The United States has stopped this Monday to officially consider China as a currency manipulator, according to the Treasury Department in a report. The decision clears an obstacle to reach an agreement that stops the commercial war that both powers have been fighting for almost two years. The announcement comes on a day in which Chinese negotiators have arrived in Washington, where the first phase of said trade agreement is scheduled for Wednesday, closed in December between both negotiating teams.
The measure revokes the controversial decision, taken in August last year by the Trump Administration, amid escalating trade tensions between the two powers, to include China in the US list of countries that manipulate their currency to gain a competitive advantage. That summer, President Trump accused Beijing of devaluing the yuan to mitigate the impact of the tariffs it had imposed on Chinese imports.
In a long-awaited report, published this Monday afternoon, the Treasury offers its first public analysis of Beijing’s monetary practices, and explains the commitments made by China to improve transparency in its handling of the yuan. The commitment, by both countries, to avoid devaluations that favor their exports is part of the agreement that Trump and the Chinese leaders plan to sign on Wednesday.
“China has made executable commitments to refrain from competitive devaluation, promoting transparency and accountability,” Treasury Secretary Steven Mnuchin said in a statement.
During much of the trade conflict between the two countries, initiated when Trump announced the imposition of tariffs on Chinese products in March 2018, the yuan has been depreciating against the dollar, reducing the impact of the levies and causing frustration in the US Administration. The official designation of China as a currency manipulator was a measure of high symbolic value, which had not happened since 1994. Mnuchin had been initially reluctant because China did not meet all the requirements that its Department requires to swell the list. But in the end, on August 6 of last year, less than a week after announcing that tariffs would cover all goods imported from the Asian giant, Mnuchin yielded to Trump’s pressures and made the decision appealing to a 1988 law that It contained a more lax definition of currency manipulation.
The measure was criticized by numerous economists, and the International Monetary Fund said in September that there was no evidence of manipulation. The weakening of the yuan could be attributed, they warned, to a slowdown in the growth of the country’s economy. The August decision, moreover, was announced in a press release, and not within the more detailed Treasury report, which deprived analysts of a detailed explanation of the decision.