Beijing/Washington: The Chinese central bank issued a severe warning saying that the US decision to declare Beijing a ‘Currency Manipulator’ would pose a grave risk of the global financial order weakening and destroy the stability of the global economy. Two days ago, China devalued its currency and allowed the Yuan to drop to the level of seven to a dollar. President Trump showered heavy criticism on China after the devaluation with a retort asking if the Federal Reserve was tracking the developments.
Following President Trump’s criticism of China, the US Department of Treasury initiated action on an immediate basis. On Tuesday, the US Secretary for the Treasury, Steven Mnuchin declared China a ‘Currency Manipulator’. It becomes only the second instance of the United States labelling the said status to China and initiating action against it. Previously, in 1994, the then US administration had categorised China as a ‘Currency Manipulator’ and had begun proceedings.
During his presidential campaign in 2016, President Trump has spoken on China looting the United States. He had accused China of fleecing the United States by keeping its currency value at a lower level. Also, Trump had warned China that it would be declared a ‘Currency Manipulator’ if he came to power although he has not taken such action in the last two years. However, China’s devaluation of its currency became the decisive factor for President Trump. After China’s move, the US President levelled strong allegations against the state and claimed that it was interfering with the currency value. On the sidelines of President Trump’s statements, the administration is said to have taken the decision on designating the state as a Currency Manipulator.
Moreover, by devaluing the Yuan, China had indicated using currency as a weapon in the trade war. The Chinese central bank, called the People’s Bank of China accused the US decision to label China a ‘Currency Manipulator’ as a unilateral one. At the same time, the central bank warned that such a decision could cause major upheavals in the global economy.