US Treasury Department Current Affairs - 2020

United States designates China a ‘Currency Manipulator’

United States has designated China a “currency manipulator”, after country’s central bank allowed Yuan (Chinese Currency) to fall against dollar. This move could escalate tense trade relations between two nations.

Key Highlights

Background

During US Presidential elections in 2016, US President Donald Trump had promised to label China as a currency manipulator, but it was on hold until now as US Department of Treasury kept country on its watch list, declining to take any step. But now US Treasury Department has announced and determined that China is a ‘Currency Manipulator’.

US Aruguments:

US accused China of manipulating its currency to gain unfair competitive advantage in international trade and that China still targets on continuing to receive hundreds of billions of dollars which it have been taking from US with unfair trade practices and currency manipulation.

Further US treasury department also alleged that China has a long history of facilitating an undervalued currency through sustained, large-scale intervention in FOREX market.

The Trigger: This recent action by US to designate China as a ‘Currency Manipulator’ came after China allowed its yuan to weaken past key 7-per-dollar level for the 1st time in more than a decade.

China Arguments:

As per Central Bank of China depreciation in its currency was due to effects of unilateralist and trade-protectionist measures and expectations for tariffs against China.

Way Ahead: US will now engage with International Monetary Fund (IMF) to eliminate unfair competitive advantage created by China’s latest actions. This move could further escalate tense trade relations between two nations.

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India 12th largest overseas holder of US securities in 2017

According to recent figures compiled by US Treasury Department, India is 12th largest overseas holder of US government securities. India’s exposure to it has risen sharply to high of US $144.7 billion at end of 2017.

The preliminary data from June 2017 benchmark survey of foreign portfolio holdings of US securities showed that total value of such holding was $18.44 trillion. Out of the total, $7.19 trillion was in equities, $10.29 trillion in long-term debt securities and $954 billion in short-term debt securities.

Key Facts

India holdings in US government securities in 2017 have raised except for few months when total exposure had declined. India’s holding of India went up to US $144.7 billion in December 2017, which was increase of little over $26 billion compared to year-ago period.

In December 2016, India’s exposure was just $118.2 billion. While holding at end of December 2017 is at one-year high compared to December 2016, the exposure was slightly higher at $145.1 billion in September 2017.

In 2017, China was largest holder of US government securities with holdings to tune of $1.18 trillion, followed by Japan at $1.06 trillion. Ireland was third with holdings of $326.5 billion followed by Cayman Islands ($269.9 billion), Brazil ($256.8 billion), UK ($250 billion), Switzerland ($249.6 billion), Luxembourg ($217.6 billion), Hong Kong ($194.7 billion) and Taiwan ($180.9 billion).  Among the BRIC countries, India had the third largest exposure while that of Russia was lower at $102.2 billion.

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