U.S. Treasury Department Labels China a Currency Manipulator | Hacker News Reader

U.S. Treasury Department Labels China a Currency Manipulator

bloomberg.com

44 pointshker4 comments

Could someone explain why this part makes sense?

> after the country’s central bank allowed the yuan to fall

They got taxed extra, limiting the economy / exports. This means less interest in investment in their market and currency. That seems like a legitimate reason for the currency to lose its value in relation to the country taxing it.

Why is there an implication that this is "allowed" or a strategic response? Not claiming it isn't, and I see how it benefits China in some ways - I'd just like to understand how it's different from a non-manipulated price drop.

China's government policy and central bank tightly control the exchange rate and only allow it to fluctuate within certain predetermined bands.

"An official re-adjustment of the mid-point rate for the trading band is announced by the country's Foreign Exchange Trading Center at 9:15 a.m. each day, Shanghai time."

https://www.fxcm.com/uk/insights/how-does-china-control-exch...

So each day the government says what the currency should be and gives traders very little wiggle room.

As for the first question should they or shouldn't they do it, I don't know.

That is only true to a point: they have to back it up with forex buy/sell orders , or their trading rate becomes meaningless and the black market comes back to set a more realistic rate (as was the case in the late 90s during my first trip to china).

In case anyone else was curious, it seems the penalties for being so labelled are enforced through the imposition of tariffs [0].

If the IMF / WTO agree with the Fed's characterization (which is doesn't currently look like will be the case, from what I read in the parent article), then it could have broader impacts, i.e. by the imposition of tariffs by companies which are not currently in a trade war with China.

However, since the US is already levying (heavier) tariffs against China, this is currently being viewed as more of a public / foreign relations move, as it seems unlikely that it will trigger even stronger tariffs.

[0]: https://www.nytimes.com/2019/05/23/us/politics/trump-currenc...

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