China’s PBoC said that the country’s foreign currency reserves dropped to USD 3.104T in July, down from USD 3.119T. The modest decline suggested that PBoC has refrained from selling foreign exchange directly for currency intervention. And according to economists, China’s capital inflows and outflows are roughly balanced. Thus, there is little need for PBoC to buy of sell foreign currencies.

State Administration of Foreign Exchange spokeswoman Wang Chunying said China’s economy has continued ” the overall stable, steady and progressive development trend, and the main macroeconomic indicators have remained within a reasonable range.” Also, ” cross-border capital flows have remained stable. ” Wang also dismissed claim of China as currency manipulator as groundless.

White House economic advisor Larry Kudlow told CNBC that despite recent intensifications in US-China tensions, “the reality is we would like to negotiate”. He reiterated that “we’re planning for the Chinese team to come here in September. Things could change with respect to the tariffs.”

Regarding Trump’s series of aggressive tweets against China, Kudlow said “in the course of his tweets and his conversations with the trade team, he would like to continue negotiations”. And, “He would like to make a deal. It has to be the right deal for the United States. We would much prefer a commercial transaction.”

Additionally, Kudlow saw clear advantage over china as tariffs burden “is falling almost 100% on China.” “The American economy is in great shape. It’s booming, there is no inflation,” Kudlow said. “We’re in terrific shape. The Chinese, regrettably, are not.”

In a strongly-worded editorial, the People’s Daily, China’s official newspaper, condemned that the US was “deliberately destroying international order”. The piece was published hours after US decision to designate China as currency manipulator, even though such issue was not mentioned. The editorial said the responsibility of big countries is to provide the world with stability and certainty. However, “some people in the United States do just the opposite”.

USD/CNH edged higher to 7.1399 earlier today but pulled back from there. It’s currently trading at 7.07, below yesterday’s close. There is sign that PBoC is looking at stem the free fall in Yuan. The general consensus remains that China wouldn’t want steep fall in Yuan exchange rate, which would trigger disastrous capital outflow and decline in asset prices. Instead, the Chinese government would likely prefer controlled depreciation.

Trump accused China for currency manipulation today, and with the same tweet, he also urged Fed to “listen” He said “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” But it’s unsure what “historic low” he referred to.

On the other hand, China dismissed Trump’s claim that the country didn’t buy US agricultural products. A National Development and Reform Commission (NDRC) was reported saying that such accusation was “groundless”. The official noted China bought 130,000 tonnes of soybeans, 120,000 tonnes of sorghum, 60,000 tonnes of wheat, 40,000 tonnes of pork and products, and 25,000 tonnes of cotton from the United States between July 19 and August 2.

Also, the NDRC official also said China purchased 75,000 tonnes of hay, 5,700 tonnes of dairy products, 4,500 tonnes of processed fruits, and 400 tonnes of fresh fruits from the United States during the same period.

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