October 13, 2019

Is China a Currency Manipulator?

“Late on Monday, the Trump administration turned its trade war with China up to 11, by officially labeling the country a “currency manipulator.”

It was an obvious reaction to a sudden fall in the value of China’s currency, which will help keep Chinese exports cheaper and help neutralize the pain of President Trump’s tariffs. But it also raises a tension: By all accounts, the renminbi dropped because China stopped intervening in the foreign exchange market. The whole idea of “currency manipulation” tends to shift depending on who’s doing the accusing and what their frame of reference is.

All of which is to say: Whether or not China is a “currency manipulator” requires a lot of unpacking.

When the debate over China’s “currency manipulator” status first heated up after a series of campaign promises by Trump, Council on Foreign Relations senior fellow Brad Setser explained that there are at least two definitions of currency manipulation the new president could draw on.”

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