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16:28, 01-Aug-2018
Experts discuss the Chinese yuan and Trump's accusations of manipulation
Updated
15:44, 04-Aug-2018
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US President Donald Trump attacked the EU and China in a tweet recently, accusing them of manipulating their currencies. But China was quick to deny the claim, and the International Monetary Fund (IMF) said the yuan's movement is in line with the market.
This came after the Chinese yuan dropped significantly in recent weeks as trade tensions with the US worsened. Trump said China, the European Union and others had been "manipulating their currencies and interest rates."
Dan McClory, head of Equity Capital Markets at Boustead Securities in California, said during an interview with CGTN's World Insight with Tian Wei that Trump's accusation is totally groundless.
"China has lot more cost than benefits of the devalued yuan. But the fact that until the yuan become fully market-driven, it’s really a policy-driven currency at this point. It will be susceptible to these kinds of attacks and accusations," said McClory.
Xiang Songzuo, deputy director of the Center for International Monetary Research under Renmin University of China, also said that there's no reason for the Chinese government to manipulate the yuan exchange rate, disagreeing that the yuan is a policy-driven currency.
"Now RMB exchange rate is very flexible. So its movements, depreciation or appreciation is totally market-driven, it’s not policy-driven," said Xiang.
"From a policy perspective, there’s no reason for the government to manipulate depreciation. Some people may think depreciation will help exports, but it will hit imports by increasing the cost. So I don’t think there’s reason for our government to manipulate exchange rate," he added.
Trump's combative tone has compounded fears of an all-out trade and currency war. But McClory said it's more rhetoric than actions.
"When President Trump says things, they’re designed to create reactions. They’re not necessary always founded in fact, and they don’t necessary always mean a policy action or reaction. So I think we should keep a level head and understand China wants to continue to grow, to make sure debt is under control, and to focus on the fundamental things. China has always done a great job," said McClory.