A currency war averted

"It is always pleasing when Donald Trump manages to hit upon a sensible policy and listens to the voices of reason within his administration," says the Financial Times. He had threatened to brand China a currency manipulator, but has now retreated from that position. His argument used to be that China artificially depressed the value of its currency in order to gain an unfair advantage for its exports.

This was "never a convincing charge", as Oliver Kamm notes in The Times, but to the extent that it was ever remotely valid, it now "no longer applies". The authorities have actually been trying to prop the yuan up, not weaken it, for the past couple of years. Because the economy is slowing, and investors have become rattled by the country's high overall debt load, money has been leaving the country, putting downward pressure on the currency. This has prompted the government to run down its foreign-exchange reserves to bolster the exchange rate.

In 2015, the International Monetary Fund declared that, after a rise of 25% in a decade, the yuan no longer looked undervalued, but was "broadly in line with the fundamentals", says Philip Aldrick in The Times. It's worth noting that China's current-account surplus has slid from a whopping 10% of GDP to 2.5% as the currency has appreciated. Trump has cited a big current-account surplus as evidence of China supposedly cheating the US out of prosperity.

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