Chinese currency still remains significantly undervalued but the steps taken by the country to reduce intervention in exchange markets and the recent appreciation of renminbi means that it cannot be designated as a currency manipulator, the US has said.
The US Department of Treasury, however, said in its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies that China’s currency still needs to further appreciate against the dollar and other currencies.
According to the report, which covers international economic and foreign exchange developments in the first half of 2012, among the G-20 emerging market currencies, RMB, Argentine peso, Brazilian real, and Indian rupee have all depreciated on a real effective basis this year.
“The available evidence suggests the RMB remains significantly undervalued and further appreciation of the RMB against the dollar and other major currencies is warranted,” it said.
On a real effective basis the three major currencies — the US dollar, the euro, and the yen — have all depreciated in the first 10 months of 2012, as has the Swiss franc.
On China, the Treasury said RMB has appreciated by 9.3 per cent in nominal terms and 12.6 per cent in real terms against the dollar since June 2010.
“China’s trade and current account surpluses both have fallen to 2.6 per cent of GDP from peaks of 8.8 and 10.1 per cent of GDP, respectively,” the Treasury said.
Chinese authorities have substantially reduced the level of official intervention in exchange markets since the third quarter of 2011, and China has taken a series of steps to liberalise controls on capital movements, as part of a broader plan to move to a more flexible exchange rate regime, it said.
“In light of these developments, the Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this report have not been met with respect to China,” the report said.
The report said, Treasury will continue to closely monitor exchange rate developments in all the countries covered by it, with particular attention to the pace of RMB appreciation, and press for policy changes that yield greater exchange rate flexibility, improve transparency, level the playing field for American workers and businesses, and support a strong, sustainable, and balanced global economy.