Chinese currency not traded fund
For two decades, China has been one of the countries on a U.
Complaints that Beijing kept the yuan exchange rate artificially low escalated as China's bilateral trade surplus soared, with regular threats to label it a currency manipulator. Washington has not taken that drastic step since the early s, but U. President-elect Donald Trump has vowed to do so, shrugging off the prospect of exacerbated tensions between the world's two largest economies. Trump is not the first American politician to vow to play hardball with China during an election campaign.
In , Ross Perot accused president George H. Bush of shipping jobs to China. Before the election, Bush's son, George W. Four years later, John Kerry accused president George W.
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Bush of being "asleep at the wheel" for failing to address China's currency manipulation. During a Democratic Party primary debate, Barack Obama vowed to "take [China] to the mat on [currency manipulation]". But President Obama's administration refrained from labeling China a currency manipulator. During a presidential election debate with Obama, Republican Party nominee Mitt Romney made the boldest campaign promise on the issue, vowing to label China a currency manipulator on "day one" in office.
So when Trump vowed on the campaign trail to attack China's currency policy and slap a 45 per cent tariff on imports from China, on the other side of the Pacific the Chinese leadership, think-tanks and state media took it as just more angry rhetoric. They thought Trump, like his predecessors, would embrace engagement.
But a succession of red flags since Trump's election victory in November have caught them off guard. It was only recently that China, in the middle of intense horse trading ahead of the Communist Party's national congress this autumn, began to prepare for economic ties with the U. More from the South China Morning Post: To let the yuan fall or not? Beijing's big burning currency question Be careful what you wish for Mr President, a stumble in relations could send China's currency for a tumble Robust dollar, tumbling yuan underline need for US-China currency deal.
China was first listed as a currency manipulator by the George H. Bush administration in May Treasury Department report attributed the inclusion to "the size and growth of China's external payments surpluses" resulting from "pervasive administrative controls" maintained by Beijing, "including a highly regulated system of foreign exchange allocation and direct controls on imports.
China's trade surplus with the U. That made it the source of America's second-largest bilateral deficit, trailing only Japan. China had a dual exchange rate system at the time, with an administrated rate applied to trade transactions under the state plan and a second rate determined in foreign exchange adjustment centers.
There was also a sizable black market. In early , Beijing announced a renewed commitment to broad economic reform. A year later it devalued the yuan by 5 percent and its surplus with the U.
In , China unified its dual exchange rates and devalued the yuan by 33 percent from 5. Washington's generally mild stance — negotiating currency issues through the WTO and through regular, high-level Sino-U.
In , China announced a "managed floating" rate system, under which the yuan was allowed to float against a basket of currencies within a narrow daily range, and revalued the yuan, setting it 2. But reform has been a stop-start affair and Beijing again pegged the yuan to the U.
After allowing the yuan to appreciate by nearly 30 percent against the greenback since , Beijing introduced a new method to determine the daily reference rate in August last year to better reflect market supply and demand.
As a result of the adjustment, to prepare for the yuan's inclusion in the International Monetary Fund's Special Drawing Rights, China slashed the yuan's fixing by a record 1.
A People's Bank of China official, speaking on condition on anonymity, said China did not meet at least one of the three criteria upon which the US decides whether a country is a currency manipulator, because its current account surplus was less than 3 percent of its gross domestic product.
Maybe Trump should reconsider what he's after and the consequences to the U. The yuan has weakened by about 10 percent against the U. Beijing has been trying to keep the yuan high, imposing administrative curbs to check capital outflows and depleting its huge foreign reserves.
Renmin University finance professor Zhao Xijun said China would follow the path it had designed to currency regime reform and "definitely say no" to being designated a manipulator.
Scott Kennedy, director of the project on Chinese business and political economy at the Centre for Strategic and International Studies in Washington, said: However, it depends on how China will respond. But it's extremely dangerous on both sides, particularly on the China side, if a trade war does break out.
That was because China's economy was "far more dependent" on the bilateral relationship than the other way around, he said, and China's economy was "much more fragile" than the U. Ricard Torne, senior economist at FocusEconomics in Barcelona, said labeling China a currency manipulator would add downward pressure on the yuan, mainly via two different channels.
Against that backdrop, FocusEconomics expects the yuan to trade at 7. On Tuesday, the first trading day of , the People's Bank of China fixed the yuan midpoint at 6.
It was the first fixing since a change to the composition of the currency basket used to determine the yuan's value which reduced the U. The Chinese leadership's emphasis on structural reforms and boosting domestic demand at last month's central economic work conference, an annual even that sets economic priorities for the following year, underscored the realization that the road ahead could be rocky if U.
At the conference, the top leadership set "progress amid stability" as the guiding principle for economic work this year. The emphasis shifted to "stability is the main theme" last year, after a flirtation with "development is the No 1 task" in This month's presidential transition in the U. Trump's nomination of several hawkish officials for his White House, who shared his view that China had stolen jobs from the U. Among them is Peter Navarro, a strident critic of Beijing, who Trump named as director of a newly created National Trade Council.
A documentary directed by Navarro, based on his best known book, Death by China, said: More than 25 million Americans cannot find a decent job. And we now owe more than 3 trillion dollars to the world's largest totalitarian nation. Trump appears bound to pursue a more aggressive trade policy with China and the recent rediscovery of year-old legislation still in the statute books could give him the tool to do so.
It had been thought that U. Ironically, the last time a US administration seems to have considered using it was against the People's Republic of China on the eve of its founding in With China likely to opt for retaliation rather than make concessions, Beijing could cancel aeroplane orders, block U. If an all-out trade war followed, higher trade barriers for Chinese goods could lead to higher input costs and higher inflation rates in the U.
Despite hopes for Trump's stimulus plan, higher inflation and interest rates would drag on growth, Torne said. Follow CNBC International on Twitter and Facebook. Asia Europe Stocks Commodities Currencies Bonds Funds ETFs Investing Trading Nation Trader Talk Financial Advisors Personal Finance Etf Street Portfolio Watchlist Stock Screener Fund Screener Tech Mobile Social Media Enterprise Gaming Cybersecurity Tech Guide Make It Entrepreneurs Leadership Careers Money Specials Shows Video Top Video Latest Video U.
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Register Log In Profile Email Preferences PRO Sign Out. Economy World Economy US Economy The Fed Central Banks Jobs GDP outlook. The currency war is over, China won: Navarro's China views may soften: Beijing's big burning currency question Be careful what you wish for Mr President, a stumble in relations could send China's currency for a tumble Robust dollar, tumbling yuan underline need for US-China currency deal China was first listed as a currency manipulator by the George H.
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