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(Bloomberg) -- The Trump administration urged China to buy more American goods and services to reduce the gaping trade imbalance after declining to label the world’s second-largest economy a currency manipulator.

No major trading partner is manipulating its currency for an unfair trade advantage, according to the first foreign-currency report released by the Treasury Department under President Donald Trump on Friday. It kept China, South Korea, Japan, Taiwan, Germany and Switzerland on its foreign-exchange monitoring list.

“China currently has an extremely large and persistent bilateral trade surplus with the United States, which underscores the need for further opening of the Chinese economy to American goods and services,” as well as quicker reforms to boost household consumption, according to the Treasury report.

Trump declared on Wednesday that he’ll back away from a campaign promise to name China a currency manipulator, a move that would have created friction between the world’s two largest economies as they try to boost trade cooperation and address North Korea’s nuclear threat. Trump, in a Wall Street Journal interview, said China hasn’t manipulated the yuan for months, while accusing nations that he didn’t identify of devaluing their currencies and saying the dollar is getting too strong.

The Treasury report said that for a decade China engaged in one-way large scale interventions to hold down the currency, and then only allowed it to strengthen gradually -- a practice that imposed “significant and long-lasting hardship on American workers and companies.” The Treasury acknowledged that China has been intervening in currency markets to prevent a depreciation of the yuan, though it said its selling of foreign currency reserves abated in the early part of this year.

Now, China needs to show that its lack of intervention in the currency markets “to resist appreciation” over the past three years is a “durable” policy by allowing the yuan to strengthen “once appreciation pressures resume,” the Treasury said.

Like the last report by the Obama administration in October, China met only one of the three criteria -- for having a large trade deficit -- that’s used by the Treasury as a threshold for manipulation. China’s $347 billion goods trade surplus with the U.S. was the largest of major trading partners last year, according to the report.

Taiwan also met one condition, while the other four met two.

The department is required by law to report to Congress twice a year on whether America’s major trading partners are gaming their currencies. The report is the government’s formal channel to impose the manipulator designation, leading to a year of negotiations for a solution and penalties if the practice continues.

The U.S. hasn’t branded any country a manipulator since 1994.

The Treasury left the criteria for manipulation unchanged at having a trade surplus with the U.S. above $20 billion; having a current-account surplus amounting to more than 3 percent of gross domestic product; repeated currency depreciating by buying foreign assets equivalent to 2 percent of output over the year.

Commerce Secretary Wilbur Ross has said that the issue of “currency misalignment” -- which could also include unintentional devaluations -- will be addressed in a study of trade abuses by nations that run large surpluses with the U.S., which is due to be ready in June.

--With assistance from Brian Chappatta

To contact the reporters on this story: Andrew Mayeda in Washington at amayeda@bloomberg.net, Saleha Mohsin in Washington at smohsin2@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Sarah McGregor

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