U.S. Department of Treasury has formally declared China as currency manipulator following its devaluation of the yuan, prompting Beijing to accuse the United States of “undermining international financial order.”
“Secretary Mnuchin, under the auspices of President (Donald) Trump, has today determined that China is a Currency Manipulator,” the department said in a statement on Monday, Aug. 5, citing a section of the Omnibus Trade and Competitiveness Act of 1988.
“As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions,” the statement said.
Explaining for its decision, the Treasury Department said China has a long history of facilitating an undervalued currency through intervention in the foreign exchange market and has recently taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past.
“The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain an unfair competitive advantage in international trade,” the department said.
The Treasury Department said Chinese authorities are violating their G-20 commitments to refrain from competitive devaluation.
The Trump administration designated Beijing as a currency manipulator after China’s central bank allowed its currency to drop below the psychological level of 7 units per U.S. dollar for the first time since 2008.
President Trump, in a tweet on Monday, criticized China for using “currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages, and harm our farmers’ prices.”
In an official response, Beijing on Tuesday said, “The Chinese side expresses deep regret over this act. Such a label is not consistent with the quantitative criteria set by the U.S. Treasury itself for the so-called “Currency Manipulator.”
In a statement on its website, China’s central bank argued that it has never used and will not use the exchange rate as a tool to deal with the trade frictions.
The statement said the U.S.’s decision would “seriously undermine the international financial order and give rise to financial market volatility.”
“The Chinese side urges the United States to rein in its horse at the edge of the cliff, turn back from this wrong path and return to a rational and objective track,” it said.