China’s yuan surged 2.6% against the dollar this year, making it the best performing currency in Asia, a far cry from the 5% fall in 2018. (Bloomberg)
China’s yuan surged 2.6% against the dollar this year, making it the best performing currency in Asia, a far cry from the 5% fall in 2018. (Bloomberg)

China pushes against US demands on trade deal enforcement, yuan

  • PBOC governor Yi Gang says US and China have talked about respecting the 'autonomy' of each other’s monetary policy
  • A US-China trade deal will be seen as lopsided unless it also binds Washington to address Beijing's own grievances

Washington/Hong Kong/Beijing: China’s top trade and monetary policy officials this weekend delivered a subtle push-back against trade demands made by Washington, delivering its own interpretation of progress made in talks over the enforcement of any deal and the role of currencies.

People’s Bank of China governor Yi Gang said the two sides have reached consensus on many crucial issues, and have discussed previous commitments made by Group of 20 nations on avoiding competitive devaluation of currencies. They also talked about respecting the “autonomy" of each other’s monetary policy, he said.

While Yi’s comments address US concerns over China’s potential depreciation of the yuan in order to blunt the impact of tariffs imposed by the Trump administration, they evaded any mention of a one-sided pledge by Beijing to hold its currency stable. That issue has been a key sticking point in talks in recent weeks, as President Donald Trump pushes for a US-China trade deal.

By playing down the chances of a currency commitment solely by China, Yi aligned with vice commerce minister Wang Shouwen, who on Saturday said any enforcement mechanism for a prospective trade deal must be “two way, fair and equal". Former high ranking officials have said that the deal will be seen as lopsided unless it also binds the US to address China’s own grievances.

Respect autonomy

“The two sides discussed issues on the yuan including the need to abide by previous commitments made by the G20 nations including not to engage in competitive depreciation and to communicate closely on currency issues," Yi said at a press conference during the annual National People’s Congress legislative meetings.

“The negotiators discussed the necessity to respect the autonomy of each other’s monetary policy, a market-oriented foreign exchange mechanism and the disclosure of information according to International Monetary Fund standards," Yi added.

The yuan has surged 2.3% against a basket of trading partners’ currencies this year amid optimism of an ebbing US-China trade war.

Trump has previously accused China of gaming its currency to gain a competitive advantage, though his US Treasury Department has repeatedly declined to name Beijing a manipulator in its semi-annual reports on foreign exchange markets.

While the US has considered continuing to use the threat of tariffs in order to hold China to the terms of an agreement, such an arrangement risks raising the perception among the Chinese public that the nation is being bullied by the US.

“China will not simply fall in line," said Katrina Ell at Moody’s Analytics Inc. in Sydney. “While it is willing to make changes to its industrial policies, it also needs to not be seen as bowing to the US demands."

Hopeful on talks

Wang said Saturday that he feels “hopeful" about the prospects for the negotiations. Neither side has confirmed a date for a possible signing ceremony.

As a sign of the earnestness of talks, Wang detailed a lunch-time session at the last round of negotiations in Washington. The two sides decided to order take-out food in order to keep talks going. Chinese vice premier Liu He dined on a hamburger while his counterpart, US trade representative Robert Lighthizer, ate a Chinese dish of chicken with eggplant. Coffee and tea were served.

“But they did not drink coffee or tea, both drank water," said Wang. “That’s what we call finding common ground."

Bloomberg's Kevin Hamlin contributed to this story.

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