WASHINGTON (Reuters) - U.S. Treasury Secretary nominee Steven Mnuchin has told senators that he would work to combat currency manipulation but would not give a clear answer on whether he currently views China as manipulating its yuan, according to a Senate Finance Committee document seen by Reuters on Monday.
In written answers to supplemental questions from the committee following his confirmation hearing last week, Mnuchin did not close the door to a potential Treasury declaration of China as a currency manipulator.
Asked by Senator Orrin Hatch, the committee’s pro-trade Republican chairman, if he agreed that China appears to have stopped trying to devalue its currency and is now trying to prevent depreciation, Mnuchin wrote: “If confirmed, I intend to review the issue of Chinese currency manipulation.”
The document was verified by a Senate aide.
The Chinese currency question is important because if Treasury declares Beijing a currency manipulator, it starts a process under which the Trump administration is required by law to demand special negotiations with Beijing to resolve the issue. That process could end in punitive duties on Chinese goods aimed at eliminating any advantage that the currency manipulation would provide.
Throughout his election campaign, President Donald Trump had threatened to levy punitive tariffs against China in order to bring down the U.S. trade deficit and such a declaration could provide a mechanism for launching that effort. He also accused China repeatedly of manipulating its currency for trade advantage.
While China was widely viewed to have held down the value of its yuan to gain a trade advantage five to 10 years ago, many economists say that in the past year, Beijing has been working to prop up the yuan’s value. China’s central bank has spent hundreds of billions of dollars in reserves to keep the yuan’s value from falling further in the face of capital outflows caused by economic uncertainty.
Former president Barack Obama’s Treasury secretary, Jack Lew, had again declined to name China a currency manipulator last October, arguing its reduced global current account surplus was a positive development.
The Treasury is due to issue its next currency report, which evaluates the foreign exchange practices of major trading partners, on April 15.
Hatch in his questions said it was possible that Trump could instruct Mnuchin to name China a currency manipulator even if it did not meet the statutory criteria.
“It seems to me that taking this action would undermine your credibility and the credibility of the U.S. when we seek to take on currency manipulation in the future. Are you advising the President to avoid taking actions that undermines the credibility of the United States?” Hatch asked.
Mnuchin answered: “Currency manipulation is a serious infraction of free trade principles and needs to be effectively addressed. As Treasury Secretary, I will ensure that we defend American jobs by combating currency devaluation utilizing the reporting and monitoring functions of the Treasury and legislative processes established by Congress.”
Mnuchin said that he would work through existing multilateral institutions such as the International Monetary Fund, the G7 and the G20 to address currency manipulation as an unfair trade practice, as well as working bilaterally with major trading partner. However, he said that the IMF and other institutions “do not appear to have prevented nations from manipulating the value of their own currencies.”
Reporting by David Lawder and Lisa Lambert; Editing by Andrea Ricci