While China has made real progress, with its real effective exchange rate appreciating meaningfully over the past six months, RMB exchange rate remains significantly undervalued, the Treasury said in its semi-annual report released on Thursday.
    
China continues to work its way out of a significant undervaluation that led to large internal and external imbalances, it said.
    
The report concluded that fundamental factors for RMB appreciation remain intact, highlighting the need for further strengthening over the medium-term.
    
In recent months, China has benefited from a sizable terms of trade gain from lower oil prices, with its monthly goods surplus repeatedly reaching new nominal highs.
    
The current account surplus exceeded USD 200 billion in 2014 (2.1 percent of GDP), up USD 60 billion from the year before, and is expected to remain on a rising trajectory in the year ahead, it said.

China continues to see relatively higher productivity growth than its major trading partners. Finally, China's currency needs to appreciate to bring about the necessary internal rebalancing toward household consumption that is a key goal of the government's reform plans and necessary for sustained, balanced global growth, the report said.
    
The Report notes China's reduced level of intervention in the foreign exchange market, consistent with the commitment of China's government at the Sixth Round of the US-China Strategic and Economic Dialogue (S&ED).

RMB is one of the few currencies to remain relatively range-bound against the US dollar over the past year, it said.     

In line with its S&ED commitments, China should allow the market to play a greater role in determining the exchange rate and build on the recent reduction in foreign exchange intervention by durably curbing its activities in the foreign exchange market, including at times when there is market pressure for further appreciation, it added.
    
The Treasury said it looked forward to progress on China's plan to subscribe to the IMF's Special Data Dissemination Standard (SDDS) for economic and financial data, including foreign exchange reserve disclosure, but highlights that more needs to be done to enhance transparency.
    
In line with the practice of most other G-20 nations, China should disclose foreign exchange market intervention regularly to enhance its exchange rate and financial market transparency, it said.

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