Wanda Tseng: China is Not Currency Manipulator

2019-08-14 IMI

This letter was first published in the Washington Post on August 9. Wanda Tseng, Member of IMI International Committee, Former Deputy Director of the Asia and Pacific Department of the IMF The Treasury Department labeled China a “currency manipulator,” roiling global financial markets. As with its tariff increases, the United States acted unilaterally. The International Monetary Fund has responsibility for ensuring orderly exchange rates among countries based on internationally agreed-upon principles. In its latest surveillance of China’s financial policies in June, the IMF determined that the renminbi (China’s currency) was in line with China’s economic fundamentals and desirable policies and welcomed the renminbi’s greater flexibility. Even under U.S. law, China is not a “currency manipulator,” based on two out of three indicators: a material global current account surplus (China’s current account surplus is 0.4 percent of gross domestic product); nor has China engaged in persistent one-way intervention in foreign exchange markets (China’s foreign currency reserves has fluctuated around $3.1 trillion, whereas persistent on-way intervention would have led to a persistent increase in reserves). The drop in the renminbi on Aug 5 could be considered a response to market forces that is pulling down the renminbi on account of President Trump’s tariffs, which are likely to further weaken China’s economy. By acting unilaterally without regard to international agreements or its own laws, the United States is not only roiling global markets but also undermining its own global leadership.

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Wanda Tseng: China is Not Currency Manipulator

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