Market News

By Yukun Zhang and Kevin Yao

BEIJING, Oct. 8 (Reuters) — China pushed back against foreign criticism of its exchange-rate policy on Thursday, saying it has never pursued competitive currency depreciation, as European policymakers call for a stronger yuan to help curb China's record trade surplus and surge in exports.

As China's trade surplus expands, European leaders have intensified calls for a stronger yuan, fearing a renewed wave of Chinese exports could create a "China Shock 2.0."

In a lengthy policy statement, the People's Bank of China (PBOC) rejected claims that Beijing keeps the yuan artificially weak to gain a trade advantage. The statement came as EU Trade Commissioner Maros Sefcovic visited Beijing to discuss ways to narrow the bloc's trade deficit with China.

"China neither needs nor intends to obtain a trade-competitive advantage through exchange-rate depreciation, and has never engaged in competitive currency depreciation," the central bank said.

The PBOC also argued that blaming exchange rates for declining domestic industrial competitiveness, weakening fiscal and financial discipline, and other structural problems amounts to avoiding responsibility for making necessary economic adjustments.

China recorded a record trade surplus of nearly $1.2 trillion in 2025, equivalent to about 6% of gross domestic product. Analysts expect exports of artificial intelligence-related and other advanced technology products to help keep the surplus elevated this year.

The central bank said China's trade strength stems from the global competitiveness of its industries, arguing that countries with large trade surpluses have historically had strong manufacturing sectors.

European Central Bank President Christine Lagarde called in June for global leaders to discuss the potential undervaluation of the Chinese currency as part of broader imbalances threatening the global economy.

The European Union is particularly concerned about its trade imbalance with China, which reached €360.6 billion ($404 billion) in 2025, according to EU data, up 15% from the previous year.

German Chancellor Friedrich Merz has said the yuan is undervalued by 25% to 30>#/strong### and called for dialogue with China over monetary policy.

Goldman Sachs said in August that the yuan was undervalued by at least 20>#/strong### under some of its valuation models. The bank argued that a stronger currency could help narrow China's outsized trade and current-account surpluses while easing protectionist pressure from trading partners.

The PBOC said exchange rates are determined by multiple economic and financial factors, rejecting claims that isolated valuation models prove the yuan is undervalued.