United States designates China a ‘Currency Manipulator’

United States has designated China a “currency manipulator”, after country’s central bank allowed Yuan (Chinese Currency) to fall against dollar. This move could escalate tense trade relations between two nations.

Key Highlights

Background

During US Presidential elections in 2016, US President Donald Trump had promised to label China as a currency manipulator, but it was on hold until now as US Department of Treasury kept country on its watch list, declining to take any step. But now US Treasury Department has announced and determined that China is a ‘Currency Manipulator’.

US Aruguments:

US accused China of manipulating its currency to gain unfair competitive advantage in international trade and that China still targets on continuing to receive hundreds of billions of dollars which it have been taking from US with unfair trade practices and currency manipulation.

Further US treasury department also alleged that China has a long history of facilitating an undervalued currency through sustained, large-scale intervention in FOREX market.

The Trigger: This recent action by US to designate China as a ‘Currency Manipulator’ came after China allowed its yuan to weaken past key 7-per-dollar level for the 1st time in more than a decade.

China Arguments:

As per Central Bank of China depreciation in its currency was due to effects of unilateralist and trade-protectionist measures and expectations for tariffs against China.

Way Ahead: US will now engage with International Monetary Fund (IMF) to eliminate unfair competitive advantage created by China’s latest actions. This move could further escalate tense trade relations between two nations.

Month: Current Affairs - August, 2019