China’s top trade and monetary policy officials this weekend delivered a subtle push-back against trade demands made by Washington, delivering Beijing’s own interpretation of progress made in talks over the enforcement of any deal and the role of currencies.
People’s Bank of China governor Yi Gang said the two sides have reached consensus on many crucial issues, and have discussed previous commitments made by Group of 20 nations on avoiding competitive devaluation of currencies. They also talked about respecting the “autonomy” of each other’s monetary policy, he said.
While Yi’s comments address U.S. concerns over China’s potential depreciation of the yuan in order to blunt the impact of tariffs imposed by the Trump administration, they evaded any mention of a one-sided pledge by Beijing to hold its currency stable. That issue has been a key sticking point in talks in recent weeks, as President Donald Trump pushes for a deal.
By playing down the chances of a currency commitment solely by China, Yi aligned with Vice Commerce Minister Wang Shouwen, who on Saturday said that any enforcement mechanism for a prospective trade deal must be “two way, fair and equal.” Former high ranking officials have said that the deal will be seen as lopsided unless it also binds the U.S. to address China’s own grievances.
Asian stocks kicked off yesterday mixed following the worst week for global equities since mid-December. The dollar nudged up after Friday’s retreat.
“The two sides discussed issues on the yuan including the need to abide by previous commitments made by the G-20 nations including not to engage in competitive depreciation and to communicate closely on currency issues,” Yi said at a press conference during the annual National People’s Congress legislative meetings.
“The negotiators discussed the necessity to respect the autonomy of each other’s monetary policy, a market-oriented foreign exchange mechanism and the disclosure of information according to International Monetary Fund standards,” Yi added.
The yuan has surged 2.3 percent against a basket of trading partners’ currencies this year amid optimism China and the U.S. are edging toward a resolution of their trade dispute.
Trump has previously accused China of gaming its currency to gain a competitive advantage, though his Treasury Department has repeatedly declined to name Beijing a manipulator in its semi-annual reports on foreign-exchange markets.
While the U.S. has considered continuing to use the threat of tariffs in order to hold China to the terms of an agreement, such an arrangement risks raising the perception among the Chinese public that the nation is being bullied by the U.S.
“China will not simply fall in line,” said Katrina Ell at Moody’s Analytics Inc. in Sydney. “While it is willing to make changes to its industrial policies, it also needs to not be seen as bowing to the U.S. demands.” Bloomberg