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 U.S. Treasury Department sharply criticized China's exchange-rate policy on Friday, though it stopped short of labeling the Asian trade giant a currency manipulator.
China was the last nation to be named a currency manipulator by the US.
Former Presidents George W. Bush and Barack Obama took a more diplomatic approach by applying pressure on China, Taiwan and other countries to change their policies during bilateral negotiations and multilateral talks.
Zhou Shijian, a senior fellow at Tsinghua University's Institute of International Relations, said the Treasury made a "right and realistic decision" not to label China as a currency manipulator, something China had not been branded since 1992. But the reversal could also mean that Trump and Chinese President Xi Jinping may have figured a way to fix the trade imbalance and the tension in the Korean peninsula during their meeting earlier this month in Florida. But as the days pass, some supporters and critics of Trump's tough talk on trade are losing patience.
Only when Taiwan meets just one of the three criteria for two US currency reports in a row, it will be removed from the monitoring list, the central bank said.
During the campaign, Trump often claimed that China was manipulating the value of its currency to boost its exports, a policy that cost the United States manufacturing jobs.
USA 100 dollar banknotes and Chinese 100 yuan banknotes are seen in this picture illustration in Beijing, China, January 21, 2016.
Trump said during the campaign that he would label China a currency manipulator on day one, leading to fears of a potential trade war.
Those imbalances include its $65 billion goods trade surplus with the United States a year ago, and what the department calls "the world?s largest current account surplus at close to $300 billion".
The Central Bank said the publication of the USA report was unlikely to cause any ripples in the foreign exchange market because its conclusions on Taiwan had been expected. "That's worth having not as good a trade deal as I would normally be able to make", he said.
Taiwan only corresponds to the final condition, officials said, while in the previous report it was also accused of excessive currency market intervention.
The Trump administration has placed six of its major trading partners including China and Japan on a "monitoring list" to keep a close watch on their currency practices. Germany, South Korea and Switzerland should increase public borrowing to support domestic demand for goods and services, the report suggested. The reversal by the Treasury department was one of the nearly half-a-dozen instances when Donald Trump or his administration have gone back on his poll campaign promises.