US Treasury rules out China as a currency manipulator

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 it retained six economies on a monitoring list created to indicate "unfair" currency practices.

In its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, the department said none of its major trading partners has manipulated their currencies over the past six months to keep them undervalued.

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

The Treasury Department created the list in April this year based on an analysis of three criteria, including a significant bilateral trade surplus with the US, a material current account surplus and engaging in persistent one-sided intervention in the foreign exchange market.

In the report, the department said that China met one of the criteria, a significant bilateral trade surplus with the US, instead of two as indicated in April's report.

The latest report explained that China's current account surplus fell to 2 percent of GDP in the first half of this year, moving below the established threshold for the criterion that current account surpluses in excess of 3 percent of GDP can be regarded as "material."

The other five economies met two of the three criteria each.

China's central bank has improved its communication on its exchange rate policy with the market since early this year and has taken measures to deal with the depreciation of its currency the renminbi, said the report.

It noted that core factors that have been supportive of the yuan remain in place, including high savings, a sizeable current account surplus, and GDP growth above the global average.

China's central bank governor Zhou Xiaochuan recently said in Washington that China will continue to enhance exchange rate flexibility while maintaining a relatively stable exchange rate. He added that China will firmly continue market-oriented reforms of its exchange rate mechanism.

C. Fred Bergsten, senior fellow at the Peterson Institute for International Economics, recently said at a forum that China does not manipulate its currency.

He noted that the Chinese economy is still growing at a relatively rapid pace, poses a high savings ratio and has significant amount of foreign reserves. All of these could support a relatively strong yuan, he added.