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China says forex market intervention is not currency manipulation
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China’s foreign trade regulator said in a report on Thursday that foreign exchange market intervention doesn't amount to currency manipulation, while predicting that the RMB exchange rate, with no basis for persistent depreciation, is to reach new equilibrium after a period of volatility. 
 
“China would not engage in competitive devaluation of its currency, instead the elasticity of the yuan against the dollar’s two-way movement will be increased,” according to the report issued by the Ministry of Commerce (MOFCOM) on Sino-US economic and trade relations.  
 
The report says that in a bid to prevent abrupt volatility in the yuan, China’s central bank would provide dollar’s liquidity support as necessary. The practice aims to remove barriers to effective adjustment of balance of payments, or not to depreciate the currency to stimulate imports. Measures to allow the currency to fluctuate according to the dollar should not be deemed as currency manipulation, it noted..  
 
China has long been accused of suppressing the yuan to make its exports more competitive with US goods. Based on MOFCOM data, both the United States and China have benefited from the bilateral economic and trade cooperation. In 2016, the US had trade surplus of $16.4 billion in farm produce with China. Its exports to China include soybeans worth $13.8 billion, airplanes worth $12.6 billion, automobiles worth $12.1 billion and integrated circuit worth $8.8 billion. 
 
Over the past decade, the growth of American exports to China was nearly three times that of the total American exports, and double the increase of Chinese exports to the US.   
 
“In reality, China intervenes in foreign exchange market to stabilize financial market. The practice would not help acquire competitive strength but lead to the use of a huge amount of forex reserves,” according to the report, “China is making efforts to strike a balance between enhancing flexibility and maintaining stability.” It notes the result would be beneficial to both the US and international society. 
 
It is reported that days after the US President Trump met China’s President Xi in April, he rolled back on his campaign promise by saying that his administration would not label China a currency manipulator.  
 
In an interview with the Wall Street Journal later, Trump said China had not been “currency manipulators” for some time and had been trying to prevent renminbi from further weakening. He also said, “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me.” 

 


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