File Photo: A worker counts Chinese currency renminbi banknotes at a bank in Tancheng County of Linyi City, east China's Shandong Province, April 11, 2013.Photo:Xinhua

China urges the US to respect existing international rules and the multilateral trading system and stop its anti-subsidy investigation into the alleged undervaluation of the Chinese currency exchange rate, Chinese commerce authority said on Saturday, in response to the preliminary findings of the countervailing duty (CVD) case against China launched by the US Department of Commerce.

The US Secretary of Commerce Wilbur Ross announced a so-called affirmative preliminary determination in the CVD investigation of twist ties from China on Tuesday.

The US commerce department preliminarily determined that exporters or producers from China received countervailable subsidies at a rate of 122.5 percent, said the announcement, claiming that among the subsidies preliminarily countervailed is China's undervalued currency. 

This is the first time the department has countervailed the Chinese yuan.

This practice is a serious violation of relevant international rules, a Chinese commerce official said Saturday, responding to the US allegation.

The WTO Agreement on Subsidies and Countervailing Measures clearly stipulates the essential elements of subsidies, such as financial support, exclusivity and benefit grant, whilst the US Department of Commerce did not conduct the investigation and demonstration in accordance with the requirements of relevant WTO rules, but made the ruling mainly based on the report of the US Treasury Department which lacked evidence, according to China's commerce authority. 

It is simply wrong for the US Treasury report to conclude that the Chinese currency was 5 percent undervalued against the US dollar in 2019, the Chinese official said, hoping that the US Department of Commerce will correct the relevant wrong practices and conclusions.

The preliminary decision of the US on Chinese currency exchange rate is one of its usual measures, aimed at pressuring the Chinese government to meet the final demands of the Trump administration, experts said.

"We say no intervention because there has been no significant change in the central bank's foreign exchange reserves and the use of counter-cyclical factors has been suspended, so I don't think the Chinese exchange rate is undervalued," Tan Xiaofen, deputy head at the School of Finance at the Central University of Finance and Economics, told the Global Times on Saturday.

At present, the yuan's exchange rate has risen from 7.2 in May to 6.5 at present, with a large appreciation rate. Meanwhile, it can be seen that the central bank's intervention has also been greatly reduced, and the exchange rate is more determined by the supply and demand of foreign exchange, experts said.

Meanwhile, the US has accused China of being a manipulator of the currency exchange rate many times, and its motive is to pressure China to make concessions in other aspects, which can be about trade talks, Tan said.

The US conflation of countervailing duties and exchange rates is meaningless, since the US allegation about the subsidies for non-market behavior of Chinese companies is groundless, Bai Ming, deputy director of the Ministry of Commerce's International Market Research Institute, told the Global Times.

"In terms of exchange rate, the fluctuation of the yuan is based on the market supply and demand, which is often subject to the state of the economy," said Bai, noting that when the economy is slowing, China needs more rapid monetary easing like the US does on dollars.

Bai said that the Trump administration is on its way out, so it is making all the remaining noises before stepping down. 

However, if the Trump administration continues its groundless moves on Chinese currency, countermeasures can be expected, noted Bai.