Currency Manipulation Update for 2015-17

Joseph E. Gagnon (PIIE) and Tessa Morrison (PIIE)


Authors' note: We thank Fred Bergsten and Brad Setser for helpful comments. See an update to this discussion for 2016–18.


The Trump administration's revision of the Korea-US Free Trade Agreement (KORUS), negotiated in late March, was reported to have contained a side agreement that could have broad implications for US trade policy in the future. That side agreement calls for a ban on currency manipulation by the two trading partners.  Details of the agreement have yet to be released, but it is likely to be similar to one that was part of the Trans-Pacific Partnership (TPP), now abandoned by the United States. A side agreement on currency manipulation is likely to be part of a revised North American Free Trade Agreement (NAFTA) still under negotiation.

Currency manipulation occurs when a country purchases excessive amounts of foreign-currency assets to hold down the value of its own currency in order to boost exports and maintain a large current account (trade) surplus. Korea, for example, has been accused of manipulating its currency in the past, which probably explains why the administration wanted to include a clause on currency manipulation in KORUS.

Although down from its peak about a decade ago, currency manipulation continues to occur. In recent years the largest manipulators have been Singapore and Switzerland, with average annual purchases in 2016 and 2017 of about $90 billion and $80 billion, respectively. Six other countries continue to manipulate to a lesser extent. Most oil exporters have switched to selling official foreign assets to cushion the blow of lower oil prices.

In previous years, China had been by far the largest currency manipulator. It switched to selling official foreign assets in 2015 and 2016 to prevent its currency from depreciating in the face of net private financial outflows. In 2017, these private outflows ceased and China's net official flows were negligible (as a share of GDP).

What Constitutes Currency Manipulation?

According to Bergsten and Gagnon (2017), a country must meet all of the following criteria to be considered a currency manipulator in a given calendar year:

  1. the current account surplus exceeds 3 percent of GDP;
  2. net acquisitions of official foreign-currency assets (net official flows) exceed 2 percent of GDP;
  3. foreign exchange reserves and other official foreign assets exceed three months of imports;
  4. foreign exchange reserves and other official foreign assets exceed 100 percent of short-term external debt, public and private;
  5. net official flows exceed 65 percent of oil exports minus production cost;
  6. classification by the World Bank as a high-income or upper-middle-income country.

The US Treasury has adopted the first two of these criteria in its semiannual report to Congress on "Foreign Exchange Policies of Major Trading Partners of the United States." Treasury limits its analysis to the top 12 trading partners, and, as required by statute, includes a criterion that a country have a significant bilateral trade surplus with the United States. However, with today's mobile capital and complex supply chains, bilateral trade balances are not an appropriate criterion for manipulation (Bergsten and Gagnon 2017, 78).

During the 11 years from 2003 through 2013, a group of 20 countries purchased an average of more than $600 billion each year in excessive quantities of foreign currencies to support large current account surpluses (Bergsten and Gagnon 2017, table 4.1). The table below provides information for 2015–17 for 19 of the 20 countries identified by Bergsten and Gagnon.1 The countries are divided into three functional groups: financial centers, manufacturing exporters, and resource exporters. The first column displays the number of years out of the three years examined that the country met all of the above criteria. The remaining columns display the net official assets, net official flows, and current account balances of these countries. Within each group, the countries are ranked by years of manipulation first and 2017 official assets in dollar terms second.

Financial Centers Are the Largest Manipulators at Present

As a group, the financial centers are the largest and most consistent manipulators in recent years. In dollar terms, Switzerland had the world's largest net official flows in 2016 and Singapore had the largest such flows in 2017.

The circumstances of each financial center are somewhat different. Switzerland's manipulation is conducted entirely by the central bank as it strives to prevent further appreciation of the Swiss franc and thus maintain a large current account surplus.2 Singapore's manipulation derives primarily from its public pension system, which collects high payroll taxes from workers and invests them entirely overseas through a sovereign wealth fund to back future pension obligations. Hong Kong and Macao both have fixed exchange rates and high rates of domestic saving, which create current account surpluses that the monetary authority buys up to prevent appreciation.3 Macao also has a separate fiscal reserve account that invests fiscal surpluses overseas.

China Is Not Manipulating

By far the largest currency manipulator in 2003–13 was China. In 2015 and 2016, China did the opposite—it sold large amounts of foreign assets—to prevent its currency from depreciating when private investors became net sellers. The private net outflow ended in 2017 and China made negligible net official purchases (less than 1 percent of GDP).

A Few Manufacturing Exporters Continue to Manipulate

Taiwan and Israel manipulate consistently at a level just above our criteria. Korea and Sweden intervene consistently at a level just below our criteria.

Thailand moved rapidly from negligible net official flows in 2015 to a very large 8 percent of GDP in 2017. At the conclusion of their latest mission to Thailand, staff from the International Monetary Fund (IMF) released a statement noting the large current account surplus and urging the Thai authorities to adopt looser monetary and fiscal policies and to limit currency intervention to "addressing disorderly market conditions."4  

Japan is a special case: It raised the target share of its public pension fund invested in foreign assets from 17 percent to 40 percent between 2012 and 2016, implying net international financial flows of more than $200 billion (4 percent of GDP) spread over several years.5 However, because its public pension fund is managed independently and is supposed to operate on market principles, it is not included in official flows. Public pension funds in other countries, including the United States, are similarly excluded from net official financial flows.6

The other manufacturing exporter in the table, Malaysia, has not had official purchases on balance over the past three years.

Most Oil Exporters No Longer Manipulate

Oil prices fell sharply in 2014 and 2015 and have recovered only modestly since then. After years of large positive net official flows, most oil exporters drew down their foreign assets in 2016 as they sought to smooth the fiscal adjustment to lower revenues. Algeria and Trinidad report continued negative net official flows in 2017. Data are missing for 2017 in the United Arab Emirates, Kuwait, and Oman, but it seems likely that these countries also continued to have net sales.7 Russia resumed significant net purchases in 2017, but not at a level that met our criteria.

Norway continues to accumulate net official assets, albeit at a slower pace than previously. In 2016 and 2017, Norway's net official flows were slightly above the criterion of 65 percent of oil exports minus production cost. For a thorough discussion of Norway's oil saving policy, see Gagnon (2018).

Updated data for Bergsten and Gagnon's list of currency manipulators*
Economy Years of manipulation in 2015–17 2017 official assets   Net official flows (billions of US dollars) 2015–17 average net official flows (percent of GDP) 2015–17 average current account (percent of GDP)
billions of US dollars percent of GDP   2015 2016 2017
Financial centers
Switzerland 3 838 123   119 95 63 14 10
Macao1 3 84 164   15 12 10 26 28
Singapore 2 800 262   -4 49 125 19 19
Hong Kong 2 423 127   36 -7 32 6 3
Manufacturing exporters
Taiwan 3 452 79   15 11 12 2 14
Israel 3 112 32   7 9 8 3 4
Thailand 2 206 47   -2 25 34 4 10
China 0 3,250 27   -358 -442 89 -2 2
Japan 0 1,433 29   10 4 15 0 3
Korea 0 574 37   7 14 19 1 7
Sweden1 0 88 16   6 4 2 1 4
Malaysia1 0 36 12   -7 1 9 0 3
Resource exporters
Norway 3 1,097 280   22 16 15 5 6
United Arab Emirates2 1 1,142 328   92 -73 n.a. 2 3
Kuwait3 0 346 312   1 -26 n.a. -11 2
Russia 0 170 12   10 4 27 1 3
Algeria1 0 94 54   -28 -27 -17 -15 -15
Oman3 0 38 57   -2 -25 n.a. -20 -16
Trinidad and Tobago4 0 14 71   -2 -1 0 -3 -6
n.a. = not available
* Updates table 4.1 in C. Fred Bergsten and Joseph E. Gagnon, Currency Conflict and Trade Policy: A New Strategy for the United States, 2017, Washington: Peterson Institute for International Economics.
1. 2017 net official flow is estimated as change in official assets.
2. 2017 official assets are not available; 2016 estimated official assets are displayed. Net official flows are estimated by changes in estimated stocks.
3. 2017 official assets are not available; 2016 estimated official assets are displayed.
4. 2017 official stocks are extrapolated based on August data. 2017 official flow is estimated as the change in official stocks.
Note: Official assets are the sum of foreign exchange reserves, net forward reserve positions, and foreign assets of sovereign wealth funds minus public and publicly guaranteed external debt. External debt is not available for 2017 and is assumed constant at its 2016 value. Net forward positions for China, Norway, Sweden, and Thailand in 2017 are extrapolated based on part-year data. In China, official assets include nonreserve foreign assets of the central bank. In Macao, official assets include fiscal reserves in foreign assets. Net official flows include reserve flows, changes in net forward reserve positions, and net acquisition of portfolio and other assets by the central bank and general government minus net incurrence of portfolio and other liabilities by the general government in emerging and developing economies. Years of manipulation are defined by criteria described in the text. Libya is one of the 20 manipulators identified by Bergsten and Gagnon (2017) but is not included here owing to insufficient data.
Sources: International Monetary Fund Balance of Payments, International Financial Statistics, International Reserves, and World Economic Outlook databases; World Bank World Development Indicators database; Sovereign Wealth Fund Institute; national central banks and statistical agencies; and authors' calculations.


Bergsten, C. Fred, and Joseph E. Gagnon. 2017. Currency Conflict and Trade Policy: A New Strategy for the United States. Washington: Peterson Institute for International Economics.

Gagnon, Joseph E. 2014. Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do. PIIE Policy Brief 14-17. Washington: Peterson Institute for International Economics.

Gagnon, Joseph E. 2018. Can a Country Save Too Much? The Case of Norway. PIIE Policy Brief 18-7. Washington: Peterson Institute for International Economics.


1. Libya is excluded owing to lack of data.

2. Officials at the Swiss National Bank argue that their intervention is aimed at preventing deflation. Gagnon (2014) discusses alternative policies Switzerland could adopt to prevent deflation.

3. Alternative policies include easing monetary policy, including through quantitative easing, or allowing the exchange rate to appreciate (Gagnon 2014).

4. IMF Press Release No. 18/115.

5. It is possible that including these purchases in net official flows would still not exceed the 2 percent of GDP criterion in any one year.

6. The government of Singapore includes the flows arising from its pension system in official flows, presumably because they are invested through a government-run fund that does not operate on strict market principles. Indeed, it is highly unlikely that private investors would direct all of their saving into foreign assets, even in a relatively small economy.

7. Stock data for these three countries are based on outside estimates. Flow data for United Arab Emirates and Oman are constructed as changes in the stock estimates, and thus include valuation effects.

Data Disclosure

The data underlying this analysis are available here.

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