R E P ORT T O C O N G R E S S

U.S. DEPARTMENT OF THE TREASURY • OFFICE OF INTERNATIONAL AFFAIRS

November 2023
Contents

Executive Summary.............................................................................................................................. 1

Section 1: Global Economic and External Developments........................................................ 5

U.S. ECONOMIC TRENDS........................................................................................................................ 5

ECONOMIC DEVELOPMENTS IN SELECTED MAJOR TRADING PARTNERS ............................18

Section 2: Intensified Evaluation of Major Trading Partners..............................................37

KEY CRITERIA........................................................................................................................................37

SUMMARY OF FINDINGS .....................................................................................................................42

TRANSPARENCY OF FOREIGN EXCHANGE POLICIES AND PRACTICES...................................43

Glossary of Key Terms in the Report............................................................................................45

This Report reviews developments in international economic and exchange rate policies

and is submitted pursuant to the Omnibus Trade and Competitiveness Act of 1988, 22

U.S.C. § 5305, and Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015,

19 U.S.C. § 4421.1

1 The Treasury Department has consulted with the Board of Governors of the Federal Reserve System and

International Monetary Fund management and staff in preparing this Report.
1

Executive Summary

Global economic growth in both 2022 and so far in 2023 has been stronger than expected. 

The IMF estimates global growth was 2.2% in 2022 (measured on a Q4/Q4 basis),

outperforming the projection of 1.7% it made in October 2022. It projects global growth to

increase to 2.9% in 2023 and further to 3.2% in 2024 on the same Q4/Q4 basis. Prices of

commodities like food and energy have become less volatile, supply chain pressures

continued to ease, and in some countries domestic demand received a boost from excess

savings. Despite more resilient near-term performance, the global economic outlook

continues to face elevated uncertainty associated with Russia’s war against Ukraine,

geopolitical stresses in the Middle East, still-elevated core inflation, and the potential for

stresses in China’s property sector to deepen. 

Global current account imbalances remained elevated in 2022 relative to pre-pandemic

levels, as trade and tourism patterns remained disrupted and rising commodity prices

tended to strengthen the current accounts of commodity exporting countries and weaken

those of commodity importers. As these impulses wane, the IMF projects global

imbalances to narrow in 2023 but highlights risks around this forecast, including additional

shocks to commodity prices or the risk of a severe tightening of financial conditions. 

Among major U.S. trading partners, the very large surpluses of Germany, Ireland,

Switzerland, Taiwan, the Netherlands, and Singapore have each remained significant as a

share of GDP over the four quarters through June 2023. China’s surplus was higher in

dollar terms at $389 billion (2.2% of GDP) over four quarters through June 2023, compared

to $380 billion in the four quarters through June 2022 (2.1% GDP). Meanwhile, the U.S.

current account deficit narrowed to 3.3% of GDP in the four quarters through June 2023,

down from 4.0% of GDP in the four quarters through June 2022. 

Differing growth and inflation outlooks have led to a range of monetary policy actions

across countries, and fundamentals including interest rate differentials, terms of trade

shocks, and growth expectations have had large impacts on currencies. In 2022, the dollar

strengthened against most major trading partners’ currencies through October 2022,

before depreciating against most major trading partners’ currencies in the last few months

of the year as global financial conditions began to ease. 

The nominal broad dollar was relatively stable in the first half of 2023, weakening slightly

but still at a strong level relative to historical values. Over the course of August and

September, though, the dollar strengthened nearly 4%, leaving it up 1.1% year-to-date as of

end-September. Notably, the dollar strengthened 13.4% against the yen, pushing the yen

close to 150 yen per dollar. The dollar is 5.8% stronger against the RMB as expectations for

Chinese growth have cooled. As of end-September, the broad dollar has strengthened 1.9%

against the basket of advanced economies’ currencies and 0.4% against the basket of

emerging market economies’ currencies.

Most interventions by U.S. trading partners continue to be in the form of selling dollars,

actions that strengthen their currency and weaken the dollar. Thus, it is not a surprise that

in the four quarters through June 2023, no trading partner was found to have manipulated
2

the rate of exchange between its currency and the U.S. dollar for purposes of preventing

effective balance of payments adjustments or gaining unfair competitive advantage in

international trade. A number of major trading partners have excessively large current

account surpluses as discussed above, suggesting imbalances in demand and supply across

major economies, but currency manipulation was not a driving force of those surpluses

during this period. It is worth noting that two trading partners that ran current account

surpluses (Singapore and China) did purchase foreign currency on net over these four

quarters, but they too did not meet the standard for preventing effective balance of

payments adjustments or gaining unfair competitive advantage in international trade.

The Biden Administration believes that a market determined exchange rate reflecting

economic fundamentals is the appropriate arrangement for the dollar. When major

economies face different stresses and accordingly pursue different policies, this will

typically be reflected in currency movements. Treasury monitors currency movements and

their impact around the world, while recognizing that a range of approaches to manage

consequences by developing and emerging economies may be warranted in certain

circumstances. Treasury is also vigilant in responding to strains that these movements can

present, whether it means a need for help from multilaterals, debt restructuring, or other

responses. The Administration strongly opposes attempts by the United States’ trading

partners to artificially manipulate currency values to gain unfair advantage over American

workers. Treasury continues to press other economies to uphold the exchange rate

commitments they have made in the G-20, the G-7, and at the IMF. All G-7 members have

committed to market-determined exchange rates. All G-20 members have agreed that

strong fundamentals and sound policies are essential to the stability of the international

monetary system and not to target our exchange rates for competitive purposes.2 All IMF

members are required to avoid manipulating their exchange rates to gain an unfair

competitive advantage over other members. 

While the present global macroeconomic circumstances — elevated inflation, monetary

tightening to slow demand, and bouts of dollar appreciation — reduce some concerns

about current account surpluses, it is important to monitor countries’ external balances

and whether their production and domestic absorption are broadly aligned.

Treasury Analysis under the 1988 and 2015 Legislation

This Report assesses developments in international economic and exchange rate policies

over the four quarters through June 2023. The analysis in this Report is guided by Sections

3001-3006 of the Omnibus Trade and Competitiveness Act of 1988 (1988 Act) (codified at

22 U.S.C. §§ 5301-5306) and Sections 701 and 702 of the Trade Facilitation and Trade

Enforcement Act of 2015 (2015 Act) (codified at 19 U.S.C. §§ 4421-4422), as discussed in

Section 2 of this Report. 

2 For a list of further commitments, see the April 2021 Report on Macroeconomic and Exchange Rate Policies

of Major Trading Partners. Available at:

https://home.treasury.gov/system/files/206/April_2021_FX_Report_FINAL.pdf.
3

Under the 2015 Act, Treasury is required to assess the macroeconomic and exchange rate

policies of major trading partners of the United States for three specific criteria. Treasury

sets the benchmark and threshold for determining which countries are major trading

partners, as well as the thresholds for the three specific criteria in the 2015 Act. 

In this Report, Treasury has reviewed the 20 largest U.S. trading partners3 against the

thresholds Treasury has established for the three criteria in the 2015 Act:

(1) A significant bilateral trade surplus with the United States is a goods and services

trade surplus that is at least $15 billion. 

(2) A material current account surplus is one that is at least 3% of GDP, or a surplus for

which Treasury estimates there is a material current account “gap” using Treasury’s

Global Exchange Rate Assessment Framework (GERAF). 

(3) Persistent, one-sided intervention occurs when net purchases of foreign currency

are conducted repeatedly, in at least 8 out of 12 months, and these net purchases total

at least 2% of an economy’s GDP over a 12-month period.4 

In this Report, in accordance with the 1988 Act, Treasury has also evaluated whether

trading partners have manipulated the rate of exchange between their currency and the

United States dollar for purposes of preventing effective balance of payments adjustments

or gaining unfair competitive advantage in international trade.

Because the standards in the 1988 Act and the 2015 Act are distinct, a trading partner

could be found to meet the standards identified in one of the statutes without necessarily

being found to meet the standards identified in the other. Section 2 provides further

discussion of the distinctions between the 1988 Act and the 2015 Act.

Treasury Conclusions Related to the 2015 Act

In this Report, Treasury finds that no major trading partner met all three criteria under the

2015 Act during the four quarters ending June 2023, such that no major trading partner

requires enhanced analysis. 

Switzerland was removed from the Monitoring List, having met only one of the three

criteria over the four quarters through June 2023, as it had in the June 2023 Report for the

four quarters through December 2022. Switzerland had previously exceeded the

thresholds for all three criteria, as noted in previous Reports, in each of which Treasury

conducted enhanced analysis of Switzerland. In early 2021, Treasury commenced

enhanced bilateral engagement with Switzerland in accordance with the 2015 Act and

discussed with the Swiss authorities the policy options to address the underlying causes of

Switzerland’s external imbalances. Treasury continues to engage closely with Switzerland,

3 Based on total bilateral trade in goods and services (i.e., imports plus exports).

4 These quantitative thresholds for the scale and persistence of intervention are considered sufficient on their

own to meet the criterion. Other patterns of intervention, with lesser amounts or less frequent interventions,

might also meet the criterion depending on the circumstances of the intervention.
4

and also continues a separate but related Standing Macroeconomic and Financial Dialogue

to discuss macroeconomic issues.

Treasury Assessments of Other Major Trading Partners

Treasury has also established a Monitoring List of major trading partners, whose currency

practices and macroeconomic policies merit close attention. When a major trading partner

meets two of the three criteria in the 2015 Act, that trading partner is placed on the

Monitoring List. Once on the Monitoring List, an economy will remain there for at least two

consecutive Reports to help ensure that any improvement in their performance, such that

they no longer meet two of the three criteria for enhanced analysis, is durable, rather than

being due to temporary factors. As a further measure, Treasury will add and retain on the

Monitoring List any major U.S. trading partner that accounts for a large and

disproportionate share of the overall U.S. trade deficit, even if that economy has not met

two of the three criteria from the 2015 Act. In this Report, the Monitoring List

comprises China, Germany, Malaysia, Singapore, Taiwan, and Vietnam.

In addition to Switzerland, Korea was removed from the Monitoring List in this Report,

having met only one out of three criteria in the 2015 Act for two consecutive Reports.

Germany, Malaysia, Singapore, Taiwan, and Vietnam are on the Monitoring List, having

triggered two criteria in the 2015 Act. 

China’s failure to publish foreign exchange (FX) intervention and broader lack of

transparency around key features of its exchange rate mechanism continues to make it an

outlier among major economies and warrants Treasury’s close monitoring. It remains on

the Monitoring List for this reason as well as due to its outsized trade imbalance with the

United States. 

Treasury Conclusions Related to the 1988 Act

The 1988 Act requires Treasury to consider whether any economy manipulates the rate of

exchange between its currency and the U.S. dollar for purposes of preventing effective

balance of payments adjustments or gaining unfair competitive advantage in international

trade. In this Report, Treasury concludes that no major trading partner of the United

States engaged in conduct of the kind described in Section 3004 of the 1988 Act

during the relevant period. This determination has taken account of a broad range of

factors, including not only trade and current account imbalances and foreign exchange

intervention (the 2015 Act criteria), but also currency developments, exchange rate

practices, foreign exchange reserve coverage, capital controls, and monetary policy.

Treasury continues to carefully track the foreign exchange and macroeconomic policies of

U.S. trading partners under the requirements of both the 1988 Act and the 2015 Act, and to

review the appropriate metrics for assessing how policies contribute to currency

misalignments and global imbalances. The Administration has strongly advocated for our

major trading partners to carefully calibrate policy tools to support a strong and

sustainable global recovery. Treasury also continues to stress how important it is for all
5

economies to publish data related to external balances, foreign exchange reserves, and

intervention in a timely and transparent fashion. 

Section 1: Global Economic and External Developments

This Report covers economic, trade, and exchange rate developments in the United States,

the global economy, and the 20 largest trading partners of the United States for the four

quarters through June 2023 and, where quarterly and/or monthly data are available,

through end-September 2023. Total goods and services trade of the economies covered

with the United States amounted to more than $5.3 trillion in the four quarters through

June 2023, about 78% of all U.S. trade during that period. 

U.S. Economic Trends

Economic Performance in 2023 H1

The economy grew solidly

during the first half of 2023—

though at a slower pace than in

the latter half of 2022. Real GDP

grew 2.0% at an annualized pace

in the first half of this year,

following a 2.9% advance in last

year’s second half. Significantly,

growth of private domestic final

purchases (PDFP)—that is,

personal consumption

expenditures (PCE), business

fixed investment, and residential

investment—accelerated in the

first half of 2023, and

contributed 2.7 percentage

points to total GDP growth – a more than five-fold increase over the 0.5 percentage point

contribution in the latter half of 2022. The much larger contribution in the first half of this

year reflected faster private consumption and, especially, a much smaller decline in

residential investment, which was driven by significant improvements in single-family

home construction as well as sales of existing homes. Real PCE continued to reflect a

rotation from goods to services, even though consumption of services slowed a bit. 

Meanwhile, the contribution from business fixed investment declined modestly in the first

half of 2023. Business spending on structures remained strong, mainly reflecting heavy

investment in manufacturing factories, but also other structures.

-2.0

0.0

2.0

4.0

2021

H2

2022

H1

2022

H2

2023

Percentage points, seasonally adjusted, 

H1

annual rates

PDFP Contribution to GDP Growth

PCE Goods

PCE Services

BFI Structures

BFI Other

Residential

PFDP

Source: Bureau of Economic Analysis.
6

Among the remaining three

drivers of real GDP, total

government consumption and

investment added a substantial,

0.7 percentage points to growth

in the first half of 2023, after

rebounding in last year’s second

half to make an identical

contribution. However, impetus

from net international demand

was far more modest in the first

half of 2023, falling to 0.2

percentage points, a fraction of

the leading contribution this component made in the second half of 2022. Exports of goods

and services declined 1.9% at an annual rate in the first half of 2023, reflecting slowing

global demand for U.S. products, while imports fell more, down -2.6%. Consequently, the

trade deficit declined by $26.4 billion, after a more substantial narrowing of $192 billion in

the second half of last year. Meanwhile, the contribution from private inventories in the

second quarter of 2022 was more than reversed in the third quarter. The change in private

inventories posed a 1.1 percentage point drag on growth in this year’s first half, after

adding 0.5 percentage points in the second half of 2022. The drag in inventories was

largely sourced in the wholesale sector.

Labor markets remained strong

in the first half of 2023, but signs

of realignment in supply and

demand continued to build. The

historically rapid pace of payroll

job creation in 2021 eased

throughout 2022 and into the

first half of 2023. The economy

created an average 354,000

payroll jobs per month during

the latter half of 2022, which

stepped down to a monthly

average of 257,000 jobs in this

year’s first half. Even so, the pace is still consistent with that needed to maintain a stable

unemployment rate. The unemployment rate (U-3), meanwhile, edged up by 0.1

percentage point to 3.6% from December 2022 to June 2023, although during the first half

of 2023, this rate fell to 3.4% in January and April, the lowest rate since May 1969, as a

growing labor supply matched the pace of job creation.

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

2021

H2

2022

H1

2022

H2

2023

H1

Percentage points, seasonally 

adjusted, annual rates

Contribution to Real GDP Growth

Private Final

Domestic Purchases

Government

Net Exports

Change in Private

Inventories

GDP Growth

Source: Bureau of Economic Analysis.

61.0

61.4

61.8

62.2

62.6

63.0

0

1

2

3

4

5

6

7 Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Percent of labor force

Unemployment & Labor Participation

U-3 (LHS) LFPR (RHS)

Source: Bureau of Labor Statistics.
7

Inflation in the first half of 2023

continued to slow due to ongoing

improvements in several drivers,

including food and energy, as

well as in underlying conditions,

such as resolving supply chains

and price pressures stemming

from Russia’s illegal invasion of

Ukraine were contained. One

major component, shelter,

showed very little improvement

from an elevated pace. After

slowing steadily in the final six

months of 2022, energy price

inflation has declined outright in

the first half of this year. Food

price inflation remained at a

double-digit pace through most

of 2022, but finally moved lower

during the first half of this year. 

As a result of all these factors,

twelve-month CPI inflation has

declined from a peak rate of

9.1% in June 2022, to 6.5% in

December 2022, and to 3.0% in

June 2023, i.e. a two-thirds

reduction from the year-earlier peak. The improvement in core CPI inflation (which

excludes food and energy) has been more modest, owing to persistently elevated readings

for shelter prices and a shift back to consumption of services. Over the year through June

2022, the core CPI rose by 5.9%, then eased to 5.7% over the 12 months through December

2022. Over the year through June 2023, however, 12-month core inflation eased more

noticeably to 4.8%. Even after slowing noticeably during the latter half of 2022, core goods

inflation decelerated further during the first half of this year, to a 12-month pace of 1.3%

through June 2023. Core services inflation remains elevated, owing to rising demand in

various service sectors, especially those adversely affected by the pandemic, as well as

persistently rapid inflation in housing (rent of primary residence and owners’ equivalent

rent).

Economic Developments Since June 2023

In the advance estimate for real economic activity in the third quarter of 2023, real GDP

rose 4.9% at an annual rate, more than double the rate in the first half of 2023 and the

fastest pace of growth since the first quarter of 2021. PDFP accounted for 2.8 percentage

points of GDP growth as household consumption strengthened and residential investment

posted its first contribution to GDP growth since the first quarter of 2021. For the

components of real GDP other than PDFP, the change in private inventories boosted real

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2021-Jun

2021-Dec

2022-Jun

2022-Dec

2023-Jun

Percentage point contribution to 

12-month inflation

CPI Inflation Decomposition

Energy

Food

Core CPI

CPI Inflation

Source: Bureau of Labor Statistics.

0.0

2.0

4.0

6.0

8.0

2021-Jun

2021-Dec

2022-Jun

2022-Dec

2023-Jun

Percentage point contribution to 

12-month core inflation

Core CPI Inflation Decomposition

Goods

Rent or Housing

Services ex.

Housing

Core CPI Inflation

Source: Bureau of Labor Statistics.
8

economic activity by 1.3 percentage points, and government purchases and investment

added 0.8 percentage points. However, net exports subtracted 0.1 percentage points from

growth as import growth outweighed the increase in exports.

Strong labor markets persisted during the third quarter of 2023 with robust payroll job

growth and low unemployment rates. From June to September, employers added an

average of 266,000 jobs, up from 201,000 in the second quarter while the unemployment

rate increased by 0.2 percentage points to 3.8% in September. Meanwhile, the labor force

participation rate continued to improve slowly, averaging 62.8% throughout the third

quarter, a post-pandemic high. Demand for labor has slowly eased: the average vacancy

ratio in July and August (last available data) ticked down by 0.1 to 1.5 job openings per

unemployed persons from the second quarter, still somewhat above the pre-pandemic

level of just over 1 but well below recent highs. The quits rate also softened, decreasing by

0.2 percentage points to 2.3% in the third quarter. These improvements have eased labor

market pressures but the vacancy ratio and quits rates still are high relative to historical

standards, signaling that the imbalance between supply and demand persists.

Inflation trended a bit higher during the third quarter, boosted by higher energy prices, but

12-month rates continued to slow relative to year-earlier readings. On a year-over-year

basis, CPI inflation was 3.7% in September 2023, up from 3.0% in June 2023. Year-overyear energy price inflation remains negative—but to a smaller degree due to recent

increase in energy prices. Meanwhile, twelve-month core inflation continued to trend

lower; over the year through September, core inflation was 4.1%, less than two-thirds of

the year-earlier reading and the slowest pace in two years. Rent of housing inflation

continues to set a high floor on core price growth.

The Federal Open Markets Committee (FOMC) tightened monetary policy further during

the third quarter. The FOMC voted to raise its short-term policy rate target (the federal

funds rate) by 25 basis points to 5.25–5.50% at the July 25-26 meeting but left the target

unchanged at the September 19-20 meeting. The target range remains at the highest level

since February 2001.

Federal Finances in Fiscal Year 2023

Federal finances have improved

significantly since Fiscal Year

(FY) 2020. In FY 2020, the

federal deficit peaked at 14.7%

of GDP due to the pandemic and

related aid measures to help

households and businesses

weather the economic shock. By

FY 2022, the deficit had

decreased to 5.4% of GDP,

reflecting the phasing out of

pandemic-related aid and

-40

-30

-20

-10

0

10

20

30

FY '10 FY '12 FY '14 FY '16 FY '18 FY '20 FY '22

Percent of GDP, fiscal years

Federal Finances

Receipts Outlays Surplus (+) / Deficit (-)

Sources: U.S. Treasury; Bureau of Economic Analysis.
9

recovery in the economy more broadly. For FY 2023, the deficit increased $320 billion to

$1.70 trillion, equal to 6.3% of GDP, as lower receipts outweighed decreased spending. 

Individual income taxes dropped $457 billion, reflecting lower capital gains realizations

and lower deposits of Federal Reserve earnings coinciding with higher interest rates and

the runoff of longer-term securities on the Federal Reserve’s balance sheet. 

Outlays decreased by $137 billion in FY 2023, partly reflecting lower student loan

expenditures and the expiration of the expanded Child Tax Credit, among other provisions. 

By contrast, outlays for national

defense, Social Security,

Medicare, and net interest all had

large increases. 

At the end of FY 2023, gross

federal debt stood at $33.2

trillion (122.9% of GDP) while

debt held by the public was

$26.2 trillion (97.6% of GDP). In

June 2023, Treasury’s borrowing

limit was suspended until 2025.

U.S. Current Account and Trade Balances

The U.S. current account deficit

decreased by $122.9 billion to

$865.5 billion in the four

quarters through June 2023. The

deficit shrank to 3.3% of GDP

over the same period, smaller

than the 4.0% in the four

quarters though June 2022. The

narrowing of the deficit was

driven by increased surpluses on

primary income and services

along with a large decrease in

the goods deficit. This offset an

increase in the secondary income deficit reflecting a decrease in general government

transfers and an increase in private transfers. The services surplus increase was driven in

part by an increase in personal travel. The deficit in goods narrowed as goods trade saw

increases in exports reflecting an increase in all major categories except agricultural

products while imports increased at a lower rate driven by an increase in automobiles and

capital goods, offsetting a decline in imports of industrial supplies and materials. From

2013 to 2019, the headline U.S. current account deficit had been quite stable, around 2-

2.5% of GDP. The reduction in the current account deficit in the four quarters of this

Report follows three years of growing current account deficits from 2019-2022.

-8

-6

-4

-2

0

2

4 2008

20092010201120122013201420152016201720182019202020212022

Q2-2023

Percent of GDP

U.S. Current Account Balance

Income Services Goods Current Account Balance

Sources: Bureau of Economic Analysis, Haver

40

60

80

100

120

140

40

60

80

100

120

140

FY '10 FY '12 FY '14 FY '16 FY '18 FY '20 FY '22

Percent of GDP, fiscal years

Federal Debt Outstanding

Federal Debt Debt Held by the Public

Sources: U.S. Treasury; Bureau of Economic Analysis.
10

The U.S. trade deficit declined

21.2% in the four quarters

through June 2023 to 2.3% of

GDP compared to the four

quarters through June 2022.

Overall, the goods deficit

declined by around $11

billion in the four quarters

through June 2023. The

services surplus was

relatively stable, increasing

around $2.7 billion. Since

peaking in March 2022, the

trade deficit has steadily declined. Among top trading partners, on a rolling 12-month

basis the U.S. deficit in goods trade has shrunk most for China and increased most for

Mexico. Overall trade growth has decreased since peaking in the first quarter of 2022. For

each month between April and June 2023 on a year over year basis trade growth has been

negative for the U.S. reflecting a slowdown in exports and an even larger slowdown in

imports. This is likely due to a moderation in trade following the large bounce back in

2021 from the pandemic-related collapse in global trade and potentially some rebalancing

in consumption from goods to services, which are less heavily traded than goods. 

At the end of June 2023, the U.S. net international investment position marked a net

liability of about $18.0 trillion (67.2% of GDP), declining by $1.3 trillion from end-June

2022. The stronger dollar in 2022 meant U.S foreign assets denominated in foreign

currency lost value in dollars, while the U.S. liabilities are primarily in dollars and their

value does not as significantly change with currency fluctuations. In addition, net other

changes also reflected U.S. stock price increases that exceeded foreign stock price

increases. Still, price and exchange rate changes were relatively muted on average in this

four-quarter period for the United States. It is not uncommon for the magnitude of

valuation changes to substantially exceed the scale of the current account, as the large size

of U.S. gross positions means relatively small percentage changes in prices can lead to large

changes in total value. The value of U.S.-owned foreign assets was $33.6 trillion, while the

value of foreign-owned U.S. assets stood at $51.6 trillion. Despite current account deficits,

the total net liability as of end-June 2023 was roughly the same as at the end of 2021.

International Economic Trends

Global economic growth in both 2022 and so far in 2023 has been stronger than many

forecasts had projected. The IMF estimates global growth was 2.2% in 2022,

outperforming its projection of 1.7% as of October 2022 (measured on a Q4/Q4 basis). It

projects global growth to increase to 2.9% in 2023 and further to 3.2% in 2024 on the same

Q4/Q4 basis. Prices of commodities like food and energy have become less volatile, supply

chain pressures continued to ease, and in some countries domestic demand received a

boost from excess savings. Many emerging market and developing economies have fared

-40

-20

0

20

40

60

20062007200820092010201120122013201420152016201720182019

2020202120222023

Annual Percent Change

U.S. Goods and Services Trade Growth

Exports Imports

Source: U.S. Census Bureau 
11

better than expected thanks in part to improved terms of trade for some, proactive

monetary policy, and a healthy build-up of external buffers. Russia’s war against Ukraine

continues to weigh on the outlook after introducing volatility among critical commodity

prices, which increased energy and food insecurity and exacerbated inflation. Looking

forward, the IMF projects global growth to be around 3% per year over the next five years,

the weakest medium-term projections seen for around thirty years.

Macroeconomic policies should be carefully calibrated to sustain the economic recovery

without exacerbating inflation. Different policy responses will be required to address weak

growth, depending on its drivers. Fiscal policy may be particularly complicated for

economies with high debt and growing debt service in light of high demands on public

sector funding for population aging, defense-related spending commitments, and efforts to

address long-standing structural challenges – including climate change, inequality, and

infrastructure investment. 

-2

0

2

4

6

8

10 India China Vietnam Malaysia Mexico Brazil Thailand Taiwan

2023 (Projected) 2024 (Projected)

-1

-1

0

1

1

2

2

3

3

4

4 United States Ireland Japan Australia Korea Canada Singapore

Belgium France Switzerland Italy Netherlands UK Germany

Annual Percent Change

Real GDP Growth

Source: IMF World Economic Outlook October 2023.

Advanced Economies Emerging Market Economies
12

Global Imbalances

Global current account

imbalances5 were broadly

stable in the few years prior

to the pandemic before

widening over the last three

years. The efforts to contain

the COVID-19 pandemic and

its negative economic effects

led to extraordinary policy

responses that contributed

significantly to global

imbalances. Global current

account imbalances

remained elevated in 2022

with a notable increase in

non-U.S. deficit countries’

deficits. Germany’s

reduction in its current

account surplus was sizable,

roughly three times the size

of the increase in China’s

surplus in nominal terms. 

Historically high energy and

commodity prices, resulting

from Russia’s war against

Ukraine, boosted the

external positions of

commodity exporters in

2022 while weakening those

of importers. The IMF

projects that global current

account balances will

narrow in 2023 and narrow

further over the medium

term as commodity prices

decline, though this is

subject to risks associated

with the heterogeneous pace

of growth and fiscal

consolidation across countries.

5 Measured as the sum of the absolute values of current account deficits and surpluses.

-3

-2

-1

0

1

2

3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Percent of Global GDP

Global Current Account Imbalances

China Germany Japan

Other Surplus United States Other Deficit

Statistical Discrepancy Oil Exporters

Sources: IMF WEO, Haver

-30%

-20%

-10%

0%

10%

20%

30%

2004200520062007200820092010201120122013201420152016201720182019202020212022

Percent of Global GDP

International Investment Positions

China Germany Japan

Other Surplus United States Other Deficit

Oil Exporters Discrepancy

Note: Discrepancy between aggregate creditor and debtor positions reflect 

any missing country-level data, as well as the global statistical discrepancy. 

Negative discrepancy values suggest missing data predominantly correspond 

to net debtor countries.

Sources: IMF, Central Bank of China (Taiwan).
13

Net international investment

positions (NIIP) have

narrowed over the last two

years relative to the historical

peaks reached in 2020 despite

large and persistent current

account balances in many

countries. Among major U.S.

trading partners, the change

in net international

investment positions over the

four quarters through June

2023 broadly reflect valuation

effects. Notably, in the case of

the Netherlands and

Singapore, these valuation

changes led to decreased net foreign asset positions despite large current account

surpluses. Conversely, the NIIP increased in Canada, Belgium, Thailand, and Italy despite

their current account deficits. As asset and liability positions are now large as a share of

GDP, when asset prices and exchange rates move considerably, valuation changes can

overwhelm annual financial flows.

Capital Flows to Emerging Market Economies

A number of pressures

continued to weigh on net

capital flows to emerging

market economies over the

four quarters through June

2023. Total net outflows

(FDI, portfolio investment,

and other investment)

receded to $396 billion over

the course of the four

quarters (relative to $698

billion over the course of

2022).

6 Combined

nonresident net flows

remained subdued and

positive over the four

quarters through June,

suggesting that foreign investor demand for emerging market economy assets remained

somewhat buoyant, but was outweighed by continued, albeit decreasing, net outflows from

6 Notably, net outflows from Russia equaled $110 billion over the four quarters through June 2023. 

-40

-30

-20

-10

0

10

20

30 CAN JPN MYS BEL CHN DEU KORIRL THA ITA CHE USA IND MEX BRA GBR FRA NLD SGP Percent of GDP

Valuation Effects (4Q change as of Jun-23)

CA Balance/GDP (4Q sum through Jun-23)

Change in NIIP/GDP (4Q change as of Jun-23)

Sources: Haver, IMF, National Authorities

Changes in Net International Investment Positions

-400

-300

-200

-100

0

100

200

300

400

Q4-08 Q4-10 Q4-12 Q4-14 Q4-16 Q4-18 Q4-20 Q4-22

USD Billions

Net Capital Flows to Emerging Markets

Financial Derivatives (Net) Other Investment (Net)

Direct Investment (Net) Portfolio Investment (Net)

Net Capital Flows (excl reserves)

Note: Financial account (excluding reserves) adjusted for errors and ommissions. 

2023 reflects data through the end-June where available.

Source: National Authorities, U.S. Department of the Treasury Staff Calculations

Capital Outflows

Capital Inflows
14

residents.7 During this

period, net outflows from

emerging markets of

portfolio and other

investment decreased to

$609 billion, narrowing

roughly $131 billion relative

to the same period one year

prior.8 On a cumulative basis,

net portfolio flows have

declined by almost $860

billion since early 2022 as the

onset of Russia’s war against

Ukraine and tighter global

financial conditions weighed

on international capital

markets. Excluding China, net outflows of portfolio investment from emerging markets

have been less pronounced, with a cumulative decline of about $514 billion compared to

pre-invasion levels.

On a quarterly basis, net capital flows were largely driven by portfolio and other

investment flows over the four quarters through June 2023. During the third quarter of

2022, net portfolio outflows remained elevated with overall net portfolio outflows totaling

$200 billion, while net outflows of other investment increased to $121 billion. Net

portfolio outflows narrowed in the fourth quarter but remained at moderately elevated

levels of about $74 billion as global financial conditions began to ease, nonresident net

flows reversed, and resident net outflows decreased. Net other investment outflows also

narrowed during this period despite an uptick in nonresident outflows. Net portfolio

outflows accelerated again in the first quarter of 2023 to $117 billion amid signs of banking

sector stress in the United States and Europe, wherein accelerating resident outflows

outweighed buoyant nonresident inflows. Resident outflows slowed in the second quarter

of the year and net portfolio outflows narrowed to $86 billion even as the pace of emerging

market central bank tightening began to ease. Notably, net portfolio investment flows into

China remained under pressure over the four quarters through June, with net outflows

totaling $186 billion amid continuing outflows from both residents and nonresidents. Net

flows of FDI into China turned negative for the first time since 2019, with outflows totaling

$104 billion, due to suppressed inflows from nonresidents.

Higher frequency data (from sources beyond quarterly balance of payments data) suggest

that, since end-June, nonresident portfolio flows to emerging markets have been mixed,

primarily driven by large, volatile equity flows in China. These measures suggest foreign

7 These sustained net outflows from residents can reflect both short-term cyclical factors such as changes in

global risk appetite as well as long-term, structural characteristics including reduced investment home bias,

increased sophistication of domestic investments, and increased access to international markets.

8 In the case of several emerging markets, substantial monetary policy tightening over the course of 2022 and

2023 may have helped to lessen the severity of net capital outflows. 

-1000

-800

-600

-400

-200

0

200

t t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8

USD Billions

Time since onset (quarters)

Global Financial Crisis (2008) Taper Tantrum (2013)

RMB Devaluation (2015) COVID Sudden Stop (2020)

Russian Invasion/Global Tightening (2022)

Note: Depicts net resident and nonresident portfolio investment flows on a cumulative 

basis following particular shock episodes. 2023 reflects data through the end-June where 

available.

Source: National Authorities, U.S. Department of the Treasury Staff Calculations

Capital Outflows

Capital Inflows

Cumulative Portfolio Flows to Emerging Markets
15

investors remain relatively sensitive to signals regarding the outlook for global growth

over the medium term, particularly from the deepening property sector deterioration in

China and its potential spillovers to the global economy and global financial system.

Foreign Exchange Markets9

The nominal trade-weighted

dollar weakened 0.8% from endJune 2022 to end-June 2023 as

foreign currency movements

continued to reflect mixed

influences regarding global

inflation, the expected pace of

monetary policy tightening, and

other factors over this period. 

The dollar depreciated broadly

over this period against advanced

economy and emerging market

economy currencies, weakening

by 0.9 and 0.7%, respectively. The

dollar appreciated during the

third quarter of 2022 by 5.4%, as

more rapid tightening of

monetary policy by the Federal

Reserve relative to the rest of the

world, continued labor market

tightness and persistent inflation

pressures in the United States,

terms of trade shocks, and safe

haven buying weighed on foreign

exchange markets. As global

financial conditions began to ease

in the fourth quarter of 2022, the

dollar depreciated 4.7%, nearly

retracing its movement from the

preceding quarter. 

Against the backdrop of more pronounced dollar appreciation over the course of 2022,

several major trading partners intervened to stem the pace of depreciation against the

dollar. In September and October 2022, Japanese authorities intervened in currency

9 Unless otherwise noted, this Report quotes exchange rate movements using end-of-period data. Bilateral

movements against the dollar and the nominal effective dollar index are calculated using daily frequency or

end-of-period monthly data from the Federal Reserve Board. Movements in the real effective exchange rate

for the dollar are calculated using monthly frequency data from the Federal Reserve Board, and the real

effective exchange rate for all other currencies in this Report is calculated using monthly frequency data from

the Bank for International Settlements (BIS) or JP Morgan if BIS data are unavailable.

Emerging Market Economies (EME)

-15 -10 -5 0 5 10 15

China

Taiwan

Malaysia

India

Vietnam

Thailand

Singapore

Brazil

Mexico

EME basket

Advanced Foreign Economies (AFE)

-15 -10 -5 0 5 10 15

2022 H2 2023 H1 2023 Q3 Net change

U.S. Dollar vs. Major Trading Partner Currencies

(+ denotes dollar appreciation)

Contribution to percent change between end-Jun. 2022 and end-Sep. 2023

Broad dollar index

Sources: FRB, Haver

-15 -10 -5 0 5 10 15

Japan

Canada

UK

Euro

Switzerland

AFE basket
16

markets, marking their first intervention in currency markets in almost 11 years. They

stated that the interventions aimed to reduce recent heightened volatility of the yen. The

Japanese authorities sold $62.3 billion in dollars and purchased yen over these two months,

strengthening the value of the yen and pushing back against depreciation.

Despite bouts of financial market stress in early 2023 and amid further market

expectations of easing financial conditions, the dollar weakened further over the first half

of 2023, depreciating by 1.2%. During this time, dollar performance was mixed across

major trading partners’ currencies. The dollar weakened most notably against the Mexican

peso and the Brazilian real, depreciating by 12.1% against the peso and 9.0% against the

real. Meanwhile, the dollar appreciated against the yen by 9.6%, the Malaysian ringgit by

6.0%, and the Chinese renminbi by 5.1%.

More recently, the dollar has rebounded, appreciating 2.4% between end-June and endSeptember, leaving it 1.1% stronger on net since the beginning of the year. While the dollar

has strengthened against almost all major trading partners in the third quarter of 2023,

dollar appreciation has been more pronounced against advanced economy currencies.

On a real effective basis, the dollar appreciated 0.7% from end-June 2022 to endSeptember 2023 and remained 16.5% above its 20-year average. In its most recent

assessment, the IMF continued to judge the dollar to be overvalued on a real effective

exchange rate basis. 

Real effective exchange rates across several economies have moved over the course of

2023, but generally not in the direction of easing current account imbalances. The bulk of

countries that had current account deficits in 2022 have seen either little move in real

exchange rates over the course of 2023 (like the United States) or have appreciated by a

fair amount (like Brazil and Mexico). In contrast, while some surplus countries have seen

appreciations, a number of major trade partners with sizable current account surpluses

have depreciated over the course of 2023, shifting relative prices in a direction making it

likely they run even larger surpluses. 
17

Foreign Exchange Reserves

Global foreign currency reserves totaled $12.0 trillion over the four quarters through endJune 2023, an increase of roughly $72 billion relative to end-June 2022. Data on the stock

of global foreign exchange reserves, the currency composition of global reserves, and

assumptions regarding the asset composition of foreign exchange reserve assets (see

footnote 22 on p. 39 for more details on Treasury’s methodology for estimating foreign

exchange intervention), suggest this increase was driven predominantly by the $74 billion

valuation effects resulting from exchange rate movements over this period, particularly

over the last two quarters of 2022, and an estimated interest income of $408 billion.

Estimated net sales of $411 billion partially offset this increase. However, balance of

payments data, which isolate flows of reserve assets from valuation effects, paint a

different picture. The most recent and available quarterly balance of payments data

suggest the increase in foreign exchange reserves was due to an accumulation of FX assets

of $36 billion while total valuation effects (both exchange rate and price changes) increased

reserves by $36 billion over the same time period. This discrepancy highlights the

sensitivity of estimates to assumptions about the asset and currency composition of

reserves, and further underscores the importance of transparent and timely data on

foreign exchange interventions. 

Treasury assesses that the economies covered in this Report continue to maintain broadly

ample—or more than ample—reserves based on standard adequacy benchmarks. 

Reserves in most of these economies are more than sufficient to cover short-term external

liabilities and anticipated import costs. Moreover, the most recent IMF assessments of

BRA

CAN

FRA

IND

MEX

GBR

USA

BEL AUS

CHN

EUR

DEU IRL

ITA

JPN

KOR

MYS

NLD

CHE SGP

THA TWN

VNM

-15

-10

-5

0

5

10

15

20

25

-5 0 5 10 15 20

Change in REER as of Sep-20231

2022 Current Account Balance (% of GDP)

2022 Current Account Balance and YTD REER Developments

Sources: National authorities; BIS REER Indices, JP Morgan, FRB

1/Change between 2022 average REER and end-September 2023. 
18

adequacy based on composite metrics across most emerging market economies for 2022

also suggest reserves are broadly adequate. For economies where reserves are

substantially/significantly below adequate levels, authorities should rebuild precautionary

buffers gradually over the medium term in a manner that does not exacerbate global

imbalances and is consistent with necessary macroeconomic adjustment.

Economic Developments in Selected Major Trading Partners

China

China’s growth increased following the end of the “zero-COVID” policy at the end of 2022,

though it continues to underperform relative to pre-Covid trends. While private demand

FX Reserves 

(USD Bns)

1Y Δ FX 

Reserves 

(USD Bns)

FX Reserves 

(% of GDP)

FX Reserves 

(% of ST debt)

FX Reserves 

(% of IMF ARA 

Metric)*

China 3,193.0 121.7 18% 241% 106%

Japan 1,126.1 -66.8 27% 37% ..

Switzerland 808.2 -79.3 96% 72% ..

India 528.0 2.4 16% 427% 165%

Taiwan 564.8 15.9 76% 303% ..

Korea 397.2 -17.3 24% 245% 97%

Singapore 317.2 12.2 67% 27% ..

Brazil 312.6 1.3 16% 388% 136%

Thailand 203.6 2.1 40% 312% 228%

Mexico 183.8 6.4 11% 293% 116%

UK 106.0 -4.3 3% 2% ..

Malaysia 101.9 2.2 25% 94% 110%

Vietnam 89.2 -12.2 21% 242% ..

Canada 86.5 7.5 4% 8% ..

France 27.5 -24.8 1% 1% ..

Italy 47.6 1.2 2% 4% ..

Australia 36.9 2.5 2% 10% ..

Germany 36.9 -0.5 1% 1% ..

Belgium 9.8 -0.9 2% 2% ..

Netherlands 6.4 1.6 1% 1% ..

Ireland 5.5 0.3 1% 0% ..

United States 36.6 0.4 0% 0% ..

World 12,048.5 71.9 n.a. n.a. ..

Foreign exchange reserves as of end-June 2023.

GDP caluclated as sum of rolling 4Q GDP through Q2-2023.

Table 1: Foreign Exchange Reserves

Short-term debt consists of gross external debt with original maturity of one year or less, as of the 

end of Q2-2023; China as of Q1-2023; Vietnam as of Q4-2022.

* IMF Assessing Reserve Adequacy Metric, a composite measure of reserve adequacy, as of end2022. China's reserves are compared to the IMF's capital controls-adjusted metric. The IMF assesses 

reserves between 100-150% of the ARA metric to be adequate.

Sources: National Authorities, World Bank, IMF, BIS.
19

has begun to recover and has been the primary driver of growth in 2023, household

consumption remains below its pre-pandemic trend. Credit demand and investment have

also been softer than expected, while declining external demand has provided another

headwind. Weakness in the property sector remains a significant drag on growth and

exacerbates local government debt issues, both of which pose risks to financial stability. In

response to the deteriorating outlook, the authorities have signaled their intention to ease

their macroeconomic policy stance through targeted measures to stimulate housing

demand, small changes in monetary policy, and most recently, a rare intra-year increase to

the central government’s fiscal deficit.

China’s current account surplus

widened marginally to 2.2% of

GDP over the four quarters

through June 2023 from 2.1% of

GDP in the four quarters through

June 2022. During this time,

China’s goods trade surplus

expanded to 3.7% of GDP from

3.5%, in part reflecting weak

domestic demand.

10 China’s

income deficit narrowed to 0.6%

of GDP from 1.0% of GDP during

this same period, primarily due

to a reduction in investment income earned by nonresidents. Partially offsetting these

trends, the services trade deficit widened to 0.9% of GDP over the four quarters through

June from 0.4% in the preceding four quarters amid an easing of restrictions on outbound

travel, though the services deficit remains well below pre-pandemic levels.

China’s bilateral goods and services surplus with the United States fell to $294 billion

during the four quarters through June 2023, down from $380 billion in the prior four

quarters. China’s bilateral trade surplus with the United States remains by far the largest of

any U.S. trading partner. The bilateral goods surplus fell to $313 billion in the four quarters

through June 2023 from $396 billion in the preceding four quarters. The reduction in

China’s bilateral goods trade surplus during this period reflects both a reduction in U.S.

imports from all trading partners and a reduction in the share of U.S. imports from China. 

China ran a bilateral services trade deficit with the United States of $19 billion in the year

through June 2023, widening from a deficit of $16 billion during the previous four quarters. 

China’s financial account deficit expanded significantly to $230 billion in over the four

quarters through June 2023 from $66 billion during the previous four quarters. The rapid

expansion of China’s financial account deficit was primarily the result of the large swing in

10 As discussed in previous Reports, these trade statistics are based on China’s official balance of payments

data compiled by the State Administration of Foreign Exchange (SAFE). Separate trade data from China’s

General Administration of Customs imply a much larger goods trade surplus of 5.0% of GDP in the year

through June 2023. Treasury’s use of SAFE data is not meant to imply that these data are more accurate but is

instead motivated by these data’s consistency with other components of the balance of payments. 

-5

0

5

10

15

200820092010201120122013201420152016201720182019202020212022

Q2-2023

Percent of GDP

China: Current Account Balance

Income Services Goods Current Account Balance

Sources: SAFE, Haver
20

China’s direct investment balance to a record deficit of $104 billion from a surplus of $149

billion during the previous four quarters, reflecting a strong deceleration in FDI inflows

during this period. The widening of China’s portfolio investment deficit to $186 billion

over the four quarters through June 2023 from $96 billion during the preceding four

quarters also contributed to the broader shift in China’s financial account. These portfolio

outflows mostly consisted of portfolio debt outflows by both residents and nonresidents

amid a growing divergence in monetary policy stances between China and most advanced

economies. These trends were partially offset by a large swing in the other investment

balance to a surplus of $57 billion over the four quarters through June 2023 from a deficit

of $113 billion over the previous four quarters, primarily due to a reduction in China’s

overseas loans and financial claims.

11 A net errors and omissions deficit of $37 billion

suggests undocumented capital outflows not captured in identified components of the

financial account, in line with previous years, although the scale of these outflows has

moderated.

The RMB depreciated by 5.5%

against the dollar in the first nine

months of 2023. During this

same period, the RMB

strengthened by 0.9% against

the People’s Bank of China’s

(PBOC’s) China Foreign

Exchange Trade System (CFETS)

nominal basket.

12 Meanwhile,

the real effective exchange rate

weakened by 5.4% in the first

nine months of 2023, as lower

inflation in China than its trading

partners caused the real exchange rate to depreciate despite the appreciation of the

nominal effective exchange rate. The RMB’s depreciation against the dollar this year

follows appreciation pressure towards the end of 2022, with the RMB appreciating 3%

against the dollar in December 2022. The RMB was relatively stable against the dollar and

the CFETS basket in the first quarter of 2023 but began to depreciate in mid-April on both a

bilateral and nominal effective basis. This depreciation occurred amid a deteriorating

growth outlook in China and a widening divergence between interest rates in China and

that of most advanced economies. Depreciation pressures temporarily eased in July –

when expectations of potential large-scale macroeconomic stimulus momentarily

supported sentiment toward Chinese assets and the broad dollar weakened – but

subsequently resumed as these supportive factors dissipated. The RMB continued to

weaken against the dollar in August before stabilizing in September, while the RMB’s

appreciation against the CFETS basket amid broad dollar strength more than offset earlier

depreciation against the basket.

11 Excluding China’s SDR allocation in August 2021, the other investment deficit was $155 billion over the

four quarters through June 2022.

12 The CFETS RMB index is a trade-weighted basket of 24 currencies published by the PBOC.

80

85

90

95

100

105

110

80

85

90

95

100

105

110

201520162017

201820192020202120222023

Indexed December 2014 = 100

China: Exchange Rates

Bilateral vs. USD CFETS REER (monthly)

Sources: CFETS, FRB, BIS
21

China provides very limited transparency regarding key features of its exchange rate

mechanism, including the policy objectives of its exchange rate management regime and its

activities in the offshore RMB market. The PBOC manages the RMB through a range of

tools including setting the central parity rate (the “daily fix”) that serves as the midpoint of

the daily trading band. Chinese authorities can directly intervene in foreign exchange

markets as well as influence the interest rates of RMB-denominated assets that trade

offshore, the timing and volume of forward swap sales and purchases by China’s stateowned banks, and the conversion of foreign exchange proceeds by state-owned enterprises

(SOEs).

The authorities have implemented several regulatory and administrative measures this

year to counteract RMB depreciation pressures:

• In early June, a self-regulatory body overseen by the PBOC reportedly instructed

banks to lower interest rates offered on dollar deposits, with major state-owned

banks subsequently cutting dollar deposit rates twice over the course of the next

month.

• In late June, the PBOC started to consistently set the daily fix at a level significantly

stronger than the market consensus forecast, which market participants interpreted

as the authorities signaling their discomfort with the pace of depreciation. 

• In July, the PBOC adjusted macroprudential regulations to incrementally ease

restrictions on resident firms’ ability to raise funds from nonresidents, a move the

central bank described as a response to deprecation pressure.

13 

• In September, the PBOC reduced the foreign currency required reserve ratio,

loosening onshore foreign exchange liquidity conditions. 

Throughout the RMB’s latest depreciation cycle against the dollar, the authorities have

made statements indicating their intention to maintain exchange rate stability, for example,

stating that the authorities will “implement a mix of policy measures to stabilize market

expectations and resolutely prevent major exchange rate fluctuations...” 14 Additionally,

multiple press reports provide evidence of state-owned banks taking actions that resist

depreciation pressure—including increasing dollar sales in exchange for RMB in the

onshore and offshore spot and forward markets—with some reports explicitly tying this

behavior to instructions from the Chinese authorities.15 The authorities have also

reportedly encouraged banks to take a variety of actions intended to limit offshore RMB

liquidity in order to support the currency, including reducing RMB lending in Hong Kong,

scaling back investments in the Hong Kong bond market under the Southbound Bond

Connect program, and limiting purchases of negotiable certificates of deposits issued by

offshore banks amid increased RMB-denominated bill issuance in Hong Kong by the

13 People’s Bank of China. Zhongguo Huobi Zhengce Zhixing Baogao 2023 Nian Di Er Jidu [China’s Monetary

Policy Implementation Report for the Second Quarter of 2023], p. 21, August 17, 2023.

14 People’s Bank of China. “PBOC Monetary Policy Committee Holds Q2 2023 Meeting,” June 30, 2023.

15 See, for example “China Told State Banks to Escalate Yuan Intervention,” Bloomberg, August 17, 2023.
22

PBOC.

16 All of these actions follow, and in some cases build upon, a range of measures the

authorities implemented last year to support the RMB, as described in the previous Report. 

China’s lack of transparency and use of a wide array of tools complicate Treasury’s ability

to assess the degree to which actions by the authorities and state-owned banks are

designed to impact the exchange rate. Treasury will continue to closely monitor China’s

use of exchange rate management, capital flow, and regulatory measures and their

potential impact on the exchange rate.

China’s headline foreign

exchange reserves increased by

$122 billion over the four

quarters through June 2023,

ending this period at $3.2 trillion. 

China is an outlier among the

economies covered in this

Report in not disclosing its

foreign exchange market

intervention, which forces

Treasury staff to estimate

China’s direct intervention in the

foreign exchange market through

the following two proxy measures. The PBOC’s foreign exchange assets booked at

historical cost, the first proxy measure for foreign exchange intervention, increased by $66

billion during the four quarters through June 2023. Between last October and March 2023,

a period in which the RMB faced pressures to appreciate, this intervention proxy recorded

a $69 billion increase, a pace of accumulation not seen since 2014, but after March, as

appreciation pressure eased, this accumulation stopped entirely. Meanwhile, net foreign

exchange settlement data, another proxy measure that includes the activities of China’s

state-owned banks, recorded net foreign exchange purchases, adjusted for changes in

outstanding forwards, of $113 billion during this period. These proxy measures suggest

intervention to resist appreciation over this period despite China’s sizable current account

surplus.

These figures represent estimates of Chinese foreign exchange intervention during a period

in which the RMB experienced both appreciation and deprecation pressures. In more

recent months, Treasury estimates suggest the authorities sold foreign exchange amid

additional depreciation pressures. As noted in previous Treasury FX Reports, the

divergence between these two proxy measures could be an indication that monthly

changes in the PBOC’s foreign exchange assets are not adequately capturing the full range

of China’s intervention methods. Overall, these developments highlight the need for China

to improve transparency regarding its foreign exchange intervention activities.

16 “China Steps Up Yuan Defence with Bond Limit Guidance.” Reuters, August 25, 2023. 

-200

-150

-100

-50

0

50

100

201520162017201820192020202120222023

Billion U.S. Dollars

China: Estimated FX Intervention

PBOC FX Assets Bank Net FX Settlement

Sources: PBOC, SAFE, U.S. Treasury Estimates
23

The authorities should provide additional policy support in a manner that does not

exacerbate economic imbalances or risks to financial stability. China should prioritize

measures to support household disposable income and consumer confidence through both

direct fiscal support and structural reforms, including improvements to the social safety

net and continued liberalization of the household registration (hukou) system. These

would not necessarily require short term stimulus but a longer-term shift towards

consumption as the primary driver of economic growth. The central government should

make greater use of its fiscal resources in order to mitigate stresses on local governments’

finances. Near-term measures to support the property sector transition to a more

sustainable size should be carefully calibrated to mitigate moral hazard and contain

adverse macro-financial spillovers while the authorities enhance insolvency and resolution

procedures. The authorities should respond to declining returns from China’s traditional

growth drivers by recommitting to reforms aimed at reducing factor misallocation,

including limiting the role of SOEs, and lowering barriers to firm entry and exit to support

productivity growth. 

The Euro Area

The euro area has gone through 2023 with very low growth momentum and stubborn core

inflation as it contends with aftershocks from the pandemic and the economic impact of

Russia’s war against Ukraine. Despite posting relatively strong growth in early 2022,

economic activity slowed in the third and fourth quarter, with 2022 growth at 1.8% on a

Q4/Q4 basis, and has remained weak since. The manufacturing sector, in particular, has

been challenged by still-elevated energy prices combined with higher financing costs and

weak domestic demand. Persistent inflation has similarly hampered household

consumption growth as European consumers’ behavior shifts to account for the increased

cost of living. The IMF expects euro area growth to remain subdued at just 0.7% in 2023,

with some intra-bloc variation including Germany’s economy contracting by 0.5% and

Spain’s economy growing by 2.5%. 

The euro area’s aggregate fiscal policy posture has remained supportive in 2023. Russia’s

war against Ukraine increased anticipated outlays in 2022-23, as governments attempted

to shield consumers and businesses from adverse spillovers, accelerate the drive toward

energy independence, and bolster defense spending. However, calls to rein in spending

have grown louder throughout 2023. While the European Commission (EC) extended the

suspension of the fiscal rules contained within the EU’s Stability and Growth Pact (SGP)

through the end of 2023, it did not advocate for a broad fiscal impulse in 2023. More

recently, the Eurogroup called for an overall restrictive fiscal stance in the euro area for

2024 and encouraged member states to wind down energy support measures as soon as

possible in 2023-24. The EC’s budget guidance for 2024 similarly encourages member

states to return to a path of debt and deficit consolidation.

Fiscal measures are funded in part through the roughly $822 (€750) billion Next

Generation EU (NGEU) pandemic recovery package agreed to in July 2020. NGEU has

distributed $114 (€106) billion in grants and $51 (€47) billion in loans from the Recovery

and Resilience Fund (RRF)—the main component of the NGEU—to member states thus far. 
24

The RRF consists of up to $363 (€338) billion in grants and $415 (€386) billion in loans. 

While member states have applied for all of the RRF’s grants, roughly $236 (€220) billion

in lending capacity remains. This remaining capacity will likely decline pending country

modification requests, as the EC has asked member states to revise their NGEU National

Recovery and Resilience Plans to incorporate the clean energy and energy security goals of

the REPowerEU program. The EC has also proposed that member states request these

unallocated funds to enact key components of the EU Green Deal Industrial Plan, including

through subsidies to “net-zero” industries.

When the recovery gained momentum in 2022, so too did inflation. Headline inflation

peaked at 10.6% year-on-year in October 2022, as Russia’s war against Ukraine

compounded price pressures. Headline inflation declined to 4.3% year-on-year by

September 2023 as energy pressures faded and base effects took hold. However, inflation

expectations are still elevated as core inflation remains sticky, holding at 4.5% year-onyear in September 2023, just 1.2 percentage points below its March 2023 high. In

September, the European Central Bank’s (ECB) baseline scenario projected headline

inflation of 5.6% in 2023 and 3.2% in 2024. The ECB anticipates that inflation will return

to the target level of 2% in the third quarter of 2025.

Still-high euro area inflation, driven in part by Russia’s war against Ukraine, accelerated the

ECB’s policy normalization timetable. This monetary tightening cycle—the most

aggressive in the ECB’s history—has proven to be a challenging task as the ECB attempts to

pursue its sole mandate of inflation targeting while also considering a weak outlook for the

real economy and pursuing its policy goal of sovereign yield management. At its

September 14 meeting, the ECB raised its deposit rate by 25 basis points to 4.0%. This is

the highest policy rate in ECB history and represents 450 basis points in consecutive

tightening since July 2022. As indicated by the ECB’s most recent bank lending survey

released on July 25, the monetary tightening is feeding through into the real economy

through continued tightening of lending standards by banks and declining corporate,

consumer, and mortgage loan demand. 

The ECB’s balance sheet policy has mirrored its rate increases. Prior to the war, the pace of

net asset purchases under its Pandemic Emergency Purchase Program (PEPP) and Asset

Purchase Program (APP) had slowed from end-October 2021; net asset purchases under

the PEPP ended as of April 2022 and under the APP as of July 2022. Following this

slowdown in net purchases, the ECB began reducing its APP portfolio by €15 billion per

month by not fully reinvesting payments from maturing securities and stepped up that

pace in July 2023 by allowing for a full passive roll-off of maturing APP holdings averaging

roughly €25 billion per month. To counter fragmentation risks, the ECB has committed to

flexibly reinvest PEPP redemptions as a first line of defense and created a Transmission

Protection Instrument (TPI) that, if triggered, allows for effectively unlimited purchases of

sovereign bonds “to counter unwarranted, disorderly market dynamics that pose a serious

threat to the transmission of monetary policy across the euro area.”

The euro area current account surplus equaled just 0.2% of GDP in the four quarters

ending Q2 2023 as supply chain disruptions, COVID-19 outbreaks, and high imported
25

energy prices weighed on the euro area’s typically positive external position. The bloc saw

a more typical current account surplus of 2.8% of GDP in 2021, followed by a sharp

reversal to a deficit of 0.7% of GDP in 2022. The IMF expects the eurozone’s current

account surplus to recover to 1.2% of GDP in 2023. In its July 2023 External Sector Report,

the IMF assessed that the euro area’s external position in 2022 was broadly in line with the

level implied by medium-term fundamentals and desirable policies, though staff assessed

that the policy recommendations to address typical external imbalances emanating from

certain member states—which appear to be resurfacing in early 2023 data—continue to

hold true.

The euro reached a two-decade

low against the dollar in

September 2022 as widening

interest rate differentials

between the United States and

Europe supported dollar

strength. While the euro was

13.5% weaker against the dollar

at end-September 2023 relative

to end-2020, it has largely held

its value relative to the dollar

since the beginning of the year,

depreciating by only 1.1%. In

real effective terms the euro appreciated 2.9% over the first nine months of 2023. The ECB

publishes its foreign exchange intervention and has not intervened in foreign exchange

markets since 2011. 

Germany

The IMF expects the German economy to contract by 0.5% in 2023. After contracting in the

last quarter of 2022, economic growth in Germany stalled over the course of 2023. Growth

stagnated at 0% in the second quarter of 2023, quarter-over-quarter, and inflationary

pressures remained persistent. Economic deceleration continues to be driven by declines

in private consumption and government expenditure, highlighting the lingering impacts of

elevated energy prices and the phasing-out of COVID-related government support

programs. Tighter monetary policy has also weighed on gross capital formation in interestsensitive sectors, such as construction and machinery.

While a rapid and firm policy response helped Germany weather the initial impacts of

Russia's war against Ukraine, higher interest rates and reduced government spending are

contributing to the slowdown in economic activity. After three years of expansive

utilization of fiscal space, Germany’s latest federal budget demonstrates a recommitment to

technical compliance with the debt brake. Moreover, to meet the 2024 budget deficit

target, the government has also proposed expenditure cuts across most ministries, with

notable exceptions such as the Ministry of Defense.

70

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120

130

2007

2008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Euro: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
26

German inflation reached the highest levels since the 1990s in October 2022 at 10.4%, 

year-on-year. Inflationary pressures appeared to be easing over the first half of 2023, until

leveling off this summer. The Federal Statistical Office reported headline inflation of 4.5% 

in September, a noticeable drop compared to previous months and the lowest value since 

Russia’s invasion of Ukraine in February 2022. However, the decline is largely due to 

below average energy price increases in September, and core inflation remains relatively 

stubborn at 4.6% (down from 5.5% the month prior). The IMF projects an annual average 

of 6.2% headline inflation in 2023 before decelerating to an above-target rate of 3.3% in 

2024.

Germany has run a large current

account surplus for well over a

decade as production levels are

consistently above domestic

absorption. In 2022, however,

the country's current account

surplus contracted by $160

billion to $174 billion, falling by

more than three percentage

points of GDP to 4.3%. This

represents the largest decline

since German reunification and

the lowest surplus in decades. 

Lower than typical surpluses have continued in 2023, with the current account at 5.1% of

GDP over the four quarters through June, with the IMF projecting a slight annual increase

to 6% of GDP in 2023.

The persistence of Germany’s external imbalances, taken together with the country’s

slowing growth and planned reinstatement of the debt brake, runs counter to needed

changes to the domestic industrial base due to shifts in energy supply and trade patterns in

the wake of Russia’s war against Ukraine. A major economy with such a consistently large

surplus requires offsetting borrowing on a persistent basis by the rest of the world on net.

The country’s bilateral trade surplus with the United States has more than doubled since

the creation of the euro, hitting $76 billion in 2022, the largest trade surplus since 2015. 

During the four quarters through June 2023, Germany’s bilateral goods and services

surplus hit $85 billion. However, despite a consistently strong bilateral surplus with the

United States, the country’s overall current account has weakened due to elevated energy

prices following Russia’s invasion of Ukraine. German industry has benefitted from cheap

energy in supporting its current account surplus, and significant investment in the green

transition, housing, and infrastructure will be necessary moving forward to maintain

competitiveness.

Despite a current account surplus and a slowdown in economic activity, the German

government still plans to adhere to the pre-pandemic debt brake and reduce fiscal

expenditures in 2024. While Treasury recognizes that the German government took strong

-4

-2

0

2

4

6

8

10

200820092010201120122013201420152016201720182019202020212022

Q2-2023

Percent of GDP

Germany: Current Account Balance

Income Services Goods Current Account Balance

Source: Deutsche Bundesbank
27

fiscal measures in response to COVID-19 and Russia’s war against Ukraine, Germany still

needs to significantly improve its chronic under-spending, which contributed to persistent

pre-pandemic fiscal surpluses. Prior to the pandemic, Germany’s approved budgets called

for fiscal balance, but stronger-than-forecasted revenues and under-execution of spending

plans resulted in fiscal surpluses averaging 1.3% of GDP between 2014 and 2019. As the

public health crisis is overcome and recovery takes hold, Treasury encourages the

government to deploy fiscal tools in 2023, 2024, and beyond, which include strengthening

efforts to combat climate change, enhancing energy security, and reinvigorating

investment—which would help external rebalancing proceed at a reasonable pace and

contribute to both global and euro area rebalancing.

Malaysia

Malaysia’s economy registered robust growth of 8.7% in 2022 on the back of a strong postpandemic recovery in private spending and investment. The outlook for growth this year

remains strong, if more tempered, largely attributable to external headwinds including

softer demand from key trading partners. Year-over-year growth slowed to 2.9% as of

June 2023. Bank Negara Malaysia (BNM) forecasts growth in the 4.0-5.0% range for 2023,

with higher overall employment and increased income supporting domestic demand. BNM

notes risks are balanced with upside potential from higher-than-expected tourism and

project implementation. Meanwhile, downside risks include weaker-than-expected global

growth. 

The fiscal deficit is projected to shrink further to 5.0% in 2023, as the government moves to

gradually tighten fiscal policy. Given the strong growth outturn, Malaysia’s public debt-toGDP fell to 60% in 2022 from its peak of 63% in 2021, still only narrowly below the

government’s statutory debt limit of 65% of GDP. 

With subsidies and other administered prices helping limit the rise in headline inflation—

which stood at 2.8% year-over-year in June 2023 (down from 4.5% in September 2022)—

BNM has tightened monetary policy gradually. BNM raised its key policy rate—the

overnight policy rate (OPR)—a cumulative 100 basis points in 2022 to 2.75%. In May

2023, BNM raised the OPR an additional 25 basis points to 3.0%. BNM notes that while its

monetary policy stance is slightly accommodative, headline and core inflation have been

moderating and the growth outlook is subject downside risks.
28

For the past decade, Malaysia’s

current account surplus has

largely held steady at around 3%

of GDP. The surplus was 3.3% of

GDP through the four quarters

ending June 2023. Over the

same period, Malaysia’s goods

surplus narrowed almost one

percentage point to 9.6% of GDP

from 10.4% of GDP. Meanwhile,

Malaysia’s services deficit

narrowed to 2.6% of GDP over

the four quarters ending June

2023, down from 3.1% at end-2022 as tourism services continued to recover. The income

deficit narrowed modestly to 3.7% of GDP from a deficit of 4.1% of GDP one year prior,

largely reflecting a fall in direct investment income. In its most recent External Sector

Report, the IMF assessed Malaysia’s external position to be stronger than the level implied

by medium-term fundamentals and desirable policies. 

Malaysia’s goods and services trade surplus with the United States reached $31 billion for

the four quarters through June 2023. Malaysia and the United States have strong supply

chain linkages in key industries, particularly electronics and related parts. Conversely,

Malaysia engages in relatively limited bilateral services trade with the United States—

about $6 billion in gross bilateral services trade flows in the four quarters through June

2023. On net, Malaysia recorded a bilateral services deficit with the U.S. of roughly $1.5

billion over the same period.

In recent years, Malaysia has

demonstrated a track record of

engaging in two-sided

intervention in the foreign

exchange market. Malaysia does

not publish data on its foreign

exchange intervention; however,

the authorities have conveyed

credibly to Treasury that net

sales of foreign exchange over

the four quarters through June

were $23 billion or 5.8% of GDP. 

According to Treasury estimates,

net sales over the four quarters to June 2023 totaled to $14 billion or 3.5% of GDP. Foreign

exchange reserves stood at around $102 billion at end-June 2023, up roughly $2.2 billion

compared to a year prior. Reserves remain broadly adequate according to standard

adequacy metrics, including that of the IMF.

-10

-5

0

5

10

15

20

25

200820092010201120122013201420152016201720182019202020212022

Q2-2023

Percent of GDP

Malaysia: Current Account Balance

Income Services Goods Current Account Balance

Source: Department of Statistics Malaysia

-10

-8

-6

-4

-2

0

2

4

6

8 2016

20172018201920202021

20222023

Billion U.S. Dollars

Malaysia: Estimated FX Intervention

Adj. Change in Gross Reserves Change in Net Fwd Book Est. Net FXI

Sources: Bank Negara Malaysia, U.S. Treasury estimates
29

On net, the ringgit depreciated

5.5% against the U.S. dollar over

the four quarters through June

2023. Over the same period, the

ringgit depreciated 2.8% on a

nominal effective basis and 3.5%

on a real effective basis.

To support Malaysia’s external

rebalancing the government

should continue to invest in

public services and improving

the scale and coverage of the

social protection system. Likewise, the government should pursue targeted public

investments. Such initiatives would support external rebalancing and help foster inclusive

and sustainable growth. This could be done in a fiscally prudent way by rolling back broad,

untargeted subsidies, which Malaysia has begun to do. The government should also

continue to allow the exchange rate to move in line with economic fundamentals and limit

foreign exchange intervention to circumstances of disorderly market conditions, while

avoiding excessive accumulation of reserves.

Singapore

Following a strong initial post-pandemic recovery (real growth was 8.9% in 2021 and 3.6%

in 2022), Singapore’s economic performance has softened. Domestic activity has cooled

from the lagged effect of prior monetary tightening, and exports are weighed down by

slowing external demand. Year-over-year GDP growth was 0.7% in June 2023. The

authorities project real GDP growth will register 0.5–2.5% this year amid weak external

demand in trade-related sectors, particularly the global electronics industry.

Singapore’s fiscal year 2023 budget (April 2023-March 2024) aims to tighten the fiscal

stance to achieve a surplus of 0.7% of GDP, mostly due to the end of remaining pandemicrelated support measures and to an increase in wealth taxes. The authorities believe the

tight fiscal policy will complement tight monetary policy in addressing inflation. The

government has introduced targeted support for low-income households to alleviate the

impact of inflation and the goods-and-services tax increase earlier this year.

The Monetary Authority of Singapore (MAS), which uses an exchange-rate based regime for

implementing monetary policy, was one of the first central banks in the region to initiate a

tightening cycle in response to burgeoning inflation pressures. MAS tightened monetary

policy five times between October 2021 and October 2022 by letting the Singapore dollar

appreciate against a basket of currencies. In April 2023, MAS announced it would leave

monetary policy unchanged, citing its projections for below-trend GDP growth in 2023. By

year-end, MAS expects a negative output gap with risks tilted to the downside due to risks

to global growth. MAS projects that inflation will remain elevated in the near term but

gradually ease over the second half of 2023 and end the year significantly lower. As of June

70

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100

110

120

130

20072008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Malaysia: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
30

2023, headline inflation remained elevated at 5.1% year-on-year, down from 6.7% at the

end of 2022. Core inflation fell to 4.6% year-on-year, down from 5.1% at the end of 2022.

Singapore recorded a substantial

current account surplus of 18.3%

over the four quarters through

June 2023, driven by a large

goods surplus (29.4%) and a

somewhat smaller, albeit

growing, services surplus

(6.3%). The rising services

surplus generally reflects

gradual increases in financial

services exports and declining

imports of transportation

services. These goods and

services surpluses were partially offset by an income deficit of 17.4%. The IMF has

assessed Singapore’s external position to be substantially stronger than warranted by

economic fundamentals and desirable policies every year from 2012 to 2022. Singapore’s

persistent current account surpluses have led to the accumulation of an outsized net

international investment position, which stood at around 175% of GDP as of end-June

2023, one of the highest levels in the world.

Singapore has historically run bilateral trade deficits with the United States in both goods

and services trade, which for the four quarters ending in June 2023 totaled $9 billion and

$24 billion, respectively. Key Singaporean services imports from the United States include

research and development, intellectual property, and professional and management

services. The Singapore goods deficit with the United States reflects in part Singapore’s

role as a regional transshipment hub, with some of Singapore’s imports from the United

States ultimately intended for other destinations in the region.

MAS implements monetary

policy by targeting the Singapore

dollar’s nominal exchange rate

against a trade-weighted basket

of currencies. The primary mode

of intervention is the purchase or

sale of U.S. dollars against the

Singapore dollar, since this is the

most liquid currency pair in the

basket. In April and September

2023, MAS published semiannual

data on intervention covering

the two quarters through

December 2022 and the two quarters through June 2023, respectively. Over the four

quarters through June 2023, total net purchases of foreign currency totaled $27 billion,

-30

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0

10

20

30

40

20082009201020112012201320142015201620172018201920202021

2022

Q2-2023

Percent of GDP

Singapore: Current Account Balance

Income Services Goods Current Account Balance

Sources: Monetary Authority of Singapore, Department of Statistics
31

equivalent to 5.7% of GDP. Singapore does not publish its foreign exchange intervention at

a monthly frequency, forcing Treasury to estimate its pattern of intervention. According to

Treasury estimates, net purchases were concentrated in the third quarter of 2022 and the

first quarter of 2023, with intervention activity more two-sided during the fourth quarter

of 2022 and the second quarter of 2023. Treasury assesses that Singapore meets the

foreign exchange intervention criterion given its exceptionally large magnitude and lack of

transparency on timing of intervention.

Official foreign exchange reserves totaled $317 billion (67% of GDP) at end-June 2023. For

FY22/23, MAS transferred approximately $140 billion of excess reserves to the

Singaporean government for longer-term management by GIC, one of Singapore’s

sovereign wealth and investment funds.

17 In addition to the reserves held by MAS,

Singapore’s government also has access to substantial official foreign assets managed by

GIC and another sovereign wealth fund, Temasek. 

The Singapore dollar appreciated

2.8% against the U.S. dollar over

the four quarters through June

2023. Over the same period, the

Singapore dollar appreciated

5.6% and 7.2% on a nominal

effective and real effective basis,

respectively.

Singapore’s fiscal and monetary

policies constrain consumption

and have pushed domestic

saving to levels that are nearly

unmatched, generating one of the largest net foreign asset positions in the world. Policy

reforms that durably strengthen domestic consumption, diminish precautionary saving

incentives, and transfer wealth to households would help address Singapore’s chronic

external imbalances. An expansion of the social safety net and investments in healthcare

and climate-resilient infrastructure could reduce Singapore’s excess external imbalances

over time. Singapore could also reduce mandatory pension contribution rates and give

households greater control over pension assets. Further appreciation of the nominal and

the real effective exchange rate over the medium term, consistent with economic

fundamentals, should also continue to play a role in facilitating external rebalancing. 

Taiwan

17 From March 2022, Singapore’s government began employing a new type of non-marketable security to

facilitate the transfer of excess official reserves from MAS to the government. The Reserves Management

Government Securities (RMGS) are issued by the government to MAS in exchange for excess reserves at the

time of transfer. Additional information about RMGS may be found here:

https://www.mas.gov.sg/statistics/reserve-statistics/reserves-management-government-securities. 

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90

100

110

120

2007

2008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Singapore: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
32

Taiwan’s real GDP grew by 0.2% in the four quarters ending June 2023, down from 4.1%

for the same period in 2022. Growth in this period was driven primarily by private

consumption as consumption patterns returned to pre-pandemic norms and were buoyed

by the authorities’ universal surplus tax rebate program (approximately $200 per person). 

Net exports were the most significant headwind to growth, declining 13.7% during the

Report review period, due to a continued decline in global technology demand, increased

energy prices, and economic weakness in China. The authorities revised Taiwan’s 2023

annual growth rate down to 1.7% in June, down from the 2.5% annual growth predicted in

December 2022.

The central bank paused its rate hiking cycle at 1.875% following a 12.5 basis point hike in

March 2023. Prices in Taiwan have been relatively stable when compared to other major

economies, with headline CPI inflation moderating to 1.8% in June 2023, down from a

recent high of 3.6% in June 2022. The authorities’ preferred measure of core inflation was

2.6% in June 2023, down from a recent high of 3.0% in January 2023. The monetary

authorities anticipate that both headline and core inflation will moderate over the course of

2023, to 2.2% and 2.4%, respectively. 

Taiwan’s current account

surplus decreased to $87 billion

(11.8% of GDP) for the four

quarters ending in June 2023,

down from $117 billion (14.8%

of GDP) for the same period in

2022. The decline was driven in

part by a decrease in Taiwan’s

goods trade surplus to $67

billion (9.0% of GDP) for the four

quarters ending in June 2023,

down from $80 billion (10.2% of

GDP) for the same period in

2022. The decline in year-over-year goods exports was driven by a moderation in global

electronics demand in line with post-pandemic normalization. The decline in imports was

greater than the decline in exports in year-over-year percentage terms as global

commodity prices remained weak, albeit at an elevated level compared to 2019, and

inventory growth remained suppressed. Despite the decline in Taiwan’s goods surplus, it

remains large relative to GDP. Taiwan’s services balance declined to $169 million (roughly

0.02% of GDP) over the Report period, as Taiwan’s services surplus turned into a deficit

during the first two quarters of 2023, again indicating a return to pre-pandemic norms of

small services deficits as freight transport and travel services continue to moderate.

Taiwan recorded a $48 billion goods and services trade surplus with the United States in

the four quarters ending June 2023, down slightly from $49 billion a year prior. The trade

surplus was primarily composed of goods trade and was driven by semiconductors and

electronic goods exports. Taiwan’s bilateral services trade with the United States was a

-5

0

5

10

15

20

200820092010201120122013201420152016201720182019202020212022

Q2-2023

Percent of GDP

Taiwan: Current Account Balance

Income Services Goods Current Account Balance

Sources: Taiwan central bank, Haver
33

small $2 billion surplus through the four quarters ending in June 2023, approximately the

same as the previous four quarters.

The New Taiwan Dollar (TWD)

weakened over the four quarters

through June 2023, depreciating

4.5% against the dollar and 1.8%

on a real effective basis. The

TWD continues to move broadly

in line with other East Asian

currencies, suggesting

movements are largely driven by

U.S. dollar dynamics and global

macroeconomic trends. The

decline in Taiwan’s electronics

exports and increased energy

prices reduced Taiwan’s foreign exchange proceeds, reducing TWD demand and likely

contributing to the TWD’s depreciation.

The stated policy of the central

bank is to maintain a “managed

float” exchange rate, in principle

determined by market forces but

with flexibility to maintain an

orderly foreign exchange market. 

The central bank publicly

disclosed $5.6 billion (0.8% of

GDP) in net foreign exchange

sales over the four quarters

through June 2023, with $4.8

billion in sales in the second half

of 2022 and $0.9 billion in sales

occurring in the first half of 2023. The intervention aimed to offset the downward pressure

on the TWD, slowing the depreciation that was taking place. Treasury estimates that the

majority of these sales occurred in the third quarter of 2022 as the U.S. dollar strengthened. 

Foreign exchange sales were partially offset by purchases in November and December,

potentially meant to relieve appreciation pressures as the U.S. dollar began to reverse

course and purchases of long-term debt securities by other financial corporations declined. 

Treasury estimates foreign exchange intervention was limited in the first half of 2023,

consistent with muted currency movements. Taiwan publishes its data on foreign

exchange intervention on a semi-annual basis, with a three-month lag.

Taiwanese authorities should deploy a careful mix of policies that better insulate the

economy from external shocks and address structural issues to reduce external sector

imbalances. For example, the authorities should explore mechanisms to diversify energy

imports, further develop energy storage capacities, and promote renewable energy

80

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100

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110

120

20072008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Taiwan: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements

-8

-4

0

4

8

12

16

2016201720182019202020212022

2023

Billion U.S. Dollars

Sources: Taiwan central bank, U.S. Treasury estimates

Taiwan: Estimated FX Intervention
34

projects and technologies to reach Taiwan’s 2050 net-zero carbon emissions target and to

improve Taiwan’s resilience to future external price shocks. Authorities should also closely

monitor non-bank financial sector risks, including foreign exchange risks. Foreign

exchange intervention should be limited and allow currency movements in line with

economic fundamentals.

Vietnam

The Vietnamese economy has decelerated substantially in 2023 amid falling global

demand. Real GDP growth weakened to 3.7% year-on-year in the first half of 2023, down

from 9.5% year-on-year in the second half of 2022, led by a slowdown in the exportoriented manufacturing sector that has weighed on domestic consumption and investment. 

Goods exports amounted to $259.7 billion during the first nine months of the year, down

8% from the same period last year. The IMF forecasts 4.7% annual growth in 2023,

significantly below the 8.0% growth achieved last year. 

As growth has decelerated, the authorities have responded with additional fiscal support. 

The government is projected to record a 1.3% of GDP fiscal deficit in 2023, following the

0.3% of GDP surplus in 2022, on higher public sector wages and investment as well as tax

cuts and deferrals. The IMF projects public debt will remain around 34% of GDP this year.

The State Bank of Vietnam (SBV) cut its benchmark interest rate by 150 basis points this

spring to support economic activity as inflation dramatically slowed. After peaking at 4.9%

year-on-year in January, headline inflation came down to 2% year-on-year in June, driven

by lower fuel prices and moderating food costs. Prices have since picked up somewhat. 

Core inflation has continued to steadily decline since peaking at a record high 5.2% yearon-year in January and was 3.8% year-on-year in September. 

Vietnam’s current account

balance stood at 4.7% of GDP

over the four quarters through

June 2023. The current account

has swung back into substantial

surplus, after prolonged deficits

due to COVID-related production

constraints and elevated

commodity prices. While

exports have fallen, the goods

trade balance has widened on a

sharper decline in imports as

factories have adjusted to

reduced orders from overseas. The current account surplus has also been supported by a

recovery in tourism, increased remittances, and reduced corporate profit repatriation. 

Vietnam’s bilateral trade surplus with the United States has expanded dramatically over

the past five years, primarily driven by growth in goods trade, though this growth has

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-5

0

5

10

200820092010201120122013201420152016201720182019202020212022

Q2-2023

Percent of GDP

Vietnam: Current Account Balance

Income Services Goods Current Account Balance

Sources: IMF BOP statistics, State Bank of Vietnam
35

flattened off. The bilateral goods and services surplus was $105 billion over the four

quarters through June 2023. Over the same period, the bilateral goods trade surplus was

$106.3 billion, marginally below the level from the previous four quarters. Vietnam

continues to have the third largest goods surplus with the United States. Electronics and

machinery have helped drive Vietnam’s recent export growth to the United States, as workfrom-home practices and social distancing shifted external demand towards increased

durable goods consumption, especially more advanced goods. Vietnam has modest

bilateral services trade with the United States and has long run a small bilateral services

trade deficit. In the four quarters through June 2023, that services deficit was $1.6 billion.

Vietnam does not publish data

on its foreign exchange

intervention. The authorities

have conveyed credibly to

Treasury that net sales of foreign

exchange in the four quarters

through June 2023 were 1.45%

of GDP. That figure is equivalent

to about $6 billion. Treasury

assesses that Vietnam engaged in

significant net sales of foreign

exchange in 2022 amid

significant depreciation pressure

resulting from Russia’s war against Ukraine, elevated commodity prices, and expectations

for policy tightening by the Federal Reserve. Vietnam has reaccumulated some of these

reserves in the first half of 2023, and foreign exchange reserves stood at $89 billion as of

June 2023. Reserves remain below the lower range the IMF considers adequate based on

its reserve adequacy metric for fixed exchange rate regimes, but broadly adequate if

assessed on the basis of the IMF’s reserve adequacy metric for floating exchange rate

regimes. 

Since January 2016, the SBV’s

exchange rate policy has been to

allow the dong to float within a

fixed trading band against the

U.S. dollar relative to the central

reference rate. The central

reference rate is reset daily

based on the movements of a

basket of currencies, among

other factors. The dong spot rate

has depreciated modestly against

the U.S. dollar in 2023, with the

dong down 3.1% from the

beginning of 2023 through the end of September. Meanwhile, the dong has strengthened

against many other currencies in the region, and has appreciated 1.7% and 1.2% on a

-6

-4

-2

0

2

4

6 2016

201720182019202020212022

2023

Billion U.S. Dollars

Vietnam: Estimated FX Intervention

Sources: State Bank of Vietnam, U.S. Treasury estimates

70

80

90

100

110

120

130

70

80

90

100

110

120

130

20072008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Vietnam: Exchange Rates

Bilateral vs. USD NEER REER

Sources: Vietcombank, JP Morgan
36

nominal effective basis and real effective basis, respectively, in 2023. In its most recent

Article IV consultation, the IMF welcomed Vietnam’s steps towards increased exchange

rate flexibility and encouraged more efforts in this direction.

Pursuant to the 2015 Act, Treasury conducted enhanced analysis of Vietnam in its

December 2020, April 2021, and December 2021 FX Reports. In early 2021, Treasury

commenced enhanced bilateral engagement with Vietnam in accordance with the 2015

Act.18 As a result of discussions through the enhanced engagement process, Treasury and

the SBV reached agreement in July 2021 to address Treasury’s concerns about Vietnam’s

currency practices. Treasury remains satisfied with the progress made by Vietnam and will

continue to engage closely with the SBV on currency issues.

 

18 Report to Congress: Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United

States, U.S. Department of the Treasury, Office of International Affairs, pp. 48-55 (Dec. 2020), available at 

https://home.treasury.gov/system/files/206/December-2020-FX-Report-FINAL.pdf, and Report to Congress:

Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, U.S. Department

of the Treasury, Office of International Affairs, pp. 47-50 (Apr. 2021), available at

https://home.treasury.gov/system/files/206/April_2021_FX_Report_FINAL.pdf.

 
37

Section 2: Intensified Evaluation of Major Trading Partners

The 1988 Act requires the Secretary of the Treasury to provide semiannual reports to

Congress on international economic and exchange rate policy. Under Section 3004 of the

1988 Act, the Secretary must:

“consider whether countries manipulate the rate of exchange between their currency

and the United States dollar for purposes of preventing effective balance of payments

adjustment or gaining unfair competitive advantage in international trade.” 

This determination may encompass analysis of a broad range of factors, including not only

trade and current account imbalances and foreign exchange intervention (the criteria

evaluated under the 2015 Act), but also currency developments, the design of exchange

rate regimes and exchange rate practices, foreign exchange reserve coverage, capital

controls, monetary policy, and trade policy actions, as well as foreign exchange activities by

quasi-official entities that may be undertaken on behalf of official entities, among other

factors.

The 2015 Act requires the Secretary of the Treasury to provide semiannual reports on the

macroeconomic and foreign exchange rate policies of the major trading partners of the

United States. Section 701 of the 2015 Act requires that Treasury undertake an enhanced

analysis of macroeconomic and exchange rate policies for each major trading partner “that

has— (1) a significant bilateral trade surplus with the United States; (2) a material current

account surplus; and (3) engaged in persistent one-sided intervention in the foreign

exchange market.” Additionally, the 2015 Act requires the President, through the Secretary

of the Treasury, to “commence enhanced bilateral engagement with each country for which

an enhanced analysis” is included in the report. The Act also provides for the possible

imposition of penalties if, on or after one year of the commencement of enhanced bilateral

engagement, the Secretary determines that a country “has failed to adopt appropriate

policies to correct the undervaluation and surpluses” that triggered the enhanced analysis

and enhanced bilateral engagement.

Key Criteria

Pursuant to Section 701 of the 2015 Act, this section of the Report seeks to identify any

major trading partner of the United States that has: (1) a significant bilateral trade surplus

with the United States, (2) a material current account surplus, and (3) engaged in

persistent one-sided intervention in the foreign exchange market. Required data for the

period of review (the four quarters through June 2023, unless otherwise noted) are

provided in Table 1 (p. 18) and Table 2 (p. 40). 

As noted earlier, Treasury reviews developments in the 20 largest trading partners of the

United States, along with other trading partners that remain on the Monitoring List over

the period of review. These economies accounted for about 78% of U.S. trade in goods and

services over the four quarters through June 2023. This includes all U.S. trading partners
38

whose bilateral goods and services surplus with the United States in the four quarters

through June 2023 exceeded $15 billion. 

The results of Treasury’s latest assessment pursuant to Section 701 of the 2015 Act are

discussed below.

Criterion (1) – Significant bilateral trade surplus with the United States:

Column 3 in Table 2 provides the bilateral goods and services trade balances for the United

States’ 20 largest trading partners for the four quarters through June 2023.

19 China has the

largest trade surplus with the United States by far, after which the sizes of the bilateral

trade surpluses decline notably. Treasury assesses that economies with a bilateral goods

and services surplus of at least $15 billion have a “significant” surplus. Highlighted in red

in column 3 are the 13 major trading partners that have a bilateral surplus that met this

threshold for the four quarters through June 2023. Table 3 provides additional contextual

information on total and bilateral trade, including individual goods and services trade

balances, with these trading partners. Because the Report now incorporates services trade,

Table 3, which provides disaggregated goods and services trade data, will be essential for

comparison with past Reports that focused on goods trade.

Criterion (2) – Material current account surplus:

Treasury assesses current account surpluses of at least 3% of GDP or a surplus for which

Treasury estimates there is a substantial current account “gap” to be “material” for the

purposes of enhanced analysis. Highlighted in red in column 2a of Table 2 are the eight

economies that met these thresholds over the four quarters through June 2023. No

economy that did not already meet the 3% current account surplus threshold had a

substantial current account gap.

20 Column 2b shows the change in the current account

surplus as a share of GDP over the last three years, although this is not a criterion for

enhanced analysis. 

Criterion (3) – Persistent, one-sided intervention: 

Treasury assesses net purchases of foreign currency, conducted repeatedly, in at least 8 out

of 12 months, totaling at least 2% of an economy’s GDP, to be persistent, one-sided

intervention.21 Columns 1a and 1c in Table 2 provide Treasury’s assessment of this

19 Although this Report does not treat the euro area itself as a major trading partner for the purposes of the

2015 Act—this Report assesses euro area countries individually—data for the euro area are presented in

Table 2 and elsewhere in this Report both for comparative and contextual purposes, and because policies of

the ECB, which holds responsibility for monetary policy for the euro area, will be assessed as the monetary

authority of individual euro area countries.

20 See Box 2 in the December 2021 Report on Macroeconomic and Exchange Rate Policies of the United States’

Major Trading Partners for a summary of how Treasury estimates current account gaps.

21 Notably, this quantitative threshold is sufficient to meet the criterion. Other patterns of intervention, with

lesser amounts or less frequent interventions, might also meet the criterion depending on the circumstances

of the intervention.
39

criterion.22 In economies where foreign exchange interventions are not published,

Treasury uses estimates of net purchases of foreign currency as a proxy for intervention. 

22 Treasury uses publicly available data for intervention on foreign asset purchases by authorities, or

estimated intervention based on valuation-adjusted foreign exchange reserves. This methodology requires

assumptions about both the currency and asset composition of reserves in order to isolate returns on assets

held in reserves and currency valuation moves from actual purchases and sales, including estimations of

transactions in foreign exchange derivatives markets. Treasury also uses alternative data series when they

provide a more accurate picture of foreign exchange balances, such as Taiwan’s reporting of net foreign

assets at its central bank. To the extent the assumptions made do not reflect the true composition of reserves,

estimates may overstate or understate intervention. Treasury strongly encourages those economies in this

Report that do not currently release data on foreign exchange intervention to do so.
40

Net Purchases

(USD Bil., 

Trailing 4Q)

(1b)

Balance

(% of GDP, 

Trailing 4Q)

(2a)

3 Year Change 

in Balance

(% of GDP) 

(2b)

Balance

(USD Bil., 

Trailing 4Q)

(2c)

Goods and Services 

Surplus with United 

States (USD Bil., 

Trailing 4Q) 

(3)

Canada 0.0 0 N o -1.0 1.1 -21 39

Mexico 0.0 0 N o -1.1 -0.5 -18 145

China 0.4 — 0.6 * 66 — 113 N o 2.2 1.5 389 294

Germany 0.0 0 N o 5.1 -2.1 212 85

United Kingdom 0.0 0 N o -1.9 -0.4 -58 -21

Japan -1.5 -62 N o 2.1 -0.7 89 65

Korea -1.8 -30 N o 0.5 -3.0 8 38

Ireland 0.0 0 N o 10.5 32.8 57 3

India -0.4 -15 N o -1.7 -2.1 -58 47

Switzerland -12.9 -109 N o 9.8 5.4 83 - 4

Netherlands 0.0 0 N o 9.6 3.3 100 -58

Taiwan -0.8 - 6 N o 11.8 0.6 87 48

France 0.0 0 N o -1.9 -1.1 -54 17

Vietnam -1.5 ** - 6 N o 4.7 0.3 19 105

Singapore 5.7 27 N o *** 18.3 1.7 86 -33

Italy 0.0 0 N o -1.1 -4.3 -23 46

Brazil 0.0 0 N o -2.6 0.7 -53 -28

Australia -0.1 - 2 N o 1.2 -0.2 20 -29

Thailand -1.2 ** - 6 N o -1.4 -8.1 - 7 42

Belgium 0.0 0 N o -1.7 -3.1 -10 -14

Malaysia -5.8 ** -23 N o 3.3 0.9 13 31

Memo: Euro Area 0.0 0 N o 0.2 -1.4 34 106

*** Authorities have conveyed bilaterally to Treasury the peristence of net FX purchases during the four quarters ending June 2023, but public data on 

intervention are not clear on timing.

† In assessing the persistence of intervention, Treasury will consider an economy that is judged to have purchased foreign exchange on net for 8 of the 12 

months to have met the threshold. Other patterns of intervention, such as less frequent interventions, might also meet the criterion depending on the 

circumstances of the intervention.

** Authorities do not publish FX intervention. Authorities have conveyed bilaterally to Treasury the size of net FX purchases during the four quarters ending 

June 2023.

Net Purchases

(% of GDP, Trailing 

4Q)

(1a)

FX Intervention

* China does not publish FX intervention, forcing Treasury staff to estimate intervention activity from monthly changes in the PBOC’s foreign exchange assets 

and monthly data on net foreign exchange settlements, adjusted for changes in outstanding forwards. Based on the PBOC's foreign exchange assets data, 

intervention was not persistent. Based on net foreign exchange settlements data, intervention was persistent.

Net Purchases

8 of 12 

Months†

(1c)

Note: Current account balance measured using BOP data, recorded in U.S. dollars, from national authorities.

Sources: Haver Analytics; National Authorities; U.S. Census Bureau; Bureau of Economic Analysis; and U.S. Department of the Treasury Staff Estimates.

Table 2. Major Foreign Trading Partners Evaluation Criteria

Current Account Bilateral Trade
41

Goods and 

Services

(1a)

Goods

(1b)

Services

(1c)

Goods and 

Services

(2a)

Goods

(2b)

Services

(2c)

Goods and 

Services

(3a)

Goods

(3b)

Services

(3c)

Goods and 

Services

(4a)

Goods

(4b)

Services

(4c)

Canada 905 782 123 39 68 -28 43.2 37.3 5.9 1.9 3.2 -1.4

Mexico 873 791 81 145 143 2 54.3 49.2 5.1 9.0 8.9 0.1

China 689 623 66 294 313 -19 3.9 3.5 0.4 1.7 1.8 -0.1

Germany 320 234 86 85 83 2 7.6 5.6 2.1 2.0 2.0 0.0

United Kingdom 308 144 163 -21 -14 - 8 9.9 4.7 5.3 -0.7 -0.4 -0.2

Japan 301 223 78 65 68 - 3 7.3 5.4 1.9 1.6 1.6 -0.1

Korea 222 183 38 38 47 - 9 13.4 11.1 2.3 2.3 2.9 -0.5

Ireland 205 97 108 3 64 -61 37.9 17.9 20.0 0.5 11.9 -11.3

India 189 127 62 47 40 7 5.6 3.7 1.8 1.4 1.2 0.2

Switzerland 177 91 87 - 4 19 -23 21.0 10.7 10.3 -0.5 2.3 -2.7

Netherlands 157 113 43 -58 -45 -13 14.9 10.8 4.1 -5.5 -4.3 -1.2

Taiwan 153 130 23 48 45 2 20.8 17.7 3.1 6.4 6.1 0.3

France 153 104 50 17 13 4 5.4 3.6 1.7 0.6 0.5 0.1

Vietnam 130 127 4 105 106 - 2 31.4 30.4 0.9 25.2 25.6 -0.4

Singapore 127 80 47 -33 - 9 -24 26.9 16.9 10.0 -6.9 -1.9 -5.0

Italy 120 98 22 46 44 2 5.8 4.7 1.1 2.3 2.2 0.1

Brazil 119 89 30 -28 -11 -17 5.9 4.4 1.5 -1.4 -0.5 -0.8

Australia 82 49 33 -29 -16 -13 4.8 2.9 1.9 -1.7 -0.9 -0.8

Thailand 79 73 5 42 42 - 1 15.6 14.6 1.1 8.3 8.4 -0.1

Belgium 76 64 11 -14 -14 0 12.8 10.9 1.9 -2.3 -2.3 0.0

Malaysia 74 68 6 31 33 - 1 18.4 16.9 1.5 7.7 8.1 -0.4

Memo: Euro Area 1209 832 377 106 175 -70 8.3 5.7 2.6 0.7 1.2 -0.5

Table 3. Major Foreign Trading Partners - Expanded Trade Data

Total Trade Trade Surplus with United States

USD Bil., Trailing 4Q

Source: U.S. Census Bureau, and Bureau of Economic Analysis.

% of GDP, Trailing 4Q

Total Trade Trade Surplus with United States
42

Summary of Findings

Pursuant to the 2015 Act, Treasury finds that no trading partner met all three criteria for

enhanced analysis in the current review period of the four quarters through June 2023,

based on the most recent available data. In total, six economies—China, Germany,

Malaysia, Singapore, Taiwan and Vietnam—constitute Treasury’s Monitoring List. 

Korea and Switzerland have been removed from the Monitoring List in this Report, having

met only one out of three criteria for two consecutive Reports.

With respect to the economies covered in this Report:

• China has met at least one of the three criteria in every Report since the October 2016

Report. For the four quarters ending June 2023, China meets one of the three criteria

(significant bilateral trade surplus) and remains on the Monitoring List due to the size

of the bilateral surplus with the United States and its lack of transparency on

intervention data. 

• Germany has met two of the three criteria in every Report since the April 2016 Report,

having a material current account surplus and a significant bilateral trade surplus with

the United States.

• Malaysia has met two of the three criteria since the June 2023 Report, having a material

current account surplus and a significant bilateral trade surplus with the United States. 

• Singapore has met two of the three criteria since the May 2019 Report, having a

material current account surplus and engaged in persistent, one-sided intervention in

the foreign exchange market.

• Taiwan met two of the three criteria since the June 2022 Report and continues to meet

two of the three criteria in this Report, having a significant bilateral trade surplus with

the United States and material current account surplus over the reporting period. 

• Vietnam, which had met one criterion under the 2015 Act in every Report since the June

2022 Report (significant bilateral trade surplus), exceeded two of the three criteria over

the four quarters through June 2023, having a material current account surplus and a

significant bilateral trade surplus with the United States. 

Treasury will closely monitor and assess the economic trends and foreign exchange

policies of each of these economies.

In this Report, Treasury has concluded that no major trading partner of the United States

engaged in conduct of the kind described in Section 3004 of the 1988 Act during the

relevant period. This determination has taken account of a broad range of factors,

including not only trade and current account imbalances and foreign exchange intervention

(the criteria in the 2015 Act), but also currency developments, exchange rate practices,

foreign exchange reserve coverage, capital controls, and monetary policy.

As the global economy regains momentum, it is critical that key economies adopt policies

that allow for a narrowing of excessive surpluses and deficits. Governments should bolster
43

domestic-led rather than externally supported growth. This would establish a firmer

foundation for strong, balanced growth across the global economy.

Transparency of Foreign Exchange Policies and Practices

There is broad consensus that economic policy transparency enhances the credibility of

economic institutions and fosters a more efficient allocation of resources as information

asymmetries are reduced. As part of this effort, Treasury monitors and provides its

assessment of foreign exchange policy transparency in the semiannual Report on

Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States

on a regular basis. 

There have been no significant changes since Treasury published this table in the

November 2022 Report. Treasury will continue to press its major trading partners to make

significant strides in enhancing the transparency of currency practices. 

Table 4: Transparency of the United States and Its Major Trading Partner’s Foreign Currency Regimes

Foreign Exchange Reserves Data Intervention

Headline 

Reserves: 

Frequency

/Lag

Derivative 

Position in 

IRFCL#

Currency 

Composition

Publish a 

Stated 

Objective

Publish 

Intervention

Frequency Lag

USA Weekly/1 

day

Yes Public Yes Yes As it 

happens*

None

ECB Monthly/

2 weeks

Yes Public23 No Yes As it 

happens*

None

UK Monthly/

3-7 days

Yes COFER24 Yes Yes As it 

happens*

None 

Japan Monthly/

1 week

Yes COFER Yes Yes Monthly 2 days

Canada Monthly/

1 week

Yes Public Yes Yes As it 

happens*

None

Switzerland Monthly/

1 week

Yes Public Yes Yes Quarterly 3 months

Australia Monthly/

1 week

Yes Public Yes Yes Annually25 4 months

Brazil Daily/1 

day

Yes Public Yes Yes Daily 5 days

Mexico Weekly/4 

days

Yes Public Yes Yes Monthly 6 days

# The IMF’s International Reserves and Foreign Currency Liquidity Template.

23 The ECB’s template on international reserves and foreign currency liquidity reports the currency composition

of the ECB’s official reserve assets but only provides the US Dollar/Japanese Yen breakdown for SDR currency

holdings.

24 “COFER” means the country provides the data confidentially to the IMF through its Composition of Foreign

Exchange Reserves (COFER) database.

25 Australia publishes daily foreign exchange intervention one time per year in October. Australia has not

intervened in foreign exchange markets since November 2008.
44

India Weekly/7 

days

Yes COFER Yes Yes Monthly 2 months

China Monthly/

1 week

?

26 COFER No No

Taiwan Monthly/

1 week

Yes No Yes Yes Semiannually3 months

Korea Monthly/

1 week

Yes COFER Yes Yes Quarterly 3 months

Singapore Monthly/

1 week

Yes COFER Yes Yes Semiannually3 months

Thailand Weekly/1 

week

Yes No Yes Yes27 Semiannually3 months

Malaysia Biweekly/

1 week

Yes No Yes Yes28 Semiannually3 months

Vietnam Monthly/

2-3 

months

No No Yes Yes29 Semiannually3 months

* Intervention is published officially in certain reports on a regular basis but in practice intervention is

announced on the day it takes place.

26 Treasury staff have questions about the consistency of China’s reported derivatives position.

27 Thailand discloses its foreign exchange intervention to Treasury with consent to publish in the FX Report.

28 Malaysia discloses its foreign exchange intervention to Treasury with consent to publish in the FX Report.

29 Vietnam discloses its foreign exchange intervention to Treasury with consent to publish in the FX Report.
45

Glossary of Key Terms in the Report

Exchange Rate – The price at which one currency can be exchanged for another. Also

referred to as the bilateral exchange rate.

Exchange Rate Regime – The manner or rules under which an economy manages the

exchange rate of its currency, particularly the extent to which it intervenes in the foreign

exchange market. Exchange rate regimes range from floating to pegged.

Floating (Flexible) Exchange Rate – An exchange rate regime under which the foreign

exchange rate of a currency is fully determined by the market with intervention from the

government or central bank being used sparingly.

Foreign Exchange Reserves – Foreign assets held by the central bank that can be used to

finance the balance of payments and for intervention in the exchange market. Foreign

assets consist of gold, Special Drawing Rights (SDRs), and foreign currency (most of which

is held in short-term government securities). The latter are used for intervention in the

foreign exchange markets.

Intervention – The purchase or sale of an economy’s currency in the foreign exchange

market by a government entity (typically a central bank) in order to influence its exchange

rate. Purchases involve the exchange of an economy’s own currency for a foreign currency,

increasing its foreign currency reserves. Sales involve the exchange of an economy’s

foreign currency reserves for its own currency, reducing foreign currency reserves. 

Interventions may be sterilized or unsterilized.

Nominal Effective Exchange Rate (NEER) – A measure of the overall value of an

economy’s currency relative to a set of other currencies. The effective exchange rate is an

index calculated as a weighted average of bilateral exchange rates. The weight given to

each economy’s currency in the index typically reflects the amount of trade with that

economy. 

Pegged (Fixed) Exchange Rate – An exchange rate regime under which an economy

maintains a set rate of exchange between its currency and another currency or a basket of

currencies. Often the exchange rate is allowed to move within a narrow predetermined

(although not always announced) band. Pegs are maintained through a variety of

measures, including capital controls and intervention.

Real Effective Exchange Rate (REER) – A weighted average of bilateral exchange rates,

expressed in price-adjusted terms. Unlike the nominal effective exchange rate, it is further

adjusted for the effects of inflation in the countries concerned. 

Trade Weighted Exchange Rate – See Nominal Effective Exchange Rate.