(Bloomberg) — The International Monetary Fund linked China\u2019s booming exports and growing trade imbalances in part to a real depreciation of the yuan, a subtle shift in its stance that adds to rising global concerns over the currency\u2019s weak exchange rate.<\/p>\n
In carefully worded remarks following the conclusion of the IMF\u2019s annual review of China\u2019s economy, fund officials said the country\u2019s low inflation relative to price levels among its trading partners has led to a weaker yuan in real terms. They urged Chinese policymakers to adopt bolder stimulus to boost consumption, which would lift consumer prices, while allowing more exchange rate flexibility.<\/p>\n
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Photographer: Samuel Corum\/Bloomberg <\/p>\n
\u201cAs the second-largest economy in the world, China is simply too big to generate much growth from exports,\u201d IMF Managing Director Kristalina Georgieva said at a press briefing in Beijing on Wednesday. \u201cContinuing to depend on export-led growth risks furthering global trade tensions.\u201d<\/p>\n
The IMF didn\u2019t explicitly recommend that China should push for the yuan\u2019s appreciation, she said.<\/p>\n
China has moved fast in recent years to gain manufacturing dominance, drawing accusations from the likes of Donald Trump over maintaining an undervalued exchange rate that gave its exporters an edge over their competitors and helped it amass trade surpluses.<\/p>\n
While the IMF has been largely silent on the fair value of China\u2019s currency in recent years, its latest remarks appeared to be siding with critics in echoing growing calls abroad and within China for a stronger yuan. The currency\u2019s inflation-adjusted exchange rate fell to the lowest in more than a decade due to persistent falling prices in China, which made its exports more competitively globally.<\/p>\n
The debate is playing out against the backdrop of China\u2019s goods trade surplus surging to a record of above $1 trillion in the first 11 months of this year. Countries fearful for the future of their industries are increasingly pushing back against the flood of Chinese exports.<\/p>\n
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China maintains a \u201cmanaged float\u201d of the yuan and has a number of tools to influence the exchange rate. Officials have repeatedly said they aim to keep the currency \u201cbasically stable,\u201d allowing the yuan to appreciate slightly this year and at times using its daily fixing to discourage rapid moves.<\/p>\n
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Even as the yuan heads for its first annual gain since 2021 in both onshore and offshore markets, Goldman Sachs Group Inc. estimates the yuan is 25% undervalued and will appreciate more than forwards contracts are pricing for 2026.<\/p>\n
The IMF has in recent years been advising China to increase the flexibility of its exchange rate. A decade ago, the IMF dropped a long-held view that the yuan was undervalued, ahead of the currency\u2019s inclusion in the fund\u2019s Special Drawing Rights basket of reserve currencies.<\/p>\n
\u201cWhat we want to see is a market-based exchange rate that reflects fundamentals,\u201d Georgieva said.<\/p>\n
External imbalances are becoming more pronounced for China, according to the IMF, with its current account surplus projected to reach 3.3% of gross domestic product in 2025.<\/p>\n
Earlier in 2025, an annual technical analysis by the IMF found that the yuan\u2019s real effective exchange rate was 8.5% weaker than its estimated equilibrium level, based on a current account surplus of 2.3% of GDP last year. The surplus reached 3.4% in the third quarter of this year, the highest since late 2010, according to Bloomberg calculations.<\/p>\n
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Given the strength of China\u2019s exports and fiscal stimulus deployed by the government, the IMF said it now expects China\u2019s economy to expand 5% in 2025 and 4.5% in 2026 \u2014 faster than in its most recent projections from October.<\/p>\n
\u201cBoosting demand would reflate the economy, lift inflation and lead to an appreciation of the real exchange rate,\u201d Sonali Jain-Chandra, the IMF\u2019s mission chief for China, said at the briefing. \u201cThis will help close internal and external imbalances.\u201d<\/p>\n
–With assistance from James Mayger and Fran Wang.<\/p>\n
(Updates with additional details in first six paragraphs.)<\/p>\n
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