Fact of the Week: The Chinese Yuan Is 25 Percent Undervalued

Source: Bloomberg News, “IMF Hints Weaker Yuan Is to Blame for China’s Growing Imbalances,” Bloomberg, December 10, 2025.

Commentary: After a review of China’s economy, the International Monetary Fund (IMF) found that the Chinese yuan is significantly undervalued, with Goldman Sachs estimating that the value of the currency is 25 percent below what is expected. The yuan has fallen in value in recent years, with 2025 being the first year the currency will appreciate since 2021. The fall in value has been driven by persistently declining domestic prices, as well as what many experts believe is currency manipulation by the Chinese Communist Party. With a low currency valuation, Chinese goods are cheaper in global markets, incentivizing firms to import from China rather than another nation. This has likely contributed to the record-breaking Chinese trade surplus in goods this year, which hit $1 trillion earlier this month, making China the first nation in recorded history to achieve a trade surplus of that magnitude. Following its review of China’s economy, the IMF echoed the calls of policymakers in the United States and other allied nations for China to allow the yuan to appreciate, bringing it closer to a true market-based exchange rate.