President Donald Trump’s administration has removed the label of currency manipulator for China as the two economic powers are due to sign the Phase One trade deal after 18 months of fierce negotiations.
The Treasury Department released its decision in the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States delivered to Congress on Monday, Jan. 13.
The administration labeled China as a currency manipulator on Aug. 5, 2019, after Beijing allowed the yuan to drop below the psychological level of 7 units per U.S. dollar at the height of U.S.-China trade tensions.
At that time, U.S. Treasury Secretary Steven Mnuchin accused China of deliberately holding down its currency value to create an unfair trade advantage.
But in the latest report, Mnuchin said, “China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” he said.
The report said that intensive trade and currency negotiations between the two countries over the last few months resulted in a Phase One trade agreement that requires structural reforms and other changes to China’s economic and trade regime in several key areas, including currency and foreign exchange issues.
In this agreement, China has also agreed to publish relevant information related to exchange rates and external balances.
According to the report, the Chinese yuan depreciated as far as 7.18 per U.S. dollar in early September, but subsequently rebounded in October and is currently trading at about 6.93 per dollar.
“Treasury has determined that China should no longer be designated as a currency manipulator at this time,” the report said.
Chinese Vice Premier Liu He arrived in Washington on Monday for a White House ceremony to sign the trade deal with President Trump, Reuters reported.