The US has offered another olive branch in the lead-up to the phase one deal, removing China’s designation as a “currency manipulator”.
The US Department of Treasury designated China as a currency manipulator in 2019 after it set the value of the renminbi below 7 per US dollar in response to tariffs imposed in September.
“China has a long history of facilitating an undervalued currency through protracted, one-sided intervention in the foreign exchange market and other tools,” the Treasury wrote in a report.
“Over the summer, China took concrete steps to devalue the RMB. Subsequently, Treasury determined under Section 3004 of the Omnibus Trade and Competitiveness Act of 1988 that China was a currency manipulator, given that the purpose of China’s devaluation was to gain unfair competitive advantage in international trade,” it said.
China has made “enforceable commitments” to refrain from further competitive devaluation in the upcoming phase one deal, leading the Treasury to remove the designation.
The value of the renminbi has appreciated since September, from ¥7.18 to ¥6.93.
However, the Treasury has maintained that it was “disturbed” by the “persistent and excessive” trade and current account imbalances that now mark the global economy.
“Subdued real interest rates across the global economy are a symptom of substantial excess saving that is not being productively employed within the domestic economies of Germany, the Netherlands, China, and other major economies,” the Treasury wrote.
“In order to achieve stronger and more balanced global growth, key economies that have maintained large and persistent external surpluses must pursue reforms that will revitalise domestically driven growth, create productive opportunities for investment, and spark private sector-led growth.”
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