By Ian TalleyWASHINGTON--China has committed to limiting its currency interventions to moves countering damaging swings in exchange rates, U.S. Treasury Secretary Jacob Lew said Wednesday after high-level talks with top officials visiting from Beijing.
The commitment, agreed upon in the annual round of U.S.-China Strategic and Economic Dialogue negotiations, narrows the conditions under which China says it would be willing to manage the value of the yuan.
The promise, counted as a small victory by Treasury Department officials, comes as the administration seeks to counter U.S. lawmakers' concerns that it hasn't done enough to spur China to liberalize its currency. It also comes amid a long-term strategy by China to gradually open its financial system, including an effort this year to get the International Monetary Fund to recognize the yuan as a global reserve currency.
The U.S. has pushed Beijing to do more, however, and it is unlikely this commitment alone will mollify Washington's concerns.
"It is critical that China remain on a path toward a more market-determined exchange rate and a more transparent exchange rate policy," Mr. Lew said.
Last year, Beijing said it would "reduce foreign-exchange intervention as conditions permit, and increase exchange-rate flexibility."
But Mr. Lew said Wednesday, "China committed to intervene in foreign-exchange markets only when it's necessitated by disorderly market conditions and will consider additional measures to transition to a market-oriented exchange rate."
Although that still gives Beijing wide latitude to determine what constitutes "disorderly conditions," U.S. officials see the commitment as progress toward less intervention.
In its semiannual currency report to Congress published in April, the U.S. Treasury Department took China to task over currency policies that it says hurt other trading partners, including the U.S.
While China had appreciated its currency over the last decade, the yuan was still "significantly undervalued," the report said. The administration urged Beijing to move faster to ensure the currency is market-determined.
Mr. Lew and his top lieutenants have been making the case that the administration's diplomatic efforts are the reason why China, long seen by the U.S. as the worst offender of currency intervention, has appreciated its currency over the past decade.
Still, China's economy is slowing, a development U.S. economists fear may tempt Beijing to slow its efforts to open its markets to foreign investment and rely once again on currency intervention to devalue the yuan and stimulate growth.
"The real test is going to be, when there's upward pressure on the [yuan], will China refrain from intervening?" Mr. Lew said. "And that is still an open issue."
In its first-quarter report on monetary policy, the People's Bank of China said it had stopped its "routine intervention" in the currency markets aimed at managing the yuan's value. The U.S. Treasury also has said China last year appeared to have stopped its large-scale foreign-currency purchases that keep a lid on the yuan's value and help spur exports, though opaque data indicated "modest foreign-exchange purchases" by Beijing earlier this year.
China also has committed to providing greater transparency on its foreign-currency reserves, data that will help outsiders gauge China's exchange rate interventions.
The secretary said Beijing promised to start publishing more economic data by the end of the year, an "explicit recognition that it is in China's own interest to adopt the transparency standards of major reserve currencies."
Write to Ian Talley at ian.talley@wsj.com
(END) Dow Jones Newswires
June 24, 2015 21:37 ET (01:37 GMT)
June 24, 2015 18:21 ET (22:21 GMT)
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