The US Treasury has declined to label China a currency manipulator.
In its semi-annual report to Congress on international exchange rates, the Treasury Department said instead that China had decreased its level of intervention regarding its currency's value.
AFP reported that Treasury officials also noted that the Chinese government had taken steps to liberalize controls of capital movements.
However, they did say that the yuan (also called the renminbi) is still significantly undervalued.
Labeling China a currency manipulator could have dire consequences — like US trade sanctions — for Asia's economic giant.
The Wall Street Journal said that when accounting for inflation, the value of the yuan had increased by 12.6 percent since June 2010.
The value of the yuan is believed to be held down by China's large foreign currency reserves and its massive trade surplus.
The yuan is now trading at about 6.39 RMB to the dollar.
In the recent US presidential elections, Republican contender Mitt Romney said that he would label China a currency manipulator on his first day in office, reported USA Today.
The Obama administration fired back, stating that such a move was dangerous and, at best, pointless rhetoric.