China does not currently fit the often-stated criteria for being a currency manipulator. While it still runs a trade surplus, its overall current position has not been in a persistent surplus. Its international reserves have declined in the last few years, as have its holdings of US Treasuries. And to the extent that the authorities have influenced the exchange-rate-setting process — and they have — it has been to slow the weakening of the currency rather than accentuate it. Indeed, if the Treasury Department labels China a currency manipulator based on recent actions, it should have done so years ago as well.
SINGAPORE (Aug 12): The surprise announcement by the US Treasury labelling China a “currency manipulator” raises a lot of questions. The answers to two of them in particular shed light on how trade tensions are likely to play out between the two largest economies in the world.
Is the label justified?
