US government refrains from calling China a currency manipulator

China could bolster confidence in the yuan by engaging in more market-friendly reforms. (AFP)
Updated 18 October 2018

US government refrains from calling China a currency manipulator

  • The US Treasury Department said a recent depreciation of China’s yuan currency will likely exacerbate the US trade deficit
  • China is trying to counter some of the yuan depreciation

WASHINGTON: The US government on Wednesday refrained from naming China or any other trading partner as a currency manipulator, as it leans on import tariffs to try to cut a trade deficit with China.
In its semi-annual currency report, the US Treasury Department said a recent depreciation of China’s yuan currency will likely exacerbate the US trade deficit, but US officials found Beijing appeared to be doing little to directly intervene in the currency’s value.
US President Donald Trump has claimed that China’s rise as an exporting powerhouse has hurt US workers and since taking office he has ordered tariffs on more than $200 billion in Chinese imports.
“Of particular concern are China’s lack of currency transparency and the recent weakness in its currency,” said Treasury Secretary Steven Mnuchin.
Since the Treasury’s last currency report was issued on April 13, the yuan has fallen by more than 9.0 percent against the US dollar.
In the last week, the currency has pushed closer to the key 7 to the dollar threshold, a level not breached since 2008. Some currency derivatives show market participants expect the yuan to weaken past that level within a year.
The Treasury noted reports that China was trying to counter some of the yuan depreciation and said China could bolster confidence in the yuan by engaging in more market-friendly reforms.
“Treasury is deeply disappointed that China continues to refrain from disclosing its foreign exchange intervention,” the department said in its report.
It added that China should advance macroeconomic reforms that support greater household consumption growth and help rebalance the economy away from investment.
China’s multi-decade investment boom has helped make it the world’s factory and fueled a trade surplus in goods with the US of $390 billion in the 12 months through June.
Some China experts have speculated that Beijing could use yuan devaluation as a weapon in a broader trade war with the US.
The Treasury also said it was keeping China, India, Japan, Germany, South Korea and Switzerland on a monitoring list for extra scrutiny.
The Treasury said it was concerned that South Korea stepped up interventions in currency markets that appeared “to have been for the purpose of slowing won appreciation against the dollar.”
The Treasury said India was on course to be left off the list when it is next updated in six months. India was added in April after a burst in foreign exchange sales by the country’s central bank.


Africa development bank says risks to continent’s growth ‘increasing by the day’

Updated 18 August 2019

Africa development bank says risks to continent’s growth ‘increasing by the day’

  • The trade dispute between US and China has roiled global markets and unnerved investors
  • African nations need to boost trade with each other to cushion the impact of external shocks

DAR ES SALAAM: The US-China trade war and uncertainty over Brexit pose risks to Africa’s economic prospects that are “increasing by the day,” the head of the African Development Bank (AfDB) told Reuters.
The trade dispute between the world’s two largest economies has roiled global markets and unnerved investors as it stretches into its second year with no end in sight.
Britain, meanwhile, appears to be on course to leave the European Union on Oct. 31 without a transition deal, which economists fear could severely disrupt trade flows.
Akinwumi Adesina, president of the AfDB, said the bank could review its economic growth projection for Africa — of 4 percent in 2019 and 4.1 percent in 2020 — if global external shocks accelerate.
“We normally revise this depending on global external shocks that could slowdown global growth and these issues are increasing by the day,” Adesina told Reuters late on Saturday on the sidelines of the Southern African Development Community meeting in Tanzania’s commercial capital Dar es Salaam.
“You have Brexit, you also have the recent challenges between Pakistan and India that have flared off there, plus you have the trade war between the United States and China. All these things can combine to slow global growth, with implications for African countries.”
The bank chief said African nations need to boost trade with each other and add value to agricultural produce to cushion the impact of external shocks.
“I think the trade war has significantly impacted economic growth prospects in China and therefore import demand from China has fallen significantly and so demand for products and raw materials from Africa will only fall even further,” he said.
“It will also have another effect with regard to China’s own outward-bound investments on the continent,” he added, saying these could also affect official development assistance.
Adesina said a continental free-trade zone launched last month, the African Continental Free Trade Area, could help speed up economic growth and development, but African nations needed to remove non-tariff barriers to boost trade.
“The countries that have always been facing lower volatilities have always been the ones that do a lot more in terms of regional trade and do not rely on exports of raw materials,” Adesina said.
“The challenges cannot be solved unless all the barriers come down. Free mobility of labor, free mobility of capital and free mobility of people.”