WASHINGTON, D.C.: The US Treasury said on Thursday (Friday in Manila) that the Chinese and South Korean governments should stop intervening in markets to protect their undervalued currencies and let them rise.
The Treasury said in a semi-annual report to Congress on currency manipulation that no country, including China, intervenes enough to be officially labeled a manipulator, a charge that could result in countermeasures to protect US trade competitiveness.
It said Beijing had reduced its foreign exchange market intervention on behalf of the yuan, also known as the renminbi (RMB), consistent with promises to Washington.
Even so, the Treasury said the yuan remains “significantly undervalued,”, which helps the country maintain its massive trade surplus with the United States.
The yuan depreciated against the dollar by 2.4 percent in 2014 and has been flat so far this year.
But on a trade-weighted basis and adjusted for inflation, the Treasury said, the currency’s real effective exchange rate against the dollar was up over 10 percent over the past six months.
Beijing has made “real progress” in letting its currency move more freely, the Treasury said, but added that it remains artificially low.
“China’s currency needs to appreciate to bring about the necessary internal rebalancing toward household consumption that is a key goal of the government’s reform plans and necessary for sustained, balanced global growth.”
The Treasury also said that while South Korea joined the rest of the G20 leading economies in 2013 in committing to refrain from competitive devaluations, it continues to intervene to protect the won and keep it low.
It said that despite the country’s large current account surplus and a sharp jump last year in its trade surplus with the United States, the won depreciated by nine percent against the dollar between June 2014 and February 2015.
“The summer of 2014 saw heavy intervention, followed by a relative lull from August through November. Intervention appears to have accelerated in December and January, a time of appreciation pressure on the won,” the report said.