Louise Lucas

Demanding the US administration label China a currency manipulator is an old chestnut, and not one that improves with age.

One, the label is self-evident: by definition any non free-floating currency is “manipulated”. The more pertinent issue is whether the currency is under-valued; the answer to that – calculations of multilateral institutions and certain US think-tanks notwithstanding – is less clear-cut.

Two, Washington does not set Chinese monetary policy. If it did, it might pause to consider the wisdom of compelling its biggest creditor to inflate its currency. Since a 5 per cent appreciation would lop, say, $70bn off the value of its largely US dollar-denominated $2,400bn foreign exchange reserves, that might temper Beijing’s appetite for US Treasuries. And three, renminbi appreciation would make barely a whit of difference to US jobs or business. Read more