There Is Least Evidence of Currency Manipulation by China Among Asian Economies, S&P Global Says
Yicai Global
/SOURCE : Yicai
There Is Least Evidence of Currency Manipulation by China Among Asian Economies, S&P Global Says

(Yicai Global) March 16 -- Although US President Donald Trump has repeatedly described China as a currency manipulator, a recent report by Standard & Poor Global said that China has the smallest possibility of currency manipulation among nine Asia-Pacific economies.

In its latest report, Standard & Poor Global studied the current account balance, real effective exchange rate and foreign reserve levels of nine major Asia-Pacific economies and concluded that there is least evidence for trade manipulation by China.

China's current account surplus as percentage of gross domestic product has declined, its real effective exchange rate has been strongest and its forex reserves have been falling rapidly, said Paul Gruenwald, chief economist for Asia-Pacific at S&P Global Ratings. There is no evidence that China is a trade manipulator.

Per the S&P report, all of the nine major Asia-Pacific economies witnessed decline in their current account balances over the past decade, with Malaysia and China suffering the biggest drop.

In terms of real effective exchange rate, the yuan rose 45 percent over the last decade, the biggest gain among the nine economies. The Philippine peso is the second-best performer with 29.9 percent increase in value over the past decade.

That means China allows the yuan to fluctuate substantially, whose floating range exceeds that of any other currency in the region, S&P Global Ratings noted.

Forex reserves are the most direct indicator of trade manipulation. An increase in foreign reserve levels usually means the central bank's intervention in foreign exchange markets to prevent local currency appreciation, S&P said in its report. In terms of this indicator, Thailand experienced one of the largest increase in forex reserves as a percentage of GDP, while China and Malaysia saw a rapid decline in foreign reserves.

China's foreign exchange reserves as a percentage of GDP fell 12 percent in the last 10 years, while Malaysia's dropped 19 percent.This contradicts the claim that China devalues the yuan through trade manipulation, Gruenwald said.

During his presidential campaign, Donald Trump repeatedly vowed to name China a currency manipulator on his first day in the White House. However, after taking office, he said he would talk to them first. Last month, Trump called China the "grand champions" of currency manipulation in an interview. Trump said he has not "held back" on his assessment that China manipulates its yuan currency, despite not declaring it a currency manipulator on his first day in office.

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