The US Treasury said Wednesday that China does not manipulate its currency, but pushed Beijing to do more to focus on domestic demand — not exports — to drive economic growth.
In a twice-yearly report to Congress, which would set sanctions on any country officially branded a “manipulator,” the Treasury said the yuan, or renminbi (RMB), had “partially recovered” from a sharp plunge earlier in the year and appreciated by 1.9 percent since late April.
However, the yuan remained “significantly undervalued,” the Treasury said, reiterating the description it has long used in pressing China to allow its currency to move toward a market-determined exchange rate.
The Treasury has consistently decided to not brand China a currency manipulator, which could lead Congress to impose sanctions on the world’s second-largest economy and top holder of US debt.
But President Barack Obama’s administration, lawmakers and manufacturers have long criticized China, alleging it purposely keeps the yuan undervalued to support cheap exports, gaining an unfair trade advantage that has ballooned the US trade deficit.
“In China, the gradual appreciation of the RMB this summer and low apparent levels of intervention indicate some renewed willingness by the authorities to allow a stronger domestic currency and to reduce intervention in line with Strategic & Economic Dialogue commitments,” the Treasury said in a statement.
“Even so, important metrics continue to indicate that the RMB exchange rate remains significantly undervalued, highlighting the need for sustained progress toward a market-determined exchange rate.”