MILAN, Aug 7 (Class Editori) – Data alone is not enough to explain why China has been defined as "manipulative". The decision was due by either last May or October, in time for the publication of the next US Treasury's report. "Its timing has more to do with the continuous worsening of the trade war rather than with data," said Claudia Calich, fund manager for M&G (Lux) Emerging Markets Bond, part of M&G Investments.
According to the Treasury's recent estimates – following below (Beijing does not normally release these data to the public) – China has not factually made an intervention on the currency for the largest part of last year. If anything, in the past China had been selling dollar-denominated reserves in order to avoid a possible quickening of the 2015-2016 depreciation, when it also worked to further strengthen its control over capitals. According to the People’s Bank of China (PBC)'s analysis, "we do not believe that, since then, a purposeful intervention aimed to weaken our currency has been made. Despite this, it has now surpassed the psychological threshold of 7 RMB for 1 dollar".
The US Treasury believes that Chinese reserves are "higher than standard adequacy measurement for reserves". This may be true for a country controlling their capitals, but since China aims at slowly opening its capital account up, the level does not pass as excessive. The reserves have been kept relatively stable since 2017, amounting to 3,100 billion dollars – so the IMF’s calculations, as seen below, are still valid.
Following the recent US announcement regarding a 10% tariff imposition over Chinese goods worth a further 300 billion dollars, the PBC allowed the RMB’s depreciation up until it passed the 7 level. Yet, such move was somehow in line with what has been happening to all other Asian currencies. If anything, the RMB had showed, up until a short while ago, a lower depreciation level when compared with its neighboring countries’ currencies – which the PBC keeps monitoring whenever it has to perform daily adjustments.
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