Treasury labels China a currency manipulator for the first time since 1994

Aug.06, 2019 8:10am

“Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions”.

“The Chinese authorities have acknowledged that they have ample control over the RMB exchange rate. In a statement today, the People’s Bank of China (PBOC) noted that it “has accumulated rich experience and policy tools, and will continue to innovate and enrich the control toolbox, and take necessary and targeted measures against the positive feedback behavior that may occur in the foreign exchange market.” This 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”.

“This pattern of actions is also a violation of China’s G20 commitments to refrain from competitive devaluation” [1]


The Trade Facilitation and Trade Enforcement Act of 2015 established criteria for identifying a currency manipulator, which can be seen in the table below:

In May of this year, a congressional report provided further clarification on this criteria:

“Persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly, in at least 6 out of 12 months, and these net purchases totalat least 2 percent of an economy’s GDP over a 12-month period.3 The updated criteria will now capture all instances where one-sided purchases are undertaken in half ormore of the months of the year. Looking over the last two decades, t his quantitative threshold would capture all significant instances of sustained, asymmetric foreignexchange purchases by important emerging markets”. [2]

After this announcement from the treasury, it was reported by Bloomberg that China had stabilized the Yuan. As of 8:10am, U.S markets have also stabilized.

Is this the end of the saber rattling? Well, if you take into account everything that has happened this year, then probably not; there is most likely more to come.[3]

1. https://home.treasury.gov/news/press-releases/sm751

2. http://chrome-extension//oemmndcbldboiebfnladdacbdfmadadm/https://home.treasury.gov/system/files/206/2019-05-28-May-2019-FX-Report.pdf

3. https://www.bloomberg.com/news/articles/2019-08-06/yuan-fixing-in-focus-after-china-named-currency-manipulator

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