China Rejects Yuan Devaluation Claims as Europe Presses Over Trade
BEIJING — China's central bank has rejected the claim that the country is deliberately weakening its currency to win foreign markets, pushing back as European Union negotiators seek concessions over the trading relationship between two of the world's largest economies.
The People's Bank of China said Thursday that Beijing has neither a reason nor an intention to pursue competitive devaluation. Its defense came during a visit to Beijing by EU trade chief Maroš Šefčovič, whose bloc has grown more confrontational over the size of its deficit with China and the growing strength of Chinese manufactured exports.
The yuan becomes the latest trade battleground
European leaders have increasingly described China's currency as undervalued, arguing that a cheap yuan makes Chinese goods more attractive abroad and puts pressure on European producers. German Chancellor Friedrich Merz has cited an estimate of a 25% to 30% undervaluation. Such figures are model-dependent and contested; they are not a settled measurement of what the exchange rate 'should' be.
China counters that trade performance cannot be reduced to the exchange rate. The central bank points to changes in the yuan over time, including appreciation of roughly 23% against the dollar since the 2005 exchange-rate reform. Reuters reported that the currency has also gained about 4% against the dollar so far in 2026.
The broader argument is about industrial competitiveness. China's factories have built deep supply chains in machinery, electric vehicles, batteries, and other strategic industries. Europe fears that pressure on its own manufacturers will intensify if access to China's market remains limited while Chinese exports continue expanding.
A deficit measured in hundreds of billions
China recorded a merchandise trade surplus of approximately $1.2 trillion in 2025, around 6% of its economy, according to reporting published October 8. The EU's bilateral trade deficit with China was approximately 360.6 billion euros, a figure that has become central to Brussels' case for trade negotiations and possible restrictions.
European officials say that uneven access to markets, industrial subsidies, and an imbalance in demand threaten jobs and political support for open trade. Chinese officials argue that Europe's own export controls and restrictions on advanced technology also contribute to the gap. Both governments are using industrial policy, and neither side's trade figures alone establish that currency manipulation caused the imbalance.
Šefčovič's Beijing talks with Chinese Commerce Minister Wang Wentao therefore extend beyond the yuan. Brussels wants stronger access for European exporters and changes to the flow of Chinese goods, while Beijing has pushed back on protectionist measures and demanded fairer treatment for Chinese firms.
Who benefits from a currency fight?
Currency disputes often appear technical, but the stakes are industrial employment and the cost of living. A stronger yuan could make some Chinese exports more expensive abroad. It could also increase Chinese consumers' purchasing power for imports. A weaker currency could have the opposite effects. The outcomes depend on wages, production costs, trade rules, and where companies choose to invest.
The People's Bank says it will provide more detailed foreign-exchange data to the International Monetary Fund beginning in 2027. China's 2026–2030 policy direction also includes a stated effort to strengthen domestic demand. Those commitments offer ways to judge the debate by observable changes rather than rhetoric alone.
For Europe and China, the question now is whether negotiations can address trade imbalances without escalating into another round of tariffs and countermeasures. Currency accusations may sharpen the disagreement, but durable progress will depend on the underlying relationship between production, household demand, and market access.
Sources and image credit
Hero image credit: Boubloub, People's Bank of China headquarters in Beijing, October 27, 2025, Wikimedia Commons, CC0. Archival contextual photograph, not an image of the October 2026 negotiations.
Comments