Oct. 8, the People’s Bank of China published its policy statement on RMB. Worth noticing is that today, Yuyuan Tantian (玉渊谭天), a social media account affiliated with China Central Television (CCTV), published a piece explaining why China published the statement now. I would consider it an official explanation.
Basically, it gave four reasons
Recently, some countries have repeatedly argued that the RMB is undervalued, seeking to force its appreciation through non-market means. Releasing the document at this time is intended to make clear that exchange rates are determined by multiple factors, not external political pressure.
Some countries have selectively cited undervaluation estimates in the IMF report to pressure China, while ignoring that different models yield different results. China hopes to prevent technical analysis from being turned into a political tool.
Responds to agenda-setting aimed at multilateral forums. Recently, there have been moves at the G20 and the OECD to link trade imbalances to Chinese policies. Issuing a formal document clarifies China’s position for subsequent international discussions and consultations, while opposing attempts to simply blame China for global problems.
To shift the discussion from “Should the RMB appreciate?” back to “How should each country adjust?” Global imbalances cannot be resolved solely through adjustments to China’s exchange rate; deficit countries must also address their own problems, including low savings, high consumption, fiscal deficits, and insufficient industrial competitiveness.
My takes:
Beyond these official explanations, it is worth noting that China–EU negotiations are now at a critical stage. On October 8, the EU Trade Commissioner led a delegation to China for talks with Chinese Commerce Minister Wang Wentao. As Europe’s stance toward China becomes more hawkish, it’s imaginable that exchange rates were brought to the table during the negotiations, hoping to change the current trade situation by forcing the RMB to appreciate. The Chinese central bank’s release of a position paper at this juncture is also intended to respond to that pressure.
Overall, Beijing sees the renewed emphasis in Europe and the US on the “undervalued RMB” as an attempt to turn exchange rates into another tool to pressure China, much like environmental protection was 10 years ago. I don’t think Beijing will buy that. In Beijing’s view, unless Europe and the US address their own deep-seated structural problems, even an appreciation of the RMB would do little to resolve their economic difficulties. Instead, they might simply make further unreasonable demands and continue to pressure China.
In Beijing’s view, the RMB’s exchange rate is fundamentally determined by the market, while the current-account deficits of Europe and the US come from their own economic structures and the existing international monetary system. In effect, China is calling on Europe and the US to undertake domestic structural reforms while continuing reforms to the international monetary system, a position consistent with China’s long-standing arguments.
The policy paper specifically stresses the need to “guard against the impact of sharp short-term exchange-rate fluctuations, particularly abrupt depreciation, on financial stability.”重点防范汇率短期大幅波动尤其是短期急剧贬值影响金融稳定. This also carries an implicit warning that China would not oppose market-driven appreciation of the RMB, but if Europe and the US were trying to force it higher, the central bank would certainly intervene in the event of short-term overshooting.
I think it would be oversimplified to take the position paper as a hard-line approach. At the end of the policy paper, China endorses the broad direction of transforming the economic growth model, expanding domestic demand, and pursuing greater openness to the global economy. Although the paper does not state it explicitly, it conveys, between the lines, an expectation that Europe and the US should also have their own medium- and long-term policy plans and be firmly committed to implementing them. In other words, adjustment cannot be a one-way process in which others make demands of China alone. They must also advance their own reforms, with both sides moving toward common ground.
Below is the Yuyuan Tantian’s article. I use AI to do translation
Why did the central bank publish its policy stance on the RMB exchange rate?央行为什么发布关于人民币汇率的政策立场
On the afternoon of October 8, the People’s Bank of China released a policy statement on the renminbi exchange rate.
The statement sets out the central bank’s position on exchange-rate issues in a systematic way. The term “policy position” refers to an official document issued on behalf of the state that represents its official stance in external communications.
To understand the statement, it must be viewed in its international context. Recently, certain countries have been loudly asserting that the renminbi is undervalued, even seeking to force it to appreciate through non-market means.
China’s release of its policy position at this juncture provides a clear basis for clarifying the issue.
At its core, the statement addresses three concerns. To understand them in plain language, we first need to understand what the international community is discussing—and what lies behind those discussions.
The exchange-rate issue itself
As Tanzhu has previously explained, claims that the renminbi is undervalued often rest on two underlying assumptions: first, that China has “manipulated” its exchange rate; and second, that pushing the renminbi to appreciate is a means of weakening the competitiveness of Chinese exports.
China’s first concern is this: All countries should respect the fact that exchange rates are the result of multiple interacting factors.
The document makes this clear from the outset: China operates a managed floating exchange-rate system based on market supply and demand, with adjustments made by reference to a basket of currencies, and remains committed to allowing the market to play the decisive role in exchange-rate formation.
One phrase worth noting is “managed floating.” This “floating” comes with certain conditions: no predetermined target level and no intervention in the long-term trend.
The document offers two reference points: the 2008 global financial crisis, and July of this year, when the yen briefly fell to a nearly 40-year low against the U.S. dollar, prompting joint intervention by the countries concerned. Put simply, China manages its exchange rate with reference to international rules and practices.
In the more than two decades since China’s exchange-rate reform, the renminbi has appreciated by a cumulative 23% against the U.S. dollar. Since 2010, it has gone through three appreciation cycles and three depreciation cycles.
Xu Peng, deputy director of the economic analysis division at the Market Research Institute of the Chinese Academy of Macroeconomic Research, told Tanzhu that allegations of “exchange-rate manipulation” are utterly groundless. This year, both the onshore and offshore renminbi strengthened past 6.7 to the dollar. Against a backdrop of currency depreciation in neighboring countries, China did not resort to beggar-thy-neighbor policies or competitive devaluation, demonstrating its responsibility as a major country.
If, as the United States and other Western countries suggest, China’s export competitiveness comes from “deliberately depreciating the renminbi,” then they misunderstand the current state of Chinese industry.
Guo Kai, president of the China Finance 40 Institute, told Tanzhu that forcing the renminbi to appreciate puts the cart before the horse and would harm other economies around the world.
One firm-level study found that a 10% appreciation of the renminbi led to a decline of less than 0.5% in renminbi-denominated export prices.
The idea that appreciation necessarily weakens competitiveness reflects a short-term, static way of thinking. Over a dynamic process of long-term development—particularly in China’s case—advantages in research and development and industrial supply chains allow industries to keep cutting costs and improving efficiency. The renminbi can appreciate even as Chinese industry becomes increasingly competitive.
China’s industrial development and exchange-rate movements over the past several years bear this out.
The imbalance issue
Background: In July 2026, the International Monetary Fund (IMF) released its 2026 External Sector Report, assessing China’s external position in 2025 as “stronger.” The report put the midpoint of the estimated gap in the renminbi’s real effective exchange rate at −21.3%. It is important to note that IMF reports are highly technical and easily misused. The IMF actually uses different models, which produce different results.
The IMF itself also says that this calculation is intended as a reference for discussion, rather than a definitive basis for assessment.
Wang Qing, chief macroeconomic analyst at Dongfang Jincheng, told Tanzhu that, using the IMF’s real effective exchange-rate index approach, the renminbi’s real effective exchange rate was slightly overvalued—by 0.5%—at the end of 2025.
China’s second concern is therefore this: We welcome international organizations’ participation in the discussion, provided their assessments are not misused. This is a prerequisite for ensuring that the international community can establish effective mechanisms to address new issues and developments in the global economy through consultation.
As the document states, using the IMF’s External Balance Assessment (EBA) results as evidence that the renminbi is undervalued constitutes a misinterpretation and misuse of those results.
Yet certain countries see only the figure suggesting undervaluation.
Behind this reasoning is an attempt to reframe the declining competitiveness of their own industries as a problem with China’s exchange rate. This requires further clarification.
Over the past few years, the global economy has experienced the shock of the pandemic, an energy crisis, inflation, rising trade protectionism, and the restructuring of industrial supply chains. Today, the United States and Europe face a common problem: insufficient competitiveness in domestic manufacturing and trade imbalances.
But “trade imbalances” are a long-standing phenomenon. The major surplus countries have changed over time, while the major deficit countries have remained largely the same familiar names. The problem lies in their own economic structures.
Pan Yuanyuan, an international investment expert at the Chinese Academy of Social Sciences, told Tanzhu that these countries’ approach is to use financial-market and exchange-rate fluctuations to influence China’s cross-border flows in the real economy and slow the accumulation of its overseas assets. Put simply, this would squeeze export earnings while potentially introducing uncertainty into the value of overseas assets already accumulated.
Some of the countries calling for renminbi appreciation were once major exporters themselves. When others asked them to reduce their exports, they repeatedly invoked respect for economic principles and the international rule of law. Now that their own exports have declined, they are demanding that other countries’ currencies appreciate. Why have they stopped talking about the principles of a market economy? This is a double standard.
They even use this argument to pin trade imbalances on China. That is not an attitude conducive to solving problems.
The surplus issue
Background: In technical discussions, a current-account surplus is often used as a basis for judging whether a currency is undervalued. That premise is itself flawed: there is no simple correspondence between a current-account surplus or deficit and the strength or weakness of an exchange rate.
China’s third concern is therefore this: Discussions of currency issues must address the central tensions in the current global monetary system, rather than focusing exclusively on a single current-account figure.
The document states that an analysis of exchange-rate movements must consider not only trade in goods but also trade in services; not only the current account but also the financial account; and not only economic fundamentals but also factors such as expectations.
China, meanwhile, has consistently been willing to contribute positively to a dynamic balance in the global economy. From expanding global supply after joining the World Trade Organization to boosting domestic demand after the 2008 global financial crisis, China has been deeply involved in several major rounds of global economic rebalancing.
At the same time, the surplus issue is fundamentally structural.
Since 2007, China’s current-account surplus as a share of GDP has gradually declined from its peak of 9.9%. Meanwhile, in recent years, China’s contribution to global economic growth has remained steady at around 30%. This shows that China is an “engine of growth,” not a “source of imbalance.”
What truly needs adjustment is the combination of low savings, high consumption, and insufficient industrial competitiveness in deficit countries.
China has also consistently worked to address this issue collectively through international cooperation.
At the recent G20 Finance Ministers and Central Bank Governors Meeting, China proposed that deficit countries reduce their fiscal deficits and raise domestic savings rates, while surplus countries moderately increase consumption and investment. All countries should formulate medium- and long-term policy plans, make clear commitments, and implement them resolutely.
Yet some voices outside China continue to reduce the issue to so-called “industrial subsidies” and the “renminbi exchange rate,” as though attacking China alone could alleviate their own problems.
This amounts to deliberate smearing. People directly involved in the negotiations told Tanzhu that, at last week’s G20 Trade Ministers’ Meeting, certain countries put forward agenda items that were highly discriminatory and intended to target China. But because other members opposed them or held different views, those countries ultimately failed to achieve their aims, and no consensus was reached.
Earlier, a meeting of the Organisation for Economic Co-operation and Development’s Trade Committee issued a joint statement addressing “overcapacity in specific sectors.” Some countries, however, portrayed it as carrying forward the outcomes of discussions at the G20 Trade Ministers’ Meeting.
In the face of such developments, the international community needs effective consultation.
Ultimately, resolving global imbalances comes down to how countries make adjustments, what commitments they make, and how they work together to implement them.
This policy statement seeks to clarify three points:
Exchange-rate issues must not be politicized, still less used to smear others.
Reports issued by certain international organizations are not jointly agreed upon by their member states. Ultimately, they represent one institution’s assessment, not an unquestionable authority, and must not be used selectively. Multilateral mechanisms must return to a process based on consensus and equal participation.
Certain countries must not portray problems of their own making as problems caused by others, then shift the blame. Responsibility for their own economic problems must be made absolutely clear.
The central bank’s systematic presentation of its policy position on the renminbi exchange rate is itself a statement of intent.
Going forward, China will continue to put its own affairs in order, while remaining willing to work with all parties to contribute positively to dynamic balance and sustainable growth in the global economy.