After years of promises, Trump again sounds dire about China trade pact

Andrew Cummings
August 12, 2019

A second Shanghai-based trader said trade talks that were scheduled for September in Washington, prior to the latest US tariff threat, now seem unlikely, adding further pressure on the Chinese currency.

Former U.S. Ambassador to China Gary Locke, however, said he strongly disagreed. A weak reference rate on Monday helped to trigger the biggest loss in the yuan since 2015 and stoked fears of a global currency war.

Trump stood by his administration's currency accusation, saying that the fact that China was subsequently able to stem the yuan's slide was proof of manipulation - which itself could offset USA tariffs on Chinese imports by blunting their impact on American consumers.

Russian Federation and China have also made progress in using one another's currency for bilateral trade which also reduces demand for the dollar and reduces transactional risk for both countries.

One week ago, China allowed the yuan to break through the key 7-per-dollar level for the first time since 2008, prompting Washington to label Beijing a currency manipulator and sparking market ructions. "If the tension escalates, it will throw anyone's dollar-yuan forecast out of the window".


"I really hope that we can cool down the rhetoric, we can get back to the bargaining table", he said "I don't think that whatever agreement is reached will be as grand a bargain as people originally hoped for several months ago and - as we were headed".

Li's remark came after the administration earlier that day announced that China's foreign trade grew 4.2 per cent year-on-year in the first seven months of the year to 17.41 trillion yuan ($2.47 trillion). "It won't benefit the PBOC's credibility and won't benefit forex reform".

Like any central bank, the PBOC will ultimately be steered by how much support, or otherwise, the domestic economy needs.

China is already taking measures to rein in bets on depreciation.

With policy makers seemingly determined to make the yuan more flexible, the PBOC "should be patient and not adjust policies in haste because of short-term market volatility", Yu said.


Since the beginning of 2018, the central bank has attempted to keep cash flowing to the economy without unduly pressuring the exchange rate by using cuts to the amount of money that banks have to hold aside, instead of broad-based reductions in the cost of borrowing.

"The Chinese yuan, which has been in the spotlight all week is edging closer to its recent decade-long low", Gorilla Trades strategist Ken Berman said in a note.

But the International Monetary Fund in its policy prescriptions for Beijing should economic conditions deteriorate and cause the yuan to depreciate rapidly, said China might need to use "FX intervention to counter disorderly market conditions". The weaker yuan may postpone that.

Li Kuiwen, a spokesman for the General Administration of Customs' Department of Statistics, said China has not only increased its market share with major economies such as the European Union this year, but its trade volume with emerging markets has also notably surged.

"No I wouldn't do that", Trump said when asked if he wanted to devalue the dollar.


Other reports by iNewsToday

FOLLOW OUR NEWSPAPER