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US to lift China currency manipulator tag ahead of trade deal

A reporter for Fox Business Network earlier tweeted the news about Treasury’s plans.

Jan 14, 2020, 08.26 AM IST
Now that a deal is in sight, the designation is being lifted.
New York: President Donald Trump’s administration plans to lift its designation of China as a currency manipulator, people familiar with the matter said, removing an obstacle to a trade deal the two nations are set to sign this week.

The Treasury Department will make the move in a semi-annual report, expected to be released soon, after being delayed as the US and China finalize a “phase one” trade pact, said the people, who spoke on condition of anonymity.

Treasury Secretary Steven Mnuchin in August first formally labeled China a currency-manipulator, a move that further escalated the trade war with Beijing after the country’s central bank allowed the yuan to fall in retaliation to new U.S. tariffs.

A Treasury Department spokeswoman declined to comment. A reporter for Fox Business Network earlier tweeted the news about Treasury’s plans.

Now that a deal is in sight, the designation is being lifted. The administration had at one point considered maintaining the label and instead announcing it would monitor the yuan with the possibility of lifting the designation in August of this year, according to the people.

Mnuchin’s August 2019 announcement prompted authorities in Beijing to increase transparency around how they manage the yuan. Some of that data has provided support for Treasury’s view that the People’s Bank of China engages in competitive devaluations of its currency, the people said.

But economists have criticized the U.S. decision. The International Monetary Fund said in September the yuan is fairly valued and that there’s no evidence of manipulation. China’s weakening currency could also be attributed to a slowdown in growth.

China also doesn’t meet the criteria outlined in a 2015 U.S. law for formally designating a country a currency-manipulator. Mnuchin instead relied on a 1988 trade law that has a looser definition of currency manipulation to justify the claim. He did so after the yuan broke the 7 per dollar level for the first time since 2008, drawing Trump’s ire. Mnuchin had resisted using the label in the previous five reports he released.

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