US Treasury reiterate that China is not manipulating currency

The US Treasury again found that neither China nor any other trading partners were manipulating its currency, according to the semi-annual report.

But Treasury called on the Asian economic giant to avoid allowing the renminbi to weaken persistently.

While the report released on Tuesday said "direct intervention by the People's Bank of China in the last year has been limited," Treasury said in a statement that it "continues to urge China to take the necessary steps to avoid a persistently weak currency.

"The closely watched report broadened the field of its scrutiny for potential currency manipulation, since a weak currency makes exports to the United States more competitive and could undermine Washington's current efforts to cut a soaring global trade imbalance.

Beginning with this report, the Treasury is assessing all US trading partners with annual trade surpluses in goods of more than USD 40 billion.

Based on trade in 2019, that standard covered 21 countries with nearly USD 3.5 trillion in goods trade with the United States, according to the report.

With the new expanded list, Treasury put nine trading partners, including China, on the "monitoring list" of countries "that merit close attention to their currency practices."

They are Germany, Ireland, Italy, Japan, Korea, Malaysia, Singapore, and Vietnam. The latest report removed India and Switzerland from the list but added Ireland, Italy, Malaysia, Singapore and Vietnam.

"Treasury takes seriously any potentially unfair currency practices, and Treasury is expanding the number of US trading partners it reviews to make currency practices fairer and more transparent," US Treasury Secretary Steven Mnuchin said in a statement.

The report noted that China's currency had fallen 3.8 per cent against the US dollar in the second half of last year, making it eight per cent weaker over the last year. However, China only triggered one of the criteria used to determine whether a country merits close monitoring.

Germany remains on the watchlist for the third year, and Treasury noted it has "the world's largest current account surplus," and a USD 68 billion trade surplus with the United States in 2018.

While Germany has repeatedly been listed, like Italy and Ireland it is part of the eurozone and no longer has independent control over its currency or monetary policy, which is handled by the European Central Bank.

India and Switzerland were removed because for two consecutive reports they had both met only one of three criteria necessary for inclusion on the monitoring list.

While India had a significant bilateral surplus, Switzerland had a material current account surplus, according to the report.