Treasury secretary-designate Steven Mnuchin testifies on Capitol Hill in Washington on Thursday at his confirmation hearing before the Senate Finance Committee. Photo: AP

US Treasury Secretary nominee Steven Mnuchin said during his Senate confirmation hearing he is willing to label China as a currency manipulator if warranted, after president-elect Donald Trump backed away from his pledge to do so immediately.

Mnuchin said “I would” when asked by Senator Robert Casey on Thursday whether he would recommend naming the Asian country a manipulator if it deserved that label.

Trump has already softened his stance on China’s currency policy, saying in an interview this month with The Wall Street Journal that he would not name the country a manipulator on his first day in office, as previously promised. “I would talk to them first,” Trump was cited as saying. “Certainly they are manipulators, but I’m not looking to do that.”

Casey, a Pennsylvania Democrat who in the past introduced legislation to crack down on China for what he said was cheating on trade through its currency practices, acknowledged that the country has “shifted of late” from efforts to deliberately weaken its exchange rate. Mnuchin, who did not object to that characterisation, also said in an interview in November that he would name China a manipulator only after determining the label was deserved.

The lack of a tougher line from Mnuchin on Thursday may further ease concerns that the incoming administration will clash with China and start a trade war. His views on the country are significant because the Treasury Department is tasked with determining whether governments are providing their companies with unfair trade advantages.

Congress has gradually granted more powers to the executive branch around enforcement of international trade rules, meaning Trump will have significant leverage in redrawing existing and pending agreements. President Barack Obama signed the Trade Facilitation and Trade Enforcement Act last February, which allows the White House some leeway in penalising countries that are flouting the rules, including by cutting them out of competition for US government contracts.

Trump’s tough talk on the Asian nation was part of his pledge to revamp trade deals in order to attract investments and prevent companies from moving factory jobs abroad. But China wasn’t a major issue in Thursday’s hearing and its currency did not come up until near the end of the 5½-hour session. Most economists say China has done a reversal of its policies to weaken the yuan, which were designed to stimulate exports.

The Obama administration appears to agree. The Treasury Department in its latest foreign exchange report said that China meets only one of three criteria to be labelled a manipulator, adding that its recent efforts to prop up the yuan were preventing a rapid depreciation that would hurt the global economy.

Casey said in a statement before the hearing that “China is a serial trade cheater and their actions result in less jobs and stagnant wages for Pennsylvanians”.
“For years, I’ve been pushing to hold China accountable for currency manipulation and its flagrant violation of trade laws,” he said.