IMF does not agree with the U.S. designation of China as a currency manipulator
August 13, 2019 Category China News Round-up, Weekly
The International Monetary Fund (IMF) has affirmed its view that China’s exchange rate is broadly in line with economic fundamentals. Experts said IMF’s new report provides further evidence that the U.S. designation of China as a “currency manipulator” is groundless and irresponsible. China’s real effective exchange rate (REER) in 2018 is estimated to be at the same level as warranted by fundamentals and desirable policies, the IMF reiterated in a staff report after concluding the annual Article IV consultation to review the Chinese economy. It noted that the average REER in 2018 appreciated by about 1.4% relative to 2017, driven by the appreciation in the nominal effective exchange rate (1.5%).
“The IMF report makes clear that there has been absolutely no currency manipulation and that China’s external balance has been appropriate,” Jeffrey Sachs, Senior United Nations Advisor and Economics Professor at Columbia University, told Xinhua in an e-mail. “The U.S. Treasury action declaring China a currency manipulator was blatantly arbitrary, capricious and political, based on Trump’s tweets rather than on objective analysis,” Sachs said, while noting that U.S. trade and financial behavior towards China is “utterly irresponsible.” The IMF report showed that China’s current account surplus fell by around 1 percentage point to 0.4% of gross domestic product (GDP) in 2018 and it is projected to remain contained at 0.5% of GDP this year.
Noting that China’s current account surplus is “small,” Mark Sobel, non-resident Senior Adviser at the Center for Strategic and International Studies, and Chairman of the Official Monetary and Financial Institutions Forum, told Xinhua “that estimates suggest China has not been intervening in the foreign exchange market.” “As such, the Article IV report clearly rebuffs the recent U.S. assertion that China is ‘manipulating’ its currency to gain an unfair competitive trade advantage,” said Sobel. The IMF report came only a few days after the United States unilaterally labeled China a “currency manipulator,” which prompted criticism from experts worldwide, the Shanghai Daily reports.
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