Goldman Sachs has said that the Chinese yuan (also called the renminbi or RMB) is “significantly undervalued,” estimating that it is around 25% cheaper than its true value based on China’s economic fundamentals.
The bank believes the yuan could appreciate more strongly in 2026 than markets currently expect.
Why Goldman Sachs Thinks the Yuan Is Undervalued
According to Goldman Sachs, its economic models show that:
- The yuan is cheaper than it should be based on China’s long-term fundamentals.
- Capital inflows into Chinese equities have improved.
- The US dollar has weakened, supporting RMB strength.
- China’s official daily yuan fixings have become stronger.
Because of this, Goldman Sachs calls the yuan trade one of its “highest-conviction ideas.” The currency is also on track for its first annual gain since 2021.
What Could Limit Yuan Gains?
Goldman Sachs also warns that several risks could slow down yuan appreciation:
- Deflation pressure in China
- A rebound in the US dollar if global markets shift
- Weak export demand, especially from Europe
Why European Companies Are Worried About China’s Weak Currency
Many European companies say China is keeping the yuan artificially undervalued. This weaker currency gives Chinese exporters a strong pricing advantage in global markets. In 2025, the yuan fell to a 10-year low against the euro.
EU Chamber: “The Weak Yuan Is Unusual and Distorting Trade”
The EU Chamber of Commerce in China argues that the weak yuan does not match China’s huge trade surplus. China’s goods trade surplus is expected to cross $1 trillion, a level that normally leads to a stronger currency.
Because of this imbalance, the Chamber warns that the weak yuan could increase EU–China tensions and may lead to new trade retaliation measures from Europe.
What This Means for Global Markets in 2025-2026
The debate around the yuan’s value shows how currency policy is becoming a key part of global economic competition. If the yuan strengthens as Goldman Sachs expects, it could:
- Reduce China’s export price advantage
- Ease trade tensions with Europe
- Shift global investment flows
If it stays weak, more countries may push for trade actions, especially the EU.
Key Questions Answered
1. Is the yuan undervalued?
Goldman Sachs believes the yuan is around 25% undervalued.
2. Why is the EU concerned?
European companies say a weak yuan gives Chinese exporters an unfair price advantage, hurting EU industries.
3. Could there be trade retaliation?
Yes. The EU Chamber warns that the weak RMB could trigger more trade measures against China.
Conclusion
The yuan’s value has become a major topic in global finance. Goldman Sachs sees strong upside potential, while Europe sees rising risk and imbalance. How Beijing manages the yuan in 2025-2026 will shape global trade, investments, and economic relations.
Be First to Comment