03 March, 2017
President Donald Trump made news last week when he repeated his belief that China is a currency manipulator.
His comments came weeks after many observers felt that United States and Chinese officials had decided to delay action on the issue. And they were made hours after the new U.S. Treasury Secretary, Steven Mnuchin, said China would not be punished.
Trump said the Chinese are, in his words, "grand champions at manipulation of currency. So I haven't held back. We'll see what happens." The Reuters news agency reported the comments.
The U.S. Treasury Department is expected to make a decision on the issue on April 15th. But Mnuchin may be forced to provide details of the Trump administration's plans when finance ministers meet in Germany later this month. The meeting is for representatives of the Group of 20 (G20) major economies.
Many economists believe China's money, the yuan, is not being devalued on purpose -- as it has been in recent years.
Last year, the International Monetary Fund said the value of the yuan was at the right level for an economy the size of China's. In other words, the Chinese government was not taking steps to force down the yuan's value.
Kaushik Basu is a former chief economist at the World Bank. He now teaches at Cornell University in New York State.
Basu told VOA "there is no evidence of currency manipulation (by China) in recent times beyond the occasional buying and selling of foreign exchange to stabilize volatilities, which all countries -- rich and poor -- do. I hope the U.S. (does) not (name) China a currency manipulator, which would not be right and would also unleash destabilizing forces in foreign exchange markets the world over."
The U.S. Treasury normally uses a three-part test to decide if a country is taking steps to influence the value of its money.
Scott Kennedy directs the project on Chinese business and political economy at the Center for Strategic and International Studies in Washington, D.C. He said that if the Treasury Department uses the test, it will not find that China is a currency manipulator because China meets only one of the three parts. But Kennedy thinks the administration could decide not to use the test. In his words, "the ultimate decision will turn on broader U.S. policy toward China, which is still being decided."
China announced last Friday it was removing Gao Hucheng as Minister for Commerce. The move came after Trump repeated his threat of declaring China a currency manipulator.
China watchers are not sure if President Xi Jinping decided to replace Gao as part of the government's preparations to deal with economic disputes with the United States. They say Gao may have been replaced only because he was close to the age at which the Communist Party directs officials to retire.
Kennedy says the decision "suggests the commerce minister has reached retirement age and Xi is starting to consider the composition of the Cabinet for his second term. Zhong Shan (the new commerce minister) may or may not stay on."
The American Chamber of Commerce in China said 25 percent of American companies in China have moved their operations out of the country or are planning to do so. Kennedy said this is a result of worsening investment conditions in China and stronger controls on money.
Jacob Kirkegaard is an economist at the Peterson Institute of International Affairs. He says that "as Chinese growth slows and financial risks increase, many foreign investors will rightly ask if their investments in China continue to be justified by the ‘ooh, it's a billion people so we gotta be there' factor. If foreign businesses don't make much money in China, he notes, they will stop coming."
I'm John Smith.
Saibal Dasgupta reported this story for VOANews from Beijing. Christopher Jones-Cruise adapted the story for Learning English. George Grow was the editor.
We want to hear from you. Write to us in the Comments Section, or visit our testbig.com.
_______________________________________________________________
Words in This Story
currency manipulator – n. also called currency intervention or foreign exchange market intervention. A monetary policy action taken by a government: a central bank -- or the government itself -- buys or sells foreign currency in exchange for their own domestic currency, usually to influencing the exchange rate
occasional – adj. happening or done sometimes but not often; not happening or done in a regular or frequent way
stabilize – v. to make (something) steady
volatile – adj. likely to change in a very sudden or extreme way
unleash – v. to allow or cause (something very powerful) to happen suddenly
composition – n. the combination of parts or elements that make up something
factor – n. something that is considered or included (something) in making a judgment or calculation