U.S. Designates China as Currency Manipulator

One thing that I think is getting lost in this discussion is the role of intent on currency manipulation.<p>Switzerland has the strongest currency in the world due to the country&#x27;s reputation for governmental and financial stability. This makes Swiss labor extremely expensive for reasons mostly outside of their control, and the Swiss government has tried (and largely failed) to remedy this. Technically, this is devaluation but given the circumstances and Switzerland&#x27;s relatively small footprint in the labor market, it&#x27;s understandable and fairly benign.<p>The Fed cutting interest rates in 2009 had the effect of weakening the USD relative to what it would have been. But the intent of the policy was not to steal a share of the export market, but rather to provide stimulus during a deep recession.<p>Japan has been in ultra-low growth and ultra-low inflation for decades. To fend off the threat of deflation and economic contraction, it ran the printing press and cut interest rates. Which, again, devalue the currency but stealing export share is not a major intent.<p>I&#x27;m not sure what the appropriate definition of &quot;currency manipulator&quot; should be but, while China&#x27;s currency policy history is a strange and variable beast, yesterday&#x27;s devaluation was clearly a different case than those above. And depending on how far you want to go back in history, there&#x27;s an argument that the intent of some previous Chinese devaluations were aimed primarily at increasing its relative attractiveness as an exporter.<p>Its most recent history until yesterday was to prop up the RMB, so it may be fair to argue that now is a strange time to label them a currency manipulator. Given yesterday&#x27;s events and their history in this area though, it&#x27;s hard to make the claim that their currency policy is altogether ordinary either.

So, really, is there any doubt that this is true? China&#x27;s currency exchange rate has been abnormally stable for a long time, and the Obama, Bush, Clinton, Bush, and Reagan administrations all knew it was the result of currency manipuliation. They just found it politically unpalatable to admit it out loud.<p>The real question would be, why is the U.S. finally admitting this out loud? 1) amping up a trade war 2) decoupling U.S. economy from China 3) trying to leverage China into doing something differently, perhaps regarding North Korea<p>Some of these, of course, would interfere with others, for example you can&#x27;t use it as leverage in #3 if China thinks you&#x27;ll keep pursuing it anyway no matter what, due to #1 or #2.

China have been manipulating their currency before this week&#x27;s drop. They use USD to buy CNY to prop up CNY exchange rate. If they stop buying CNY using USD, the value of CNY would fall (happening now). So China is technically no longer manipulating their currency.<p>Why are they doing this? My guess is to respond to trade war tariff. The US is manipulating USD through Fed interest rate. The Fed lowers interest rate to prop up borrowing and economic growth. I think China has figured out a way to deal with the situation. They will adjust the USD-CNY exchange to prop up their own economy.<p>This trade war is turning into a silly cat and mouse game. China is not making a deal. They have ways to get around tariff and TPP. War is about deception. The US needs some sneaky attack if it wants to win.

I have no idea what all this means so tried to read <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Currency_manipulator" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Currency_manipulator</a>.<p>Found it interesting that &quot;Switzerland have been manipulating their currency more than China since 2009 and Germany and South Korea since 2014&quot;<p>Still it is not clear what that means in terms next steps. Will there be more tariff increases or sanctions? And then China will devalue their currency even more. So where does it end?<p>This is US Treasury report from 2017 I started looking through: <a href="https:&#x2F;&#x2F;www.treasury.gov&#x2F;resource-center&#x2F;international&#x2F;exchange-rate-policies&#x2F;Documents&#x2F;2017-04-14-Spring-2017-FX-Report-FINAL.PDF" rel="nofollow">https:&#x2F;&#x2F;www.treasury.gov&#x2F;resource-center&#x2F;international&#x2F;excha...</a><p>The last paragraph explained the logic a bit more:<p>&gt; The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates. Treasury is committed to aggressively and vigilantly monitoring and combatting unfair currency practices.<p>Granted it&#x27;s published by US Treasury. I imagine the Chinese government sees the picture very much differently.

Isn&#x27;t being able to manipulate their currencies exactly the reason countries maintain currencies of their own? Don&#x27;t other countries like Japan and the USA manipulate their currencies routinely?

&gt;Treasury uses three criteria to apply the designation: actively intervening in their currency markets, having large trade surpluses with the U.S., and having large overall current-account surpluses.<p>Monday’s action by Treasury is mostly symbolic, requiring the U.S. administration to consult with the International Monetary Fund to try to eliminate the unfair advantage the currency measures have given a country.<p>Does that mean it is only &quot;unfair&quot; if it negatively affects the US? such a definition of &quot;fair&quot; means that no country should be allowed to do better than US

As the reserve currency, the USD has some weight on it due to that position, can&#x27;t just manipulate it like others can as easily except printing more [1].<p>Being the reserve currency, it was more fair when everyone was pegged to the dollar so at least manipulation was in check a bit. Both the unpegging and the free trade agreements put more pressure on the US for being a reserve currency.<p>Ultimately, the USD is too high and it is the root of lots of the problems with jobs, exports&#x2F;imports and the trade imbalance, national debt as the reserve currency is a safer investment due to it not being as easy to manipulate due to the sheer size of the supply. Now that we are a debtor nation rather than a creditor nation, the problems are more evident [1].<p>[1] <a href="https:&#x2F;&#x2F;www.forbes.com&#x2F;sites&#x2F;bobmcteer&#x2F;2013&#x2F;09&#x2F;05&#x2F;reserve-currency-status-a-mixed-blessing&#x2F;#244e4bc14e59" rel="nofollow">https:&#x2F;&#x2F;www.forbes.com&#x2F;sites&#x2F;bobmcteer&#x2F;2013&#x2F;09&#x2F;05&#x2F;reserve-cu...</a>

The best part of this is that they are being called a manipulator for not shoring up their currency artificially.

3% stock market movements set in motion by the US president alone. &quot;Great&quot; insider trading potential. Have someone set up the right derivatives strategy and bam: instant millions.<p>I couldn&#x27;t convince myself to immediately write that idea off as utter nonsense.<p>Anyone with more relevant financial experience? Can you reassure me this would be difficult to pull off? Or would you have to confirm this would be difficult to catch?<p>EDIT: Let me try put this in an even more neutral way. Let&#x27;s say one knew down to the minute when the entire US and EU stock markets were going to sustain substantial losses. How much value one could siphon off without triggering too much suspicion? Surely market depth and trade volume must offer at least order of magnitude hints about that?

I&#x27;m not an economist, but my impression is that if the Chinese currency is allowed to float, the major effect is that they would begin to import more goods from abroad and that their exports would be less competitive. But what would China import that they are not already importing?<p>Personally I would rather see the rules about local ownership of businesses open up so that foreign people can actually freely do business in China. Now that China is not a super poor country anymore, it seems fair. And this way they can keep their currency devalued as there is still a way for trading partners to use it to their advantage, while the majority of the advantage remains with China

The entire premise of the post-Bretton Woods neoliberal world US currency is based on an agreement with the Saudis to sell oil in US dollars for military support and on threats to bomb countries who sell oil in non-US denominations. And China is the currency manipulator.

&gt;Mnuchin had warned in June that China could be designated a currency manipulator if it stopped intervening to prop up its currency.<p><a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;amp&#x2F;news&#x2F;articles&#x2F;2019-08-05&#x2F;u-s-treasury-department-labels-china-a-currency-manipulator" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;amp&#x2F;news&#x2F;articles&#x2F;2019-08-05&#x2F;u-s-t...</a>

China burned through almost $1 trillion in US treasuries defending the peg when the Yuan depreciated last time[1]. They were &quot;manipulating&quot; the currency to make it stronger.<p>This time they did nothing, and they are being accused of being a currency manipulator. It is insane.<p>[1] <a href="https:&#x2F;&#x2F;www.scmp.com&#x2F;business&#x2F;banking-finance&#x2F;article&#x2F;2071318&#x2F;chinas-holdings-us-treasuries-sink-2016-prop-yuan" rel="nofollow">https:&#x2F;&#x2F;www.scmp.com&#x2F;business&#x2F;banking-finance&#x2F;article&#x2F;207131...</a>

Stock futures down another 2%.<p>Amazing how much money one can lose in a matter of days. Stomach churning.

China has started invading Europe through Tsjechie also.<p>Just read a disturbing dutch article and Europe should join the US.<p>I wasn&#x27;t sure before, but I&#x27;m sure now.<p>Here&#x27;s a small report of the EU : <a href="https:&#x2F;&#x2F;www.europarl.europa.eu&#x2F;thinktank&#x2F;en&#x2F;document.html?reference=EPRS_BRI(2018)625173" rel="nofollow">https:&#x2F;&#x2F;www.europarl.europa.eu&#x2F;thinktank&#x2F;en&#x2F;document.html?re...</a><p>Yeah, it&#x27;s disturbing and it doesn&#x27;t even contain all the info...

Well, that&#x27;s rich. Especially since dollars (which the US has &quot;license to print&quot;, manipulate, change interest rates, subsidize whole industries, etc.) have been forced as the world&#x27;s trade currency for close to a century...

China can outlast the US on this one. Next up, let&#x27;s crash the price of oil and flip off the Iran sanctions:<p><a href="https:&#x2F;&#x2F;www.cnbc.com&#x2F;2019&#x2F;08&#x2F;05&#x2F;brent-and-wti-price-could-crash-if-china-buys-iranian-oil.html" rel="nofollow">https:&#x2F;&#x2F;www.cnbc.com&#x2F;2019&#x2F;08&#x2F;05&#x2F;brent-and-wti-price-could-cr...</a>

How is Currency Manipulator different than quantitative easing which everyone does?

Good news for the people of Hong Kong, since the Hong Kong Dollar is tied to the U.S. dollar, and not the Chinese currency.

Every country would prefer to devalue their currency relative to others in order to increase their trade surplus (or cut their deficit). Mathematically they cannot all succeed, so it ends up being a slow motion race to the bottom.

All Governments manipulate currencies...

China has a peg to the USD - they can peg at any given multiplier, no particular multiplier is any more valid than another, so how can they (or any other country with a peg) <i>not</i> be manipulating their currency?<p>It seems to me, the US gov&#x27;t no longer cares much for the new multiplier, so this is just a cynical way to put negotiating pressure on them.

Pretty rich coming from the US, but I digress

Little outside of the topic but:<p>“We expect a quick—and possibly intemperate—response from the White House, and consequently expect a more rapid escalation of trade tensions.”<p>Haha, really? No one would expect a intemperate response out of this cool and collected admin.

US sad they can&#x27;t set Fed rates like the People&#x27;s Republic of China without incurring interest. Federalize the Federal reserve and we would be capable of doing similar.

Doesn’t China have the right to do whatever they want with their currency, as a sovereign country?

why don&#x27;t all countries let their currencies float?

Wouldn&#x27;t a more effective US strategy against China been to get the EU, Japan, and South Korea in on the tarrifs as well? Might as well throw in Canada and Mexico as well on account of being NAFTA partners. That would account for all of Chinas major trading partners. Japan and SK might have been difficult, but a combined North America + EU might have done the trick.<p>Maybe the Trump Administration tried this, but I find it unlikely since this Administration opened up lambasting our traditional allies. This trade war as it stands is going nowhere. China won&#x27;t budge.

The long story to this is that the Chinese dont like what Trump is doing, he is the first to stand up to their tactics. The thing is, if Trump doesn&#x27;t get reelected, a democratic candidate will most likely not continue the trade war. China has every incentive to place pressure on the us stock market in the hope that it ruins Trumps chances at reelection. So they play this long waiting game, in the chance that Trump doesnt get elected.

so what? surely it is their freedom to do with their currency as they please

It means the Trump family will make a bunch of money on the volatility, and the US will capitulate in a few months.

It ends with China being cut off from SWIFT and correspondent banking.<p>That would probably make them re-think their approach to economic warfare.

Isn&#x27;t Chinese Yuan depreciation caused by Trump&#x27;s relentless tariff, just like Mexican Peso&#x27;s depreciation when Trump threatened tariff early this year?<p>I&#x27;m confused who is manipulating the market &amp; currency.

Now what?<p>Is there a legal designation or meaning to currency-manipulator I&#x27;m unaware of, or is this basically like the Chinese designating Trump a &quot;name-caller.&quot;

This is just nonsense. All central banks &quot;manipulate&quot; their currencies. The FED did that by printing trillions in QE. The FED did that in 1973 when they went off the gold standard. The FED did that in 1935 when they changed the value of the dollar.<p>Funnily enough, the only way other major currencies can stop depreciation is by having more dollars. The way to do that would be more exports. But trade-warrer-in-chief just slapped 10% tariff on Chinese exports. If their exports go down, their currency will go down.<p>So, in effect, Trump caused the Yuan to devalue? So Trump is the manipulator, not China?

Yes considering the US prints hand over fists amounts of money to deal with its economic woes, it&#x27;s sort of a joke where the emperor wears no clothes, but no one says anything because he&#x27;s the emperor.<p><a href="https:&#x2F;&#x2F;www.investopedia.com&#x2F;articles&#x2F;investing&#x2F;090915&#x2F;quantitative-easing-vs-currency-manipulation.asp" rel="nofollow">https:&#x2F;&#x2F;www.investopedia.com&#x2F;articles&#x2F;investing&#x2F;090915&#x2F;quant...</a><p>&gt; &quot;In theory, currency manipulation and a monetary policy like quantitative easing aren&#x27;t the same thing. One is interest rate policy based and the other currency focused. However, as central banks began their QE programs, one result was the weakening of its currency.<p>&gt; Intentional or not, it can be argued that QE is, in some way, a form of currency engineering. Whether its manipulation that will always be up for debate.&quot;

Yeah you have manipulated a made up thing that we control and you are not playing by the rules where we put sanctions on you and then you become f*ed.