China Keeps Yuan 20%-35% Undervalued, Driving $1.4 Trillion Goods Surplus
Updated
Updated · Council on Foreign Relations · Aug 2
China Keeps Yuan 20%-35% Undervalued, Driving $1.4 Trillion Goods Surplus
2 articles · Updated · Council on Foreign Relations · Aug 2
Summary
China’s current account surplus is estimated at 4% of GDP and could reach about 6% after adjustments, implying the yuan is undervalued by roughly 20% to 35%.
State banks have reportedly been buying about $2 billion of foreign currency a day—around $50 billion a month—to keep the yuan from strengthening, underscoring tight PBOC control over the exchange rate.
That weak currency has coincided with a customs goods surplus excluding gold of 7% of GDP and a $1.4 trillion goods surplus, while net exports added 1.5 percentage points to growth in both 2024 and 2025.
The report argues a stronger renminbi would curb export outperformance faster than waiting for domestic-demand reforms, which critics say Beijing has delayed since the 2021 property slump.
It warns that leaving China’s model unchanged would deepen global dependence on Chinese industry, with vehicle exports already above 10 million a year and potentially reaching 20 million within three years.