Currency manipulation

China rejects Trump charge of currency manipulation

By DOUG PALMER

China on Tuesday strongly rejected the Trump administration's determination that it's manipulating its currency for an unfair trade advantage and accused the U.S. Treasury Department of ignoring reality.

"The United States disregards the facts and unreasonably affixes China with the label of 'currency manipulator,' which is a behavior that harms others and harms oneself," the People's Bank of China said, according to a translation of a statement posted on its website. "The Chinese side firmly opposes this. This will not only seriously undermine the international financial order, but also trigger financial market turmoil."

On Monday, Treasury Secretary Steven Mnuchin took the rare step of formally declaring China a currency manipulator — a designation that no U.S. administration has made in regard to any country since the early 1990s when China was designated for the first and only other time.

Mnuchin's announcement came hours after President Donald Trump lashed out at Beijing for allowing its currency, officially known as the renminbi, to depreciate below 7 yuan-to-the-dollar for the first time in over a decade.

A weaker yuan relative to the dollar makes it cheaper for Chinese companies to sell in the U.S., offsetting some of the impact of tariffs imposed by Trump. It also makes the price of American goods more expensive for Chinese importers.

By Tuesday, the bank had shored up the yuan to let it settle at 6.9683 to the dollar — a signal that Chinese authorities may not have been comfortable letting the value of the renminbi to continue sliding, according to wire service reports.

China’s move to steady the yuan was expected to help lift U.S. stock prices on Tuesday, a day after trade war frictions helped push the main indexes to their biggest one-day percentage drop so far in 2019.

The Chinese central bank made its initial move on Monday following Trump's announcement last week that he would impose a 10 percent tariff on another $300 billion worth of Chinese goods, on top of his earlier decision to impose a 25 percent duty on $250 billion worth of imports from China.

In its statement Tuesday, the central bank acknowledged the exchange rate "has depreciated to a certain extent" since August, but said that was mainly due to changes in the marketplace and friction caused by the trade war.

The central bank also said its currency is much stronger now than in the mid-2000s when American politicians first became concerned about China's currency practices and began pushing Beijing for reforms.

"According to the data released by the Bank for International Settlements, from the beginning of 2005 to June 2019, the nominal effective exchange rate of the RMB appreciated by 38 percent, and the real effective exchange rate appreciated by 47 percent," the Chinese central bank said.

In addition, the International Monetary Fund recently concluded "the RMB exchange rate is generally in line with fundamentals," the central bank said.