Off The Wire
INTERVIEW-U.S.-China trade talks must cover currency, U.S. Treasury chief says
The yuan weakened on Friday to 6.912 to the dollar as China reported a record September trade surplus with the United States, fanning fears of an escalation of the two countries' trade war . The Chinese currency has depreciated by 5.6 percent against the dollar since the start of the year.
"NOT POLITICAL" CURRENCY REPORT
Mnuchin would not discuss the findings of the currency
report and declined comment on media reports that Treasury staff
had recommended that China not be labeled a currency
But Mnuchin emphasized that the report is based on rigorous
research and data, and that Treasury's career staff and
leadership were fully aligned on currency issues.
"The currency report is something we report to Congress. It
is done pursuant to two separate pieces of legislation. This is
not a political document," he said.
IMF Managing Director Christine Lagarde warned on Thursday
against adding currency wars to the trade conflict, saying this
would hurt global growth and "innocent bystander" countries. Despite U.S. President Donald Trump's pledge to declare
China a currency manipulator on "day one" of his administration,
the Treasury has stuck to its three-part test for evidence of
currency manipulation -- and China has failed to qualify for such a designation.
These include a high bilateral trade surplus with the United
States, a global current account surplus above three percent of
gross domestic product and "persistent" one-way currency market
intervention to weaken or prevent a rise in a country's currency. In the past two years, China has failed on only one criteria, its high trade surplus with the United States. U.S. laws mandating the report require the Treasury to enter special negotiations with an offending country to correct their practices, a process that could eventually lead to trade sanctions. But the Trump administration has already hit China with tariffs on $250 billion worth of Chinese goods imports, and has threatened duties on the remaining $267 billion. Mnuchin declined to confirm a Wall Street Journal report that the White House had decided to proceed with a meeting in November between President Donald Trump and President Xi Jinping at the G20 leaders summit in Buenos Aires. But he said re-launching trade talks would require China to commit to taking action on structural reforms to its economy.
"It's got to be more than a signal" from China, Mnuchin said. "It has to be that we can reach an agreement on action items that can rebalance the relationship. We've made it clear that if they have real action items that they want to discuss that we will listen." Separately, Mnuchin told CNBC in a televised interview on Friday that Trump would go through with plans to meet Xi "if it looks like we can make positive direction," adding that there was no set deadline for trade talks with China. If the U.S.-China relationship could be rebalanced, Mnuchin told Reuters their total annual trade relationship could grow to $1 trillion from $650 billion currently, with $500 billion of exports from each country. That would approach the $1.2 trillion U.S.-Canada-Mexico trade under the North American Free Trade Agreement.
PAKISTAN DEBT TRANSPARENCY
As the IMF launches talks with Pakistan over a bailout
package, Mnuchin said transparency was needed for Pakistan's
debts to China and other creditors.
"I think it's pretty clear that if there is an IMF program,
that we'd need to make sure those funds are used for appropriate
purposes and they're not being used to repay China or other
creditors. I would expect China to understand that."
Regarding steep U.S. stock market declines over the past two
days, Mnuchin said these were "normal market corrections".
"I don't believe markets are efficient," he said. "So I
think that when people invest in the markets, they need to be
prepared that there will be times when markets go too far in
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Trade tensions in China's stock, currency markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Susan Heavey in Washington; Editing by Simon Cameron-Moore and Phil Berlowitz)