'Currency Manipulation' jibe is typical act of US Unilateralism

China Plus Published: 2019-08-07 00:59:32
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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]

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.

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of chinaandgreece.com, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.