2020.01.13; MJa13th: U.S. to Remove China's Currency Manipulator Label Ahead of Trade Deal--2nd Update
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U.S. to Remove China's Currency Manipulator Label Ahead of Trade Deal--2nd Update
01/13/2020 | 07:41 pm
By Kate Davidson and Josh Zumbrun
WASHINGTON -- The U.S. Treasury Department will drop its designation of China as a "currency manipulator" just two days before negotiators from Beijing and Washington are set to sign the first phase of the trade deal between the two countries, according to a senior U.S. official.
The trade agreement will include a section on Chinese currency practices that addresses many of the concerns raised when the U.S. applied the manipulator designation in August. As part of the agreement, China will commit to not depress its exchange rate and will make additional disclosures about its foreign-exchange practices.
U.S. lawmakers, economists and industry representatives have long expressed concern that China undervalues its currency to make its exports more competitive, with some saying U.S. jobs were lost as a result. Even so, the Treasury Department refrained from branding China a manipulator until August, the first time it did so since 1994.
The designation, which came amid rising trade tensions between the world's two largest economies, was largely symbolic. By law, the action kicks off negotiations that could eventually lead to the imposition of tariffs. But the U.S. was already negotiating with China over trade and had already followed the legal steps to impose tariffs on all Chinese imports.
The decision was reported earlier Monday by Fox Business Network.
The law governing currency manipulation directs the Treasury Department to ask the International Monetary Fund for assistance addressing currency manipulation. IMF research, however, didn't support the conclusion that China had manipulated its currency.
Roughly every six months the Treasury Department publishes a report on the currency and macroeconomic policies of major trading partners. The report uses three criteria to apply the manipulator designation: the extent of active intervention in currency markets, the size of trade surpluses with the U.S., and the size of a country's overall current-account surplus. A new report, in which the designation against China is formally lifted, is expected soon.
The August move caught many observers off guard because it wasn't part of the periodic report. It also came when China had not been actively intervening in currency markets and didn't have a large current-account surplus. China does have a large trade surplus with the U.S., although that surplus has been dwindling as import duties damped purchases from China.
The administration has touted the currency section in its deal with China as one of its most significant accomplishments. The currency component has been a key focus of Treasury Secretary Steven Mnuchin in the talks.
The text of the agreement hasn't yet been released.
Write to Kate Davidson at kate.davidson@wsj.com and Josh Zumbrun at Josh.Zumbrun@wsj.com