US removes designation of China as currency manipulator

News:The US has removed China as a  currency manipulator as the two countries are preparing to sign a trade deal.


About Currency manipulator:

  • Currency manipulation happens when governments try to artificially tweak the exchange rate to gain an unfair advantage in trade.
  • US defines currency manipulation as when countries deliberately influence the exchange rate between their currency and the US dollar to gain unfair competitive advantage in international trade.

Criteria for designation as a currency manipulator:The US Treasury has established three criteria for currency manipulator which are:

  • A significant bilateral trade surplus with the US is one that is at least $20 billion.
  • A material current account surplus is one that is at least 3% of GDP.
  • A persistent, one-sided intervention reflected in repeated net purchases of foreign currency and total at least 2% of an economy‚Äôs GDP over a year.

Implications for destination as a currency manipulator:

  • Once a country is designated as a currency manipulator by the U.S., the next step taken by the US government is to seek negotiations with the government accused of manipulation.

Note:United States had removed India from its currency monitoring list of major trading partners in May,2019.