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

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

June 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 ........................................................ 20

IN-DEPTH ANALYSIS............................................................................................................................................... 36

SECTION 2: INTENSIFIED EVALUATION OF MAJOR TRADING PARTNERS.......................42

KEY CRITERIA .......................................................................................................................................................... 42

SUMMARY OF FINDINGS.......................................................................................................................................... 47

GLOSSARY OF KEY TERMS IN THE REPORT ...............................................................................49

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 turned out stronger in 2022 than expected in the Fall. The IMF

lifted its estimate of global growth during 2022 from 1.7% as of October 2022 to 2.0% in

April 2023 (measured on a Q4/Q4 basis). Prices of commodities like food and energy have

stabilized, supply chain pressures continued to ease, and China’s reopening should provide

a boost to global growth. Nevertheless, Russia’s war against Ukraine continues to weigh on

the outlook and has increased energy and food insecurity. Looking forward, the IMF

projects global growth to increase in 2023, to 2.9% before increasing to 3.1% in 2024. The

global economic outlook continues to face elevated uncertainty as Russia’s war enters its

second year, core inflation remains high, and financial market stresses emerged.

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

levels, as trade and tourism patterns remained disrupted. Rising commodity prices tended

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

commodity importers. 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 December 2022. 

China’s surplus was higher in dollar terms at $402 billion over four quarters through

December 2022 (2.2% of GDP), roughly $49 billion higher than in the four quarters through

December 2021. Meanwhile, the U.S. current account deficit rose modestly to 3.7% of GDP

in the four quarters through December 2022, up from 3.6% of GDP in the four quarters

through December 2021. 

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, through

October 2022, the dollar strengthened against most major trading partners’ currencies,

reflecting strong U.S. growth and rising interest rate differentials, as well as safe haven

flows. Except for a moderate appreciation against the Indian rupee, the dollar depreciated

against all major trading partners’ currencies as global financial conditions began to ease in

the fourth quarter of 2022. 

On net, the dollar finished stronger against nearly all major trading partners. As such, most

intervention by U.S. trading partners was in the form of selling dollars, actions that weaken

the dollar and strengthen their currency. Thus, it is not a surprise that in calendar year

2022 no country was found to have violated the currency manipulation standard of

systematically intervening to gain an unfair competitive advantage. A number of major

trading partners did have excessively large current account surpluses, suggesting

imbalances in demand and supply across major economies, but currency manipulation was

not a driving force in 2022.

The Biden Administration believes market determined exchange rates 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
2

the world, cognizant 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 this 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 have committed 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 dollar appreciation — reduce 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 December 2022. 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. 

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). 

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

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

Treasury has found in this Report that no major trading partner met all three criteria under

the 2015 Act during the four quarters ending December 2022. 

Switzerland, which had previously exceeded the thresholds for all three criteria under the

2015 Act, exceeded one of the three criteria over the four quarters through December

2022. Though Switzerland no longer meets all three criteria for enhanced analysis,

Treasury will continue to conduct an in-depth analysis of Switzerland until it does not meet

all three criteria under the 2015 Act for at least two consecutive Reports. 

Meanwhile, Treasury will also continue its enhanced bilateral engagement with

Switzerland to discuss the Swiss authorities’ policy options to address the underlying

causes of its external imbalances.

Treasury Assessments of Other Major Trading Partners

Treasury has also established a Monitoring List of major trading partners that merit close

attention to their currency practices and macroeconomic policies. An economy meeting

two of the three criteria in the 2015 Act 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 performance versus the criteria is durable and is not 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, Korea, Germany,

Malaysia, Singapore, Switzerland, and Taiwan.

Japan has been removed from the Monitoring List in this Report, having met only one out of

three criteria for two consecutive Reports. Germany, Malaysia, Singapore, and Taiwan are

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

on the Monitoring List having triggered two criteria. Korea, and Switzerland triggered just

one criterion, but are on the Monitoring List having triggered at least two criteria in the last

Report. 

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

transparency around key features of its exchange rate mechanism 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 the outsized trade imbalance. 

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 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 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 the importance of all

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

intervention in a timely and transparent fashion. 
5

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 December 2022 and, where quarterly and/or monthly data are available,

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

the United States amounted to more than $5.4 trillion in the four quarters through

December 2022, about 78% of all U.S. trade during that period. 

U.S. Economic Trends

Real gross domestic product (GDP) rebounded in the second half of 2022, after contracting

slightly in the first half of the year. Moreover, labor markets remained historically tight in

the third and fourth quarters of 2022—with the six-month pace of job creation at roughly

double the pace in 2019, just before the pandemic—and there continued to be nearly two

job openings for every unemployed person. On the inflation front, price growth began to

slow in the second half of 2022 due in part to falling oil prices and improved supply chain

performance.

The outlook for growth in the first half of 2023 appears modestly favorable. Real GDP rose

1.1% at an annual rate in the first quarter—though private sector surveys expect weaker

growth in the second quarter. Job growth remains very strong with employers adding

more than 1 million jobs in the first four months of the year, accompanied by an increase in

labor supply. Year-over-year headline inflation continued to slow in the first four months

of 2023, reflecting lower prices for energy and moderating food and core inflation. 

However, both food inflation and core inflation remain elevated.

Economic Performance in 2022 H2

Economic performance during

the second half of 2022 reflected

improvements in many of the

components that had subtracted

from growth during the first half

of the year. Real GDP grew at a

2.9% annualized pace in the

second half of 2022, after

declining by 1.1% in the first half

of the year. The four major

components of GDP (private

domestic final purchases,

government final purchases, net

exports, and changes in private inventories) all contributed to GDP growth in the second

half of 2022. 

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2021

H1

2021

H2

2022

H1

2022

H2

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.
6

Among those four constituent

pieces, private domestic final

purchases (PDFP)—that is, the

sum of personal consumption

expenditures (PCE), business

fixed investment, and residential

investment—is an especially

useful gauge of the most stable

and predictive components of

output. PDFP contributed 0.5

percentage points to total GDP

growth, less than half the 1.1

percentage point contribution in

the first half of the year. The

smaller contribution reflected a

materially steeper decline in

residential investment, led by less single-family home construction.

The drag from residential investment, however, was offset by moderate growth in PCE, as

well as a stronger advance in business fixed investment. Real PCE continued to reflect a

rotation back from goods to services consumption—though it is not clear that the

composition of household consumption will fully return to pre-pandemic levels. 

Meanwhile, the contribution from business fixed investment increased in the second half of

2022. Notably, business spending on structures turned positive as investment in

commercial and health care facilities increased for the first time since the first two quarters

of 2020.

Among the remaining three drivers of real GDP growth, total government consumption and

investment swung from a drag on growth in the first half of 2022 to a contributor in the

second half. The international demand component of real GDP also contributed to growth

in the second half of 2022. Exports of goods and services rose 5.0% at an annual rate in the

second half of 2022, while imports fell 6.4%. Accordingly, the real trade deficit narrowed

by $206 billion, following a $177 billion increase in the first half of the year. Meanwhile in

the final component of GDP, the contribution from the change in private inventories turned

modestly positive in the latter half of 2022, supported by a buildup in manufacturers’

goods.

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2021

H1

2021

H2

2022

H1

2022

Percentage points, seasonally adjusted, 

H2

annual rates

PDFP Contribution to GDP Growth

PCE Goods

PCE Services

BFI Structures

BFI Other

Residential

PFDP

Source: Bureau of Economic Analysis.
7

In labor markets, strong job

growth persisted into the second

half of 2022—though there were

some signs that supply and

demand were realigning. The

historically rapid pace of payroll

job creation in 2021 eased

throughout 2022 but remained

well above that needed to

maintain a stable unemployment

rate. In the second half of the

year, employer payroll growth

stepped down to 354,000 jobs

per month from 445,000 jobs per

month during the first half of

2022. The unemployment rate

(U-3), decreased by

0.3 percentage points to 3.6%

from December 2021 to June

2022 and eased another tenth to

3.5% by December 2022,

matching the five-decade low

seen just before the pandemic. 

The labor force participation rate

(LFPR) improved significantly

throughout 2021 but fluctuated

in a relatively narrow range of

0.4 percentage points

throughout the second half of 2022.

Inflation in the second half of

2022 reflected improvement in

several of the principal drivers of

inflation in 2021 and the first

half of 2022. Supply and demand

mismatches eased as global

supply chains recovered from

the COVID-19 pandemic, and

while Russia’s brutal war against

Ukraine persisted, the initial

shocks to energy and food prices

abated by mid-2022. Energy

commodities were largely a drag

on CPI inflation in the final six months and inflation for food at home also began to slow. As

a result, twelve-month CPI inflation peaked in June 2022 at 9.1% and slowed to 6.5% by

December. Core CPI inflation (excluding food and energy), however, proved more

0.0

2.0

4.0

6.0

2021

H1

2021

H2

2022

H1

2022

H2

Millions of jobs, 6-month change

Payroll Job Growth

Private Goods

Leisure & Hospitality

Other Private

Services

Total Government

Total Payrolls

Source: Bureau of Labor Statistics.

61.0

61.4

61.8

62.2

62.6

0

2

4

6

8 Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Percent of labor force

Unemployment & Labor Participation

U-3 (LHS) LFPR (RHS)

Source: Bureau of Labor Statistics.

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2021 2022

Percentage point contribution to 

12-month inflation

CPI Inflation Decomposition

Energy

Food

Core CPI

CPI Inflation

Source: Bureau of Labor Statistics.
8

persistent. Over the year

through June 2022, core CPI rose

by 5.9% and had eased only to

5.7% by December. Stresses in

global supply chains have eased,

and monthly core goods prices

were a drag on inflation

throughout the second half of

2022. However, core services

inflation remained elevated,

reflecting higher demand in a

variety of service sectors as well

strong growth in price indices

for housing (rent of primary residence and owners’ equivalent rent) which are reflected in

CPI with a lag.

Economic Developments Since December 2022

In the second estimate for real economic activity in the first quarter of 2023, real GDP rose

1.3% at an annual rate, slowing from 2.9% annualized growth in the second half of 2022.

Notably, real PDFP growth, reflecting consumer demand as well as business and residential

investment, was 2.9% at an annual rate, nearly 2.5 percentage points above the pace in the

second half of 2022. Real consumer spending posted solid increases and residential

investment was less of a drag on overall growth. Although business fixed investment

weakened, growth of spending on private nonresidential structures remained solid.

For the components of real GDP other than PDFP, the change in private inventories was a

significant drag on real economic activity, shaving 2.1 percentage points from growth. By

contrast, both public sector and international spending boosted GDP growth. Government

consumption and investment was boosted primarily by increased federal defense

expenditures, and net exports improved as exports grew faster than imports in the second

half of the year.

Labor markets remained exceptionally tight in the first four months of 2023, with robust

employment gains accompanying an increase in labor force participation. Employers have

added 1.1 million jobs since December 2022—notable gains following record employment

increases in 2021 and second-strongest performance in 2022. The unemployment rate was

3.4% in April, returning to January’s more than five-decade low. In addition, the

underemployment rate—which includes marginally attached workers and those working

part-time for economic reasons—stood at 6.6%, only slightly above the record low of 6.5%

in December. Meanwhile, labor force participation has moved higher in recent months,

standing at 62.6% in April, a pandemic recovery high and up 0.4 percentage points on net

from a year earlier (it was 63.3% in February 2020). The prime-age (ages 25 to 54) LFPR

increased to 83.3% in April, the highest reading since March 2008 and exceeding the

February 2020 level by 0.3 percentage points. Still, further improvement in labor force

participation would help ease labor market tightness. In March 2023, the ratio of job

0.0

2.0

4.0

6.0

8.0

2021 2022

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.
9

openings to unemployed persons (1.64) was more than 30% higher that the pre-pandemic

peak of 1.2 vacancies, while the quits rate has remained above 2019 values since March

2021. Although both measures have come off their recent record readings (job openings to

unemployed peaked at 2.01 in March 2022), they continue to signal a historically tight

labor market.

Inflation remained elevated in the first four months of 2023—though 12-month rates have

continued to slow from the end of 2022. On a year-over-year basis, CPI inflation was 4.9%

in April 2023, down from 6.5% in December 2022 and more than 4 percentage points than

the peak in June 2022. Even so, the pace of moderation has been uneven, given the

volatility of energy prices, and April’s positive reading for energy inflation contributed to

the continued high pace of year-to-date inflation. Since December, headline CPI has grown

4.0% at an annual rate. While drag from declining energy prices lessened significantly,

impetus from year-to-date food inflation was roughly one-third of that in the second half of

2022. Indeed, prices of groceries (food at home) have decreased for two consecutive

months. Meanwhile, year-to-date core inflation has held steady at 5.1% annualized

through April 2023—though its composition has changed. Core goods inflation

strengthened, largely due to rising prices for durables, while core services inflation was

modestly softer owing to modestly slower growth in the cost of housing. 

The Federal Open Markets Committee (FOMC) continued to tighten monetary policy in the

latter half of 2022 and into 2023—though the degree of tightening eased following slower

inflation and tighter credit due to financial sector stress. At the May 2-3 meeting, the FOMC

voted to raise its short-term policy rate target (the federal funds rate, or FFR) by 25 basis

points to 5.00–5.25%, the highest since September 2007. During his press conference,

Chair Powell suggested that “[the peak FFR] may not be far off. Possibly even at [the

terminal] level.” Nonetheless, he stressed that future FOMC decisions would be data

dependent in determining whether “additional policy affirming may be appropriate.” The

current FFR target range is consistent with the median 2023 year-end estimate in the

March Summary of Economic Projections (released every other meeting).

Federal Finances in Fiscal Year 2022 and H1 of Fiscal Year 2023

Federal finances have improved

significantly over the past

several years. In FY 2020, the

federal deficit peaked at 14.9%

of GDP due to the pandemic and

related aid measures to help

households and businesses

weather the economic shock. 

Over FY 2021, the deficit

decreased to 12.3% of the

economy, and fell further to

5.5% of GDP in FY 2022. 

Between fiscal years 2021 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.
10

2022, the federal deficit dropped by $1.4 trillion over the year as pandemic-related aid

policy phased out and the economy recovered from the pandemic.

In the first seven months of FY 2023 (October 2022 to April 2023), the federal deficit was

$925 billion, up $565 billion from the same period in FY 2022. Outlays increased by $266

billion for the fiscal year to date, led by higher spending in just three major categories. 

National defense outlays and Social Security spending alone accounted for $100 billion of

the increase while net interest payments added another $108 billion. Meanwhile, receipts

shrank by $225 billion from the first seven months of FY 2022 to the equivalent period in

FY 2023. Individual income

taxes dropped $307 billion;

about a third of the decrease was

due to a sharp increase in

refunds. While social insurance

and retirement receipts were

$75 billion higher—related to

robust payroll job growth—

contributions from Federal

Reserve profits were lower by

$70 billion coinciding with the

runoff of longer-term securities

on the Federal Reserve’s balance

sheet. 

At the end of April 2023, gross federal debt stood at $31.5 trillion while debt held by the

public was $24.6 trillion. 

U.S. Current Account and Trade Balances

The U.S. current account deficit

widened by $97.4 billion to

$943.8 billion in 2022. The

deficit reached 3.7% of GDP, up

slightly from 3.6% in 2021. This

increase was driven mainly by a

declining services surplus. 

Goods trade saw increases in

both exports and imports which

reflected increases in all major

components, led by industrial

supplies and materials, mainly

petroleum and products. From

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

2.5% of GDP. 

-8

-6

-4

-2

0

2

4 2007

200820092010201120122013201420152016201720182019202020212022

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 '10FY '12

FY '14FY '16FY '18FY '20FY '22

Percent of GDP, fiscal years

Federal Debt Outstanding

Federal Debt Debt Held by the Public

Sources: U.S. Treasury; Bureau of Economic Analysis.
11

The U.S. trade deficit increased

slightly over 2022 to 3.7% of

GDP from 3.6% in 2021. Overall,

the goods deficit widened by

around $100 billion or 0.4% of

GDP in 2022. The services

surplus was relatively stable,

increasing just $0.5 billion. 

Overall, however, trade growth

was relatively modest; after

peaking in March 2022, the U.S.

goods and service trade deficit

declined over the course of 2022 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. Weakening global growth is also likely weighing on trade. 

At the end of December 2022, the U.S. net international investment position marked a net

liability of about $16.1 trillion (63.2% of GDP). The $2.0 trillion change in the net

investment position from the end of 2021 to the end of 2022 came from net financial

transactions of –$677.1 billion5 and net other changes in position, such as price and

exchange-rate changes, of $2.68 trillion. 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 do not change with currency fluctuations, generating an exchange

rate related loss of over $1 trillion. This was more than offset by changes in the prices of

foreign assets and foreign liabilities which resulted in a net gain of over $4 trillion. The

value of U.S.-owned foreign assets was $29.7 trillion, while the value of foreign-owned U.S.

assets stood at $46.6 trillion. 

International Economic Trends

Global growth in 2022 proved stronger than projected last fall. The IMF lifted its estimate

of global growth during 2022 from 1.7% as of October 2022 to 2.0% in its most recent

projections from April 2023 (measured on a Q4/Q4 basis). Prices of commodities like food

and energy have stabilized. Supply chain pressures continue to ease. China’s reopening

should provide a boost to global growth and many emerging market and developing

economies continue to fare better than expected thanks in part to improved terms of trade

for some, nimble monetary policy, and a healthy build-up of external buffers. Russia’s war

against Ukraine continues to weigh on the outlook after causing critical commodity prices

to soar, which increased energy and food insecurity and exacerbated inflation. Looking

forward, the IMF projects global growth to increase in 2023, to 2.9% before increasing to

5 The net borrowing tracked in financial accounts was notably smaller than that implied by the current

account resulting in a statistical discrepancy of $271 billion.

-40

-20

0

20

40

60

20062007200820092010

2011201220132014201520162017201820192020202120222023

Annual Percent Change

U.S. Goods and Services Trade Growth

Exports Imports

Source: U.S. Census Bureau 
12

3.1% in 2024, while it expects global headline inflation to fall from 9.2% in 2022 to 5.6% in

2023, and then down to 3.7% in 2024. 

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. Targeted fiscal policy should protect the most

vulnerable, while monetary policy should respond in line with central bank mandates. 

Most emerging market economies continue to have significant buffers to withstand

external shocks. Despite the complicated macroeconomic landscape, countries should not

back away from efforts to address long-standing structural challenges – including climate

change, inequality, and infrastructure investment. 

-2

0

2

4

6

8

10

Malaysia Vietnam India Mexico China Brazil Thailand Taiwan

2022 2023 (Projected)

-2

0

2

4

6

8

10

12

14 Ireland Netherlands UK Italy Australia Singapore Canada Belgium France Korea SwitzerlandUS Germany

Japan

Annual Percent Change

Real GDP Growth

Source: IMF World Economic Outlook April 2023.

Advanced Economies Emerging Market Economies
13

Global Imbalances

Global current account

imbalances6 were broadly

stable in the few years prior

to the pandemic before

widening over 2020 and

2021. 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

offset to some extent by an

increase in China’s surplus. 

Historically high energy and

commodity prices as a result

of Russia’s war against

Ukraine boosted the external

positions of commodity

exporters while weakening

those of importers. 

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

-3

-2

-1

0

1

2

3 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Percent of Global GDP

Global Current Account Imbalances

China Germany Japan

Other Surplus United States Other Deficit

Statistical Discrepancy

Sources: IMF WEO, Haver

-30%

-20%

-10%

0%

10%

20%

30%

200420052006

2007200820092010201120122013201420152016201720182019202020212022

Percent of Global GDP

International Investment Positions

China Germany Japan

Other Surplus United States Other Deficit

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).
14

Net international investment

positions (NIIP) have

narrowed over the last two

years relative to the historical

peaks reached in 2020. 

Among major U.S. trading

partners, the change in net

international investment

positions over the four

quarters through December

2022 primarily reflect

valuation effects. Notably, in

the case of Switzerland, the

Netherlands, and Singapore,

these valuation changes led

to decreased net foreign asset

positions despite large current account surpluses. Conversely, the NIIP increased in the

United States, the United Kingdom, France, and Mexico 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

Amid broad-based

inflationary pressures,

tighter global financial

conditions, and mixed signals

surrounding the global

economic recovery, net

capital flows to emerging

market economies remained

under considerable pressure

over the four quarters

through December 2022. 

Total net outflows of FDI,

portfolio investment, and

other investment reached

$690 billion over the course

of the year, the largest annual

outflow on record in nominal

terms, considerably larger than in other recent global capital market events.

7 Combined

nonresident net flows decreased though remained positive over the four quarters through

7 Notably, net outflows from Russia equaled $237 billion over the four quarters through December 2022. 

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

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

Change in NIIP Valuation (4Q change as of Dec-22)

CA Balance (4Q sum through Dec-22)

Change in NIIP (4Q change as of Dec-22)

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. 

2022 reflects data through the end-December where available.

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

Capital Outflows

Capital Inflows
15

December, suggesting that

foreign investor demand for

emerging market economy

assets remained somewhat

buoyant, but were

outweighed by continued net

outflows from residents.8 

During this period, net

outflows from emerging

markets of portfolio and

other investment increased

dramatically to more than $1

trillion, roughly $677 billion

more than over the course of

2021.9 On a cumulative basis,

net portfolio flows have

declined by nearly $660 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 $375 billion compared to pre-invasion

levels.

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

investment flows over the course of 2022. After beginning to experience net outflows of

portfolio investment and other investment in late 2021, emerging markets continued to see

net outflows in the first quarter of 2022—outweighing robust foreign direct investment—

as Russia’s war against Ukraine contributed to a complicated global environment with

global financial conditions tightening. During this period, net portfolio outflows across

emerging market economies reached a record $175 billion; net nonresident flows retreated

from emerging market economies for the first time since the onset of the COVID-19

pandemic, while residents continued to invest abroad. Net nonresident outflows picked up

in the second quarter of 2022 and net resident outflows remained relatively unchanged,

with overall net portfolio outflows totaling $207 billion, the largest nominal quarterly

portfolio outflow on record. During the third quarter, net portfolio flows remained broadly

unchanged on an overall basis as resident net outflows decreased and nonresident net

outflows increased. Net portfolio outflows narrowed in the fourth quarter but remained at

moderately elevated levels of about $75 billion as global financial conditions began to ease,

nonresident net flows reversed, and resident net outflows decreased. Notably, net

portfolio investment flows retreated from China at a record pace over this time period,

with net outflows in the first and second quarters totaling about $80 billion each, and $104

billion in the third quarter amid strong outflows from both residents and nonresidents. 

8 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.

9 In the case of several emerging markets, substantial monetary policy tightening over the course of 2022 may

have helped to lessen the severity of net capital outflows. 

-700

-600

-500

-400

-300

-200

-100

0

100

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. 2022 reflects data through the end-December 

where available.

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

Capital Outflows

Capital Inflows

Cumulative Portfolio Flows to Emerging Markets
16

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

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

mixed, across both equity and debt flows. These measures suggest foreign investors

remain relatively sensitive to signals regarding the pace of monetary policy tightening

across the global economy, the resilience of the global financial system in the face of recent

financial sector developments, and the prospects for continued global growth.

Foreign Exchange Markets10

The nominal trade-weighted

dollar strengthened 5.3% from

end-December 2021 to endDecember 2022 as foreign

currency movements reflected

mixed influences surrounding

global inflation, expected

monetary policy tightening, and

other factors. Over this period,

the dollar appreciated most

strongly against advanced

economy currencies, by about

7.2%, whereas the dollar

appreciated against emerging

market currencies by just 3.6%. 

Dollar appreciation occurred

predominantly during the second

and third quarters of 2022 where

the nominal trade weighted dollar

rose 4.9% and 5.4%, respectively,

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.

10 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 20 25

India

Taiwan

China

Malaysia

Vietnam

Thailand

Singapore

Brazil

Mexico

EME basket

Advanced Foreign Economies (AFE)

-15 -10 -5 0 5 10 15 20 25

2022 H1 2022 H2 2023 Q1 Net change

U.S. Dollar vs. Major Trading Partner Currencies

(+ denotes dollar appreciation)

Contribution to percent change between end-Dec. 2021 and end-Mar. 2023

Broad dollar index

Sources: FRB, Haver

-15 -10 -5 0 5 10 15 20 25

Japan

UK

Canada

Euro

Switzerland

AFE basket
17

Over the first three quarters of 2022, the dollar appreciated against all other major trading

partners’ currencies except moderate depreciations against the currencies of Mexico and

Brazil. The dollar strengthened against advanced economy currencies in particular,

appreciating by nearly 26% against the Japanese yen, 21% against the British pound, and

16% against the euro during this period. 

Against this backdrop, several major trading partners intervened to stem the pace of

depreciation against the dollar. In September and October 2022, Japanese authorities

intervened in currency 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.

 

Except for a moderate appreciation against the Indian rupee, the dollar depreciated against

all major trading partners’ currencies as global financial conditions began to ease in the

fourth quarter. Despite signs of potential financial market strains in March, dollar easing

continued against most major currencies in the first three months of 2023, most notably

against the Mexican peso and the Brazilian real. The dollar weakened 1.6% on net over the

first three months of the year.

From a longer-term perspective, the dollar has retraced most of its movements against

currencies of advanced economies and emerging markets since the onset of the pandemic,

strengthening by 3% against advanced economy currencies and 3% against emerging

market currencies between mid-February 2020 and end-March 2023. 
18

On a real effective basis, the dollar appreciated 4.7% from end-December 2021 to endMarch 2023, while the real broad dollar remained 16.3% 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. Meanwhile, the real effective exchange rates of several major

trading partners have adjusted considerably. Some economies that the IMF assessed to be

undervalued in 2021 have adjusted substantially or appreciated through March 2023

relative to the 2021 average (e.g., Singapore, Vietnam, and Thailand), while others have

adjusted minimally or depreciated substantially over the same period (e.g., the

Netherlands, Ireland, Malaysia, Euro area, Japan, Australia, and Germany). However, these

adjustments only provide partial information about current exchange rate misalignments,

especially given that the significant movements in currencies over the course of 2022

reflected multiple macroeconomic fundamentals. In particular, terms of trade shocks or

policy rate differentials can temporarily affect equilibrium levels without meaning that

exchange rates have departed from fundamentals.

Foreign Exchange Reserves

Global foreign currency reserves totaled $11.9 trillion over the four quarters through endDecember 2022, a decline of roughly $1 trillion relative to end-December 2021. Data on

-20

-15

-10

-5

0

5

10

15

20

25 Mexico United States Brazil Canada U.K. France India Belgium

Italy Switzerland Singapore Vietnam Thailand Ireland Netherlands China Korea Euro Area Malaysia

Germany

Japan Australia Percent

2021 REER Gap Assessment (mid)1 Adjustments as of Mar-20232

CA Deficit Economies3 CA Surplus Economies

IMF Estimates of Exchange Rate Valuation and Recent Developments Undervalued Overvalued

Sources: IMF 2022 External Sector Report, IMF 2022 Article IV Consultation Staff Report for Ireland, IMF 2022 Article IV Consultation Staff 

Report for Vietnam, BIS REER Indices, JP Morgan, FRB.

1/The IMF's estimate of real effective exchange rate (REER) gap (expressed as a range) compares the country's average REER in 2021 to 

the level consistent with the country's medium-term economic fundamentals and desired policies. The midpoint of the gap range is 

depicted above.

2/Change between 2021 average REER and end-March 2023. Because the REER level consistent with the country’s medium-term 

economic fundamentals and desired policies changes over time, these adjustments provide partial information about current exchange 

rate misalignments.

3/Economies sorted based on whether they were more frequently in deficit or surplus over the past five years.

Note: The IMF does not provide an estimate of Taiwan's REER gap.
19

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 26 on p. 44), suggest this decrease was driven predominantly by estimated net

sales of $952 billion in foreign exchange, as well as an additional $340 billion decline due to

valuation effects resulting from dollar appreciation over this period. Estimated interest

income of $283 billion offset a portion of the decline. 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 fall in foreign

exchange reserves was largely due to total valuation effects, contributing a decline of $887

billion, while net sales of foreign exchange only contributed a decline of $122 billion. 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. 

Despite the decline in global foreign currency reserves, 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 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.
20

Economic Developments in Selected Major Trading Partners

China

China’s economic growth slowed considerably in 2022, with real GDP growth decelerating

to 3.0% from 8.1% in the previous year. Elevated uncertainty amid periodic large-scale

lockdowns to curb the spread of COVID-19 and heightened stress in the property sector

significantly weakened private domestic demand. Soft private demand also reflected

China’s unbalanced macroeconomic policy response to the pandemic, which favored

infrastructure investment and support for manufacturing firms over direct support for

households. Adding to these challenges, external demand declined over the second half of

the year. In the final months of 2022, the authorities abandoned their “zero-COVID” policy

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 3,127.7 -122.5 17% 247% 106%

Japan 1,108.2 -175.1 26% 36% ..

Switzerland 848.5 -185.3 105% 72% ..

India 498.0 -71.9 15% 386% 165%

Taiwan 554.9 6.5 73% 297% ..

Korea 399.0 -39.3 24% 239% 97%

Singapore 279.8 -128.5 60% 23% ..

Brazil 293.9 -37.0 15% 434% 136%

Thailand 195.6 -29.2 39% 287% 228%

Mexico 174.8 -6.0 12% 319% 116%

UK 110.3 -17.5 4% 2% ..

Malaysia 105.3 -1.9 26% 96% 110%

Vietnam 84.7 -22.7 21% 201% ..

Canada 79.7 1.6 4% 8% ..

France 52.8 -0.8 2% 2% ..

Italy 46.6 -2.0 2% 4% ..

Australia 38.5 1.1 2% 10% ..

Germany 36.7 -0.3 1% 1% ..

Belgium 11.1 -0.1 2% 2% ..

Netherlands 5.2 -0.1 1% 0% ..

Ireland 5.6 -0.3 1% 0% ..

United States 37.2 -3.5 0% 0% ..

World 11,905.5 -1,007.6 n.a. n.a. ..

Foreign exchange reserves as of end-December 2022.

GDP caluclated as sum of rolling 4Q GDP through Q4-2022.

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 Q4-2022; Vietnam as of Q2-2022.

* 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.
21

and announced measures to support the property sector, mitigating two major growth

headwinds. Partially as a result of these developments, China’s near-term growth outlook

has improved, with the IMF projecting growth at 5.2% in 2023, but remains subject to

important downside risks related to the strength of both domestic and external demand

and continued financial stability risks in the property sector. 

China’s current account surplus

widened to 2.2% of GDP in 2022

from 2.0% of GDP in 2021,

driven primarily by an expansion

of China’s goods trade surplus to

3.7% of GDP from 3.2% in the

previous year.11 The increase in

the goods trade surplus

primarily reflected weak

domestic demand, with import

volumes contracting more

sharply than export volumes last

year. The services trade deficit remained subdued at 0.5% of GDP in 2022, largely due to

restrictions on outbound travel. China’s income deficit widened to 1.0% of GDP in 2022

from 0.6% of GDP in 2021, primarily reflecting a substantial widening of the investment

income deficit in the second quarter of 2022.

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

any U.S. trading partner, growing to $383 billion in 2022 from $353 billion in 2021. China

ran a bilateral services trade deficit of $16 billion in 2022, down from a deficit of $18 billion

in 2021. Overall, China’s bilateral goods and services surplus with the United States

reached $367 billion last year. 

China’s financial account deficit expanded significantly to $211 billion in 2022 from $30

billion in 2021. The rapid shift in China’s financial account was primarily the result of a

large swing in China’s portfolio investment balance to a record-high deficit of $281 billion

from a surplus of $51 billion in the previous year. These portfolio outflows mostly

reflected portfolio debt outflows by both residents and nonresidents amid a growing

divergence in monetary policy stances between China and advanced economies. A rapid

decline in FDI inflows over the course of 2022 also contributed to the overall shift in the

financial account, with the net FDI surplus falling to $30 billion in 2022 from a surplus of

$165 billion in 2021. These trends were partially offset by a large swing in the other

investment balance to a surplus of $45 billion last year from a deficit of $257 billion in the

11 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 4.9% of GDP in 2022. 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. An official report published by SAFE in September 2022

suggests that part of the discrepancy between SAFE and Customs data may be explained by changes to SAFE’s

statistical treatment of trade conducted from multinational corporation-owned facilities in China’s tariff-free

zones.

-5

0

5

10

15

200720082009201020112012201320142015

2016201720182019202020212022

Percent of GDP

China: Current Account Balance

Income Services Goods Current Account Balance

Sources: SAFE, Haver
22

previous year, primarily due to a reduction in China’s overseas loans and financial claims.

12 

A net errors and omissions deficit of $91 billion suggests strong undocumented capital

outflows not captured in identified components of the financial account, in line with

previous years.

The RMB depreciated by 7.7%

against the dollar and 3.8%

against the People’s Bank of

China’s (PBOC’s) China Foreign

Exchange Trade System (CFETS)

nominal basket in 2022.13 The

real effective exchange rate

weakened by 7.9% last year

(lower inflation in China than its

trading partners meant the real

exchange rate depreciated more

than the nominal). The RMB’s

sharp nominal depreciation last

year occurred primarily during two distinct episodes between mid-April and mid-May and

between mid-August and the end of October. Both episodes occurred during periods in

which the dollar was appreciating rapidly on a nominal effective basis and China’s domestic

growth outlook was deteriorating amid COVID-related developments and property sector

stress. The RMB reversed its depreciation trend in the final two months of the year, as the

broad dollar depreciated, and China’s growth outlook improved amid anticipated easing of

the zero-COVID policy and additional policies aimed at reviving growth. In early 2023 the

RMB was more stable, ending the first quarter 0.4% stronger against the dollar and 1.2%

stronger against the CFETS basket. 

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. Recently, the authorities have publicly indicated that

they have reduced the magnitude and frequency of intervention in foreign exchange

markets, but their lack of transparency makes it impossible to verify this claim.14

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 state-owned banks, and the conversion of

foreign exchange proceeds by state-owned enterprises (SOEs).

The authorities implemented several regulatory and administrative measures last year to

counteract RMB depreciation pressures. The PBOC announced reductions in the foreign

12 Excluding China’s SDR allocation, the other investment deficit was $299 billion in 2021.

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

14 “Yi Says China Largely Ended Currency Intervention in Market Tilt,” Bloomberg, April 15, 2023.

80

85

90

95

100

105

110

80

85

90

95

100

105

110

2015

201620172018201920202021

20222023

Indexed December 2014 = 100

China: Exchange Rates

Bilateral vs. USD CFETS REER (monthly)

Sources: CFETS, FRB, BIS
23

currency required reserve ratio in April and September, loosening onshore FX liquidity

conditions during periods of rapid RMB depreciation. In September, the PBOC also reimposed a reserve requirement on financial institutions that sell FX forwards to clients. 

The following month, the PBOC increased the cross-border financing macroprudential

adjustment parameter, permitting resident banks and corporates to increase fund raising

from nonresidents. Throughout the RMB’s depreciation episode between mid-August and

the end of October, the PBOC 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. Moreover, multiple

press reports provide evidence that during this same period the Chinese authorities

privately instructed Chinese banks to take actions to resist depreciation pressure, including

limiting dollar purchases and increasing dollar sales in exchange for RMB in both onshore

and offshore FX markets.15 These measures follow a nearly two-year period during which

Chinese policymakers pursued measures that had the effect of counteracting RMB

appreciation pressures.

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

to assess the degree to which official actions 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 decreased by

$123 billion in 2022, ending the

year at $3.1 trillion. This

represents the largest annual

decline in China’s headline

reserves since 2016. This

decline is likely due in large part

to valuation effects associated

with dollar appreciation and

declining asset prices; however,

China’s lack of transparency on

the composition of its reserves

makes it difficult to confidently estimate the size of these valuation effects. 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 $27 billion last year. Meanwhile, net foreign exchange

settlement data, another proxy measure that includes the activities of China’s state-owned

banks, recorded net foreign exchange purchases of $88 billion in 2022, adjusted for

15 “China Regulator Warns Banks Against Yuan Selling,” Reuters, August 24, 2022. “China’s State Banks Told

to Stock Up for Yuan Intervention,” Reuters, September 29, 2022. “China’s State Banks Seen Acquiring Dollars

in Swaps Market to Stabilize Yuan,” Reuters, October 17, 2022. “China’s State Banks Sold Dollars to Support

Yuan Late on Tuesday – Sources,” Reuters, October 25, 2022.

-200

-150

-100

-50

0

50

100

20152016201720182019

202020212022

Billion U.S. Dollars

China: Estimated FX Intervention

PBOC FX Assets Bank Net FX Settlement

Sources: PBOC, SAFE, U.S. Treasury Estimates
24

changes in outstanding forwards. 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.

The authorities should use available policy space to support the recovery in private

domestic demand following the end of the zero-COVID policy in a manner that does not

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

measures to bolster 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. Making

greater use of the central government’s available fiscal space would help to mitigate

stresses on local governments’ finances. Near-term measures to support the property

sector should be carefully calibrated to mitigate moral hazard 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. 

Korea

Korea’s real GDP grew by 2.6% in 2022 after a 4% expansion in 2021. Growth was led by

strong private consumption and supportive government spending, which helped buoy the

Korean economy amongst a weakening in the external sector. The IMF projects growth to

decelerate to 1.5% in 2023. The Korean government passed a budget that expects to

reduce the projected 2023 fiscal deficit to approximately -0.6% of GDP, from a 2022 deficit

of -3.3% of GDP following the second supplemental budget. Korea’s central bank tightened

monetary policy from August 2021 through January 2023 to address financial imbalances

and above-target inflation, before holding its policy rate at 3.5% in recent meetings.

Korea’s current account surplus

declined sharply to 1.8% of GDP

in 2022 from 4.7% a year prior. 

The decline was driven by a

decrease in Korea’s goods

surplus due to weakening

external demand and increased

energy import prices. Some of

the decline was offset by an

increase in income balance,

which posted its largest surplus

on record driven predominantly

by investment income from

abroad. Moderation in Korea’s current account surplus continues a narrowing trend that

began in 2015 and more recently reflects some normalization of pandemic-induced

-4

-2

0

2

4

6

8

10

2007200820092010201120122013201420152016201720182019202020212022

Percent of GDP

Korea: Current Account Balance

Income Services Goods Current Account Balance

Sources: Bank of Korea, Haver
25

demand for Korean exports, coupled with rising energy prices as a result of Russia’s war

against Ukraine. Korea’s bilateral trade surplus with the United States, inclusive of goods

and services, increased to $36 billion in 2022, up from $22 billion in 2021. 

Despite the relatively sharp

depreciation against the dollar,

the real effective index did not

move nearly as much in 2022, as

many of the currencies of Korea’s

trading partners also weakened

against the dollar. The Korean

won depreciated in 2022,

weakening 5.7% against the

dollar and 1.8% on a real

effective basis. Since weakening

considerably in September and

October 2022, the won has

appreciated 9.8% against the dollar from end-September 2022 through end-March 2023 as

dollar strength moderated. Sizeable equity outflows stemming from rising global interest

rates also contributed to won weakness in 2022. Korea’s national pension fund’s total

foreign asset holdings decreased by around $16 billion over the four quarters ending in

December 2022, from $336 billion to $320 billion, likely driven by changes in valuations of

foreign assets.

Korea reported net foreign

exchange sales of $46 billion

(2.7% of GDP) in the spot market

over the four quarters ending in

December 2022 as Korean

officials intervened to curb the

won’s depreciation amid the

global strengthening of the U.S.

dollar. Treasury estimates that

the Korean authorities sold

foreign exchange at increasing

amounts throughout the first

three quarters of 2022 in line

with increasingly rapid won depreciation over the course of the year. Treasury estimates

sales moderated in the fourth quarter in line with reduced depreciation pressures on the

won. Korea publicly reports its foreign exchange intervention on a quarterly basis.16 Korea

should limit currency intervention to only exceptional circumstances of disorderly foreign

16 Treasury’s estimates are monthly and are based on interest-adjusted changes in foreign currency reserves

from monthly balance of payments statistics as well as changes in the central bank’s forward position. 

Treasury estimated $31 billion in estimated net foreign exchange sales through the four quarters ending in

December 2022. Differences in estimated Bank of Korea operating profits likely drove the gap between

Treasury’s estimate and the Korean authorities’ reported intervention figure.

70

80

90

100

110

120

130

70

80

90

100

110

120

130

20072008200920102011201220132014201520162017

201820192020202120222023

Indexed to 20Y Avg = 100

Korea: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements

-16

-12

-8

-4

0

4

8

12

2016201720182019202020212022

Billion U.S. Dollars

Korea: Estimated FX Intervention

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

Sources: Bank of Korea, U.S. Treasury estimates
26

exchange market conditions. The authorities’ recently announced measures to improve the

operations of and access to the Korean foreign exchange market; these include expanding

trading hours, allowing the direct participation of foreign financial institutions in the

onshore interbank FX market, developing FX market infrastructure, and establishing

cooperative relationships between local and foreign financial institutions. Korea maintains

ample foreign exchange reserves at $399 billion as of December 2022.

After supporting the economic recovery from the COVID-19 pandemic, the Korean

authorities have deployed monetary and fiscal policies to arrest inflation and financial

imbalance concerns while continuing to support vulnerable households. Going forward,

the authorities should consider utilizing their sizable fiscal capacity to support equitable

and green growth policies that will raise incomes for vulnerable workers while

undergirding energy security and economic resilience, while avoiding an unnecessarily

rapid fiscal expansion. Progress on structural reforms, such as encouraging broad-based

participation in the labor market, strengthening social safety net programs, decreasing

administrative burdens on starting businesses, reducing non-tariff trade barriers, and

integrating carbon reduction commitments into economic planning would help secure

economic opportunity for disadvantaged workers, reduce old-age poverty, increase

business dynamism, and insulate Korea from external energy shocks.

The Euro Area

Despite posting relatively strong growth of 3.5% in 2022 overall, economic activity

flatlined with 0.0% annualized growth in the fourth quarter. The euro area averted the

most dire analyst projections of an economic downturn in late 2022, and while risks are

becoming more balanced, they remain tilted to the downside with heightened financial

sector vulnerabilities, ongoing spillovers from Russia’s war against Ukraine, and continued

adverse pandemic-related effects. The IMF expects euro area growth to remain subdued at

just 0.8% in 2023, with some intra-bloc variation including Germany’s economy

contracting by 0.1% and Spain’s economy growing by 1.5%. 

Even prior to Russia’s war against Ukraine, the euro area’s aggregate fiscal policy posture

was set to remain supportive through 2022. Russia’s war led to further outlays, as

governments attempted to shield consumers and businesses from the impacts of rising

energy prices, accelerate the drive toward energy independence from Russia, bolster

defense spending, and respond to the influx of refugees. Given these expenditure needs,

the European Commission announced that fiscal rules contained within the EU’s Stability

and Growth Pact would continue to be suspended until 2024. The Commission’s proposal

to reform these rules—currently under negotiation with EU finance ministers and the

European Parliament—would provide some additional flexibility for counter-cyclical

spending and more realistic debt reduction paths. In the meantime, the Commission did

not advocate for a broad fiscal impulse in 2023. Instead, the ECB and European

Commission continue to encourage member states to pursue temporary, targeted, and

tailored energy assistance so as not to introduce additional inflationary pressures by

supporting aggregate demand. The Commission’s budget guidance for 2024 similarly

encourages member states to return to a path of debt and deficit consolidation. 
27

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

Generation EU (NGEU) pandemic recovery package agreed in July 2020. NGEU is now

operational, with $115 (€105) billion in grants and $52 (€47) billion in loans from the

Recovery and Resilience Fund (RRF)—the main component of the NGEU—distributed to

member states thus far. The RRF consists of up to $370 (€338) billion in grants and $423

(€386) billion in loans. While member states have applied for all of the RRF’s grants,

roughly $241 (€220) billion in lending capacity remains, with some capacity earmarked for

the REPowerEU program. The European Commission has proposed repurposing these

unallocated funds to allow member states to enact key components of the EU Green Deal

Industrial Plan, including as state aid to “net-zero” industries.

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

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

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

pursue its sole de jure mandate of inflation targeting while also considering a weak outlook

for the real economy and pursuing its de facto goal of sovereign yield management. The

central bank has raised its key rates 375 basis points since July 2022, with the deposit rate

now at 3.25%. 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 balance sheet in March 2023, reducing its APP portfolio by €15 billion per month by not

fully reinvesting payments from maturing securities, and expects to discontinue APP

reinvestments as of July 2023. To counter fragmentation risks, the ECB has committed to

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

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.”

While the recovery gained momentum, so too did inflation, with headline inflation peaking

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

pressures. Though headline inflation declined to 6.9% year-on-year by March 2023 as

energy pressures faded and base effects took hold, inflation expectations remain elevated

as core inflation remains sticky, increasing to 5.7% year-on-year in March 2023. In March,

the ECB’s baseline scenario projected headline inflation of 5.3% in 2023. The ECB

anticipates that inflation will return to the target level of 2% in the second half of 2025.

The euro area current account deficit equaled 1.1% of GDP in 2022 as supply chain

disruptions, COVID-19 outbreaks, and high imported energy prices weighed on the euro

area’s typically strong external position; the bloc saw a more typical current account

surplus of 2.3% of GDP in 2021. The IMF expects the eurozone to return to a small current

account surplus of 0.6% of GDP in 2023. In its August 2022 External Sector Report, the IMF

assessed that the euro area’s external position in 2021 was moderately stronger than the

level implied by medium-term fundamentals and desirable policies.
28

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

remained 11% weaker against

the dollar from end-2020 to

March 2023, it has retraced most

of its losses since the beginning

of Russia’s war against Ukraine

as euro area economic activity

remained more resilient than many analysts expected when the war began. In real

effective terms, the euro depreciated 3.0% between end-January 2022 and end-March

2023. The ECB publishes its foreign exchange intervention and has not intervened in

foreign exchange markets since 2011. 

Germany

Despite struggling under the weight of continued COVID-related supply disruptions, high

energy prices, and other spillovers from Russia’s war against Ukraine, German economic

output expanded by 1.8% in 2022, year-on-year. Economic growth in the first three

quarters was driven by private consumption. The German economy markedly lost

momentum toward the end of the year, with gross domestic product contracting by 0.4% in

the fourth quarter, quarter on quarter, as private consumption slowed and construction

and machinery gross capital formation decreased.

With Russia’s war creating new economic headwinds across Europe, and Germany being

particularly impacted by energy supply issues, the IMF’s April 2023 WEO forecasts near

zero German real GDP growth in 2023. The German Council of Economic Experts expects

Germany to narrowly avoid recession in 2023, with an expected real GDP growth of 0.2%. 

The short-term outlook for the German economy has improved compared to the Fall of

2022, with Germany avoiding a winter energy crisis, maintaining a resilient labor market,

and strengthening its public finances. After three years of expansive utilization of fiscal

space to combat the impacts of the coronavirus pandemic, the German finance minister has

committed to technical compliance with the debt brake in 2023. If implemented as

planned, the government would eliminate the use of off-budget “special funds,” which the

government employed to provide funds to modernize the German military and shield

households and business from higher energy costs.

German inflation reached the highest levels since the 1990s in October 2022 at 11.6%, year 

on year. The rate has steadily decreased since, falling to 7.8% year on year in March 2023, 

with inflationary pressures expected to continue to ease over the course of 2023. Recent 

inflationary declines have been driven primarily by a decrease in energy inflation, partially 

offset by an increase in food prices. For example, the average price of natural gas in Europe 

70

80

90

100

110

120

130

70

80

90

100

110

120

130

20072008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Euro: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
29

in the first half of March 2023 was around €46 per MWh, around 80% lower than at its 

peak in August 2022.

Germany’s current account

surplus contracted by $160

billion to $174 billion in 2022,

falling by more than three

percentage points of GDP to

4.3%. This represents the

largest decline since German

reunification and the lowest

surplus since 2003. Despite this

contraction, 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 changes in energy supply and trade patterns in the wake of Russia’s

war against Ukraine. Germany has run a large surplus as a share of GDP for well over a

decade as production is consistently above domestic absorption. A major economy with

such a consistently large surplus requires offsetting borrowing on a persistent basis by the

rest of the world on net.

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

creation of the euro. Germany’s bilateral goods and services trade surplus with the United

States stood at over $76 billion in 2022, roughly $3 billion more than 2021, the largest

since 2015. 

While Treasury recognizes that the German government took strong fiscal measures in

response to COVID-19 and Russia’s war against Ukraine, Germany still needs to

significantly improve its chronic spending under-execution, which contributed to

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

budgets called for fiscal balance, but stronger-than-forecast 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, including

through strengthening efforts to combat climate change, enhance energy security, and

reinvigorate 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 recovery in

private spending and investment. The authorities project 4.0-5.0% growth in 2023

supported by China’s reopening (and associated demand for commodities), a continued

rebound in tourism, and resilient labor markets. While the authorities began to wind down

-5

0

5

10

200720082009201020112012201320142015201620172018201920202021

2022

Percent of GDP

Germany: Current Account Balance

Income Services Goods Current Account Balance

Source: Deutsche Bundesbank
30

COVID-19 related spending in 2022, they provided significant fiscal support to buffer

households and businesses from the shocks to global energy and food prices stemming

from Russia’s war against Ukraine. As a result, the fiscal deficit is estimated to have shrunk

modestly to roughly 5.0% of GDP in 2022 (from 6.4% of GDP in 2021). Given the strong

growth outturn, Malaysia’s public debt-to-GDP 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 3.4% year-over-year in March—Bank Negara Malaysia (BNM) has tightened

monetary policy gradually. BNM raised its key policy rate a cumulative 100 basis points in

2022 to 2.75%, and in May 2023 increased an additional 25 basis points to 3.0%. 

Malaysia runs perennial current

account surpluses, though they

have narrowed substantially

since 2008 and stood at 3.0% of

GDP over the four quarters

through December 2022. 

Malaysia’s goods surplus

narrowed roughly one

percentage point to 10.4% of

GDP last year as import growth

modestly outpaced export

growth. Meanwhile, Malaysia’s

services deficit shrunk as

inbound tourism—which averaged 5.7% of GDP in the five years prior to the pandemic—

began to recover. The income deficit widened to 4.2% of GDP from a deficit of 3.3% of GDP

one year prior, largely reflecting a fall in direct investment income. Over the last decade,

the IMF has consistently assessed Malaysia’s external position to be stronger than the level

implied by medium-term fundamentals and desirable policies (with its assessment ranging

from moderately to substantially stronger depending on the year).

Malaysia’s goods and services trade surplus with the United States reached $36.6 billion in

2022. 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 $7 billion in gross bilateral

services trade flows in the four quarters through December 2022. On net, bilateral services

trade was roughly in balance. 

-10

-5

0

5

10

15

20

25

2007200820092010201120122013201420152016201720182019202020212022

Percent of GDP

Malaysia: Current Account Balance

Income Services Goods Current Account Balance

Source: Department of Statistics Malaysia
31

Malaysia has established a track

record of two-way intervention

in the foreign exchange market

in recent years. Malaysia does

not publish data on its foreign

exchange intervention; however,

the authorities have conveyed

credibly to Treasury that net

sales of foreign exchange in 2022

were $25.3 billion or 6.2% of

GDP. According to internal

Treasury estimates, net sales

accelerated over the middle of

2022 amid net portfolio outflows as the authorities leaned against depreciation pressures

on the ringgit, and then switched to net purchases in the fourth quarter when the ringgit

faced appreciation pressures. Foreign exchange reserves stood at around $105 billion at

end-December 2022, down roughly $2 billion compared to end-2021. Reserves remain

broadly adequate according to standard adequacy metrics, including that of the IMF.

On net, the ringgit depreciated

5.1% against the U.S. dollar in

2022. Despite weakness against

the dollar, the ringgit

appreciated 2.0% on a nominal

effective basis in 2022. Over the

same period, the ringgit

appreciated 0.3% on a real

effective basis.

The authorities should upgrade

the scale and coverage of the

social protection system and

pursue targeted public investments to help foster inclusive and sustainable growth and

support external rebalancing. This could be done in a fiscally prudent way by rolling back

broad, untargeted subsidies. The authorities 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

Singapore recovered strongly from the pandemic, with 8.9% growth in 2021 followed by

continued above-trend growth of 3.6% in 2022. The economic outlook has softened

entering 2023—with growth turning negative in the first quarter—as domestic activity

cooled from the lagged effect of prior monetary tightening and exports were weighed down

by slowing external demand. The authorities project real GDP growth will register 0.5–

-10

-8

-6

-4

-2

0

2

4

6

8 2016

201720182019202020212022

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

70

80

90

100

110

120

130

70

80

90

100

110

120

130

2007

2008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Malaysia: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
32

2.5% this year amid still-elevated inflation and drags from weaker activity in trade-related

sectors, particularly the global electronics industry.

The authorities’ fiscal year 2023 budget (April 2023-March 2024) aims to narrow the

deficit from 0.3% to 0.1% of GDP, returning to the broadly balanced budget stance that has

typically been maintained in recent decades outside of crisis periods. In January, the

authorities raised the goods-and-services tax (GST) from 7% to 8% and will raise it further

to 9% in 2024. To help mitigate the effects of the GST increase on households, the

authorities are providing income-dependent GST rebates and cash payouts totaling around

0.3% of GDP annually over the next five years.

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 began tightening

monetary policy in October 2021, and has since further tightened monetary policy four

times, including two off-cycle moves in January and July 2022. Nonetheless, price

pressures remain elevated amid both high global inflation and a relatively tight domestic

labor market. As of March 2023, headline inflation stood at 5.5% year-on-year and core

inflation 5.0% year-on-year. MAS projects that inflation will remain elevated in the near

term but should ease in the second half of 2023 as imported inflation continues to fall and

domestic wage growth moderates.

Singapore’s outsized current

account surplus averaged 17% of

GDP over the last ten years and

reached 19.3% of GDP in the four

quarters through December

2022, owing primarily to a

massive goods surplus, offset in

part by a sizable income deficit. 

The IMF has consistently

assessed Singapore’s external

position to be substantially

stronger than warranted by

economic fundamentals and

desirable policies. Singapore’s long history of large current account surpluses has pushed

its net international investment position to around 170% of GDP, one of the highest levels

in the world, leaving it open to very large swings in NIIP due to valuation as was seen this

year.

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

and services trade, and in 2022 these widened to $15 billion and $21 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

-20

-10

0

10

20

30

40

50

2007200820092010201120122013201420152016

201720182019202020212022

Percent of GDP

Singapore: Current Account Balance

Income Services Goods Current Account Balance

Sources: Monetary Authority of Singapore, Department of Statistics
33

transshipment hub, with some of Singapore’s imports from the United States ultimately

intended for other destinations in the region.

Unique among advanced

economies, MAS uses the

nominal effective exchange rate

as its primary tool for monetary

policy. MAS intervenes in the

foreign exchange market to

manage the nominal effective

exchange rate of the Singapore

dollar and implement its policy. 

In October 2022 and April 2023,

MAS published data on

intervention covering calendar

year 2022. Net purchases of

foreign currency totaled $73 billion in 2022, equivalent to 15.6% of GDP. Net purchases

were concentrated in the first half of 2022, with intervention activity becoming more twosided by the fourth quarter. Official foreign exchange reserves totaled $280 billion (60% of

GDP) at end-December 2022. Despite MAS’s significant net purchases of foreign exchange,

official reserves held by MAS declined in 2022 as MAS transferred more than $170 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 a second sovereign wealth and investment fund, Temasek. 

The Singapore dollar appreciated

0.9% against the U.S. dollar in

2022. Meanwhile, the Singapore

dollar rose strongly against most

other currencies in the region, in

some cases reaching record

highs against other trading

partners, as MAS tightened

monetary policy. Consequently,

the Singapore dollar appreciated

8.2% and 9.5% on a nominal

effective and real effective basis,

respectively, in 2022.

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. 

80

90

100

110

120

80

90

100

110

120

2007200820092010201120122013201420152016201720182019202020212022

2023

Indexed to 20Y Avg = 100

Singapore: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements

-15

-10

-5

0

5

10

15

20

25

2016201720182019202020212022

Billion U.S. Dollars

Singapore: Estimated FX Intervention

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

Sources: Monetary Authority of Singapore, U.S. Treasury estimates
34

Singapore’s policies, including the recent increases in consumption taxes have constrained

consumption and have pushed domestic saving to levels that are nearly unmatched among

high-income economies and generated one of the largest net foreign asset positions in the

world. Policy reforms that durably strengthen consumption, diminish precautionary

saving incentives, and transfer wealth to households would help address external

imbalances. Key policies include loosening fiscal policy on a structural basis, bolstering

social support, increasing green and climate-resilient investment, reducing mandatory

pension contribution rates, and giving households greater ownership and 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. The authorities should refrain from onesided foreign exchange intervention and excessive reserve accumulation. In this context,

the significant net purchases in 2022 acted to stem appreciation when inflation was

running above target and Singapore maintained a large current account surplus.

Taiwan

Taiwan’s real GDP grew by 2.5% in 2022, down from 6.5% in 2021. Growth in 2022 was

driven by private consumption, with government consumption and fixed asset investments

also contributing positively to growth, but net exports weighed on growth due to increased

energy prices, COVID-19 lockdowns in China, and a decline in global semiconductor

demand. In February 2023, the Legislative Yuan passed a special bill to boost the economy

by allocating the authorities’ surplus tax revenue stemming from strong corporate tax

receipts. The measure includes, among other items, direct cash subsidies to citizens,

subsidies for small- and medium-sized businesses, and incentives for international

travelers to visit. The IMF expects growth to be 2.1% in 2023. 

The central bank began tightening monetary policy to address elevated inflation with a 25-

basis point hike in March 2022 followed by four consecutive 12.5 basis point hikes at each

of their subsequent quarterly meetings to bring the central bank’s policy rate to 1.875% at

the end of March 2023. In June 2022, headline inflation reached 3.6% year-on-year, the

highest level since July 2008, but has since moderated to 2.4% as of April 2023, while

authorities’ preferred measure of core inflation stood at 2.7% year-on-year in April 2023,

down from a 14-year high of 3.0% reached in January 2023. The monetary authorities
35

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

2023, though they have also noted uncertainties related to this outlook.

Taiwan’s current account

surplus decreased to $102 billion

(13.3% of GDP) in 2022, from

$117 billion (15.1% of GDP) in

2021. The decline was driven by

Taiwan’s $69 billion goods trade

surplus (9% of GDP), down from

$88 billion (11.3% of GDP) in

2021. A decline in year-overyear goods exports was driven

by a normalization of export

levels led by moderation in

global semiconductor demand. 

Import growth moderated substantially as global commodity prices stabilized albeit at an

elevated level compared to 2019. Despite the moderation in Taiwan’s goods surplus, it

remains large relative to GDP.

Taiwan’s services balance stood at a $13 billion (1.7% of GDP) surplus over the Report

period, continuing a decade-long strengthening trend that began after a record services

deficit of $6.5 billion in 2012. Nevertheless, Taiwan’s services surplus over the last two

years is the result of pandemic distortions, namely rising freight transport service exports

and the decline in overseas tourism due to Taiwan’s strict travel restrictions, both of which

began to normalize in 2022. Taiwan’s services surplus is likely to moderate further as the

shipping and travel constraints continue to ease in 2023.

Taiwan recorded a $50 billion goods and services trade surplus with the United States in

2022, up from $40 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 small $3 billion surplus in 2022, from a $0.2

billion deficit in 2021.

The New Taiwan Dollar (TWD)

weakened throughout 2022,

depreciating 9.7% against the

dollar and 4.6% on a real

effective basis. Russia’s war

against Ukraine drove a sharp

depreciation of the TWD in

February 2022. Since then,

lingering geopolitical

uncertainty, rising energy prices,

and persistent, large portfolio

equity outflows caused in part by

-5

0

5

10

15

20

20072008200920102011201220132014201520162017201820192020

20212022

Percent of GDP

Taiwan: Current Account Balance

Income Services Goods Current Account Balance

Sources: Taiwan central bank, Haver

80

90

100

110

120

80

90

100

110

120

20072008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Taiwan: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
36

the tighter global financial conditions have driven the TWD weaker against the dollar. 

From August 2022, a broad-based slowdown in both Taiwan’s tech and non-tech exports

further contributed to TWD depreciation pressures. 

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 $13 billion (1.7% of

GDP) in net foreign exchange

sales in 2022, with $8.3 billion in

sales in the first half of 2022 and

$4.8 billion in sales occurring in

the second half of 2022. 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

March and April 2022 following the start of Russia’s war against Ukraine, with net foreign

exchange sales being partially offset by purchases in November and December, potentially

meant to relieve appreciation pressures alongside U.S. dollar weakening. Taiwan publishes

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

Taiwanese authorities should continue to deploy a careful mix of policies that support

domestic demand, raise the labor share of income, and better insulate the economy from

external shocks. These steps should help moderate Taiwan’s outsized current account

surplus. Fiscal support for vulnerable workers, including short-term and young workers,

should not be withdrawn too quickly and, where appropriate, some of these programs

could be modified to target workers particularly affected by the technical recession that

began at the end of 2022. The authorities should explore regulatory and fiscal mechanisms

to encourage green growth and meet Taiwan’s 2050 net-zero carbon emissions target,

including by setting a 2030 intermediate emission target, which would improve Taiwan’s

resilience to future external energy shocks. Foreign exchange intervention should be

limited and allow currency movements in line with economic fundamentals.

In-Depth Analysis

Switzerland

In early 2021, Treasury commenced enhanced bilateral engagement with Switzerland in

accordance with the 2015 Act18 and has been discussing with the Swiss authorities the

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

-8

-4

0

4

8

12

16

2016201720182019202020212022

Billion U.S. Dollars

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

Taiwan: Estimated FX Intervention
37

policy options to address the underlying causes of Switzerland’s external imbalances.

Treasury expects these productive discussions to foster a deeper understanding of the

policy issues related to Switzerland’s external imbalances. Treasury and the Swiss

authorities are continuing a separate but related Standing Macroeconomic and Financial

Dialogue to discuss macroeconomic issues. 

Treasury conducted enhanced analysis of Switzerland in its December 2020 and April 2021

Reports, in-depth analysis in its December 2021 Report, and enhanced analysis in its June

2022 and December 2022 Reports. Though Switzerland no longer meets all three criteria

for enhanced analysis, Treasury will continue to conduct an in-depth analysis of

Switzerland until it does not meet all three criteria under the 2015 Act for at least two

consecutive Reports. An in-depth analysis of recent economic developments is provided

below.

Spillovers from Russia’s war against Ukraine, primarily higher commodity prices, weighed

on economic activity in 2022. The Swiss economy grew by 2.1% in 2022, below the IMF’s

pre-war forecast of 3.0%. Resilient private consumption was the main driver for GDP

growth in 2022. Net exports – driven by a notable increase in merchanting exports – also

supported growth but had a smaller contribution than in 2021 because of higher energy

imports while a decrease in gross capital formation was a minor drag to economic output. 

Government assistance helped limit unemployment and bolster consumer spending in

2020 and 2021 but was less important in 2022. Unemployment stood at 1.9% at the end of

2022, the lowest it has been since 2001. The IMF expects that growth in 2023 will decrease

to 0.8% on the back of weaker global growth, weaker domestic demand, and tighter

monetary policy in Switzerland and globally. 

In 2022, the Swiss franc

depreciated by 1.0% against the

dollar but appreciated by 5.3%

relative to the currencies of its

trading partners on a nominal

effective basis. On a real effective

basis, the Swiss franc depreciated

by 0.1% in 2022 as lower

inflation in Switzerland

compared to its trading partners

offset the nominal appreciation. 

Developments in the Swiss

nominal exchange rate were

driven in 2022 by Switzerland’s significant inflation differential with the rest of the world,

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. 50-53 (Apr. 2021), available at

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

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. 42-45 (Dec. 2021), available at

https://home.treasury.gov/system/files/206/December-2021-FXR-FINAL.pdf

70

80

90

100

110

120

130

140

70

80

90

100

110

120

130

140

20072008200920102011201220132014201520162017201820192020202120222023

Indexed to 20Y Avg = 100

Switzerland: Exchange Rates

Bilateral vs. USD NEER REER

Sources: FRB, Bank for International Settlements
38

the expected path of monetary policy tightening, and the broad-based strength of the US

dollar. Between end-2022 and March 2023, the Swiss franc has appreciated against the

dollar by 1.2% but has remained roughly unchanged relative to the currencies of its trading

partners on a nominal and real effective basis.

Switzerland is a small, open economy with significant exposure to external factors, and

exchange rate movements can often have a major impact on inflation. The Swiss franc has

also long been a safe haven currency that investors acquire during periods when global risk

appetite recedes, or financial volatility accelerates, which can pose challenges for Swiss

macroeconomic policymakers. The IMF classifies the Swiss franc as a de facto floating

currency, and the Swiss National Bank (SNB) sets monetary policy with the aim of keeping

inflation stable within its price stability range of 0% to 2%. In times of heightened regional

and global risk, the large safe haven inflows can put considerable appreciation pressure on

the franc, and sustained appreciation can weigh on domestic inflation.

Over the last 15 years, the franc

has been subject to notable

pressures from large swings in

global risk appetite, particularly

emanating from the global

financial crisis, the euro area

crisis, and the COVID-19

pandemic. The SNB has

employed a range of tools to try

to offset appreciation pressure

on the franc and limit negative

impacts on inflation and

domestic growth. From

December of 2014 until September 2022, the SNB maintained negative interest rates to

limit franc appreciation and combat deflationary risks. As the interest rate was at the

effective lower bound and with limited space for quantitative easing due to the scarcity of

risk-free assets caused by the Swiss government’s low debt levels, net purchases of foreign

exchange became the main tool used by the SNB to meet its inflation objectives. 

The objective of the SNB’s foreign exchange interventions changed in 2022 as inflation

surpassed the upper bound of the SNB’s 0% to 2% price stability range. Starting in October

2022, the SNB engaged in substantial net sales of foreign exchange as a means of

strengthening the franc to complement its monetary policy rate increases and help control

inflationary pressures. Based on the SNB’s published data on intervention, Switzerland

sold $22.8 billion in foreign exchange over the course of 2022, a significant change from

$23.0 billion in net purchases over the course of 2021. By the end of 2022, Switzerland’s

foreign currency reserves stood at $0.8 trillion, down from $1.03 trillion at end-2021. This

decline was caused in part by the net sale of reserves but mainly due to mark-to-market

losses to its reserve assets in 2022. As of end December 2022, reserves covered 72% of

short-term debt and 105% of GDP.

-15

-10

-5

0

5

10

15

20

25

30

2016201720182019202020212022

Billion U.S. Dollars

Sources: Swiss National Bank, U.S. Treasury estimates 

Switzerland: Estimated FX Intervention
39

In its most recent monetary policy meeting on March 23, 2023, the SNB raised its monetary

policy rate by 0.50 percentage points to 1.5%, citing ongoing inflationary pressures. Since

its first hike on June 16, 2022, the SNB has increased rates in four consecutive meetings

after keeping its policy rate unchanged at -0.75% since January 2015. In its press release

after its monetary policy meeting on March 2023 the SNB shared insights on its FX

interventions by noting that: “To provide appropriate monetary conditions, the SNB also

remains willing to be active in the foreign exchange market as necessary. For some

quarters now, the focus has been on selling foreign currency.” Inflation was 2.6% year-onyear in April 2023, down from a peak of 3.4% in August 2022. Although inflation remains

above the SNB’s 2% target, it has remained below that of most other advanced economies. 

In their latest communication, the SNB projects inflation to reach 2.0% in Q1-2024 but

remains concerned about the continued strength of core inflation, which has remained at

2% on average over the past year.

The Swiss authorities have a

history of restrained

macroeconomic management,

particularly a fiscal policy

approach that prioritized debt

reduction for several decades

beginning in the 1990s. 

Switzerland’s fully funded

pension system and

demographic profile have also

resulted in significant aggregate

savings. The country’s highly

competitive corporate tax

system has made Switzerland a destination for multinational enterprises, contributing to

Switzerland’s outsized role in some high value-added global industries (e.g.,

pharmaceuticals and merchanting).

19 These factors have contributed to persistent, and

often extremely large, current account surpluses during recent decades. In 2021 the

current account surplus rebounded to 8.8% of GDP, following an unusually small surplus of

0.3% of GDP during 2020.

20 In 2022, the current account surplus rose to 10.1% of GDP.

The widening of the current account surplus is largely explained by a higher-than-average

goods trade surplus of 14.6% of GDP in 2022, as high volatility in commodity markets

contributed to an elevated merchanting surplus. Despite the large recent current account

surpluses, Switzerland’s net international investment position declined to 96% as share of

GDP in 2022 from 108% in 2021, making it a smaller net lender to the rest of the world

when compared to the size of its economy than in 2021.

21 

19 The authorities have agreed to implement the OECD-led global corporate tax reforms, which will imply

bringing rates up to 15% for all cantons when it becomes effective. Anecdotal evidence from the Swiss

authorities suggests that pharmaceuticals and merchanting may be insensitive to exchange rate changes, and

increased trade in these sectors can potentially lead to increased current account balances even when

exchange rates appreciate.

20 At the time of the December 2021 Report, the 2020 current account surplus totaled just 1.2% of GDP.

21 This decline reflects valuation effects.

-10

-5

0

5

10

15

20

2007200820092010201120122013201420152016201720182019202020212022

Percent of GDP

Switzerland: Current Account Balance

Income Services Goods Current Account Balance

Sources: Swiss National Bank, Haver
40

Switzerland’s bilateral goods and services trade surplus with the United States declined to

$2.0 billion in the four quarters ending in December 2022 compared to $20.5 billion in the

four quarters ending in December 2021 as goods exports to the U.S. decreased and services

imports from the U.S. increased. This decline results in a goods and services trade surplus

with the United States below the $15 billion threshold established to assess whether a

trading partner has a significant bilateral trade surplus with the United States. In 2022

Switzerland’s goods trade surplus with the United States declined to $22.6 billion, versus

$39.5 billion in 2021. Switzerland maintains a large goods trade surplus with the United

States, but this traditionally has been mirrored largely by a services trade deficit. 

Switzerland’s bilateral services trade deficit with the United States stood at $20.6 billion in

2022, compared to $19.0 billion in 2021. Until 2020, the United States’ trade deficit with

Switzerland in recent years had been closer to balance when including services data. The

increase in the trade deficit in 2020 had been partly attributable to net gold exports of

more than $10 billion to the United States, while services imports from the United States

had not increased by the same magnitude. Gold exports began a downward path in 2021

and accelerated in 2022, leading to the trade balance in gold shifting to a deficit of $13

billion in 2022, driving some of the improvement in the U.S.-Switzerland goods trade

balance. 

Switzerland ran a fiscal surplus of 1% of GDP in 2022, which surpassed the government’s

expectations due to strong tax collection from cantons and municipalities, higher social

security contributions as a result of the strong labor market, and the phasing-out of

emergency expenditures. The overall fiscal balance is expected to moderate in 2023 as a

result of zero SNB profit transfers and higher expenditures22 on refugees, energy, and

national security. Switzerland has significant fiscal space relative to many other advanced

economies because of its low public debt burden, close to 40% of GDP, affordable interest

payments, and favorable debt structure.

Increased public investment could lower government net saving, rebalance the policy mix,

and help Switzerland meet its long-term challenges associated with an aging population,

climate change, energy security, and national defense. The extension in September 2022 of

the current CO2 law until 2024 and measures for incentivizing reductions in greenhouse

gas emissions for the 2025-2030 period offer an opportunity to increase in fiscal spending

to meet climate targets in the near term. 

Switzerland’s tight fiscal policy is a result, in part, of its federal “debt brake” rule that calls

for a structural fiscal balance on an ex-ante basis, and in the case of ex post spending

overruns, requires the government to offset with structural surpluses in the following

years. The federal debt brake rule is reinforced further by separate fiscal rules

implemented by Swiss cantons, which vary substantially. The federal debt brake rule’s

design and implementation tend to skew towards tighter fiscal policy than warranted, due

22 Contingent liabilities stemming from government guarantees to UBS amount to CHF109 billion.

Government guarantees provided to facilitate the Credit Suisse-UBS merger will only affect the fiscal position

if called and may materialize over several years as asset losses are realized. Therefore, the fiscal impact, if

any, is expected to be contained and distributed over time. 
41

to consistently conservative forecasting of structural revenue and under-execution of

expenditures. Switzerland ends almost each year with a larger budget surplus than

planned, and Switzerland has seen significant debt reduction since implementing the debt

brake rule. In addition, the rule is applied asymmetrically, as it mandates an offset

requirement in case of ex post overspending, but not for ex post underspending. 

Due to these factors, Switzerland’s fiscal policy has consistently overperformed the rule’s

objective of debt stabilization, thereby contributing less to economic growth, complicating

efforts to maintain positive inflation, and contributing to external surpluses. At end-2022,

amortization needs stemming from the COVID-19 crisis and other extraordinary

expenditures were CHF22.7 billion (3% of GDP), including 2022 outlays for refugees from

Ukraine. The Swiss parliament approved an extended timeframe for the amortization of

outstanding COVID-related debt until 2035 with the option of lengthening the timeframe to

2039 under extraordinary circumstances. The fiscal savings will be achieved through

spending underruns of CHF1 billion per year and a measure that recognizes profits shared

by the SNB as revenue. This would avoid any expenditure cuts or measures to increase tax

revenue. The Swiss have also undertaken measures to further limit spending underruns in

the future.

In addition to consistent government saving, other structural factors play a role in

Switzerland’s historically large current account surpluses, including high per capita

income; a large share of prime-aged savers and an aging population; a high household

savings rate, which is almost double the advanced economy average per OECD data;

relatively limited domestic investment opportunities; measurement issues; and a large

positive net international investment position, for which returns further raise the income

balance. 
42

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 December 2022, unless otherwise noted) are

provided in Table 1 (p. 20) and Table 2 (p. 45). 

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 December 2022. This includes all U.S. trading
43

partners whose bilateral goods and services surplus with the United States in the four

quarters through December 2022 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 December 2022.

23 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 December 2022. 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 seven

economies that met these thresholds over the four quarters through December 2022. No

economy that did not already meet the 3% current account surplus threshold had a

substantial current account gap.

24 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.25 Columns 1a and 1c in Table 2 provide Treasury’s assessment of this

23 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.

24 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.

25 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.
44

criterion.26 In economies where foreign exchange interventions are not published,

Treasury uses estimates of net purchases of foreign currency as a proxy for intervention. 

26 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.
45

Net Purchases

(USD Bil., 

Trailing 4Q)

(1b)

Net Purchases

8 of 12 

Months†

(1c)

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 -0.4 1.6 - 8 53

Mexico 0.0 0 N o -0.9 -0.5 -13 130

China 0.2 — 0.5 * 27 — 88 N o 2.2 1.5 402 367

Japan -1.5 -62 N o 2.0 -1.4 85 68

Germany 0.0 0 N o 4.3 -4.1 176 76

United Kingdom 0.0 0 N o -3.9 -1.1 -121 -23

Korea -2.7 -46 N o 1.8 -1.8 30 37

Ireland 0.0 0 N o 9.0 28.7 48 5

India -2.5 -85 N o -2.4 -1.3 -80 46

Switzerland -2.8 -23 N o 10.1 6.1 81 2

Taiwan -1.7 -13 N o 13.3 2.5 102 51

France 0.0 0 N o -2.1 -2.7 -58 15

Netherlands 0.0 0 N o 4.4 -2.5 44 -52

Vietnam -6.6 ** -27 N o -0.2 -3.9 - 1 115

Singapore 15.6 73 Yes 19.3 3.2 90 -36

Brazil -1.6 -31 N o -3.0 0.7 -57 -31

Italy 0.0 0 N o -1.2 -4.6 -24 43

Malaysia -6.2 ** -25 N o 3.0 -0.5 12 37

Thailand -2.9 ** -14 N o -3.5 -10.5 -17 42

Australia -0.2 - 3 N o 1.2 0.8 20 -27

Memo: Euro Area 0.0 0 N o -1.1 -3.4 -152 105

† 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.

** Authorities do not publish FX intervention. Authorities have conveyed bilaterally to Treasury the size of net FX purchases during the four quarters ending 

December 2022.

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.

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
46

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 904 794 110 53 82 -29 42.2 37.1 5.1 2.5 3.8 -1.4

Mexico 854 779 75 130 131 0 60.4 55.1 5.3 9.2 9.2 0.0

China 759 691 69 367 383 -16 4.2 3.8 0.4 2.0 2.1 -0.1

Japan 306 229 77 68 68 0 7.2 5.4 1.8 1.6 1.6 0.0

Germany 302 220 82 76 74 2 7.4 5.4 2.0 1.9 1.8 0.1

United Kingdom 293 141 152 -23 -13 -10 9.5 4.6 4.9 -0.8 -0.4 -0.3

Korea 224 187 38 37 44 - 7 13.4 11.2 2.3 2.2 2.6 -0.4

Ireland 203 98 105 5 66 -61 38.4 18.5 19.9 0.9 12.5 -11.6

India 191 133 58 46 38 7 5.7 3.9 1.7 1.3 1.1 0.2

Switzerland 181 96 84 2 23 -21 22.4 11.9 10.4 0.2 2.8 -2.6

Taiwan 159 136 23 51 48 3 20.8 17.8 3.1 6.7 6.3 0.4

France 151 103 48 15 12 4 5.4 3.7 1.7 0.5 0.4 0.1

Netherlands 149 107 42 -52 -38 -13 15.1 10.8 4.2 -5.2 -3.9 -1.4

Vietnam 142 139 3 115 116 - 2 34.8 34.0 0.8 28.0 28.4 -0.4

Singapore 125 78 47 -36 -15 -21 26.8 16.7 10.2 -7.7 -3.1 -4.6

Brazil 121 93 28 -31 -15 -16 6.3 4.8 1.5 -1.6 -0.8 -0.8

Italy 117 97 20 43 42 2 5.8 4.8 1.0 2.2 2.1 0.1

Malaysia 79 73 7 37 37 0 19.5 17.9 1.6 9.0 9.0 0.0

Thailand 79 74 5 42 43 - 1 15.9 15.0 0.9 8.5 8.7 -0.2

Australia 77 46 30 -27 -14 -13 4.5 2.7 1.8 -1.6 -0.8 -0.8

Memo: Euro Area 1165 805 359 105 174 -69 8.3 5.7 2.5 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
47

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 December

2022 based on the most recent available data. Switzerland, which had previously exceeded

the thresholds for all three criteria under the 2015 Act, exceeded one of the three criteria

over the four quarters through December 2022. In total, seven economies—China,

Korea, Germany, Malaysia, Singapore, Switzerland, and Taiwan—constitute

Treasury’s Monitoring List. Japan has 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 December 2022, 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.

• Korea had met two of the three criteria in every Report since April 2016, except for the

May 2019 Report, having a material current account surplus and a significant bilateral

trade surplus with the United States. For the four quarters ending December 2022,

Korea met one of the three criteria, having a significant bilateral trade surplus with the

United States. 

• Malaysia, which had met one criterion under the 2015 Act in the November 2022

Report (significant bilateral trade surplus), exceeded two of the three criteria over the

four quarters through December 2022, having a material current account surplus and a

significant bilateral trade surplus with the United States. Prior to the November 2022

Report, Malaysia had met two of the three criteria since the May 2019 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.

• Switzerland, which had previously exceeded the thresholds for all three criteria under

the 2015 Act in the November 2022 Report, exceeded one of the three criteria over the

four quarters through December 2022. 

• 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. 

Treasury will closely monitor and assess the economic trends and foreign exchange

policies of each of these economies.
48

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

domestic-led rather than externally supported growth. This would establish a firmer

foundation for strong, balanced growth across the global economy.
49

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.