China Currency Gets a Pass, But Depreciation Noted

Stephanie Henry

Continuing a 20 year-long trend, the US Treasury Department this week did not name China a currency manipulator, though said China’s currency remains “significantly undervalued.” In its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, the Treasury Department said China’s currency had appreciated 2.9 percent against the dollar over the course of 2013, but did not appreciate “as fast or by as much as is needed.” The report also raised concern over recent depreciation of the renminbi (RMB) in 2014, and said evidence suggests “continued actions to impede market determination.” The Treasury Department did, however, acknowledge China’s step to widen the trading band in March, which it said “gives China an opportunity to reduce intervention and allow the market to play a greater role in determining the exchange rate.” China was last labeled a currency manipulator” in 1994 under the Clinton Administration.

According to the US-China Business Council's (USCBC) estimates, the RMB has appreciated more than 30 percent since 2005. USCBC’s long-standing position is that China should move faster to a more market-oriented exchange rate, and opposes legislative proposals in Congress that would impose tariffs based upon highly subjective estimates of the "true" exchange rate.

While currency has oft been discussed in Congress in relation to the Trans-Pacific Partnership (TPP) negotiations, legislative action towards China on currency has been dormant. Some in Congress have pushed to include currency as a negotiating objective in Trade Promotion Authority (TPA) legislation, which establishes an expedited timeline for Congress to approve trade agreements to which TPA authority applies. Currently, China is not party to any agreement that would be subject to TPA.