Yellen to label Taiwan 'currency manipulator,' let China off hook

葉倫為使中國脫困，將台灣貼上“匯率操縱國”標籤

Taiwan's Central Bank says surging demand during pandemic reason for trade surplus, not currency manipulation


TAIPEI (Taiwan News) — In an apparent disconnect with the Biden administration's vow to hold Beijing accountable for unfair trade practices, U.S. Secretary of the Treasury Janet Yellen appears poised to decline to label China a currency manipulator and apply the designation to Taiwan instead.

During Biden's first formal news conference as president last month, he stressed that he had told Chinese Chairman Xi Jinping (習近平) during a phone call that he would insist that China abide by international rules for fair competition and fair trade and respect human rights.

Biden appointed Taiwanese-American Katherine Tai (戴琪) as U.S. trade representative (USTR), and talks on a Trade and Investment Framework Agreement (TIFA) between the U.S. and Taiwan are said to be slated for this year.

In 2020, the New Taiwan dollar soared by 5.6 percent against the U.S. dollar. This year, the trend has continued, with the Taiwanese currency rocketing to NT$27.711 per dollar on March 3, setting a high mark not seen since 1997.

Likewise, the Chinese yuan strengthened significantly against the greenback, posting a gain of 6.5 percent in 2020. However, over the first quarter of 2021, both currencies have weakened slightly versus the U.S. dollar, with the Chinese currency dropping from 6.532 yuan per dollar on Jan. 1 to 6.547 yuan on April 12 and the New Taiwan dollar falling from NT$28.054 on Jan. 1 to NT$28.394 on April 12.

Sources familiar with the matter told Bloomberg that Yellen is planning on not labeling China as a currency manipulator in the first semiannual foreign exchange report but will label Taiwan as such. The news site suggested that the avoidance of listing China as a currency manipulator is to "sidestep a fresh clash with Beijing."

The Treasury's three criteria for labeling a country as a currency manipulator include: having a trade surplus with the U.S. exceeding US$20 billion over 12 months, a global current account surplus of at least 2 percent of the country's GDP over that period, and net purchases of foreign currency amounting to at least 2 percent of its GDP over a year.

The U.S. most recently labeled China a currency manipulator in 2019, but the Trump administration withdrew the label in January of 2020 in exchange for Beijing's promise to refrain from devaluing its currency to make its products cheaper for foreign consumers. Phase one of Washington's trade agreement with Beijing also includes the latter's pledge not to engage in competitive currency devaluations.

Taiwan was included on the watch list at the end of last year after the first two criteria were met. Taiwan's Central Bank recently announced that the net purchase of foreign currencies in 2020 will have reached US$39.1 billion, accounting for 5.84 percent of Taiwan's GDP and meeting the third criteria.

Central Bank Governor Yang Chin-long (楊金龍) was cited by Liberty Times as saying frankly that "it is possible" Taiwan will be classified as a currency manipulator. However, Yang said that last year, Taiwan’s exports to the U.S. expanded to US$29 billion, mainly due to the impact of the U.S.-China trade war and the increase in U.S. demand for Taiwan’s telecommunications products.

Yang claimed the increase in trade had nothing to do with the Central Bank's management of foreign currencies but was because the pandemic had prompted the U.S. Federal Reserve to implement unlimited quantitative easing.

He said that the spillover effect of the influx of funds posed a threat to the stability of Taiwan’s financial market. He said that the Central Bank had intervened in the currency market based on its statutory responsibility to maintain stability in the market.

He said the Taiwanese Central Bank is expected to communicate with the Treasury on the issue. Yang argued that last year was unique and recommended that the U.S. examine the rationality of its three major criteria in this case.

During her confirmation hearing in January, Yellen indicated that she was considering changing the criteria for the label, saying that bilateral trade deficits should not be seen as “a single catch-all metric.” Since she took the helm, there have been further reports that her team is considering rolling back the thresholds for the label set under the Trump administration.