Treasury Secretary Jack Lew, in an exclusive interview with CNBC, diplomatically but firmly criticized China's handling of its currency devaluation. He also said the recent trading turmoil isn't a major concern at this point, but "I keep my eye on the market."
Regarding China, whose devaluation last month helped set off the plunge in world markets, Lew said: "They have to understand, and I make this point to them quite clearly, that there's an economic and a political reality to things like exchange rates." His comments follow those of other officials who have been critical of the way China went about devaluing its currency.
"They need to understand that they signal their intentions by the actions they take and the way they announce them. And they have to be very clear that they're continuing to move in a positive direction. And we're going to hold them accountable," said Lew, who will be participating in a meeting of G-20 financial ministers and central bankers Friday in Turkey.
"I think that we have been very clear for a very long time with China, how they manage their exchange rate is a matter of great concern to us and that they need to be willing to let market forces drive the value up, not just drive it down," he said in the interview Wednesday. "I think it is something we will discuss at the G-20, is any temptation to slip into what might look like competitive devaluation. It's both unfair and it ultimately leads to a worse global economy."
The treasury secretary's remarks come ahead of the Chinese premier's visit to the U.S. later this month, and with markets swinging wildly on concerns over the Chinese economy. China last month took extraordinary steps to devalue the yuan, a move that experts said was an acknowledgement of what's been known for some time—the world's second largest economy has slowed amid efforts to transform the drivers of growth there.
Lew said more economic reform is the right answer for China. "There needs to be a set of reforms put in place where the economy becomes much more market oriented, where consumer demand grows and there's a shift from a heavy, heavy emphasis on investor spending to more consumer-driven spending," he said.
"What they're experiencing now is the challenge of managing that transition in an orderly way," he continued. "The really important question for the medium and the long term is, 'Do they have the ability to stick to the reform plan that they've mapped out?"
On the campaign trail, Republican presidential contender Donald Trump has said what's going on with China's economic policy is "one of the greatest thefts in history."
In the interview that aired Thursday, Lew told CNBC: "I don't need to look to the political statements to focus on the importance of the U.S.-China economic relationship."
"We expect them to behave in a way that meets a level of transparency where it's credible that they're moving to keep commitments that they've made," he said.