The near-consensus among financial commentators is that China's currency is undervalued, driving global imbalances. But the renminbi's weakness reflects weak domestic demand, and pursuing currency appreciation without addressing that issue head-on would be counterproductive for everyone.
BEIJING—The renminbi is back at the center of debates about global macroeconomic imbalances. With China’s merchandise trade surplus widening to $1.2 trillion in 2025, and with its manufacturing sector becoming increasingly dominant, the near-consensus among financial and economic commentators is that the renminbi is significantly undervalued. The implication is that China should let its currency appreciate sharply, thereby shrinking its surplus, easing competitive pressure on manufacturers elsewhere, and helping rebalance the global economy.