Donald Trump likes to slam China for unfairly devaluing its currency, but there's a problem with his attacks: They're the precise opposite of what China is doing.
The president-elect took to Twitter as recently as Sunday and went after China as a currency manipulator that reduces the value of the yuan so that it can get the upper hand with its exports.
TWEET: Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into.
TWEET: their country (the U.S. doesn't tax them) or to build a massive military complex in the middle of the South China Sea? I don't think so!
Trump's accusations would have been true a decade ago, when China always pegged the yuan low against the dollar in an effort to make its exports — which were priced in yuan — cheap relative to U.S.-made products priced in dollars. Those currency machinations did, in fact, give China a trade advantage.
But today, China is spending its foreign currency reserves like crazy, buying up the yuan on foreign exchange markets in a desperate attempt to keep its currency from plunging. Markets are sending the yuan lower by themselves — too low, for Beijing's taste.
A weak yuan prompts Chinese citizens to try to move their wealth into other currencies at a time when China and its leader Xi Jinping are deeply concerned about capital fleeing the country. A weak yuan also risks sparking a currency war with China's regional neighbors and trading partners, who could respond by diminishing their own currencies.