foreign exchange purchase, although the RMB depreciated sharply against the US dollar, it did not prevent the us from taking away the hat of currency manipulation countries.
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