US Treasury says China does not manipulate its currency

WASHINGTON -- US Treasury Department on Friday declared that no major trading partner of the US, including China, met the standard of manipulating its currency, while six economies were listed on its Monitoring List as their foreign exchange polices bear close monitoring.

In its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, the Treasury Department concluded that no major trading partner of the United States, including China, has manipulated their currencies over the past six months to keep them undervalued.

However, it put China, China's Taiwan, Japan, South Korea,, Germany, and Switzerland on its Monitoring List, saying their foreign exchange policies bear close monitoring.

The report said that China remained on the list because of its "disproportionate share of the overall US trade deficit," despite that China's current account surplus was only 1.8 percent of GDP in 2016, sharply down from 2.8 percent of GDP in 2015.

US President Donald Trump this week said in an interview that China hasn't been manipulating its currency for months, a sharp reversal from his campaign rhetoric.

Many economists have argued that the Chinese currency, RMB, has been at equilibrium level in recent years.

Over the last decade, China's effective exchange rate has appreciated more than any other major currency, rising a total of more than 40 percent, said David Dollar, a senior fellow at the Brookings Institution.

Brad Setser, an expert with Council on Foreign Relations, noted that the RMB exchange rate is now close to equilibrium. He expected that the RMB exchange rate would remain stable at current level with China's current account surplus and its efforts to deal with capital outflows.

The International Monetary Fund declared the RMB as no longer undervalued in 2015. Under Obama administration, the Treasury Department also dropped its previous assessment that the RMB was "significant undervalued".