How undervalued is the renminbi?

Even though the renminbi is at its strongest level against the US dollar since 2022, in real trade-weighted terms it remains close to its weakest in more than a decade. In our assessment, it is undervalued by as much as 25%. Reducing China’s trade surplus to a broadly balanced position would necessarily involve significant renminbi appreciation. But exchange rate adjustment alone would not resolve the imbalances associated with the second China shock and is unlikely to happen without a major realignment of macroeconomic policies in China and its key trade partners.

This report is part of our new series on China Shock 2.0. Explore the series and follow the latest publications on this dedicated page.