And not much else, despite currency manipulation's ties to lost U.S. jobs.
U.S. Treasury Secretary Jack Lew made a brief visit to China this week, where he pressed his Chinese counterpart to continue reforms to that country’s economy.
The trip came as international support gathered for a Beijing-led infrastructure bank, which could serve as an alternative to the World Bank where the U.S. of A. has a lot of sway. It also came as China prepares to recommend its currency, the yuan (RMB), for inclusion among the International Monetary Fund’s reserve currencies, which would greatly increase its economic and political clout. The United States isn’t to keen to see that happen, not without a lot more market liberalization.
And you know what that means! Secretary Lew got up on the mic at the Asia Society in San Francisco, shortly after landing stateside.
China moving towards a more market-determined exchange rate has been an important part of our agenda for years, and it remains at the top of our economic engagement with China today. It is important that China continue to move towards a market determined exchange rate. China’s failure to allow the market to play a decisive role in setting the exchange rate has adversely impacted the global economy.
At last year’s S&ED, China committed to reduce its foreign exchange intervention as conditions permit. And intervention appears to have declined since. We expect China to continue to refrain from intervention across different market conditions, including in times of market pressure for a stronger RMB.
If China wants the RMB to increasingly be an international currency, a natural next step in the liberalization and reform of the Chinese economy, China will need to successfully complete difficult fundamental reforms, such as capital account liberalization, a more market-determined exchange rate, interest rate liberalization, as well as strengthening of financial regulation and supervision. This will leave China’s economy more balanced internally and externally. Internally it would be less dependent on investment and artificially low interest rates. Externally it would be less dependent on exports and an undervalued exchange rate.
Strong words, Kemosabe. But here’s the truth of it: The Treasury Department of the Obama administration has had 12 chances, via Treasury's semi-annual Report to Congress on International Economic and Exchange Rate Policies, to correctly label the Chinese government a currency manipulator. It hasn’t done it once. Meanwhile, America’s currency manipulation-fueled trade deficit with China has been documented to have cost the U.S. economy millions of jobs. And a ton of those were middle-income manufacturing positions.
The administration, like those before it, has been willing to slow-walk concerns about this issue. It could speed them up, by putting real pressure on the Chinese government to get out of the manipulation game — and in doing so greatly improve the yuan's chances for reserve status at the IMF. A win-win! Treasury has another chance coming up; that afforementioned semi-annual exchange rate report is due this month!
But it almost certainly won't. That has cost the American economy dearly. It’s time to get tough on China.