In early August, the renminbi’s exchange rate broke through the psychological threshold of CN¥7 per US dollar. While investors were still digesting the full significance of this event, US President Donald Trump’s administration startled the market by labeling China a “currency manipulator.”

Applying maximum pressure, including labeling China as a “currency manipulator” will not sway China. If the U.S. refuses to return to the negotiation table, China has the option of seeking closer ties with other regional and international partners.

The US has labeled China a currency manipulator, and the trade war does not seem to be ending anytime soon. This may not be the beginning of a US-China currency war, but is definitely another low point in the US-China trade war.

Beijing vows not to devalue yuan to help exports.

The issue of currency manipulation remains one of the thorniest issues to be hammered out during the final rounds of US-China trade talks. So far, negotiations have not reached consensus on a mechanism for dispute resolution that could satisfy both sides.

In a rare harmony of interests, both China and the United States are pushing to stabilize the yuan. What remains to be seen is how this hypothetical agreement will bear on China’s long-term journey toward the yuan becoming one of the world’s principal reserve currencies.

China says it's able to keep its yuan stable.

The Chinese government won’t devalue the yuan against the dollar, for reasons which may surprise both policymakers and mainstream economists.

China needs to continue improving the RMB’s attraction as a financial transaction currency by marketizing the exchange rate and opening up the capital market. In the long-term, it means that the RMB internationalization will be more driven by being used in pricing and as reserve currency rather than by cross-border trade settlement.