A relieved China Wednesday welcomed the US' decision not to label it as a currency manipulator, saying Washington's decision was in line with the "basic common sense" and promised to deepen reforms of the exchange rate of its currency.
The US Treasury department in its semi-annual report on macroeconomic and foreign exchange policies of major trading partners of America said, that no country meets the criteria to be labelled as one seeking to gain unfair trade advantages over the US by manipulating its currency.
It, however, dropped India and Switzerland from the previous watch list but placed nine countries including China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore and Vietnam on the monitoring list.
Though China remained in the watch list, it is a big relief for Beijing considering the on-going trade war between the two countries in which Trump is throwing everything at his disposal to pressure the second largest economy to agree to his demand of reducing the USD 539 billion trade deficit.
Successive US Presidents have alleged that China is deliberately keeping the exchange rate low to make its exports profitable. China says its currency against dollar depreciated by eight per cent in recent months.
"We noted the relevant report issued by the US side. The conclusion that China is not a currency manipulator is in line with the basic common sense and the consensus of the international community," Chinese Foreign Ministry spokesman Lu Kang told media here.
"We hope the US will respect the law of the market and objective facts and do not politicise the currency issue," he said in an apparent reference to Trump's poll campaign promise of declaring China a currency manipulator with in 100 days of taking over power.
"We also advise the US to act in line with multilateral and international rules and do not make unilateral assessment of other country currency rates," Lu said.
"The US is not in a position to decide whether a country is a currency manipulator. The relevant international agencies are in a position to do so. Going forward China would continue to deepen the reform of its exchange rate and improve market based and a regulated floating exchange rate system to keep the currency exchange rate basically stable at a reasonable level," he said.
The US Treasury report said while China does not meet the standards to be declared as a currency manipulator, it will carefully monitor and review this determination over the following 6-month period in light of the exceptionally large and growing bilateral trade imbalance and China's history of facilitating an undervalued currency.
In its report, the Treasury said that it continues to have significant concerns about China's currency practices, particularly in light of the misalignment and undervaluation of the renminbi (RMB) relative to the US dollars.
China should make a concerted effort to enhance transparency of its exchange rate and reserve management operations and goals, it said.
The Treasury said it will continue its enhanced bilateral engagement with China regarding exchange rate issues, given that the RMB has fallen against the dollar by 8 per cent over the last year in the context of an extremely large and widening bilateral trade surplus.
"Treasury continues to urge China to take the necessary steps to avoid a persistently weak currency, the report said.
China needs to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment, it said.
Improved economic fundamentals and structural policy settings would underpin a stronger RMB over time and help to reduce China's trade surplus with the United States, it added.
The Treasury alleged that China continues to run an extremely large, persistent, and growing bilateral trade surplus with the United States, by far the largest among any of the United States' major trading partners.
The Treasury Department is required to report to Congress every six months on whether any countries are manipulating their currencies to gain trade advantages over the US.
During the 2016 campaign, Trump vowed to declare China a currency manipulator as soon as he took office.
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