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China

Trump’s currency war without a cause

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US Dollar and China Yuan notes are seen in this picture illustration 2 June 2017. (Photo: Reuters/Thomas White)

Author: Yiping Huang, Peking University

The greatest economic damage of the ongoing trade war between China and the United States is caused by policy uncertainty, not import tariffs. In early August 2019, US President Donald Trump introduced some new shocks. Amidst the new round of trade talks between the two countries, Trump announced that the United States will start putting tariffs of 10 per cent on the remaining US$300 billion of goods imported from China. Quickly following that, the US Treasury Department designated China as a ‘currency manipulator’.

This currency war reminds me of an old Chinese saying: ‘Even when right a scholar cannot win an argument with a soldier’ — because it defies any common sense about currency manipulation. At one of the earlier G20 meetings, a US official warned that the United States would name China a currency manipulator if it did not intervene to hold up the value of Chinese renminbi (RMB). In fact, it would have been more appropriate to label China the ‘currency non-manipulator’.

The US Treasury Department usually follows three criteria to determine if a trading partner is a currency manipulator — the first is a bilateral trade surplus with the United States of more than US$200 billion; the second is a current account surplus of more than 3 per cent of GDP; and the third is a total purchase of foreign exchange equivalent to more than 2 per cent of GDP within 12 months.

Of these, China only satisfies the first criterion. And even this one needs to be looked at with caution. It is widely known that China’s bilateral trade surplus with the United States is a result of the global supply chain, as its overall trade account is almost balanced. And even this bilateral surplus is shrinking rapidly.

The US Treasury’s action might have been triggered by the weakening of the RMB on 5 August, with its bilateral exchange rate against the US dollar (USD) exceeding 7.0 for the first time in more than ten years. But this depreciation was a direct result of Trump’s announcement of additional tariffs that could deteriorate China’s external account. Several months ago, a senior IMF official suggested to me a hypothetical scenario, in which Trump would push down the value of the RMB by escalating trade tensions and then would call China a currency manipulator. This was exactly what happened.

If there was a cause for the new currency war, it was single-handedly created by Trump.

In July 2005, China started the managed floating exchange rate regime with reference to a basket of currencies. The People’s Bank of China (PBoC) pursues a policy agenda trying to make the exchange rate more market-determined over time but attempting to avoid excessive volatility in the short term. The RMB appreciated gradually before mid-2014 but suffered from periodical depreciation pressures after that. But since the beginning of 2017, the PBoC has avoided intervening heavily in the foreign exchange markets.

‘Management’ of the exchange rate is done mainly through the application of the ‘counter-cyclical factor’ by setting central parity at the start of trading days. The 12-month moving average of exchange rate volatility of the RMB increased steadily from late 2010 and was already close to those of major global currencies — such as the US dollar, the Euro and the Japanese yen — in early 2019.

By and large, the purpose of the ‘management’ is to reduce excessive exchange rate volatility, not to lower the currency value. The perception that a weaker currency strengthens economic growth is also outdated since it only considers the trade channel of the exchange rate effect on growth. But the effect of the finance channel could be the opposite — a weaker currency encourages capital outflow and weakens economic growth. During the second half of 2015, for instance, RMB depreciation was accompanied by sharp declines of net capital inflow.

Empirical analyses also confirm that, in China today, the finance channel already dominates the trade channel. Therefore, it is no longer in China’s own interest to single-mindedly pursue a policy of a weak RMB.

Likewise, a US policy of a weak US dollar would likely be futile, because US comparative advantages are more concentrated in the service sectors rather than in manufacturing industries. As C Fred Bergsten pointed out, Trump’s trade wars with China and many other countries reduced US imports, but did not boost US exports or bring back manufacturing facilities from overseas.

Unfortunately, such an unreasonable currency war would…

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Trends and Future Prospects of Bilateral Direct Investment between China and Germany

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China and Germany experienced a decline in direct investment in 2023 due to global economic uncertainty and policy changes. Despite this, China remains an attractive destination for German FDI. Key industries like automotive and advanced manufacturing continue to draw investors, although FDI outflows from Germany to China decreased by 30% in the first three quarters of 2023. Despite this, the actual use of foreign capital from Germany to China increased by 21% in the same period according to MOFCOM. The Deutsche Bundesbank’s FDI data and MOFCOM’s actual use of foreign capital provide different perspectives on the investment trends between the two countries.


Direct investment between China and Germany declined in 2023, due to a range of factors from global economic uncertainty to policy changes. However, China remains an important destination for German foreign direct investment (FDI), and key industries in both countries continue to excite investors. We look at the latest direct investment data between Germany and China to analyze the latest trends and discuss key factors that could shape future business and commercial ties.

Direct investment between China and Germany has undergone profound changes over the past decade. An increasingly complex investment environment for companies in both countries has led to falling two-way FDI figures in the first three quarters of 2023, in stark contrast to positive trends seen in 2022.

At the same time, industries with high growth potential, such as automotive and advanced manufacturing, continue to attract German companies to China, and high levels of reinvested earnings suggest established firms are doubling down on their commitments in the Chinese market. In Germany, the potential for electric vehicle (EV) sales is buoying otherwise low investment among Chinese companies.

According to data from Deutsche Bundesbank, Germany’s central bank, total FDI outflows from Germany to China fell in the first three quarters of 2023, declining by 30 percent to a total of EUR 7.98 billion.

This is a marked reversal of trends from 2022, when FDI flows from Germany to China reached a record EUR 11.4 billion, up 14.7 percent year-on-year.

However, according to China’s Ministry of Commerce (MOFCOM), the actual use of foreign capital from Germany to China increased by 21 percent year-on-year in the first eight months of 2023. The Deutsche Bundesbank’s FDI data, which follows standards set by the IMF, the OECD, and the European Central Bank (ECB), includes a broader scope of transactions within its direct investment data, including, broadly, direct investment positions, direct investment income flows, and direct investment financial flows.

Meanwhile, the actual use of foreign capital recorded by MOFCOM includes contracted foreign capital that has been concluded, including the registered and working capital paid by foreign investors, as well as the transaction consideration paid for the transferred equity of domestic investors.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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China’s coast guard on Saturday fired a water cannon at a Philippine supply boat in disputed waters in the South China Sea, causing “significant damages to the vessel” and injuring its crew, the Philippine coast guard said.

Manila was attempting to resupply troops stationed on a ship at the Second Thomas Shoal, known locally as Ayungin Shoal, when the Chinese coast guard and maritime militia “harassed, blocked, deployed water cannons, and executed dangerous maneuvers against the routine RoRe (rotation and resupply) mission,” said the Philippine National Task Force for the West Philippine Sea.

The West Philippine Sea is the part of the South China Sea that Manila claims as its jurisdiction.

The Chinese coast guard also set up “a floating barrier” to block access to shoal where Manila ran aground an old warship, BRP Sierra Madre, to serve as a military outpost.

The Philippine task force condemned China’s “unprovoked aggression, coercion, and dangerous maneuvers.”

Philippines’ RoRe missions have been regularly blocked by China’s coast guard, but this is the first time a barrier was set up near the shoal. 

The Philippine coast guard nevertheless claimed that the mission on Saturday was accomplished.

Potential consequences

The Second Thomas Shoal lies within the country’s exclusive economic zone where Manila holds sovereign rights. 

China, however, claims historic rights over most of the South China Sea, including the Spratly archipelago, which the shoal forms a part of.

A Chinese foreign ministry’s spokesperson on Saturday said the Philippine supply vessel “intruded” into the waters near the shoal, called Ren’ai Jiao in Chinese, “without permission from the Chinese government.”

“China coast guard took necessary measures at sea in accordance with law to safeguard China’s rights, firmly obstructed the Philippines’ vessels, and foiled the Philippines’ attempt,” the ministry said.

“If the Philippines insists on going its own way, China will continue to adopt resolute measures,” the spokesperson said, warning that Manila “should be prepared to bear all potential consequences.”

Chinese Maritime Militia vessels near the Second Thomas Shoal in the South China Sea, March 5, 2024. (Adrian Portugal/Reuters)

U.S. Ambassador to the Philippines MaryKay Carlson wrote on social media platform X that her country “stands with the Philippines” against China’s maneuvers.

Beijing’s “interference with the Philippines’ freedom of navigation violates international law and threatens a free and open Indo-Pacific,” she wrote.

Australian Ambassador to the Philippines Hae Kyong Yu also said that Canberra shares the Philippines’ “serious concerns about dangerous conduct by China’s vessels adjacent to Second Thomas Shoal.” 

“This is part of a pattern of deeply concerning behavior,” Yu wrote on X.

Edited by Jim Snyder.

Read the rest of this article here >>> Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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Foreigners in China: 2024 Living and Working Guidelines

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China’s Ministry of Commerce released updated guidelines for foreign businesspersons living and working in China in 2024. The guidelines cover accommodations, visas, work permits, and emergency protocols. It also outlines responsibilities regarding social security premiums and individual income tax obligations. prompt registration for temporary accommodation is required upon arrival.


The updated 2024 guidelines for foreign businesspersons living and working in China, released by the country’s Ministry of Commerce, outline essential procedures and considerations covering accommodations, visas, work permits, and emergency protocols.

On January 25, 2024, China’s Ministry of Commerce (MOFCOM) released the latest version of the Guidelines for Foreign Businessmen to Live and Work in China (hereinafter referred to as the “guidelines”).

The document is divided into four main sections, labeled as:

Furthermore, the guidelines elucidate the regulatory framework governing foreign businessperson’s responsibilities concerning social security premiums and individual income tax obligations.

This article provides a comprehensive overview of the guidelines, delving into their significance and implications for foreign businesspersons in China.

Upon arrival in China, prompt registration for temporary accommodation is required.

If staying in a hotel, registration can be facilitated by the hotel staff upon presentation of a valid passport or international travel documents.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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