US Treasury Secretary Jacob Lew urged China to further ease control of the renminbi’s exchange rate as the Chinese currency is still “undervalued”, financial website Caixin reported.
“The renminbi has been undervalued as we’ve found in the exchange rate report. We’ve seen the [Chinese] government has moved to a more market-dominated exchange rate in the last couple of months, such as widening the trading band,” Lew told Caixin in an interview.
In its semi-annual currency report released in April, the US Treasury expressed “serious concerns” about the Chinese government’s intervention in the exchange rate, although it stopped short of designating Beijing as “currency manipulator”.
“However, the renminbi weakens against US dollar after the widening of trading band, and we’ve also noticed a continued accumulation of foreign exchange reserves, which are evidence of government intervention,” Lew added.
China’s official reserves increased by US$129 trillion to hit a record high of US$3.95 trillion in the first quarter of this year.
“The exchange rate reform is aimed at increasing the purchasing power of Chinese consumers and creating a fair international business environment. Therefore, the renminbi should be allowed to move both directions. However, the renminbi has kept weakening until a few days ago,” he added.
Lew also urged Beijing to enhance transparency of its exchange rate intervention exchange, such as releasing the make-up of its foreign exchange reserves, the report quoted him as saying.
The renminbi has weakened about 2.8 percent against the greenback since January, after the Chinese central bank stepped in to deter the inflow of “hot money”.
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