October 19, 2015 / 8:30 PM / 4 years ago

U.S. says further yuan appreciation 'key' to rebalancing China's economy

WASHINGTON, Oct 19 (Reuters) - The United States on Monday called on China to allow its currency to appreciate further as a crucial support to the world’s second biggest economy in rebalancing its economy.

In the Treasury’s semi-annual report on economic and currency policies of major trade partners, the United States also said that the yuan, officially known as the renminbi, remains below its “appropriate medium-term valuation.”

The language is a shift from the previous report in April when the United States said the Chinese currency was significantly undervalued.

The Treasury, in its regular scorecard, did not label any major trading partner a currency manipulator but called on countries with current account surpluses, which include Germany and South Korea, to do more to boost flagging global growth.

The roughly $50 per barrel decline in the price of oil is shifting income of over $600 billion annually from oil exporters to oil importers, the Treasury said.

U.S. Treasury Secretary Jack Lew has been urging China to allow its currency, the yuan, to float more freely.

In August, Chinese authorities surprised markets by devaluing the yuan.

Many U.S. lawmakers have repeatedly complained that China deliberately undervalues its currency to gain a competitive advantage in international markets. The last time the Treasury labeled a country a manipulator was China in 1994.

Before the devaluation, the currency had been appreciating as the Chinese government sought to support its aim of shifting the economy’s main engine from exports to domestic demand.

“Further currency appreciation is key...and will support the purchasing power of Chinese consumers and help shift production towards non-traded goods and services,” the report said.

China is pushing for the yuan to be included in the International Monetary Funds’s benchmark currency basket as a means of reducing its dependence on the dollar, but policymakers have yet to decide if it has met all the market-based criteria.

Reporting by Lindsay Dunsmuir and Krista Hughes; Editing by Diane Craft

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