Wed, Oct 10, 2018 - Page 10 News List

US Treasury concerned over yuan’s fall

DEPRECIATION:The Treasury, which is to release its semi-annual currency report next week, is closely monitoring the yuan for signs of manipulation, an official said

Reuters, NUSA DUA, Indonesia

The US remains concerned about China’s recent currency depreciation, a senior US Department of Treasury official said on Monday, adding that it was unclear whether US Secretary of the Treasury Steven Mnuchin would meet with any Chinese officials at the IMF and World Bank meetings this week.

“On Chinese currency, of course, we continue to closely monitor developments in the RMB [yuan], we remain concerned about some of the recent depreciation of the RMB,” the official told reporters on a conference call. “More broadly, we’re concerned about China’s turn away from more market-oriented policies and continued reliance on non-market mechanisms that impact the macroeconomic and trade environment.”

The official said these concerns would be laid out in the Department of Treasury’s semi-annual currency report, which is due to be released next week.

However, he declined to preview any details of the report.

Mnuchin said in July that he was closely monitoring the depreciation of the yuan for signs of manipulation.

US President Donald Trump has frequently accused China of manipulating its currency for a trade advantage.

The Treasury official said Mnuchin has no meetings scheduled with Chinese officials at the IMF and World Bank meetings on Bali, but his schedule was still being firmed up.

Mnuchin’s normal Chinese counterpart on trade-related issues, Vice Premier Liu He (劉鶴), will not attend the meetings, so there are unlikely to be trade discussions, the official said.

China normally sends People’s Bank of China (PBOC) Governor Yi Gang (易綱) and Chinese Minister of Finance Liu Kun (劉昆) to IMF and World Bank gatherings.

It is possible Mnuchin would meet with them, but they would likely discuss topics other than trade, the official added.

Meanwhile, IMF chief economist Maurice Obstfeld yesterday said that he was not concerned about the Chinese government’s ability to defend its currency despite the recent depreciation of the yuan.

“No, I don’t think it’s a problem,” Obstfeld said, when asked about the issue on the sidelines of a news conference at the IMF and World Bank annual meetings on Bali, Indonesia.

However, Obstfeld also told the news conference that Beijing would face a “balancing act” between actions to shore up growth and ensure financial stability.

The yuan has faced strong selling pressure this year, losing more than 8 percent from March to August at the height of market worries, though it has since pared losses as authorities stepped up support.

The PBOC yesterday fixed the yuan’s official mid-point for trading at 6.9019 per US dollar, edging close to the psychologically important 7 barrier and helping to send Asian stocks to a 17-month low.

Obstfeld said financial markets have overly emphasized short-term movements in the Chinese currency, adding that the yuan has often quickly recovered from periods of volatility in recent years.

The IMF has been recommending that Chinese authorities de-emphasize the quantity of growth to focus more on its quality and sustainability to allow the economy to better withstand shocks, Obstfeld said.

While government officials have been moving to rein in China’s credit expansion, it was understandable they would take steps to boost growth in the face of trade tensions with the US, and these have impacted short-term economic growth, affecting the yuan, he said.

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