Is China a currency manipulator? While there is little doubt that the recent RMB depreciation occurred without PBOC approval, it isn’t clear China meets the three criteria to be considered a manipulator. China does run a significant bilateral trade surplus with America, but the other two points are less clear cut. Is China’s current account surplus material? At 1.3% of GDP (and falling) it is debatable, particularly when compared to Germany and Japan (7.1% and 3.4%, respectively). The third question is if there is a persistent one-way intervention in FX markets? Yes, but to strengthen the RMB! The RMB is overvalued, and would likely weaken dramatically without PBOC intervention. The ‘fix’, the PBOC’s method of taming RMB-volatility, should follow the market rate. However, it has generally remained stronger than the market rate, including at the moment.




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