The Treasury Department again declined to designate China as a currency manipulator in a report sent to Congress Feb. 4, nearly four months after it was initially expected. Instead, the report said China was not in violation, continuing the administration's less-direct efforts for change.
Chinese officials resumed exchange rate flexibility in June, and have since pledged to go further by expanding domestic demand and allowing the currency to float more freely, commitments that Chinese President Hu Jintao reiterated during his recent U.S. visit. Still, the report said Treasury would continue to press for additional gains, echoing Treasury Secretary Timothy Geithner's most recent public statements on the issue.
According to the report, the renminbi, which Treasury said remains substantially undervalued, appreciated 3.7 percent through Jan. 27. That equals about 6 percent annually on a nominal basis.
The report also said more renminbi flexibility would help curtail high inflation in China , as well as credit, property, and equity bubbles there. In addition, the report said it would benefit the broader strategy of increasing domestic demand in China and remove pressures in other emerging economies with more flexible exchange rates.
China 's state sector holds about $3.4 trillion in foreign currency assets, the report said, about three times as much as Japan , the economy with the second largest holdings.
Treasury has not cited China for currency manipulation since 1994, but that has not stopped escalating rhetoric on Capitol Hill, where last year the House passed a bill that would have made it easier to impose countervailing duties on Chinese goods benefitting from the undervalued currency.
