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By David Lawder
NUSA DUA, Indonesia (Reuters) – U.S. Treasury Secretary Steven Mnuchin said on Friday that he told China's central bank that China's central bank is likely to be affected by the US.
Mnuchin also told Reuters in an interview that China needs to identify concrete "action items" to rebalance the two countries' trade relations before talks to resolve their disputes can resume.
The U.S. Treasury Chief and People's Bank of China Yi Gang Governor extensively discussed currency issues on the sidelines of the International Monetary Fund and World Bank annual meetings on the Indonesian resort island of Bali.
"I expressed my concern about the weakness in the (yuan) currency and that part of any trade talks," said Mnuchin said of the meeting.
Mnuchin said, "I think we have a productive explanation of its standpoint on those issues."
Yi told an audience audience on Thursday that China's monetary policy has been raised against the backdrop of the Federal Reserve.
Mnuchin 's comments on China' s currency as it 's coming to a close next week is scheduled to take place in the first half of the world.
The yuan weakened on Friday to 6.912 to the dollar as China reported a record September trade surplus with the United States, fanning fears of an escalation of the two countries' trade war.
The Chinese currency has depreciated 5.6 percent against the dollar since the beginning of the year.
"NOT POLITICAL" CURRENCY REPORT
Mnuchin would not discuss the findings of the currency report and have not seen it.
But Mnuchin emphasized that the report is based on rigorous research and data, and that they are fully aligned on currency issues.
"The currency report is something we report to Congress." It is not a political document, "he said.
IMF Managing Director Christine Lagarde warned on Thursday against adding currency wars to the trade conflict, saying this would hurt global growth and "innocent bystander" countries.
Despite President Donald Trump's pledge to declare China a currency manipulator on "day one" of his administration, the Treasury has stuck to its three-part test for evidence of currency manipulation – and China has failed to qualify for such a designation.
These include a high bilateral trade surplus with the United States, and a persistent currency market intervention to weaken or prevent a rise in a country's currency. In the past two years, China has failed on the one criteria, its high trade surplus with the United States.
U.S. laws mandating the report require the negotiation of their respective practices, a process that could eventually lead to trade sanctions. But the Trump administration has already hit China with tariffs on $ 250 billion worth of Chinese goods, $ 267 billion.
Mnuchin declined to confirm a Wall Street Journal report that the White House had to make a meeting with President Donald Trump and President Xi Jinping at the G20 summit leaders in Buenos Aires.
But he said re-launching trade talks would require China to commit to taking action on structural reforms to its economy.
"It's got to be more than a signal" from China, Mnuchin said. "We have made it clear that they have real action items that they want to discuss that we will listen."
Separately, Mnuchin told CNBC in a televised interview on Friday that it would be possible to make positive direction, "adding that there is no set deadline for trade talks with China.
If the U.S.-China relationship could be rebalanced, Mnuchin told Reuters their total annual trade relationship could grow to $ 1 trillion from $ 650 billion currently, with $ 500 billion from each country. That would approach the $ 1.2 trillion U.S.-Canada-Mexico trade under the North American Free Trade Agreement.
PAKISTAN DEBT TRANSPARENCY
As the IMF launches talks with Pakistan over a bailout package, Mnuchin said it was needed for Pakistan and other creditors.
I would expect China to understand that I think it is a good idea that they are an IMF program, that we would need to make sure that they are . "
Regarding steep US stock market declines over the past two days, Mnuchin said these were "normal market corrections".
"I do not believe markets are efficient," he said. "So I think that when people invest in the markets, they need to be prepared for those markets."
(Additional reporting by Susan Heavey in Washington, edited by Simon Cameron Moore and Phil Berlowitz)
