China currency becomes key issue in US trade talks

PARIS, Mar 03 (AFP): US officials have said any trade deal with China will include a provision to prevent manipulation of the exchange rate to help exporters but Beijing's currency regime reflects a complex reality.

US President Donald Trump, who has accused the Asian giant of artificially undervaluing its currency for competitive purposes, last week said "we have a deal" with China on the currency.

And White House economic adviser Larry Kudlow on Thursday said the draft documents would prohibit currency manipulation and oblige authorities in Beijing "to report any interventions in the market."

But at the centre of the issue is a paradox: China does not necessarily want a weak currency, and the downward pressure on the yuan is in large part caused by US economic conditions, like rising interest rates.

The yuan or renminbi (RMB) is not freely convertible and the government limits its movement against the US dollar to a two per cent range on either side of a central parity rate which the People's Bank of China sets each day to reflect market trends.