WASHINGTON – The Obama administration is raising concern about the value of China’s currency but is declining, as in recent years, to accuse Beijing of manipulating it.
The administration also expressed concern Tuesday about South Korea’s actions in currency markets and about countries that use the euro and have wide trade surpluses.
The Treasury Department said China’s currency, the renminbi, has appreciated but not as fast or as much as needed. Treasury reached that conclusion in its twice-yearly report on whether nations are manipulating currencies to gain trade advantages.
China has announced a modest easing of exchange-rate controls, which have been criticized by Washington and other nations. The action last month was among a series of reform initiatives aimed at making its slowing economy more efficient.
The issue has been a point of conflict because a weaker renminbi makes Chinese goods cheaper for Americans and U.S. goods costlier in China.
The range in which the tightly controlled currency is allowed to fluctuate against the dollar each day was doubled in size, though to a still relatively narrow 2 per cent band.
The Treasury report said recent movements of the renminbi “would raise particularly serious concerns” if they’re a prelude to renewed resistance by the Chinese government to letting the currency strengthen. Treasury said it will continue to closely monitor China’s currency policy and “will press for further policy changes” that would let the rate be determined by the market.
The report said Treasury also will closely watch Japan’s currency policies and to what extent they support the growth of economic demand in that country. Japan’s central bank last year launched a new effort to bolster the country’s economy.
The report also cautioned that the South Korean government should only intervene in the currency market during infrequent episodes of “disorderly market conditions” and should make its interventions more transparent. Seoul intervened to sell South Korea’s currency, the won, in 2012 and 2013 to keep its value from rising.
Regarding Europe, Treasury said it will encourage countries in the euro bloc that have large and persistent trade surpluses to act to increase domestic demand and thereby reduce their surpluses.
U.S. manufacturers have long contended that China is pursuing currency policies to gain trade advantages.
The Obama administration has now declined to formally brand China as a currency manipulator for 11 straight semi-annual reports to Congress. It has contended that the U.S. is more likely to make progress on economic issues with China through negotiation than confrontation.
The U.S. trade deficit with China has for years been the largest with any country.
The last time the U.S. named any country as a currency manipulator was in 1994, when the Clinton administration made that accusation against China.