On the afternoon of August 5th local time in the United States, the US Treasury Department officially listed China as a exchange rate manipulator. This is the first time since 1994 that China has been listed as a currency manipulator by the United States.
In response to this, the People's Bank of China issued a statement on August 6, expressing its firm opposition, and also stated, "Since August this year, the RMB exchange rate has depreciated to a certain extent, mainly due to the reflection of market supply and demand and fluctuations in the international exchange market under the background of changes in the global economic situation and the intensified trade frictions. It is driven and determined by market forces."
What is the "reward rate manipulator"?
exchange rate manipulators are to manipulate the exchange rate artificially, making it appear relatively low, making its export price seem cheap, and may cause major import trading partners to criticize it as a exchange rate manipulator. Because its products are cheaper, people like their products and reduce their purchase of local products, which can lead to job losses in the importing countries over time.
Therefore, countries that sacrifice the interests of other countries to create more jobs for their own country and enjoy a higher GDP are recognized as exchange rate manipulators.
The "exchange rate manipulator" defined by the United States
According to the regulations of the US Treasury Department, there are three indicators to determine whether its trading partners manipulate exchange rates:
❶ The economy and the US trade surplus exceeds 20 billion ;
❷ The current account surplus of this economy accounts for at least 3% of ;
❸ Continuously interfere with the foreign exchange market and promote its currency price to develop in one direction.
If a country (region) meets the above three indicators, it is considered as exchange rate manipulation. If both criteria are met, or if they account for too much of the overall U.S. trade deficit, they will be included in the exchange rate manipulation watchlist.
In this regard, the US Treasury Department will submit the "International Economic and Exchange Rate Policy Report" to Congress in April and October every year to examine whether the exchange rate policies of other major economies are unfair to the United States. Therefore, the Ministry of Finance has two chances to update the list of exchange rate manipulators or watch lists twice a year. According to the latest data updated by the US Treasury Department on May 28, 2019, the United States has listed 9 countries in and out of the observation list. Among them, in addition to China, the observation list also includes Japan, South Korea, Germany, Italy, Ireland , Singapore , Malaysia , and Vietnam .
China only meets the first standard
According to data from the General Administration of Customs of the People's Republic of China, as of June 30, 2019, China's total trade surplus with the United States in the first half of the year was approximately US$5140.48 billion, far exceeding the standard line of US$20 billion. Meet the first criteria.
In addition, according to the "State Administration of Foreign Exchange Annual Report (2018)" released by , China's current account surplus in 2018 accounted for 0.4% of GDP. Therefore, from this point of view, China cannot meet the second standard defined by the US.
For the third standard, the People's Bank of China believes that "the depreciation of the RMB exchange rate to a certain extent is mainly reflected in the changes in the global economic situation and the intensified trade frictions in the context of market supply and demand and fluctuations in the international exchange market, which are driven and determined by market forces", rather than unilateral intervention. Therefore, China cannot meet the third standard defined by the US.
What will the United States do next?
If listed as a exchange rate manipulator by the US Treasury Department, the country will adopt appropriate policies to correct the exchange rate and international trade surplus within one year.If the country cannot correct this situation a year later, the US president can take the following measures:
❶ prohibits any project in the country from obtaining financing from US overseas private investment companies;
❷ excludes the country from the US government procurement and supply location;
❸ calls on International Monetary Fund to strengthen supervision over the country;
❹ instructs the U.S. Trade Representative to evaluate whether to sign a trade agreement with the country, or to consider the country's exchange rate manipulation when starting or participating in trade agreement negotiations.
What impact does it have on China
After the United States lists China as a exchange rate manipulator, the United States will strengthen its momentum to impose strict trade sanctions on China based on this. China, defined as a "transfer rate manipulator", will be hit by the United States in all aspects, which is likely to trigger a large-scale trade war between the two sides, and will exceed the scope of the two countries and affect the world.
In the worst case, the United States can impose tariffs on imported goods from China at will, which can be outrageously 100% or even 200%; the United States can ban the purchase of any Chinese goods; the United States can set arbitrarily financing barriers on China in the international capital market; even assets are frozen by the United States and a specific commodity is banned in world trade.
But looking back at U.S. history, the United States can only list its trading countries as "exchange rate manipulators" since the 1988 Comprehensive Trade and Competition Act legislation. The law only gives the U.S. Treasury Department the right to list other countries as exchange rate manipulators, but does not give the U.S. president this right. If the US president wants to take further measures, it will take a year to wait.
That is to say, if the worst situation above happens, it will only happen in a year. However, within one year, the US Treasury Department will also conduct negotiations with China. Regarding the fact that it does not exist, it is believed that the US's false accusation of China's "transfer rate manipulator" will be resolved soon.
However, based on the current international market situation, the US President has repeatedly put pressure on the Federal Reserve, causing it to cut interest rates to reduce the balance sheet , and global central banks follow the trend and cut interest rates. In this extreme situation, it is inevitable that the RMB exchange rate will break "7". The United States' unilaterally listed China as a "exchange rate manipulator" because the RMB broke the "7" was too eager for quick success and instant benefits. At most, it would be just to satisfy the treacherous means used by the United States to put psychological pressure on China and to scare and scare Chinese companies investing in the United States.
