Who is Manipulating China?
|The US Treasury did not name China as a currency manipulator because it cannot. The standard was written by Congress, "persistent, one-sided" intervention in the exchange market and Beijing is not guilty.
The yuan is a managed currency. Its rate against the dollar is set by the government. Is the almost 3 percent differential between the yuan's 10.3 percent devaluation against the dollar since March and the 7.5 percent decline of the yen, the euro and the sterling evidence of nefarious intent in Beijing? Is it a warning to Washington? Or is it a reasonable market penalty for the potential damage to China's economy should the trade dispute with the United States drag on?
Since the Chinese tamed the offshore yuan market in Hong Kong (USD/CNH), which for a spell in early 2017 was exhibiting some freedom, or as Beijing said excessive speculation, there is no independent trading in the yuan. China's economy is export dependent and the trade argument with the U.S. is causing problems for the domestic economy. How widespread they are and whether they will bring China to the bargaining table with a deal that can win over the Trump administration in the near future is difficult to tell.
But one thing is certainly possible, a freely traded yuan might be even lower against the dollar than it actually is.
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