The US Treasury Department on Monday designated China a currency manipulator in response to the drop in the renminbi's value to under 7 per US dollar. It's ridiculous that the US has taken China's step intended to appease the market by using the country's ability to prevent a sharp exchange rate fall as proof of the alleged manipulation.
The White House had long desired to label China as a currency manipulator. The US Treasury Department lays down three criteria for identifying manipulation. It couldn't designate China because the country only meets one of the criteria — it has a significant trade surplus with the US. The unexpected decision on Monday is totally political. It is aimed at showing US wrath for China.
Except the small policy circle in Washington, is there anyone who believes China is manipulating its currency? Most Chinese people don't think so, because although a fall in the exchange rate is good for exports, it won't help inspire the society at the moment. It's widely believed as bringing more harm than good to China. An indisputable fact is that pressure of devaluation has been there for a while, and China's financial policy is to keep the currency stable rather than indulging in seeing it drop.
When China was widely believed to have taken measures to keep the renminbi at 7, the US didn't frown at it. But when China allows market forces to determine the renminbi exchange rate, Washington accuses it of manipulation. This is absurd.
Exchange rate is an issue of sovereignty. The US has frequently accused other countries of currency manipulation. Many of the countries that have been blacklisted or put on the watch list are US allies. However, the political significance of blacklisting China is particularly obvious. Some radical Americans regard it as a sign of a tough stance against China.
After listing China as a "currency manipulator," the US will engage with the International Monetary Fund to substantiate the accusation. If it was two years ago, the Chinese may have worried about US retaliation because such an accusation may lead to Washington imposing tariffs on China's exports to the US. But now, since the US tariffs on Chinese products have already been implemented on a large scale, the label of "currency manipulator" is only bluff and bluster.
China does not want a trade war, but we will fight to the end. The US only has itself to blame. It started an unjustified trade war with a wrong opponent at a wrong time. The US needs to learn from bitter experience that it is not invincible. Necessary restraint can prevent Washington from getting trapped in a dilemma.
Every time the US repudiated trade talks, the trade war escalated. Now a vicious circle has formed. But China has two things that the US lacks. First, China has a powerful political system and the Chinese people have united against a common source of hatred. Second, China has a rapidly expanding domestic market and huge development potential. Which country has room for maneuver, and which country is facing a political cliff? We will let time prove.
