U.S. Urges China to Allow Yuan Appreciation, Stops Short of
‘Currency Manipulator’ Tag
Washington says it could still designate
Beijing in future if evidence found that it limits currency’s strength
·
The United
States pressed China to allow the yuan (RMB) to strengthen,
calling it “substantially
undervalued.”
·
The remarks came in the U.S. Treasury’s latest semi-annual foreign currency report
released on Thursday.
·
The Treasury urged Chinese authorities to let the exchange
rate appreciate in line
with market forces and macroeconomic fundamentals.
·
China’s exchange-rate policy was criticised for a “relative lack of transparency”
compared with other major U.S. trading partners.
·
Despite the criticism, the U.S. did not designate China a “currency
manipulator” in the report.
·
Washington warned that the lack of transparency does not rule out future designation
if evidence shows China is intervening to prevent yuan appreciation.
·
The U.S. last labelled China a currency manipulator in 2019,
during President Donald Trump’s first term.
·
Unlike the sharp yuan depreciation during the first Trump
term, the currency has strengthened
during “trade war 2.0”, except for a brief dip in April after
new U.S. reciprocal tariffs were announced.
·
Analysts widely view the yuan as undervalued, with Goldman Sachs estimating it trades about
25% below fair value against the dollar.
·
On Friday, China’s central bank set the daily midpoint at 6.9678 per dollar,
while offshore trading was slightly stronger at around 6.947.
·
The yuan has stayed stronger
than 7 per dollar since late January after breaking the key
psychological level.
·
Over the past year, the yuan has appreciated by about 5%
against the U.S. dollar.
·
Analysts believe the People’s
Bank of China prefers a firmer yuan, but remains wary of overly rapid appreciation.
·
PBOC Governor Pan
Gongsheng said the central bank would
keep the yuan basically
stable at a reasonable and balanced level.
·
Under China’s 15th
Five-Year Plan, authorities aim to strengthen market-based exchange-rate
mechanisms, maintain flexibility, and avoid excessive
volatility.
The
United States has urged China to allow the yuan to appreciate, accusing Beijing
of a lack of transparency and describing the currency as “substantially undervalued”.
“It
is important that the Chinese authorities allow the RMB exchange rate to strengthen
in a timely and orderly manner in line with market pressure and macroeconomic fundamentals,”
the US Treasury said in a report released on Thursday (29.01.2026).
China’s
exchange-rate policies stood out among major US trading partners for their “relative
lack of transparency”, it added, though it stopped short of designating Beijing
a currency manipulator.
The
report, the latest semi-annual foreign currency review by the US Treasury, came
amid Washington’s long-standing concern that Beijing may intentionally undervalue
the yuan. It last labelled China a currency
manipulator in 2019, during US President Donald Trump’s first term.
“This
relative lack of transparency will not preclude [the] Treasury from designating
China if available evidence suggests that it is intervening through formal or informal
channels to resist RMB appreciation in the future,” the report said.
In
contrast to the sharp depreciation seen during Trump’s first term – which fuelled
speculation that Beijing had allowed the yuan to weaken to offset tariffs – the
currency has trended stronger in “trade war 2.0”, despite a brief dip in early April
when Washington announced sweeping “reciprocal tariffs” on nearly all its trading
partners.
Still,
the Chinese currency is widely seen as undervalued, with Goldman Sachs analysts
assessing in a January 5 report that the yuan could be trading at about 25 per cent
below its fair value against the US dollar.
On
Friday, the People’s Bank of China set the yuan’s midpoint rate – also known as
the daily fixing rate – at 6.9678 to the US dollar, while offshore trading was slightly
stronger in the afternoon at about 6.947. The currency has held stronger than seven
per US dollar after the central bank strengthened it to break through the psychologically
significant threshold on January 23.
Analysts
broadly believe that China’s central bank may prefer a firmer currency, but remains
cautious about too sharp an appreciation.
The
yuan has gained roughly 5 per cent against the US dollar over the past year.
In
an interview with state-run news agency Xinhua published last week, central bank
governor Pan Gongsheng said the bank would “manage expectations
well and keep the yuan basically stable at a reasonable and balanced level”.
Over
the course of the 15th five-year plan, it would also improve the mechanism for establishing
the yuan exchange rate, uphold the market’s decisive role in setting rates, maintain
flexibility and guard against excessive swings, he added.