The U.S. Treasury Department said on Thursday that China cannot be ruled as a currency manipulator, but highlighted the need for sustained progress toward a market-driven exchange rate.
China has made real progress in its market-determined exchange rate system, said the Treasury in its Semi-Annual Report to Congress on International Economic and Exchange Rate Policies.
China's current account surplus fell significantly from 10 percent of the GDP in 2007 to 2.1 percent in 2014 and the real effective exchange rate appreciated by more than 10 percent in the past six months, the fastest pace since 2009, the Treasury said.
China's reduced level of intervention in the foreign exchange market, consistent with the commitment of Chinese government at the U.S.-China Strategic and Economic Dialogue (S&ED), the Treasury added.
It noted that, although the Chinese currency faced short-term downward pressures against the dollar, such as the country's central bank's moves to cut interest rates and the capital outflows under the capital account in the end of 2014, the fundamental factors for RMB appreciation remain intact, and the need for China to further strengthen the currency over the medium term still exists.
According to the Treasury, the lower oil prices have benefited China in terms of trade gains, which led to and will continue to contribute to a rising current account surplus.
China continues to see relatively higher productivity growth than its major trading partners and the appreciation of the RMB is in line with China's efforts to rebalance the economy toward household consumption, said the U.S. Treasury.
China will accelerate reform and opening up of its capital market in 2015, aiming to make the Chinese yuan convertible on the capital account, China's central bank governor Zhou Xiaochuan said in late March in Beijing.
The U.S. Treasury also said that it looks forward to progress on China's plan to subscribe to the International Monetary Fund's Special Data Dissemination Standard (SDDS) for economic and financial data, including foreign exchange reserve disclosure.
Chinese President Xi Jinping announced last November that China had decided to switch to the IMF's SDDS, a more transparent data disclosure standard.
The U.S. Omnibus Trade and Competitiveness Act of 1988 requires the Treasury to provide reports on whether its major trading partners manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.
In previous such reports from the Obama administration, the U.S. government did not label China as a "currency manipulator."