China’s intervention in foreign exchange markets has “fallen significantly” in the past year, U.S. Treasury Secretary Jacob J. Lew said.
Still, the Obama administration plans to continue encouraging the world’s second-largest economy to move towards a market-determined exchange rate, Lew said in prepared testimony to the Senate Finance Committee Thursday.
“We will continue to intensify our efforts on exchange rates using the tools and channels that are most effective,” he said. “We will build on our ongoing multilateral and bilateral engagement in the G-20, IMF, and U.S.-China Strategic and Economic Dialogue to press countries even harder towards more market-determined exchange rates and to secure strong commitments on currency disciplines.”
In its semi-annual currency report last week, the Treasury Department reiterated its view that China’s yuan remains “significantly undervalued.”
The Treasury is trying to fend off a challenge to its authority on foreign-exchange issues. Some lawmakers are seeking to attach a provision to a trade bill that would allow the Commerce Department to impose duties on products from countries that manipulate exchange rates.
Instead of amending the trade legislation, Lew said he would be open to finding tools that would supplement Treasury’s currency report, the main way the U.S. polices other countries’ behavior on foreign exchange markets.
“We would look to find tools that would supplement the current foreign exchange report with an additional ability to use objective criteria,” Lew said. “Things like significant bilateral trade surplus with the United States, like a material current account surplus, like persistent one-sided intervention in foreign exchange, to set a standard that could trigger some additional actions that we could take.”