By Liu Zhiqin Source: CGTN Published: 2018-7-30
That “China is a currency manipulator” is a lie spread out by the US for many years. We found it very interesting that whenever the US met economic problems it used to blame China as a currency manipulator and even threaten to impose punishment on China.
This always makes me recall the words of famous American writer Mark Twain: "A lie can travel halfway around the world while the truth is putting on its shoes."
This is exactly the case when the US tries to put the cap on China as a country that manipulates its currency. It is shameless abuse against China.
The fact is that China has never used the value of the RMB as a "tool " or "weapon" to solve economic difficulties that the country has encountered during the past four decades.
China has never taken advantage of crises in other countries to develop its economy. We still remember what China did during the Asian financial crisis in the 1990s. China didn't reduce its currency value to safeguard itself, and the same was true during financial crises in Russia and Mexico.
When the sub-prime financial crisis happened in 2008 in the US, China again played the role as "firefighter" or "fire extinguisher" to protect the US and the rest of the world from falling into deep disaster. China "could " have taken the best chance to devalue its currency and thus heavily beat up the US economy. Fortunately, China remained true to its nature with honesty and responsibility to help those countries that were suffering from the US financial crisis.
So there is absolutely no reason to label China as a "currency manipulator," because China adheres to its principle "to make fortune with the right means." Currency manipulation is a financial crime that must be seriously condemned by the whole world.
For an explanation of the recent depreciation of the RMB, we have to look at the following reasons.
First, the market pressure reflects the need for a depreciation. Since the US announced its withdrawal from the Iran nuclear pact, the global oil industry has been facing severe challenges and the price of crude oil is changing regularly. This has brought "fear" into the oil market, causing a prudent depreciation of the RMB to maintain a balance in the import and export of goods from the world market. Labor costs and manufacturing output have also resulted in currency fluctuation. The controls on capital outflows in past months have contributed as well to RMB depreciation.
Second, following the launching by the US of a "tariff war" against China, creating uncertainties in the global market and harming China as an export economy, the RMB value has shown a proper depreciation to meet the requirement of the market. This round of depreciation is more or less like an urgent reaction when a human falls ill; the body immediately activates an "immune response."
Third, the strong US dollar is the main reason for the depreciation of the RMB. We noticed that all other major currencies in the basket of IMF have experienced similar depreciation in recent months. This shows the US dollar has become too strong, making other currencies' devaluation a normal scenario. Of course, the economy in the US is improving. GDP grew 3.9 percent in the most recent month and the recovery had shown good and positive signs to the world market, but such booming is hedged by a "trade war" which could lead to a "currency war." The uncertainty and scarred sentiment that have caused the RMB depreciation could continue until the "heat" of the "trade war" cools.
Actually depreciation is sometimes not helpful for a sound and healthy economy because it will definitely impact imports as it will mean China has to pay a lot more to buy the same quantity of goods from other countries. That is not helpful to China's long-term development.
The US had taken QE policy to maintain its currency value and lowered the interest rate for many years and that was valid up to last year. This action could be regarded as "manipulating currency " in another form. But China has kept the promise made when it joined the WTO, realized its commitments and played its role as a "stable and trustful country" to deal with the various conditions and challenges ahead.
China will remain as the most reliable country in the world to stabilize the global economic recovery and further support the world to "build up a common society with shared prosperity."
Liu Zhiqin is a senior fellow of the Chongyang Institute for Financial Studies at Renmin University of China.