American Cable News Network (CNN) published a commentary by Sherisse Pham, a science and technology and business journalist on the website on August 6, 2019, entitled The U.S. Threat to China on Monetary Issues is Weak
It is more complicated for the United States to list China as a currency manipulator. First, the Trump Administrations view that China gains an unfair competitive advantage in trade by manipulating its currency is not unchangeable (the Trump Administrations sclaimabout the other Chinarigsite smoney to gain an unfair competitive advantage in intra-industry ist cut and dry), and Beijing denies that it has. Manipulation of the RMB.
However, this event has had a significant effect on the global market. Chinas allowing the yuan to depreciate against the dollar on Monday has apparently made some investors nervous, as well as in the first hours of trading on Tuesday.
In the context of the U.S. -China trade war, listing China as a currency manipulator Congress will further deepen the tension between the two countries on the currency issue, and the market will be very worried about it. This is not what investors who want stability want to see, Eurasia Group said in a research report released on Tuesday.
Renminbi Breaking Seven: A Symbolic Threshold
However, most experts and analysts say that, in fact, the central bank has been taking measures to keep the value of the renminbi strong for many years to prevent industry and business from withdrawing funds from China.
In this regard, China has also received support from the IMF, which has never recognized Chinas currency manipulation. In a report released in July this year, the IMF said that Chinas RMB policy in 2018 is satisfactory and in line with the basic principles of monetary management. Ms. Lagarde, the outgoing president of the IMF, criticized the Trump Administration last year for its view that China manipulates its currency. She believed that the depreciation of the RMB against the US dollar actually reflected the strength of the US dollar. According to Bloomberg, Ms Lagarde pointed out at a conference in Indonesia: When you compare the relative status of the RMB with the US dollar, the relative status of the RMB has a lot to do with the strength of the US dollar itself. Otto do with the strength of the dollar).
When the RMB exchange rate fluctuates, investors are very nervous about the phenomenon of breaking seven once or twice, and the US labeling China as a currency manipulator. But the market is more concerned about how the central bank will manage its own currency in the future. Looking ahead, China has ample reasons to avoid too rapid devaluation of the RMB, because the unstable RMB is not in Chinas own interests. The Peoples Bank of China is lowering expectations that the renminbi will rapidly depreciate, which is the more important medium-term impact on the market, Logan White said.
Economic impact of bad reputation
All countries in the world do not want to be classified as currency manipulators. This label will have a negative impact on a countrys reputation in the international community, because being labelled as a currency manipulator means that the country is not an equitable macroeconomic participant in the international community, and it also has a collateral effect: private sector investors will not be willing to travel in a non-compliance tour. Play rules are invested in countries where other countries are unwilling to trade with a country that has an unfair competitive advantage.
However, the situation in China is different. Most of the international community would think that the Trump governments action of listing China as a currency manipulator is for political purposes.
To classify a country as a currency manipulator can generally be used by one country as a tool to influence another country, but in the current complex situation between the United States and China, the effectiveness of such a tool is very limited, Logan White said.
Now the United States has labelled China as a currency manipulator, and Washington can negotiate with Beijing or the IMF on this issue under a 1988 law enacted by the United States. The ultimate goal of the negotiations is to ensure that the exchange rate between the two currencies is adjusted and eliminate any unfair trade competitive advantage.
Many trade experts have pointed out that the United States and China are already at the negotiating table, and that many rounds of negotiations involve currency issues. But the situation is getting more and more tense. The United States has just announced that it will impose new tariffs on Chinese imports to the United States, and optimistic expectations about the outcome of the negotiations have been reduced. Given the current trade war between the United States and China, the label of a currency manipulator has little practical significance, Logan White said.
Experts said that if Stephen Mnuchin filed a complaint against China at the IMF Council, the IMF would have to investigate the situation. After the investigation, the IMF Council will discuss whether Chinas currency behavior conforms to international law. After all these investigations and discussions, the IMF Council will send its views to the government of the accused country, and the views of the international community and the lessons learned from such incidents in the past will have an impact on the countrys policies in this way, IMF rules write.
The IMF is not necessarily on the side of the U.S. accusing it. After all, the IMF has expressed its support for Chinas position on the RMB issue. Very important is that the United States can indeed bring charges against China at the IMF, but the global bodys opinion on whether China manipulates its currency does not imply a real economic penalty.
(Observer Network horsepower translated from CNN)
Source: Responsible Editor of Observer Network: Wang Xiaowu_NF