US president risks ratcheting up tensions with latest currency claims and repetition of desire for nuclear supremacy.
Beijing has hit back at Donald Trump after the US president risked reigniting a simmering feud with China by accusing it of being the “grand champion” of currency manipulation.
After months of turbulence and uncertainty between the world’s two biggest economies, relations appeared to settle two weeks ago after the US president and his Chinese counterpart, Xi Jinping, held their first phone conversation since the billionaire’s inauguration.
However, in an interview with Reuters on Thursday that also saw Trump reiterate his desire for American nuclear supremacy, the US president, who has attacked China over trade, Taiwan, North Korea and the South China Sea, threatened to undermine the tentative rapprochement with a fresh verbal assault.
“I think they’re grand champions at manipulation of currency. So I haven’t held back. We’ll see what happens,” Trump said.
The president’s comments were reported just hours after the incoming treasury secretary, Steven Mnuchin, made apparently contradictory remarks signalling that the White House had no immediate plans to label China a currency manipulator – something Trump had pledged to do on his first day in office.
Beijing rejected Trump’s claims on Friday, with a foreign ministry spokesperson, Geng Shuang, claiming his country had “no intention of deliberately devaluing its currency to gain a trade advantage”.
Asked by the Guardian about Trump’s claims of currency manipulation, Geng said: “If you must pin the label of ‘grand champion’ … on China, then we are a grand champion of economic development. We’ve made great achievements since the start of economic reform and opening-up, making us the undisputed grand champion.”
Chinese scholars expressed frustration at the president’s allegation. “He has such a big mouth. What can we do about it? Let him talk,” said Zhu Feng, a professor of international relations at Nanjing University.
Economists in and outside China reject Trump’s claim – repeatedly aired during his campaign – that China is guilty of purposefully forcing down the value of its currency, the yuan, in order to boost its own exporters and hamstring US manufacturers.
“The logic of Trump’s claim is that he believes other countries keep their currencies artificially cheap to increase their exports to the US. But as a matter of fact, the Chinese yuan has seen a 13% devaluation since last year,” Zhu said, pointing out that Trump had previously also accused South Korea and Japan of manipulating their currencies.
Christopher Balding, a Peking University finance professor, said: “China is clearly manipulating its currency, there’s no two ways about it. But at this point they are essentially propping up the value of their currency rather than manipulating it lower to gain an unfair trade advantage.”
“To some degree Trump is correct, that of any major economy they probably are the grand champions of currency manipulation,” he added.
“But we need to very clearly distinguish between manipulating a currency to gain an unfair trade advantage – which they were pretty clearly doing maybe a decade to five years ago but they are clearly not doing that these days – and propping up the currency.”
Over the past year, China’s central bank has spent billions of dollars in foreign exchange reserves shoring up the yuan to counter capital outflows, Reuters reported.
Trump told Reuters that he wants the US to expand its nuclear arsenal, in his first comments on the issue since taking office.
He said: “We’re never going to fall behind any country even if it’s a friendly country. We’re never going to fall behind on nuclear power. It would be wonderful, a dream would be that no country would have nukes, but if countries are going to have nukes, we’re going to be at the top of the pack.”
In statement, the Arms Control Association said Trump’s position was misguided: “Mr Trump’s comments suggest, once again, that he is ill-informed about nuclear weapons and has a poor understanding of the unique dangers of nuclear weapons.”
“The history of the cold war shows us that no one comes out on ‘top of the pack’ of an arms race and nuclear brinksmanship.”