But "that's not the right framework" to look at the yuan exchange rate, because China has an extremely high national saving rate and it's not going to be a capital importer, argued Lardy, who believed Chinese currency is approaching the "equilibrium value" despite the government's current control on capital movements.
Lardy said the currency issue will be discussed during the China-US S&ED talks, because there are still some congressional concerns about currency manipulation and some lawmakers have proposed to add enforceable currency provisions into trade legislations.
The President Obama administration "has to say something and do something" against currency manipulation, but "I don't think it will be a top priority," said Lardy. "I think the focus will be more on the bilateral investment treaty and other issues."
Tony Fratto, a partner at Hamilton Place Strategies and deputy White House press secretary to former US President George W Bush, said at a panel discussion last month that currency manipulation issues "become less and less important" as major economies have recognized the benefits of more flexible currency and significant costs associated with using currency as a tool to expand trade.
Dollar said "there's no chance" that the legislation addressing currency manipulation would be enacted because he is skeptical that both Houses of Congress would pass the legislation, and US President Obama could veto it if passed by full Congress.
"Those provisions would undermine our international efforts to address this issue, raise highly problematic questions about consistency with our international obligations, lead to other countries pursuing retaliatory measures that could hurt our exporters," the White House recently said in a statement regarding the currency legislation.
In recent years, both the House and Senate have passed separate bills to use the countervailing duty process to address currency undervaluation, but neither has reached Obama's desk to sign into law.
The IMF's latest view on Chinese currency would make it more difficult for Washington to continue to argue that the renminbi is significantly undervalued and press China to boost its value of the currency.
In fact, the Obama administration has shifted its attention to issues such as increased market access for US businesses operating in China, and better protection of intellectual property rights, as the renminbi exchange rate has not become the primary concern of US companies.
"The impact of China's exchange rate value on company competitiveness ranks near the bottom of company concerns once again," the US-China Business Council said in its 2014 China Business Environment Survey. "While the currency topic is one that periodically gets a great deal of attention on Capitol Hill, it is yesterday's problem, not today's."
"I think in practice there will be a lot of discussions about trying to move more quickly on the bilateral investment treaty that would require China to open a lot of sectors for investment," Dollar said of the upcoming China-US S&ED talks.
Both the Chinese and US governments have expressed intentions to conclude the negotiations of bilateral investment treaty under current administration, as the investment treaty has become a top priority for bilateral economic relations.
Talks on the investment treaty began in 2008 as both countries sought to increase mutual investment, which only accounted for a tiny share of their overseas investment. The treaty is expected to cement the foundation of China-US economic ties and significantly benefit global economy.
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