Branding China as currency manipulator puts U.S. credibility at risk

China Plus Published: 2019-08-07 22:20:18
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Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

The recent move by the United States to flout its own criteria to designate China as a currency manipulator reflects Washington's eagerness to exert extreme pressure on Beijing using a form of economic bullying that will likely expose the global economy to greater risk.

[File photo: VCG]

[File photo: VCG]

The United States has been resorting to using exchange rates to suppress its competitors on previous occasions. In the early 1980s, Japan's emergence as a leading manufacturing and trading power was regarded by Washington as a threat to the economic dominance of the United States. Washington thus turned to depreciating the greenback to counter its expanding fiscal and trade deficits. In September 1985, led by the United States, Japan along with Germany, France, and Britain signed the Plaza Accord. The accord sought to manipulate exchange rates by depreciating the U.S. dollar relative to major currencies including the Japanese yen. This contributed to Japan's two lost decades of economic growth.

In the 1980s and 1990s, Washington also designated a slew of countries as currency manipulators, including its ally South Korea. It forced these countries to increase their exchange rate flexibility and relax capital controls, and at the same time appreciate their currencies against the U.S. dollar. Germany, Italy, Japan, and Singapore among others have also been put on the currency manipulation watch list by Washington, despite being allies of the United States.

China was accused of currency manipulation by the United States as early as 2005, when lawmakers proposed the Chinese Currency Act and threatened to impose tariffs on China in order to push for a big appreciation of its currency, the renminbi (RMB). But since China reformed its exchange rate regime in 1994, the marketization of its currency has increased significantly. During recent negotiations, the International Monetary Fund found that China's handling of its currency was broadly in line with its economic fundamentals. Moreover, in none of the five Treasury Reporting Rates of Exchange issued under the Trump administration has China been branded a currency manipulator. That Washington has decided to turn a blind eye to these authoritative assessments shows its real intention is to cater to domestic political needs.

Branding China as a currency manipulator creates new obstacles to the development of China-U.S. economic and trade relations, and exacerbates global financial market turmoil. This hinders international trade and puts the global economic recovery at risk of faltering. In response to this decision, former U.S. Treasury Secretary Lawrence Summers wrote an article saying that the move to label China a currency manipulator is unjustified, and warning that it will damage the credibility of the United States government and risks exposing its economy to the risk of recession.

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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, 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.