FLASH Update: China “Grand Champions” of Currency Manipulation

FLASH Update: China “Grand Champions” of Currency Manipulation

FLASH Update: China “Grand Champions” of Currency Manipulation


FLASH: US President Donald Trump declared China the “Grand Champions” of currency manipulation Thursday, just a few hours after his new Treasury Secretary, Steven Mnuchin, pledged a more methodical approach to analyzing Beijing’s Fx (foreign exchange) practices.

In an exclusive interview with Reuters, President Trump said he has not “held back” in his assessment that China manipulates its yuan currency, despite not acting on a campaign promise to declare it a currency manipulator on his first day in office.

Stay tuned…

US Treasury Secretary Steven Mnuchin signaled no urgency to designate China a currency manipulator, as he wants to use a regular review of foreign-exchange markets to determine if the US’s largest trading partner is cheating.

No announcement on currency manipulation will come before the Treasury’s April report, Sec. Mnuchin said in an interview Thursday.

President Trump said on the campaign trail he would seek to fix large trade imbalances with countries such as China, some administration officials are softening the rhetoric, with Sec. Mnuchin saying in the interview he’s had “very good conversations” with his Chinese counterparts.

Sec. Mnuchin can use the Treasury’s currency report to reconsider trade negotiations, press the International Monetary Fund (IMF) to strengthen its surveillance of a country’s exchange-rate policies, or formally designate it a manipulator. While the Hussein-Obama Admin in its October report said China meets just 1 of 3 criteria to be labeled as such, the Treasury can change those criteria.

The US has long accused China of undervaluing its currency to boost exports, but Beijing has recently been burning through foreign reserves to support its RMB Yuan amid an economic slowdown and capital outflows.

Tuesday, Sec. Mnuchin, in a call with IMF chief Christine Lagarde, said he wants the fund to “provide frank and candid analysis of the exchange rate policies” of member countries.

In its last annual assessment of the Chinese economy, the IMF found the value of the RMB Yuan “remains broadly in line with fundamentals.”

Sec. Mnuchin will also explore issuing debt maturing in more than 30 years to cushion the effect of rising interest rates. With rates expected to be historically low for a long period of time, it “makes sense” for the Treasury to explore 50- and 100-year maturities, he said in a TV interview early Thursday. While the Federal Reserve has signaled that rates may go up this year, it’s “really about where we are not relative to just today, but where we are relative to interest rates over a long period of time,” he said.

“We’ll reach out to the market, investors, different people but I think it’s something that is a very serious issue” that we should explore, he said in  that interview.

He said said the Trump Administration’s internal scoring of its tax plan would assume higher growth economic growth projections than an evaluation by the Congressional Budget Office.

The Treasury has a Team of more than 100 people working to run its own scenarios, he said. The CBO and the Joint Committee on Taxation typically provide estimates on the budgetary effects of proposed tax legislation.

President Trump’s preliminary growth forecasts were more positive than projections made by independent agencies and private forecasters. Sec. Mnuchin sees the impact of tax cuts feeding into the economy in late Y 2018, reiterating his goals of reaching at least 3% growth.

The Treasury boss said he has “some concerns” with the border-adjusted tax.

Speaker Paul Ryan (R-MI) and House Ways and Means Chairman Kevin Brady (R-CA) have been struggling to gain support for the proposal from other Republicans.

  • USD/CNY: -0.19% to 6.865
    • Beijing’s economic team is getting a shakeup with the top banking regulator, the commerce minister, and the top economic-planning person all being replaced

Stay tuned…

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