Like other large emerging market countries including India and Brazil, China also needs to disclose its foreign exchange market intervention to increase the credibility of its monetary policy framework and to promote exchange rate and financial market transparency, the United States has said.
"In line with the practice of most other G-20 nations, China should disclose foreign exchange market intervention regularly to increase the credibility of its monetary policy framework and to promote exchange rate and financial market transparency," it said.
In its six monthly report to the US Congress, the Department of Treasury, however, declined to name China a currency manipulator even though it noted that its currency renminbi (RMB) has not appreciated as fast or as much as needed.
The RMB's recent depreciation underlines the importance of a significant increase in the transparency of China's actions in the foreign exchange market, it said.
"Because China still does not provide transparent disclosure of its activity in the currency market, market participants and other observers must resort to estimating China's intervention using published reserve levels and changes in the central bank balance sheet," the Treasury said in its report.
"Other large emerging market countries - including India, Russia, and Brazil -disclose their monthly intervention in the foreign exchange market, with several publishing daily intervention data," it said.
According to the report, while the desire to introduce two-way volatility in the RMB foreign exchange market is clear, recent developments in the RMB exchange rate raise particularly serious concerns, if they presage a retreat from China's announced policy of allowing the exchange rate to reflect market forces, reducing exchange market intervention, and moving toward a market-determined exchange rate.
"We will continue to monitor this issue closely going forward," it said.
Based on the analysis in this report, the Treasury Department has concluded that the standard identified in Section 3004 of the Congressional Act has not been met with respect to any of the countries covered in this Report for the period evaluated.
"The report concludes that, although global growth prospects are improving, progress on rebalancing global demand remains inadequate," it said.
