US Treasury moves to unseat China as a currency manipulator

U.S. Treasury has determined that China should no longer be designated as a currency manipulator.

The United States Treasury Department dropped Monday its designation of China as a currency manipulator, two days before the signing of a preliminary trade agreement to ease an 18-month tariff war.

The currency report from the U.S. Treasury said the Chinese yuan, had depreciated as far as 7.18 per U.S. dollar in early September, but had rebounded in October and was currently trading at about 6.93 per dollar.

“In this context, Treasury has determined that China should no longer be designated as a currency manipulator at this time,” the report read.

The decision came in a semi-annual currency report, reversing an unexpected move by Treasury Secretary Steven Mnuchin last August at the height of U.S.-China trade tensions.

Mnuchin had accused China of deliberately holding down the value of its yuan currency to create an unfair trade advantage, just hours after, President Donald Trump, angered at the lack of progress in trade negotiations, also accused China of manipulating its currency.

However, on its latest currency report, the Treasury said that as part of the Phase 1 trade deal, China had made “enforceable commitments to refrain from competitive devaluation” and agreed to publish relevant data on exchange rates and external balances.

Although the manipulator designation had no real consequences for Beijing, its removal was an important symbol of goodwill for Chinese officials in a moment  where Vice Premier Liu He has arrived to Washington for a White House ceremony to sign the trade deal with Trump.

The agreement will likely reduce some U.S. tariffs on Chinese goods in exchange for increased Chinese purchases of U.S. agricultural, manufactured and energy products by some US$200 billion over the next two years, nearly double U.S. exports, according to U.S. Trade representatives.

China also suspended the planned additional tariffs on some U.S. products to be implemented on Dec. 15, which covered the 10 and five percent additional tariffs, respectively, on the imported products.

However, no version of the text has been made public, and Chinese officials have yet to publicly commit to key points, such as increased imports of U.S. goods and services.