China’s yuan rallies after report currency pact may be included in possible interim US trade war deal
- Delegation led by China’s Vice-Premier Liu He will meet their US counterparts in Washington on Thursday and Friday
- Pact may to be similar to the proposed United States-Mexico-Canada Agreement (USMCA), including refraining from currency devaluations
China’s yuan exchange rate rose sharply on Thursday as the possibility that a currency pact could be included in a small-scale trade deal between China and the United States helped fuel optimism ahead of talks resuming in Washington.
The contents of the currency section in any US-China deal would likely bear similarities to the proposed United States-Mexico-Canada Agreement (USMCA), which the US Congress has yet to vote on, analysts said. At the time, US officials said that the USMCA currency section was a template which would be used in future US trade negotiations.
The USMCA currency section, as currently written, requires the signatories to refrain from currency devaluations to seek trade advantage and also increases transparency of information sharing about government foreign exchange operations such as currency market interventions.
OCBC Bank economist Tommy Xie Dongming said that it should not be a problem for China to promise to refrain from competitive devaluations in the yuan’s exchange rate as it already agreed to a G20 statement in 2013 opposing competitive currency devaluations.
