Posts Tagged ‘currency manipulator’

China slams US aluminium foil tariff ahead of Trump visit

October 30, 2017


© AFP/File | China has criticised new US anti-dumping duties on aluminium foil, saying it is “extremely dissatisfied” with the new measures

BEIJING (AFP) – China has criticised new United States anti-dumping duties on aluminium foil, saying it was “extremely dissatisfied” with the new measures, just days before President Trump visits Beijing.

The tariff was announced Friday by the US following concern that China was undercutting American manufacturers by flooding the country with underpriced aluminium products.

But the timing has raised fears of a trade dispute during Trump’s first visit as president to the Chinese capital next week, when commerce between the nations is expected to be high on the agenda.

On Saturday evening, China’s Ministry of Commerce said the US was ignoring World Trade Organization rules by introducing the duties, and not fulfilling its international obligations.

“The US is not only harming the interests of Chinese companies, it is also damaging the seriousness and authority of multilateral rules and regulations,” said Wang Hejun, Director of the Trade Remedy and Investigation Bureau, in a statement.

The US Commerce Department plans to impose fresh duties of 96.81 percent to 162.24 on Chinese aluminium foil imports to the US.

The new tariff will affect the type of aluminium foil found in kitchens, packaging and automobiles.

Since assuming the presidency in January, Trump has largely refrained from taking the hard-nosed measures he boasted about on the campaign trail, where he threatened to label China a “currency manipulator”. But his administration has started to take a tougher line on trade.

The Trump administration has initiated 77 antidumping and countervailing duty investigations since January, up 61 percent since last year, the Commerce Department said on Friday.

Trade is likely to be high on Trump’s agenda during the visit. Last week, he tweeted he had discussed North Korea and trade in a phone call with President Xi, calling them “two very important subjects!”

In September, China’s monthly trade surplus with the United States hit a high not seen in at least three years.

The Ministry of Commerce’s statement said the US was using “discriminatory” surrogate country pricing practices to introduce the duties, which it said were no longer applicable to China as of December, 2016.



U.S. Treasury Declines to Label China a Currency Manipulator

October 18, 2017

Nation remains on formal Monitoring List, along with Japan, South Korea, Germany and Switzerland

Related image

The U.S. Treasury again declined to label China a currency manipulator, though it continued to criticize Beijing for its large trade surplus and restrictions on foreign investors.

“Treasury remains concerned by the lack of progress made in reducing the bilateral trade surplus with the United States,” the department said of China in its semiannual report on international exchange rates. “China should take concrete steps to level the playing field for American workers and firms.”

The Treasury Department’s report, released Tuesday, is the document in which Washington could formally criticize Beijing for manipulating the yuan lower in an effort to boost its exports. As a candidate, President Donald Trump said he would label China as a currency manipulator, but this is now the second of the semiannual reports in which his administration has declined to make the designation, a label that may have led to a deepening trade confrontation. The U.S. also is trying to encourage China to work with it in cracking down on trade and finance flows to North Korea.

The U.S. gave China credit for allowing the yuan to rise this year and noted that China’s trade surplus has been narrowing.

The report kept China on the Treasury’s formal Monitoring List, which is what the U.S. uses to place countries on notice that the government considers their currency and other economic policies to be putting the U.S. at unfair disadvantage.


  • China’s Xi Sets Stage for Long Rule
  • China’s World: President Uses Big Data to Tighten Big Brother’s Grip
  • One Nation Under Xi Jinping
  • China’s Xi Approaches a New Term With a Souring Taste for Markets

Since the spring, the Treasury has removed Taiwan from its monitoring list. It has continued to keep Japan, South Korea, Germany and Switzerland on it.

In removing Taiwa n from the watch list, Treasury cited the progress Taiwan has made in reducing the scale of its foreign-exchange interventions.

Placement on the list can trigger sanctions if the countries satisfy three criteria: persistently intervening in currency markets, running a significant trade surplus with the U.S. and running a large current account surplus overall. None of the countries met all three criteria.

The five countries remaining on the watchlist—China, Japan, South Korea, Germany and Switzerland—all trigger some of the criteria.

In blaming China for currency manipulation during his presidential campaign, Donald Trump may have been fighting the last battle: China’s visions are far more potent and complex. Photo: Getty

The report faulted China for running the largest bilateral surplus with the U.S., and faulted Germany, Japan and South Korea for its U.S. surpluses and overall surpluses. Germany now runs the world’s largest current account surplus. Switzerland has a large current account balance and intervened heavily in its exchange markets, but runs a relatively small trade surplus with the U.S.

“The administration remains deeply concerned by the significant imbalances in the global economy,” the report said. “More broadly, current account surpluses in several major trading partners have not only been large but unusually persistent over the last decade.”

The report also added criticism of India, saying that there has been “a notable increase in the scale and persistence of India’s net foreign exchange purchases.”

Although it didn’t formally add India to its monitoring list, it said “Treasury will be closely monitoring India’s foreign exchange and macroeconomic policies.”

Write to Josh Zumbrun at

Thais Hope to Get Off Trump’s Trade Hit List as Tillerson Heads for Bangkok

August 7, 2017

BANGKOK — Thai officials voiced hope ahead of a visit by U.S. Secretary of State Rex Tillerson of escaping U.S. pressure over the size of their trade surplus with the United States as their figures point to a jump in imports, but U.S. data shows little change.

A spokeswoman for the State Department’s East Asia Bureau said Tillerson, who will be the most senior U.S. official to visit Thailand since a 2014 coup, will discuss a broad range of issues including security, trade and investment.

Tillerson visits Bangkok on Tuesday after attending regional meetings in Manila at the weekend.

A narrowing trade gap would also reduce the risk of Thailand being labelled by Washington as a currency manipulator – the last thing Thailand wants as it struggles with a baht currency that exporters find uncomfortably strong.

Related image

According to Thai customs-cleared figures, imports rose 35 percent from a year earlier in the first six months of 2017 while exports to the United States rose 7 percent.

That meant Thailand’s trade surplus over the six months narrowed from $6 billion (4.60 billion pounds) to $4.8 billion.

“We hope higher imports from the U.S. will help ease pressure on this issue… and the trend should continue,” Pimchanok Vonkhorporn, head of the commerce ministry’s trade policy and strategy office, told Reuters on Monday.

However, U.S. figures calculated using a different methodology showed little change in the gap during the first five months year on year. The U.S. estimate of a Thai trade surplus of $18.9 billion put it in 11th place on U.S. President Donald Trump’s list of countries to be investigated.

The growth in Thailand’s imports from the United States this year was led by planes and parts, circuit boards, chemicals, metal and machinery and parts, the Thai data showed.

It shows “we haven’t conducted any trade protectionist policy”, said Thanavath Phonvichai, professor at the University of the Thai Chamber of Commerce.

After being put on the U.S. list, Thailand defended itself with a 22-page justification that covered everything from its support for the United States in the Korean War to investment by U.S. companies in Thailand.

About 40 percent of Thai exports to the United States come from U.S. firms, officials say. Thailand is the world’s No. 2 maker of hard drives, with U.S. firm Seagate Technology and Western Digital among big players.

Although the Trump administration has indicated no specific action against Thailand, Trump has ordered a study into the causes of U.S. trade deficits.

(Additional reporting by Kitiphong Thaichareon in BANGKOK; and David Brunnstrom in WASHINGTON; Editing by Matthew Tostevin, Amy Sawitta Lefevre and Nick Macfie)

Is US steering clear of South China Sea under Trump? — Is Trump Ceding Influence and Power to China?

May 4, 2017

Image may contain: 2 people

Updated 6:20 AM ET, Thu May 4, 2017

(CNN) The Trump administration appears to be easing up on Beijing in the South China Sea, in what is being seen as another concession to China by the new US president who hopes for a solution in North Korea.

Since Trump took office, the sole request by US military to sail a warship close to artificial islands China has built in the contested waters has been turned down by the Pentagon, a senior defense official told CNN Wednesday.
Freedom of navigation operations in the South China Sea were regularly authorized by the Obama administration, with US Navy vessels sailing within 12 nautical miles of China’s artificial islands at least three times in the past year-and-a-half.
The official said the denial — first reported by the New York Times — was partly due to an effort inside the Pentagon to turn down the temperature of operations that could be viewed as antagonizing China or North Korea.
Analysts say it’s the latest in a series of efforts by President Trump to appease China, whose help he wants in restraining North Korea’s nuclear ambitions.

Trump backs down on China


The last publicly announced freedom of navigation operation was in October 2016, four months before Trump took power.
Prior to his inauguration, Trump’s point man on foreign policy promised stern action in the South China Sea against China’s island building and militarization.
At his confirmation hearing, US Secretary of State Rex Tillerson said the Trump administration might take a more aggressive approach to the South China Sea.
“Building islands and then putting military assets on those islands is akin to Russia’s taking of Crimea. It’s taking of territory that others lay claim to,” Tillerson said in January.
He even hinted that Chinese access to the artificial islands could be restricted by US vessels.
But as relations between Trump and Chinese President Xi Jinping have improved, with the US prioritizing tensions in the Korean Peninsula, the South China Sea has fallen out of the spotlight.
Trump backed down on his pledge to label China as a currency manipulator on his first day in office, while early in his presidency he quickly agreed to honor the “one China” policy which Beijing considers a necessity.
In the past week, Trump even said he’d call Xi for permission before he spoke to Taiwan’s leader over the phone again.

‘Ceding to China’.


Mike Chinoy, non-resident senior fellow at the University of Southern California’s US China Institute, told CNN that Beijing would be thrilled by the administration’s apparent decision to hold off testing China in the South China Sea.
“I think if you’re sitting in Beijing you have to be very pleased that Donald Trump is in the White House because he is ceding to China a great deal in terms of clout and advantage,” Chinoy said.
“In the meantime, countries in Asia that have not wanted a US-China clash but have wanted substantial American presence to counterbalance the growing clout of China … are going to calculate that they can’t count on the US in the way they did before.”
The recalculation has started for some countries.
At the Association of Southeast Asian Nations (ASEAN) leader summit in Manila in April, China scored a major victory when the joint statement seriously watered down the denunciation of its island-building in the South China Sea.
“ASEAN cannot maintain its position in dealing with China… unless the pressure is on China by the maritime powers,” Carl Thayer, regional security analyst and emeritus professor at the University of New South Wales, told CNN.

Freedom of navigation operations to go unreported


Pentagon spokesman Capt. Jeff Davis told CNN Wednesday that US forces operated in the Asia-Pacific region on a daily basis, “including in the South China Sea.”

US starts 'routine' patrols in South China Sea
US starts ‘routine’ patrols in South China Sea 00:46
“All operations are conducted in accordance with international law and demonstrate that the United States will fly, sail, and operate wherever international law allows,” he said.
The Pentagon said the US military will continue with regular freedom of navigation operations but in the future Davis said “these operations will be released publicly in the annual FONOPS report, and not sooner.”
This would mark a significant change from the Obama administration which publicly discussed South China Sea operations on a routine basis.

  (The authors say, China prefers places with lots of poverty and corruption and not too much interest in rule of law or human rights…)


No automatic alt text available.

On July 12, 2016 a ruling of the Permanent Court of Arbitration in the Hague said China’s nine-dash line claim (shown above) was invalid and not recognized in international law.

Handle with extreme care: How to deal with the world’s most dangerous regime

April 21, 2017

Donald Trump grapples with his trickiest task

NORTH KOREA can be as confusing as it is alarming. It is a hereditary Marxist monarchy. It has the world’s youngest supreme leader and also its oldest. The reigning tyrant, Kim Jong Un, is in his 30s; and his grandfather, Kim Il Sung, is the “eternal president” despite having died in 1994. To celebrate grandpa Kim’s birthday on April 15th, his grandson ordered warplanes to fly past in a formation spelling out his age: 105. He also ordered a gigantic parade, with goose-stepping soldiers and missiles on trucks. A male-voice choir belted out “Peace is guaranteed by our arms”, even as the regime threatens to rain nuclear destruction on its enemies and is building a missile designed to reach the continental United States.

No automatic alt text available.

Dealing with the bellicose junior god-king will be one of Donald Trump’s trickiest tasks. It will also be the first big test of how he handles relations with China, which are shifting as the rising superpower challenges the Pax Americana in Asia (see our special report). There are no good options, but arriving at the least-bad ones will require understanding both the regime and the Asian geopolitical jigsaw into which it fits. It will also require patience. Ominously, Mr Trump says he has little when it comes to North Korea, and his vice-president, Mike Pence, says that “all options” are on the table.

Wanting to do something quickly is emotionally appealing. North Korea is a vile, blood-drenched dictatorship where any hint of disloyalty is punishable by gulag or death. Mr Kim has children imprisoned for their parents’ thought-crimes and his own relatives murdered on a whim. The prospect of such a man threatening Los Angeles is harrowing. Yet a pre-emptive strike on North Korea would be reckless beyond belief (see article). Its nuclear devices are hidden, possibly deep underground. Its missiles are dispersed on mobile launchers. Tokyo is just across the Sea of Japan. Seoul, the capital of peaceful, capitalist South Korea, is only a few miles from the border. Northern artillery and conventional missiles could devastate it; a conflict could rapidly turn nuclear and kill millions.

Mr Trump cannot possibly want to start a war. His military actions in Syria and Afghanistan suggest that he is more cautious than his bluster makes him sound. But even creating the impression that he might strike first is dangerous. If Mr Kim were to believe that an American attack is imminent, he might order his own pre-emptive nuclear attack, with disastrous consequences. So Mr Trump should cool his rhetoric immediately.

Dealmaker, meet deal-breaker

For all his eccentricities, Mr Kim is behaving rationally. He watched Muammar Qadaffi of Libya give up his nuclear programme in return for better relations with the West—and end up dead. He sees his nuclear arsenal as a guarantee that his regime, and he, will survive. (Though it would be suicidal for him to use it.) Mr Trump can do little to change his mind. Economic sanctions that harm his people will not spoil his lunch. Cyber-attacks, which may account for the failure of some recent missile launches, can slow but not stop him. America can solve the Korean conundrum only with China’s help.

China has leverage over Mr Kim. It accounts for 85% of North Korea’s foreign trade and could shut off its oil supply. But its interests are not the same as America’s. North Korea is its ally. China’s leaders do not like the Kim regime, but they do not wish to see it collapse and North Korea reunite, German-style, with the democratic South. That, China fears, would mean the loss of a valuable buffer. There are 28,500 American troops stationed in the South; China does not want them on its border.

To contain North Korea—and to conduct a successful foreign policy more broadly—Mr Trump has to learn how to talk to China. His instinct is to do deals. Last week he tweeted that he told Xi Jinping, China’s president, that “a trade deal with the US will be far better for them if they solve the North Korean problem!” Later he explained that his decision not to label China a currency manipulator, as he had threatened, was a quid pro quo for China helping out over North Korea. Dropping the currency threat was the right policy, but Mr Trump’s transactional approach to diplomacy is exactly the wrong one.

China would love to carve up the world bilaterally into spheres of influence, with the great powers dominating their regions and trading favours elsewhere. America has long been the guardian of something different: a rules-based order that applies to every country, big or small, and which has underpinned the relative peace and remarkable growth of the world since 1945. That Mr Trump appears to scorn this rules-based global order is worrying. The world would become a more dangerous place if America started letting China break the rules (for example, in the South China Sea) in exchange for help to resolve whichever issue happens to be in the news. A better response to China’s rise would be for America to strengthen the rules-based order and invite China to join it more actively. Alas, Mr Trump is unlikely to do this.

So the best hope is that he or his diplomats persuade China that it is in its own interest to curb North Korea. And the way to do this is to talk about North Korea itself, not the yuan or American steel jobs.

Three generations of Kims are enough

China does not gain if North Korea destabilises East Asia, or starts a regional arms race that leads Japan and South Korea to build their own nuclear weapons. Mr Trump should reassure his allies in Tokyo and Seoul that they remain under Uncle Sam’s protection. But he should also deal with China’s concerns. To that end, he could make it clear that freezing and then rolling back the North’s nuclear programme is his goal rather than regime change. He could also guarantee that, were the North to collapse into the arms of the South, America would keep its troops south of the current north-south boundary. China hates to admit that the Kim dynasty might not last, but it is rash not to plan for that possibility.

The crucial message for Mr Kim as for his predecessors is that, if the North were to use its nukes, the regime would be obliterated. In the long run, reunification is inevitable and desirable. Meanwhile, the junior god-king can be deterred.

This article appeared in the Leaders section of the print edition under the headline “Handle with extreme care”

U.S. Treasury Stops Short of Calling China a Currency Manipulator

April 15, 2017

Department’s report does sharply criticize Chinese exchange-rate policies

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy.

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy. PHOTO: XAUME OLLEROS/BLOOMBERG NEWS

WASHINGTON—The U.S. Treasury sharply criticized China’s exchange-rate policies on Friday, though it stopped short of labeling the Asian trade giant a currency manipulator, as President Donald Trump said he would do while running for office.

“China has a long track record of engaging in persistent, large-scale, one-way foreign-exchange intervention,” the Treasury Department said in its semiannual report on foreign exchange policies of major U.S. trade partners. Although Beijing has allowed the yuan to slowly appreciate in recent years and actively fought depreciation recently, its past interventions “imposed significant and long-lasting hardship on American workers and companies,” the Treasury said.

The report followed an apparent warming of relations between the U.S. and China following a visit to Washington and Mr. Trump’s Mar-a-Lago resort by Chinese leader Xi Jinping last week. Mr. Trump is counting on Mr. Xi for support in a confrontation with North Korea. After the visit, Mr. Trump told The Wall Street Journal he wouldn’t name China a currency manipulator, a label that may have led to a deepening trade confrontation.

Still, the administration sought to stick to some of the tough themes Mr. Trump laid out as a candidate and as president on trade and currency.

“Treasury will be scrutinizing China’s trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the United States,” the Treasury report said.

The report has traditionally been used as a diplomatic tool to prod other countries whose currency policies were deemed a threat to U.S. industries. The latest report’s censure of China and other countries, including South Korea and Germany, could be used in the future as a pretext for new tariffs.

“Treasury is committed to aggressively and vigilantly monitoring and combating unfair currency practices,” the report said.

Preserving a two-decade precedent, no country was named a currency manipulator.

Along with Friday’s about-face was an acknowledgment by Mr. Trump and his team that Beijing has been propping the yuan up over the last two years, instead of pushing it down as the president had previously alleged. Building debt problems and a slowing economy has put downward pressure on the yuan, forcing the central bank to burn through $1 trillion, or a quarter of its foreign-exchange reserves, to keep the currency from falling.

“The administration clearly realized this was not the right time to have a fight with China over currency,” said Brad Setser, a senior fellow at the Council on Foreign Relations and a former senior U.S. Treasury official in the Obama administration.

Still, “there’s a clear suggestion that China needs to do more to open up its markets to U.S. goods and services,” Mr. Setser said. “The challenge will be getting real changes that have a real impact on the size of U.S. exports to China.”

Most Western economists agree Chinese authorities in the past used an undervalued exchange rate to help fuel its rise to being the No. 2 economy in the world. A cheaper currency makes products less expensive to produce and more attractive to buyers overseas. That was an essential factor in making China the world’s biggest manufacturing base, but it cost the U.S. and other countries millions of jobs.

During his campaign, Mr. Trump tapped into anger at China that was pent up in major manufacturing states, saying he would label the country a currency manipulator and slap fresh tariffs on its imports.

Amid rising concerns about an increasingly belligerent North Korea sparking a dangerous conflict with U.S. allies Asia, Mr. Trump earlier this week said he decided to treat Beijing with more leniency on trade and currency in exchange for Beijing’s help in reining in Pyongyang.

China was not alone in being targeted in Treasury’s latest report.

Repeating criticisms made under the Obama administration, the Treasury Department also kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a special “monitoring list” that flags trade partners with currency and other economic policies deemed to be a risk to the U.S. economy.

The name-and-shame list can trigger sanctions against offending trade partners if the countries can be shown to intervene in foreign-exchange markets and maintain large trade surpluses with the U.S. and rest of the world. None of the countries met all of the criteria.

Japan and South Korea, two major U.S. trade partners, have long been on Treasury’s radar in part because they have pushed down the value of their currencies in the past. And even though Germany doesn’t control the value of the euro because it is only one member of the European currency union, the country has been targeted because its economic policies and a relatively weak euro have helped the country to achieve the world’s largest trade surplus.

Future reports could step up the criticism, given Treasury’s latitude under the original laws guiding the report to Congress.

China could again allow the yuan to fall, triggering fresh criticism from U.S. manufacturers and renewed political pressure on the administration to label them a manipulator. There are costs to keeping the yuan stable beyond selling exchange-rate reserves. It also makes it harder for the government to meet its growth targets.

Also, the Commerce Department is preparing a study of why the U.S. has such large trade deficits with other nations, and some analysts believe that could lay the foundation for applying countervailing duties against countries that manipulate their currencies. The exchange-rate undervaluation, under a proposal the Commerce Department is considering, would be considered a subsidy.

While some trade experts question whether that plan would be compliant with current World Trade Organization rules, the administration could still use it as a pretense for levying across-the-board tariffs on imports from a currency-manipulating country.

Although many of the findings in the report repeated the basic assessments made under the Obama administration, the report still carried a distinct Trump administration tone. For example, it used sharper language in its warning trade partners against exchange-rate offenses.

“Though there has been a trend in the last two years towards reduced currency intervention by key trading partners, it is critical that this not represent merely an opportunistic response to shifting global macroeconomic conditions…but a durable policy shift away from foreign-exchange policies that facilitate unfair competitive advantage,” the report said.

“The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates,” it added.

Write to Ian Talley at


Asian markets cautiously higher ahead of Xi-Trump summit

April 5, 2017

© AFP/File | President Donald Trump has warned China he is willing to sideline the country to deal with North Korean leader Kim Jong-Un and his nuclear programme


Asia’s markets edged tentatively higher Wednesday as investors sit tight ahead of a summit between Chinese President Xi Jinping and Donald Trump this week.

The two-day gathering in Florida comes after the US tycoon has hit out at Beijing’s trade policies and labelled it a currency manipulator, fanning worries of a possible trade war between the world’s top two economies.

There are also geopolitical concerns linked to North Korea’s growing nuclear programme, with Trump warning he would be prepared to sideline Beijing in dealing with the rogue state.

North Korean leader Kim Jong-Un lifted tensions Wednesday by firing another ballistic missile into the Sea of Japan, the latest in a series of launches in recent months.

Also in focus is the release of US jobs figures Friday, which will provide a fresh snapshot of the state of the world’s top economy, as well as minutes from the Federal Reserve’s March policy meeting. A private US jobs reading is due later Wednesday.

“It seems most folks are waiting on the meeting between presidents Xi and Trump. And of course, non-farm payrolls,” said Greg McKenna, chief market strategist at AxiTrader.

Shanghai jumped 1.1 percent while Hong Kong was down 0.2 percent at the break, as both markets returned from public holidays.

Tokyo added 0.3 percent by the break, while Singapore, Sydney and Seoul were flat. Taipei and Manila posted healthy gains.

The gains followed a positive lead from Wall Street after the US Commerce Department said the trade deficit narrowed in February by the most in six months.

But traders have taken a step back from the four-month rally that greeted Trump’s November election victory as they grow increasingly concerned about his ability to push through promised tax cuts and spending promises that would fire the economy.

– Key figures at 0500 GMT –

Tokyo – Nikkei 225: UP 0.3 percent at 18,861.68 (break)

Hong Kong – Hang Seng: DOWN 0.2 percent at 24,215.97

Shanghai – Composite: UP 1.1 percent at 3,256.67

Euro/dollar: UP at $1.0675 from $1.0671

Pound/dollar: UP at $1.2446 from $1.2441

Dollar/yen: DOWN at 110.65 yen from 110.74 yen

Oil – West Texas Intermediate: UP 32 cents at $51.35 per barrel

Oil – Brent North Sea: UP 28 cents at $54.45 per barrel

New York – Dow: UP 0.2 percent at 20,689.24 (close)

London – FTSE 100: UP 0.5 percent at 7,321.82 (close)

No automatic alt text available.

Trump’s Currency Complaints Hit Unexpected Targets

February 17, 2017

Top-five trading partners China, Japan and Germany brush them off; Taiwan and Switzerland seem to be paying heed


Feb. 17, 2017 3:47 a.m. ET

HONG KONG—U.S. President Donald Trump’s accusations of currency manipulation appear to be reaching an audience he may not have primarily intended.

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies,…

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies , while his top trade adviser Peter Navarro has accused Germany of benefiting from what he termed the “grossly undervalued” euro .

All three countries, which rank among the U.S.’s top five trading partners, have brushed off the Trump administration’s claims.

“No one has the right to tell us that the yen is weak,” Japan’s finance minister Taro Aso told parliament on Wednesday, following last weekend’s meeting between Mr. Trump and Prime Minister Shinzo Abe . Japan hasn’t directly intervened in currency markets since 2011 following a major tsunami and resulting Fukushima nuclear disaster.

“The charge that Germany exploits the U.S. and other countries with an undervalued currency is more than absurd,” Jens Weidmann , the president of the German central bank, said earlier this month.

China hasn’t directly commented on Mr. Trump’s criticisms, but most analysts say Beijing recently has been propping up the yuan by selling foreign-currency reserves rather than looking to weaken it.

Still, some smaller economies look like they are taking notice, notably Taiwan and Switzerland. The U.S. Treasury found in October that both had engaged in persistent, one-way currency intervention, essentially by buying foreign currencies like the U.S. dollar and selling their own to maintain weak exchange rates.

Image may contain: 2 people

Analysts say the central banks of Switzerland and Taiwan are now stepping back from those activities, perhaps to avoid closer scrutiny from the Trump administration. The upshot: The Swiss franc has advanced nearly 2% against the U.S. dollar this year, while the new Taiwan dollar has surged 5.3%. Both have outperformed the euro and yen since the U.S. election in early November.

Taiwan’s central bank bought $500 million in foreign currencies in the fourth quarter, well below its quarterly average of more than $3 billion since 2012, according to Khoon Goh , head of Asia research at ANZ in Singapore, who said he suspects it is stepping back from “currency-smoothing operations.” The central bank said it doesn’t comment on currency policy.

For the first nine months of last year, the Swiss National Bank /quotes/zigman/1379668/delayed CH:SNBN +0.12% intervened heavily in currency markets to slow the franc’s rise, spending an amount roughly equivalent to its current-account surplus for the period, J.P. Morgan/quotes/zigman/272085/composite JPM -0.76% analysts note. Over the following four months, the scale dropped to around two-thirds of the surplus.

“It’s not an entirely fanciful suggestion that the SNB might be tapering intervention in order to the guard against the risk of being cited by the U.S. Treasury as a currency manipulator,” the analysts wrote in a note.

The Swiss National Bank declined to comment.

For the U.S. to label an economy a currency manipulator under the current law, it must have a large trade surplus with the U.S. and a hefty current-account surplus and persistently intervene in the currency in one direction. As of October, no economies met all three criteria.

Recent comments from officials in South Korea, which the Treasury has flagged for its hefty trade surplus with the U.S. and its current-account surplus, suggest they’re similarly eager to avoid U.S. ire, says Govinda Finn , senior analyst at Standard Life Investments in Edinburgh. The Korean won has surged 5.2% against the dollar this year.

But any gains in the Korean and Taiwanese currencies due to U.S. political pressure may not last, he said: “On a longer-term horizon, there’s a pretty strong case to say both of those currencies can and will weaken as the authorities look to support their economies.”

Jenny W. Hsu contributed to this article.

Write to Saumya Vaishampayan at

Yuan Pares Record Rally as Goldman Says Now’s the Time to Sell — The yuan is likely to weaken this year as capital outflows continue

January 6, 2017
January 5, 2017, 8:32 PM EST January 6, 2017, 3:53 AM EST
  • Offshore rate tumbles as much as 1.1%, most in a year
  • PBOC strengthens fixing less than forecasts from Mizuho, ANZ

What’s Triggering the Rally in the Yuan?


The offshore yuan pared its record weekly rally as China’s central bank raised its fixing less than projected and some analysts reiterated their bearish views on the currency.

The exchange rate fell as much as 1.1 percent to 6.8623 a dollar in Hong Kong, the most since this day last year, after a 2.5 percent surge over the past two sessions. Goldman Sachs Group Inc. advised clients that the best times to bet against the yuan have tended to be after interventions that flushed out bearish positions, or when China concerns were off traders’ radar screens.

Yuan short sellers were squeezed in Hong Kong this week after interbank borrowing rates soared, the dollar weakened and Bloomberg News reported that Chinese policy makers are preparing contingency plans to support the exchange rate. The move widened the offshore yuan’s premium over the onshore rate to 1.6 percent, the most since February last year. While borrowing rates in Hong Kong remained elevated on Friday, a broad recovery in the U.S. currency eased some of the pressure on bears.

“The offshore yuan is sinking because there is some recovery in the dollar, perhaps the unwinding of short-yuan positions has mostly been done, and it’s closing the gap with the onshore currency,” said Roy Teo, senior currency strategist at ABN Amro Bank NV in Singapore. The yuan is likely to weaken this year as capital outflows continue and the U.S. Federal Reserve increases interest rates, Teo said.

China’s central bank raised its daily reference rate by 0.92 percent to 6.8668 per dollar on Friday, following a 1 percent drop in a gauge of the greenback’s strength overnight. The offshore yuan was trading 0.9 percent weaker at 6.8537 per dollar as of 4:51 p.m. in Hong Kong, while the onshore rate slumped 0.6 percent. Friday’s fixing was weaker than Mizuho Bank Ltd.’s prediction of 6.8447 and Australia & New Zealand Banking Group Ltd.’s estimate of 6.8456.

The three-month yuan interbank rate in Hong Kong, known as Hibor, surged to a record high, while the overnight rate jumped 23 percentage points to 61 percent, the highest since last January’s cash crunch. Rising interbank rates can make some short positions prohibitively expensive.

The yuan is giving back some of its gains after a week that echoed the short squeeze in January of last year. That abrupt reversal marked the beginning of a nearly 5 percent rally lasting two months.

Chinese policy makers have several reasons to engineer a stronger or stable yuan in the short term. U.S. President-elect Donald Trump has pledged to label the country a currency manipulator on his first day in office, while the exchange rate came close to breaking through the psychologically-important level of 7 per dollar earlier this week. Policy makers also want to avoid a flood of capital outflows as citizens’ annual foreign-exchange quotas reset for the new year.

Goldman Forecast

Still, the analyst consensus suggests China will eventually let the yuan continue its descent. The exchange rate will fall to 7.16 per dollar by year-end before sliding to 7.3 the following year, according to the median of projections compiled by Bloomberg.

Goldman researchers see an even quicker retreat. The Chinese currency will probably drop to 7.3 per dollar by December, emerging-market strategists led by Kamakshya Trivedi in London predicted in a note dated Thursday.

Benjamin Fuchs, chief investment officer at the $2 billion hedge fund BFAM Partners (Hong Kong), said China’s moves to repeatedly tighten capital controls risk eroding confidence in its currency. The dollar’s advance against the yen and other currencies has also increased competitive pressure on China to let the yuan depreciate, he said.“We’re starting to see more and more of a negative cycle being created,” Fuchs said. China’s attempts to curb outflows are “just making people want to take money out quicker, and make companies change their behavior.”

— With assistance by Robin Ganguly, Justina Lee, and Tian Chen


 (Wall Street Journal)


China Faces Off Against World on Open Global Markets

December 9, 2016

Anniversary of China’s accession to World Trade Organization highlights global rift over Beijing’s economic policy

Donald Trump returned to Iowa triumphant Thursday, rallying in Des Moines not as an unconventional presidential candidate, but as the president-elect of the United States.

Trump drew a crowd of perhaps 6,000 supporters to Hy-Vee Hall for his thank-you tour rally, reveling in his 9-point Iowa victory and sharing the stage with Gov. Terry Branstad, his newly named ambassador to China.

“I’m here today for one main reason – to say thank you to the great, great people of Iowa!” Trump said as he took the stage. “You went out and pounded — and I mean pounded — the pavement. You organized your fellow citizens and propelled us to victories at the grassroots and every other level. We have a movement the likes of which this world has never seen before.”



Dec. 9, 2016 5:32 a.m. ET

China’s 15-year anniversary as a member of the World Trade Organization on Sunday threatens to trigger a clash with growing forces in the West that cast Beijing as an abuser of open global markets.

The anniversary marks Beijing’s eligibility for “market-economy status,” which would remove many risks of punishment when Chinese companies are accused of selling products below cost. But the issue is bringing to the fore mounting global frustration over China’s state-led economic policy.

Since joining the WTO on Dec. 11, 2001, China has leveraged the open markets the organization fosters to lift millions of people from poverty and catapult itself to become the world’s No. 2 economy. But Beijing’s critics say it has gamed the system by curbing access to its markets and marshaling massive state resources to compete against foreign companies.

“China wanted the advantages without meeting its obligations, and trade won’t work when it’s a one-way street like that,” said Rep. Sander Levin, the top Democrat on the House committee that overseas trade. “They went in with full knowledge and essentially began thumbing their nose.” Mr. Levin voted for legislation tied to China’s WTO accession but has since become a vocal critic of Beijing’s compliance.

Changing China’s market-economy status is dependent on individual countries declaring that they are changing the way they handle antidumping and other trade cases—something the Obama administration isn’t ready to do.

“It is a conversation that we are engaged in, but it is not ripe for us to change our protocols,” said Commerce Secretary Penny Pritzker said last month after talks with Chinese officials.

President-elect Donald Trump has threatened to declare China a currency manipulator and slap big tariffs on its hundreds of billions of dollars in annual exports, although some of his aides have played down those warnings as laying the ground for future negotiations. “They haven’t played by the rules, and they know it’s time they’re going to start,” Mr. Trump said at an Iowa rally on Thursday, naming “massive theft of intellectual property” and “product dumping.”

Mr. Trump’s comments and choice of advisers—including steel executives—suggest his administration will step up trade enforcement against China through the WTO as well as in antidumping and subsidy cases within the U.S., trade lawyers say. Trump representatives didn’t comment on the issue.


The European Commission, the EU’s executive arm, also isn’t ready to declare China a market economy. In November, the commission proposed a new formula to calculate antidumping duties.

In cases where it determines markets are distorted by state intervention, the commission would eliminate the concept of nonmarket economies and instead allow for high tariffs to be imposed on imports deemed to be priced below international-market levels.

“We are not declaring China a market economy status but we are reforming the system so as to make it country-neutral,” Cecilia Malmström, the EU’s trade chief said Wednesday.

Japan said this week it continued to view China as a non-market economy.

Beijing bridles at being a lightning rod for global angst over trade and unemployment and on Thursday renewed vows to take WTO countermeasures if it doesn’t receive market status.

“We are playing by the rules and you need to keep your promise,” Xue Rongjiu, a trade adviser to the State Council, China’s cabinet, said this month. “It’s unfair to blame China for your problems, which have resulted from bad management and operations.”

Economists say China generally abides by WTO rules, a system largely designed to address the movement of goods across borders, making it difficult to deny Beijing market-economy status over the long term.

But the rules are ill-equipped to handle China’s massive state companies, investment inequity, intellectual property issues, limited transparency and restricted access to new economic sectors like services, internet and the cloud, critics say.

“The WTO seems like a single-stroke engine in a jet-engine age,” said James McGregor,former chairman of the American Chamber of Commerce in China. “China has played into our open system with great skill.”

Free-trade advocates focus on Chinese state-owned entities, which are granted such benefits as preferential funding, free land, protected domestic markets and limited pressure to turn a profit, saying the system fuels debt and inefficiency that distorts global markets. President Xi Jinping has vowed to maintain the central economic role for state-owned firms.

Zak Fardi, founder of U.S. solar panel maker 1SolTech Inc., said China’s system victimized him. The Dallas-based company prospered until late 2011 when Chinese state-subsidized panels began flooding the U.S. market, he said. The Chinese sold panels at 40% below his production cost and offered customers multimillion-dollar lines of credit he was unable to match.

Panel makers petitioned for help, leading to punitive U.S. and European duties on imports of Chinese solar cells even as Chinese manufacturers denied competing unfairly. But by then the damage was done. Not only did Mr. Fardi’s business fail but dozens of Chinese solar makers did too after the subsidies sparked a competitive glut. “They kicked our butts,” Mr. Fardi said. “It was definitely dumping. It seemed very well organized.”

Shipping containers at a port in Qingdao in eastern China's Shandong province.
Shipping containers at a port in Qingdao in eastern China’s Shandong province. PHOTO: CHINATOPIX/ASSOCIATED PRESS

Aside from solar panels, China has used an array of state financing, subsidies and price cutting to secure globally dominant positions in disc drives and personal computers, saidDirkThomas, principal in Hong Kong-based Summit Partners, a tech advisory firm. Beijing is now setting its sights on mobile phones and semiconductors, he said. “It’s the same game over and over again,” said Mr. Thomas, who helps Chinese technology companies acquire assets overseas.

Beijing’s industrial policies are driving discontent to new levels, especially over excess Chinese production of steel, aluminum and other products. In the first half of 2016, 17 countries and regions launched 65 trade investigations against Chinese products, a two-thirds increase year-over-year, according to Chinese data. Beijing has pledged to cut 150 million tons of steel production by 2020, but industry analysts say that would reduce only about a third of China’s 30% excess capacity.

A new source of concern to foreign companies is the “Made in China 2025” blueprints released last year that call for indigenous development and import substitution in many strategic industries where Western companies have an edge, including semiconductors.

“The global system of trade is under siege and has been challenged by the biggest new kid on the block, China, not playing by the rules,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “China points at growing protectionism of the West, but they only have themselves to blame.”

Calls also are rising to tighten curbs on Chinese technology investments in the U.S. in response to investment bans Beijing has imposed, often on national security grounds.

“With [China’s] expansive definition, national security could be your local ballet school,” said Claire Reade, a former U.S. Trade Representative negotiator and now a trade lawyer.

This month, President Barack Obama blocked on national security grounds the proposed acquisition by a Chinese company, Fujian Grand Chip Investment Fund, of German chip maker Aixtron SE, which has operations in California.

In response, a Chinese Foreign Ministry spokesman said this week that Beijing hopes Washington will “cease making groundless accusations” against Chinese companies.

Write to Mark Magnier at and William Mauldin at