When it comes to the latest US stance vis-a-vis China's currency manipulation, the jury is out, and based on two recent statements it is more confused than ever.
The reason why is that shortly after Treasury Secretary Mnuchin said in a Bloomberg TV interview that there is "no urgency to brand China a currency manipulator", and that no announcement on currency manipulation will come before the Treasury’s April report (which contradicted an October pledge by candidate Donald Trump to direct his Treasury secretary to name China a manipulator on the first day of his administration), hours later Reuters released an interview with Trump in which he accused China of being a "grand champion" at currency manipulation, adding he had not "held back" in his assessment that China manipulates its yuan currency.
"I think they’re grand champions at manipulation of currency. So I haven’t held back. We’ll see what happens."
This morning China responded Trump's accusation, when Beijing said it has no intention of using currency devaluation to its advantage in trade, which presumably excludes China's August 2015 devaluation which unleashed a period of acute market volatility. Chinese Foreign Ministry spokesman Geng Shuang said he hoped the United States could "fully and correctly" view the exchange rate issue.
Quoted by Reuters, Shuang said "China has no intention of seeking foreign trade advantages via an intentional devaluation of the renminbi. There is no basis for the continued devaluation of the renminbi," he told a daily media briefing in Beijing.
Geng said there was no basis for the continued devaluation of the renminbi and he hoped "the relevant side can fully and correctly view the renminbi exchange rate issue." And yet, earlier this month, China's SAFE, or main fX regulator, said the economy still faced weak global demand and financial market volatility caused by expectations of further interest rate rises by the U.S. Federal Reserve, implying that every move higher in US rates will likely lead to a weaker Chinese currency.
In any case, Geng returned Trump's "compliment" saying "If you must attach the label 'grand champion' to China, then I think China is a grand champion. But we are the grand champions of economic development," by which he clearly meant central planning, fabricating economic data, bailing out insolvent SOEs and injecting record amounts of unsustainable debt.
According to Reuters, the Foreign Ministry has no say in currency policy, but it is the only Chinese government department that holds a daily briefing that foreign reporters attend. The central People's Bank of China did not respond to a request for comment.
Trump has frequently accused China of keeping its currency artificially low against the dollar to make Chinese exports cheaper, "stealing" American manufacturing jobs. But he did not act on a campaign promise to declare China a currency manipulator on his first day in office.
In some ways Trump is correct: the yuan fell 6.6% in 2016, its biggest annual drop since 1994, pressured by mounting capital outflows as the domestic population sought to flee China's economy. On the other hand, in recent months China has been manipulating its currency to be stronger, not weaker, to dissuade continued capital outflows. In addition, Beijing has taken a raft of steps in recent months to curb capital flight to support its weakening yuan, while trying to bring in more foreign investment.