The United States has decided not to label China as a currency manipulator, according to a report from the BBC.
The U.S. Treasury releases a semi-annual report, called the Foreign Exchange Report, to Congress every year recording how the U.S. currency is fairing compared to the currency of other countries.
The Foreign Exchange Report released in Nov. 2012 stated that China did not meet the requirements to be labeled a currency manipulator. It also reported the yuan had appreciated against the dollar by only 9.3 percent since June 2010.
The report said, “It is in China’s interest to allow the exchange rate to continue to appreciate, both against the dollar and against the currencies of its other major trading partners.”
When China’s currency appreciates, it will be beneficial to economies in other countries that trade with China and countries that view China as a trade competitor.
Many Americans believe China has kept the value of the yuan low to keep the price of exports low. This debate has strained the relationship between the two countries.
Former presidential candidate Gov. Mitt Romney said that if he would have won the presidency, he would have labeled China a currency manipulator his first day in office. This could have arguably set off a tight trade sanction by China against the U.S.
The U.S. Treasury described the effects China is now experiencing because of the strained appreciation rate.
The report said, “The effects of sustained appreciation of China’s real effective exchange rate, and China’s efforts to encourage structural changes in its economy, have begun to play a role in reducing its current account surplus. While exchange rate reform may not be sufficient in itself to bring about rebalancing of the Chinese economy, rebalancing cannot take place without it.”
The report also said that because of China’s low appreciation rate, consumption within China has declined. China’s gross domestic product growth has fallen from 9.3 percent in 2011 to 7.7 percent in 2012.
The U.S. Treasury has asked China to do something immediately about these issues, because it would further promote a strong and sustained global recovery.
