Taiwan is unlikely to be taken off the U.S. currency watch list in that country's mid-April foreign exchange market report despite local media speculation, a top central bank official said Thursday.
▲圖／英文中國郵報
In light of U.S. President Trump's comments in March that suggested China could be getting off the list, Taiwanese legislators have voiced concerns regarding the R.O.C.'s own status on the list.
Local media quoted unnamed financial officials as saying that Taiwan could be taken off the list as it does not meet all of the criteria that govern whether a country is labeled a currency manipulator as defined by the U.S. Treasury: a significant bilateral trade surplus with the U.S. larger than US$20 billion, a material current account surplus above 3 percent of gross domestic product and persistent-one-sided intervention in the currency market.
Such intervention is defined as net foreign exchange purchases exceeding 2 percent of a country's GDP over the past 12 months. As Taiwan's foreign-exchange reserves increased only US$8.17 billion in 2016 — considerably lower than the 2 percent GDP mark (roughly US$10.6 billion) — it does not meet the criteria, local media quoted financial officials as saying.
However, Harry Yen (顏輝煌), director-general of the Central Bank of the Republic of China's foreign exchange department, said that a country only needed to meet one of the criteria to be placed on the list.
Countries are officially labeled currency manipulators when they meet all three criteria, he said.
To be removed from the watch list, Yen said, a country must only meet one of the three criteria two times in a row in the U.S. foreign exchange market report, which is released in October and April of every year.
Taiwan met two of the three criteria in the U.S. foreign exchange market report last October, so it will not be off the watch list even if meets only one criterion in this year's report, he said.
Taiwan was put on the U.S. currency watch list when it was inaugurated in 2016, alongside China, Japan, South Korea, Germany and Switzerland.
Taiwan was put on the list for having an account surplus of above 3 percent of GDP and intervening in the currency market.
The Fates of Taiwan and China Intertwined
According to central bank deputy governor Yang Chin-long (楊金龍), mainland China, like Taiwan, currently meets only one of the three criteria for currency manipulation.
This is why many international media outlets are speculating that China could be removed from the list. If China is to be removed, as central bank Governor Perng Fai-nan (彭淮南) previously suggested it might during a parliamentary session, then, "if the U.S. does not change its three criteria, Taiwan will also not be labeled."
All eyes are now on the Trump-Xi meeting taking place this Thursday and Friday U.S. time, as discussions that take place during the summit could affect whether Taiwan and other countries are listed as currency manipulators, according to foreign reports quoting a senior South Korean official.
Political experts have been quoted as saying that the Trump administration may consider changes to the criteria to
deter future manipulations,
with Reuters reporting that the most logical option, according to policy experts, "would be to lengthen the time period for reviewing currency market interventions from 12 months to several years."
This would capture more of China's past interventions, but as the South Korean official reportedly said, would also "likely lead to manipulator designations for South Korea, Taiwan and possibly other countries."
What Happens to Manipulators?
Under a law passed in 2015, countries designated currency manipulators go through a year of negotiations with the United States to try and resolve the issues, The Associated Press reported.
Only if these talks fail, the report continued, would the U.S. impose sanctions, such as suspending funding programs, to punish manipulators.
It has reportedly been more than a decade since any country has received the currency manipulator designation from the United States.
Taiwan was designated a currency manipulator in 1988, while Beijing was the last recipient of the designation in 1994.
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