The U.S. Treasury Department on Friday said China is not a currency manipulator, making a trade war less likely. In a report sent to Congress, the department writes “that no major trading partner of the United States met the standards identified in Section 3004 of the Omnibus Trade and Competitiveness Act of 1988 for currency manipulation in the second half of 2016.”
President Trump had repeatedly promised to label China a currency manipulator. Real estate insiders and economists were concerned that such a move would worsen economic relations between the two countries and damage the industry, which has become increasingly dependent on China for cash.
“Entering into a trade war is the fastest way to get us into a recession,” Chris DeMuth, founder of the Connecticut-based investment firm Rangeley Capital told The Real Deal in January.
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It would also have a “massive impact on [big banks] that underwrite these [trade] deals,” he added.
But after meeting with China’s president Xi Jinping at Mar-a-Lago earlier this month, Trump changed his stance, telling the Wall Street Journal that the country is “not a currency manipulator.”
The New York market has become increasingly dependent on Chinese money in recent years. Just last month, the Hainan-based conglomerate HNA Group agreed to buy the Midtown office tower 245 Park Avenue for $2.21 billion in this year’s most expensive real estate deal so far.
The Treasury Department merely placed China on a manipulator “monitoring list,” along with Germany, Japan, Korea, Switzerland and Taiwan. In its report, the department points out that China’s recent moves to prevent its currency from falling in value benefited the U.S. because it prevented capital markets turmoil in China that could have spilled abroad.
“China will need to demonstrate that its lack of intervention to resist appreciation over the last three years represents a durable policy shift by letting the (Renminbi) rise with market forces once appreciation pressures resume,” the report notes.