THE Treasury Department stopped short of declaring China a currency manipulator in its semiannual report on foreign-exchange rates, averting an escalation of a trade war while serving notice that the United States will be closely watching the yuan after its recent slide.
“Of particular concern are China’s lack of currency transparency and the recent weakness in its currency,” Treasury Secretary Steven Mnuchin said in a statement. “We will continue to monitor and review China’s currency practices, including through ongoing discussions with the People’s Bank of China.”
While Treasury said in the report that direct intervention by China’s central bank has recently been “limited,” the US is “deeply disappointed” that the nation doesn’t disclose its foreign-exchange intervention.
No major trade partner was designated a currency manipulator, according to the report, which was released on Wednesday by the Treasury. Still, the department dialed up criticism of China’s state-driven economic model.
“Real exchange-rate movements in 2018—particularly the strengthening of the dollar and the decline in China’s currency—would, if sustained, exacerbate persistent trade and current account imbalances,” according to the report. The Treasury said China’s economic model, “which continues to rely significantly on nonmarket mechanisms, is posing growing risks to the long-term global growth outlook.”
The decision not to label China a manipulator stands in contrast with public comments made by President Donald J. Trump, who has repeatedly accused China of gaming the value of the yuan to gain an advantage in trade. While formally declaring China a manipulator wouldn’t have triggered sanctions or other US penalties, it would have worsened an already tense relationship between the world’s two biggest economies.