Summary: The US Treasury Department labeled China a "currency manipulator," to which China expresses deep regret. This label does not meet the quantitative criteria for a so-called "currency manipulator" set by the US Treasury itself. It is an arbitrary act of unilateralism and protectionism that seriously undermines international rules and will have a major impact on the global economy and finance.
SMM News: On August 6, the US Treasury Department labeled China a currency manipulator, and the People's Bank of China responded. The central bank stated that China expresses deep regret over the US Treasury Department's designation of China as a "currency manipulator." This label does not meet the quantitative criteria for a so-called "currency manipulator" established by the US Treasury itself, and is an arbitrary act of unilateralism and protectionism.
The central bank said that China operates a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. Under this mechanism, the RMB exchange rate is determined by market supply and demand, and there is no issue of "currency manipulation."
The following is the full text of the statement from the People's Bank of China:
Statement of the People's Bank of China on the US Treasury Department's Designation of China as a "Currency Manipulator"
On August 6, Beijing time, the US Treasury Department designated China as a "currency manipulator," to which China expresses deep regret. This label does not meet the quantitative criteria for a so-called "currency manipulator" set by the US Treasury itself. It is an arbitrary act of unilateralism and protectionism that seriously undermines international rules and will have a major impact on the global economy and finance.
China operates a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. Under this mechanism, the RMB exchange rate is determined by market supply and demand, and there is no issue of "currency manipulation." Since August this year, the RMB exchange rate has depreciated to some extent, mainly reflecting market supply and demand and fluctuations in the international foreign exchange market against the backdrop of changes in the global economic situation and intensifying trade frictions. This depreciation is driven and determined by market forces. The People's Bank of China has always been committed to maintaining the basic stability of the RMB exchange rate at a reasonable and equilibrium level, and this effort is well known to the international community. According to data released by the Bank for International Settlements, from the beginning of 2005 to June 2019, the nominal effective exchange rate of the RMB appreciated by 38%, and the real effective exchange rate appreciated by 47%, making the RMB the strongest currency among G20 economies and one of the currencies with the largest appreciation globally. In the just-concluded Article IV consultation with China, the International Monetary Fund pointed out that the RMB exchange rate is broadly in line with fundamentals. During the Asian financial crisis in 1997 and the global financial crisis in 2008, China has always committed to keeping the RMB exchange rate stable, strongly supporting the stability of international financial markets and the recovery of the global economy. Since 2018, the United States has continuously escalated trade disputes. China has always adhered to not engaging in competitive devaluation, and China has not and will not use the exchange rate as a tool to deal with trade disputes.
By disregarding the facts and unreasonably labeling China as a "currency manipulator," the US side has taken an action that harms both others and itself, and China firmly opposes this. This will not only seriously undermine the international financial order and trigger turbulence in financial markets, but will also greatly hinder international trade and global economic recovery, and ultimately the United States will reap what it has sown. This unilateral act by the United States also undermines the multilateral consensus on exchange rate issues and will have a serious negative impact on the stable operation of the international monetary system. China urges the United States to rein in its actions, abandon its wrong approach, and return to a rational and objective track.
China will continue to adhere to a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies, and maintain the basic stability of the RMB exchange rate at a reasonable and equilibrium level.