US RMB exchange rate accusation unjustified

The U.S. accusation that Chinese currency, or renminbi (RMB), remains "significantly undervalued" is not justified because China's current account surplus has declined sharply and the country has stopped intervening in foreign exchange markets, experts said Friday.

"At the moment I don't think using the term 'significantly undervalued' is justified by the facts about the situation," Adam Posen, president of Peterson Institute for International Economics, told Xinhua after a panel discussion on economic growth in Asia organized by the Center for Strategic and International Studies.

Posen said "it doesn't make any sense" to "use the same adjectives and the same languages" in 2015 to talk about the Chinese currency which he believed was undervalued in 2004 to 2005 when China's current account surplus amounted to about 10 percent of its gross domestic product (GDP) and the country intervened intensively in foreign exchange markets.

But in 2015, China's current account surplus has declined to 2 percent of its GDP and the country basically doesn't intervene in foreign exchange markets at all, he said.

The U.S. Treasury, Posen said, has acknowledged that China's reduced level of intervention in the foreign exchange market is consistent with the commitment of Chinese government at the U.S.- China Strategic and Economic Dialogue (S&ED).

Posen made the remarks a day after the U.S. Treasury declined to rule China as a currency manipulator, but highlighted the need for sustained progress toward a market-driven exchange rate, saying the RMB was still "significantly undervalued" in its Semi- Annual Report to Congress on International Economic and Exchange Rate Policies.

Manu Bhaskaran, the chief executive officer of Centennial Asia Advisors, an independent research and advisory firm based in Singapore, echoed Posen's view, saying the manipulation of exchange rates can be measured by one country's foreign exchange reserves.

"China has not accumulated foreign exchange reserves any more. In fact, it has been declining, which suggests it's not intervening (in foreign exchange markets)," Bhaskaran said.

China's foreign exchange reserves have fallen to 3.84 trillion U.S. dollars by the end of last year from a peak of 3.99 trillion dollars, according to China's State Administration of Foreign Exchange (SAFE), the country's top forex regulator.

The SAFE said last month that the RMB exchange rate is already at a balanced level now, and China will steadily promote free RMB convertibility under capital account.