Taiwan remains on U.S. forex intervention monitoring list

Taiwan remains on the foreign exchange intervention monitoring list under the U.S. Department of Treasury, after being put on the list in April, the U.S. Treasury said Friday.

The U.S. Treasury released Foreign Exchange Policies of Major Trading Partners of the United States Friday, putting Taiwan, China, Japan, South Korea, Germany and Switzerland on the monitoring list.

The report is released twice a year based the provisions of the Trade Facilitation and Trade Enforcement Act of 2015, also known as the Customs Bill. The provisions of the Customs Bill provide the U.S. government with new monitoring tools and measures to address unfair currency practices.

The U.S. Treasury said that all six countries on the watch list meet two of the three criteria for enhanced analysis. The three criteria are: a significant bilateral trade surplus with the U.S., hitting US$20 billion; a material current account surplus, which accounts for more than 3 percent of an economy’s gross domestic product (GDP); and the involvement in persistent one-sided intervention in the foreign exchange market.

No economy in the latest report met all of the three criteria, according to the U.S. Treasury.

For Taiwan, the report said, it still met two of the three criteria.

“Taiwan has a current account surplus well above the material threshold and, per Treasury estimates, has engaged in persistent net foreign currency purchases in the 12 months through June 2016,” the report said.

“Such interventions limit currency appreciation that would generally reduce Taiwan’s very large and growing current account surplus,” the report added.

In the report, the U.S. Treasury said that China still enjoyed a material trade surplus with the U.S., but Beijing’s current account surplus fell to 2.4 percent of its GDP for the last four quarters through June 2016, which moved below the established threshold for that criterion.

“China’s intervention in foreign exchange markets has sought to prevent a rapid RMB (Chinese yuan) depreciation that would have had negative consequences for the Chinese and global economies,” the report said.

“More transparency over exchange rate management and goals, and strong adherence to G-20 commitments to refrain from competitive devaluation and not to target exchange rates for competitive purposes, will enhance the credibility of China’s exchange rate regime,” the report said.

The report urged China to continue a market-oriented exchange rate reform, which is expected to allow two-way flexibility in the movement of the Chinese currency.

The U.S. Treasury said that once the U.S.-led Trans-Pacific Partnership (TPP) trade bloc takes effect, Washington is expected to come up with more measures to deal with the unfair currency intervention practices.

Source: Focus Taiwan News Channel