Subscribe
E-Paper
Washington to continue pressure Beijing over currency, trade
By Park Hyong-ki
Trade disputes between the United States and China are not likely to subside in the near future as Washington is expected to continue applying pressure on Beijing, analysts say.
They expect that the Trump administration will further make China's foreign exchange transactions transparent and open its market for U.S. imports.
The U.S. Treasury Department did not label China as a currency manipulator in its foreign exchange report on Oct. 17, but it expressed concerns over China's lack of transparency in its exchange rate practices and persistent trade surplus.
Analysts say keeping China on the monitoring list was expected as the U.S. does not want to make it more uneasy for the two sides to settle their differences when their presidents meet at the G20 summit in November.
U.S. President Trump is expected to meet Chinese President Xi Jinping on the sidelines of the summit in Buenos Aries on Nov. 30.
"The Treasury has made a 'strategic' decision ahead of the G20 summit," said Kim Doo-un, an economist at KB Securities.
Treasury Secretary Steven Mnuchin said the U.S. will watch the yuan's decline.
The value of Chinese yuan has depreciated against the dollar by more than 7 percent since June. The yuan has also fallen 6 percent against a broader basket of currencies in the same period, according to the report.
Kim Hwan, an analyst at NH Investment & Securities said China could "move to enhance its transparency" if the two sides seek a mutual agreement on trade.
This is because Korea, Canada and Mexico agreed to "avoid unfair currency practices." Mexico and Canada reached the agreement as part of their free trade negotiations with the U.S.
Korea has agreed to increase its transparency of exchange rate intervention and begin reporting on it in early 2019.
"We welcome this important development in Korea's foreign exchange practices," the Treasury report said.
"It is important that the Korean authorities act to strengthen domestic demand; recent fiscal policy proposals would be a step in the right direction, but Korea maintains ample policy space to more forcefully support demand growth. Treasury will continue to monitor closely Korea's currency practices."
While Korea has narrowed down its trade surplus with the U.S. since 2015, China still has a "very large surplus" with the U.S. at $390 billion as of June 2018, according to the Treasury report.
This high number has warranted the U.S. Treasury to keep China on its monitoring list, along with five other countries, including Korea, Japan and Germany, which President Donald Trump had criticized for manipulating their currencies to take advantage of the U.S.
A country has to meet all three criteria to be labeled a currency manipulator. It has to have a "significant bilateral trade surplus with the U.S. of at least $20 billion. A country's current account surplus accounts for at least 3 percent of its GDP, and has intervened to buy U.S. dollars "repeatedly" and totaled at least 2 percent of the GDP over 12 months.
China's current account surplus accounts for 0.5 percent of the GDP as of June, and the U.S. could not detect any Chinese currency intervention.
