Treasury warns China over recent yuan decline

The US Treasury Department accused China on Tuesday of keeping the value of its currency low to gain an advantage in US and international markets, saying the decline in the yuan was “unprecedented.”

In its twice-yearly report to Congress on exchange rates, the Treasury strongly warned China against manipulating the yuan, or renminbi, and expressed doubt over the Asian giant’s resolve to let market forces guide the value of its currency.

“Recent developments in the … exchange rate raise particularly serious concerns if they presage a retreat from China’s announced policy of allowing the exchange rate to reflect market forces,” the Treasury report said.

“China has continued large-scale purchases of foreign exchange in the first quarter of this year, despite having accumulated $3.8 trillion in reserves, which are excessive by any measure. This suggests continued actions to impede market determination,” the report said.

Since the middle of February, the Chinese currency has dropped 2.7 percent against the dollar, falling to its lowest level in more than a year. Countries with undervalued currencies find it easier to export their products to international markets.

On Wednesday, China rejected the Obama administration’s warning that its currency was too weak, urging the United States to recognize that China aims to “perfect and regulate” the exchange rate system.

China will continue with the “reform of its renminbi exchange rate mechanism,” Chinese Foreign Ministry spokeswoman Hua Chunying said at a daily news briefing. “We aim to perfect and regulate the exchange rate system.”

Beijing has also repeatedly warned Washington against trade protectionism and existing antidumping duties on Chinese products. China has challenged certain US antidumping practices on imported products such as coated paper, steel products, and shrimp.