US keeps Taiwan on currency monitoring list

Instead, the administration's first twice-yearly currency review singled out China and five other countries as needing to be monitored for their currency practices. The report kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a watch list as they met some of the criteria.

The report said China remained on the list because of its "disproportionate share of the overall United States trade deficit", despite that China's current account surplus was only 1.8 per cent of GDP in 2016, sharply down from 2.8 per cent of GDP in 2015.

The Trump administration has chosen not to brand China a currency manipulator in an official report, reversing one of the president's most prominent campaign promises on trade. But the US Treasury concluded China was doing the opposite, preventing its yuan from falling against the dollar and other currencies.

The United States has declined to label China a currency manipulator despite President 's insistent pledge during the election campaign that he would do so as soon as he took office. In a recent interview after meeting China's President Xi Jinping, he said he no longer planned to go ahead with the move.

The report said that China remained on the list because of its "disproportionate share of the overall USA trade deficit", despite that China's current account surplus was only 1.8 percent of GDP in 2016, sharply down from 2.8 percent of GDP in 2015.

Economists and business leaders had said that China wasn't manipulating its currency.

Also, Seoul's financial authorities intervened on the foreign exchange market throughout 2016 in order to ease a sharp depreciation of the local currency, selling $6.6 billion over the on-year period.

"Using that label right now would have ratcheted up the tensions, would have accomplished little in terms of advancing US economic and business interests, and could have hurt the bilateral relationship at a time when the relationship is even more important, not just for economics but for geopolitical issues", Prasad said.

Although the report did not signal a major shift in Washington's own currency policy, it is likely Trump will try to use the issue as a bargaining chip in negotiations with other countries.

Presidents have often used these semiannual reports as a diplomatic tool while engaging with countries that are seen as having exchange rate policies that harm and economic growth.

Now, China needs to show that its lack of intervention in the currency markets "to resist appreciation" over the past three years is a "durable" policy by allowing the yuan to strengthen "once appreciation pressures resume", the Treasury said.

"Treasury will be scrutinizing China's trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the United States", it added.

Before the summit, Trump tweeted that the meeting would be a "very hard one" due to China's large trade deficit and the American jobs it had cost. He said he had changed his mind on China. Germany, South Korea and Switzerland should increase public borrowing to support domestic demand for goods and services, the report suggested.

  • Leroy Wright