PAYING: The Central Bank of China said on Tuesday (August 6th) that it is "firmly opposed" to the US labeling Beijing a currency manipulator.
"The US has ignored the facts and wrongly described China as a" currency manipulator, "a statement from the People's Bank of China (PBOC) said.
He also warned that Washington's move "will seriously harm the international financial order and cause chaos in the financial markets" and "prevent global economic and trade recovery."
It was China's first official response to the latest US salvo as trade tensions rise between the two largest economies in the world.
China "has not used and will not use the exchange rate as a tool for resolving commercial disputes," a PBOC release said on its website.
"China has advised the United States to harness its horse before the abyss and to be aware of his mistakes and turn back the wrong way," she added.
READ: US designates China as currency manipulator for the first time in decades
The indictment of the US currency, which followed a sharp decline in the yuan on Monday, has led to an even bigger wedge between the world's largest economies and crushed any remaining hopes of quickly resolving their longstanding trade war.
The dispute has already spread beyond tariffs in other areas, such as technology and analytics, and expanding precautionary measures could expand in scope and burden, further weighing on business confidence and global economic growth.
The US Treasury Department said on Monday it had determined for the first time since 1994 that China was manipulating its currency by moving their trade dispute beyond tariffs.
The US decision was driven solely by a political motive to "vent his anger," said the Global Times, an influential Chinese tabloid published by the ruling Communist Party's People's Daily.
China "no longer expects goodwill from the United States," Hui Xinjiang, editor-in-chief of the newspaper, tweeted on Tuesday.
READ: Chinese media say US "destroys international order" after branding currency manipulators
The decision by the United States to declare China a manipulator came less than three weeks after the International Monetary Fund (IMF) said the value of the yuan was in line with China's economic fundamentals, while the US dollar was overvalued by 6 percent to 12 percent.
US law defines three criteria for identifying manipulation among major trading partners: a significant current account surplus on a global scale, a significant trade surplus with the US, and constant one-way foreign exchange market intervention.
CHINESE RETALIATION OPPORTUNITIES
Chinese state media have warned that Beijing could use its dominant position as a rare-earth exporter to the United States as a lever in a trade dispute. The materials are used in everything from military equipment to high-tech consumer electronics.
Shares in some of the rare Chinese land-related companies opened on Tuesday amid speculation that the sector could be the next front in the trade war.
Beijing may also increase pressure on US companies operating in China, analysts said.
READ: Chinese companies stop buying American farm produce
Explanator: Trump's China tariffs – paid by importers from the US, not China
In June, Beijing issued travel tips, warning Chinese tourists about the risks of traveling to the United States, citing fears of gun violence, robbery and theft.
Air China said on Tuesday that it is ceasing its flights on the Beijing-Honolulu route, starting on August 27, after reviewing its network.
In a further sign of deterioration in ties, the Chinese Commerce Ministry announced overnight that its companies had stopped buying American agricultural products in retaliation against Washington's latest threat.
"Ultimately, the United States will eat the fruits of its own labor," PBOC said.
FILE OF THE YUAN
Chinese monetary authorities are letting the yuan fall past the closely watched level 7 on Monday, so that markets can finally raise concerns about the trade war and economic downturn, three knowledgeable agencies said on Monday.
The yuan fell 2.7 percent against the dollar in the last three days to 11-year lows following President Donald Trump's sudden declaration last week that it would impose 10 percent tariffs on $ 300 billion in Chinese imports from September 1.
READ: Chinese Yuan falls to its lowest level against the US dollar since August 2010.
But on Tuesday, it appears that it remains steady amid signs that China's central bank may be looking for a slide step, raising concerns about a global currency war.
The offshore yuan fell to a record low of 7.1397 on the dollar on Tuesday before cutting losses after the central bank said it was selling Hong Kong-denominated yuan accounts, a move seen as curbing short-selling currency.
Onshore yuan also opened weaker before steady movement, but remained below 7th level. While the central bank set a little tighter than expected morning base, it was still the weakest since May 2008.
The PBOC insists that the value of the yuan should be determined by the market, though it maintains a stable grip on the currency and maintains it when it reaches sensitive levels in the last year.
US Treasury Secretary Stephen Mnuchin said the US government would commit to the IMF to eliminate unfair competition from Beijing.
An IMF spokesman said the organization had no immediate comment.
After designating a country to be a manipulator, the Treasury is required to request special talks aimed at correcting undervalued currencies, with sanctions such as exclusions from US government contracts.
"Naming China a currency manipulator could open the door to US tariffs, which could eventually increase to over 25 percent for Chinese goods," a note from DBS Group Research said.