Considering that China’s currency is a source of heated discussion, the yuan has been relatively stable.
The yuan, also known as the “renminbi”, or “people’s money”, is currently changing hands at $0.14 to the US dollar. A month ago, on 3 May, it was trading at $0.15, and a year ago it traded at $0.16, on 3 June 2018.
Five years ago, on 13 June 2014, it was equal to $0.16, making the yuan one of the most stable denominations in the world.
“Merit close attention”
On the face of it this makes the constant accusation of China’s manipulation of the yuan all the more curious. It is often suggested that China may be intentionally devaluing its currency in order to secure a bigger share of global trade.
The most recent shot fired came on 28 May, when the US Treasury reported to Congress on “the macroeconomic and foreign exchange policies of the major trading partners of the United States”.
China received a special mention from Treasury Secretary Steven Mnuchin: “Treasury will continue its enhanced bilateral engagement with China regarding exchange rate issues, given that the RMB [renminbi] has fallen against the dollar by 8% over the last year in the context of an extremely large and widening bilateral trade surplus.”
Mr Mnuchin’s department added: “Treasury continues to urge China to take the necessary steps to avoid a persistently weak currency. China needs to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment.”
“Improved economic fundamentals and structural policy settings would underpin a stronger RMB over time and help to reduce China’s trade surplus with the United States.”
A long history of accusations
An article in the Financial Times suggested on 24 May that the Chinese authorities are devaluing the currency to offset the effects of tariffs imposed by President Donald Trump in the course of the trade war with China. It noted: “China’s central bank exercises firm control over the value of the renminbi. The onshore renminbi exchange rate, for example, is allowed to only within a trading band of 2% either side of a daily midpoint fixed by the bank.”
China’s most recent Article IV health check from the International Monetary Fund (IMF) painted an upbeat picture of the world’s second-largest economy. It said: “The Chinese economy continues to perform strongly…Reforms progressed in several key areas. A wide range of regulatory reforms reduced financial sector risks, over-capacity reductions progressed, anti-pollution efforts intensified and opening up accelerated recently.”