'Currency Manipulation' jibe is typical act of US Unilateralism
Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".
The US Treasury Department on Tuesday labelled China a 'currency manipulator,' despite the fact that it flies in the face of the criteria set by itself. Such a reckless act of unilateralism and protectionism will seriously undermine the international order.
Chinese currency yuan and the U.S. dollars. [File Photo: IC]
In May 2019, the US Treasury Department declared that China met only one of its three criteria for the label, namely, that it has an annual trade surplus worth more than 20 billion US dollars. It also said that China did not manipulate the exchange rate to gain an unfair advantage. Just two months later, the US Treasury Department has overturned its own conclusions and contradicted itself.
According to the consensus between the World Trade Organization and the International Monetary Fund, the IMF is the institution specialized in managing issues related to currency exchange rates. Its professional opinion is the premise and basis for judging whether a country is controlling its exchange rate. The United States has no right therefore to unilaterally evaluate other countries’ exchange rates. During a recent round of negotiations, the IMF found that China’s handling of its currency was broadly in line with the country’s economic fundamentals. By ignoring this assessment by an institution of authority and labeling China a currency manipulator, the US has broken the rules of multilateralism for its own selfish gains. Such a typical act of unilateralism and trade protectionism reflects the thinking of a bully that cannot stand the prosperity of others.
Since the beginning of August, the RMB exchange rate has undergone minor depreciation, mainly in line with market expectations in the wake of rising unilateralism and trade protectionism, and the increase of tariffs on Chinese exports by the US. This is a true reflection of market supply and demand, and the fluctuations in the foreign exchange market.
China operates a floating exchange rate system based on the market supply and demand, with reference to a basket of currencies, and with the market playing the decisive role. As the world’s second largest economic entity, China has been acting responsibly and is biding by the commitments of the G20 leaders summit on exchange rate issues. Since 2018, despite the United States’ continuous efforts to escalate the trade dispute, China has insisted on not engaging in competitive devaluations. Neither will it use the exchange rate as a tool to deal with trade disputes.
The United States has labeled China as a currency manipulator principally to maintain maximum pressure on the country, to disrupt market expectations and frustrate the Chinese economy. But such action will only lead to financial market turbulence, and greatly hinder international trade and global economic recovery.
The trade imbalance between China and the US has much to do with factors on the part of the US, namely its lack of domestic savings, its restrictions on high-tech exports to China, and the dollar’s role as a foreign exchange reserve currency. The United States should focus on solving its own structural problems, instead of seeking after unfair trade advantage by groundlessly accusing others of being currency manipulators.