The Chinese regime responded angrily to the United States’ designation of China as a “currency manipulator,” running commentaries accusing the U.S. government of bullying in all its major state-run outlets, including People’s Daily, CCTV, Xinhua, and Global Times.
The value of the Chinese yuan slid on Aug. 5 and breached a key seven-per-U.S. dollar exchange rate—for the first time in 11 years.
“China has a long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market. In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves, despite active use of such tools in the past,” the Treasury Department stated.
Central Bank Responses
The People’s Bank of China (PBC), China’s central bank, published a statement on its website on Aug. 6, in which it said the United States’ decision “was the wayward behavior of unilateralism and protectionism, which will severely damage the international financial order and have a major impact in global financial markets.”
It used tough rhetoric to condemn the United States, while denying currency manipulation. “China advises the United States to rein in the horse before the precipice, be aware of its errors, and turn back to the right, rational, and objective path,” the statement said.
In its announcement, the Treasury Department cited an Aug. 5 statement by the PBC as clear evidence that Chinese authorities actually had full control over the yuan exchange rate.
The PBC said it would “continue to … take necessary and targeted measures against the positive feedback behavior that may occur in the foreign exchange market.”
“This is an open acknowledgment by the PBC that it has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis,” according to the Treasury statement.
State media took a similar approach. The People’s Daily, the Chinese Communist Party’s (CCP) official mouthpiece newspaper, published a commentary on Aug. 7, stating, “The U.S. Treasury Department will eventually reap what it has sown.”
The commentary claimed that the Chinese economy is healthy and stable.
Meanwhile, China’s state broadcaster CCTV aired an eight-minute segment during its daily primetime 30-minute news program, “Xinwen Lianbo,” about the subject of currency manipulation. Chinese authorities mandated that the program be broadcast on all local TV stations simultaneously; it’s unusual for CCTV to give so much precious airtime to one subject.
The program repeated the commentaries from official media, as well as the PBC statement. It then interviewed Chen Yulu, the deputy governor of PBC, who recited the same statement.
The program also interviewed Guan Tao, an economist from Wuhan University. “Judging whether a country is a currency manipulator or not is the business of the International Monetary Fund (IMF),” Guan said.
But the currency manipulator designation is, in fact, a term used by governmental authorities.
Meanwhile, a tabloid published under People’s Daily, the Global Times, tacitly admitted to currency manipulation in an Aug. 6 commentary.
“When the Chinese government was widely considered to have taken measures to maintain the exchange rate at below seven-per-U.S. dollar, the U.S. and China were at peace. But now that China is thought to have allowed market forces to decide the yuan’s value and accepted the situation of the exchange rate being over seven, Washington has accused China of manipulating the exchange rate,” the Global Times stated.
The Chinese regime has strived to keep the exchange rate below seven in order to maintain foreign investment and prevent capital outflow.
But as the United States has enacted punitive tariffs on Chinese goods throughout a protracted trade war, a devalued currency could allow China to offset the costs of paying tariffs on goods exported to the United States.