CNY: Undervaluation and Export Gains Questioned – Commerzbank

Commerzbank analyst Volkmar Baur has questioned recent internal analyses suggesting the renminbi is undervalued and that China is using this to gain an export advantage. In his view, judging by China's exchange rate management policies and gold purchase behavior, the intention leans more toward guiding the renminbi weaker rather than maintaining strength to subsidize exports.

**Questioning the Logical Contradiction of the "Undervaluation" Narrative**

Recently, German politicians have publicly accused the renminbi of being undervalued by 20% to 30% against the euro, giving Chinese exporters an unfair price advantage. However, Baur's analysis points out that if China truly wanted to subsidize exports, its policy tools would be directed at pushing the renminbi lower, which logically conflicts with the current market narrative of a "undervalued renminbi." According to market sources, China's recent exchange rate management operations and sustained gold purchases are precisely being interpreted by some analysts as signals of actively guiding the domestic currency weaker.

**Divergence Between the Renminbi's Actual Performance and Political Accusations**

Despite political accusations, the renminbi has actually appreciated in market performance this year. Reports indicate the renminbi has gained 3.5% against the U.S. dollar year-to-date and 5.5% against the euro. However, over a longer timeframe, the renminbi remains at historically low levels, still 10% below its five-year average against the euro. This complex situation of short-term strength and long-term weakness makes the simple assertion that the renminbi is "undervalued" appear overly simplistic. Goldman Sachs has also previously stated that, given the renminbi's low valuation, Chinese policymakers may be more tolerant of a gradual appreciation, and expects the renminbi to rise modestly against the U.S. dollar over the next 12 months.

**Lack of International Coordination**

Notably, although leaders such as German Chancellor Merz have privately discussed the renminbi exchange rate issue, the recent G7 summit's final communiqué did not directly mention currency exchange rates, only broadly addressing the roots of global trade imbalances. This indicates that among major economies, there is currently a lack of clear coordination willingness and consensus on exchange rate issues, similar to the 1985 Plaza Accord, making unilateral accusations difficult to translate into concrete joint action.