'Currency cheat' tag dropped as US-China phase-1 trade deal set

Top News | Agencies 15 Jan 2020

The Trump administration has lifted its designation of China as a currency cheat, saying Beijing has made "enforceable commitments" not to devalue the yuan and agreed to publish exchange rate information.

The change in the American stance was outlined in the US Treasury Department's semi-annual foreign-exchange report to Congress, which was released in the countdown to the United States and China signing a so-called "phase 1" trade agreement at the White House in Washington today.

American officials also anticipate US$200 billion (HK$1.5 trillion) in new purchases should help reduce a yawning trade deficit and repair some of the damage suffered by farmers, Bloomberg noted. China has also pledged to buy additional manufactured goods from the United States over the next two years as part of a trade war truce, Reuters was told. The US$80 billion increase for manufactured goods is said to include significant purchases of autos and auto parts, aircraft, agricultural machinery, medical devices and semiconductors.

The phase 1 deal calls for Chinese purchases of US agricultural goods to increase by some US$32 billion over two years.

When combined with the US$24 billion American agricultural export baseline in 2017, the total gets close to the US$40 billion annual goal touted by President Donald Trump.

Robert Lighthizer, the US administration's trade representative, is calling the agreement a "huge step forward" for trade relations between the two countries and "a really, really good deal for the United States."

And he said Beijing's compliance would be monitored closely, Lighthizer told Fox Business Network.

"We expect them to live up to the letter of the law," he said. "We'll bring cases, we'll bring actions against them if they don't."

China's exports rose for the first time in five months in December and by more than expected, signaling a modest recovery in demand as Beijing and Washington agreed to defuse their prolonged trade war.

The trade surplus with the United States for December stood at US$23.1 billion, a Reuters calculation based on Chinese customs data showed yesterday. That was a slight narrowing from November, when the surplus was US$24.6 billion.

As for the Chinese currency, Wang Tao, head of Asia economics and the chief China economist at UBS, sees the yuan against the US dollar at around 7.0 by the end of this year.

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