The People’s Bank of China (PBOC) released its “Policy Stance on the RMB Exchange Rate” on the 8th, systematically articulating the central bank’s core positions on the RMB exchange rate. The document emphasizes that the PBOC does not preset exchange rate target levels or intervene in long-term exchange rate trends, and reiterates that China has no intention of gaining trade competitive advantages through currency depreciation. The document, published simultaneously in Chinese and English, is widely viewed as a direct response to renewed criticism from the US and Western countries over the RMB exchange rate.
In the document, the PBOC explicitly states that China implements a managed floating exchange rate regime based on market supply and demand, with reference to a basket of currencies for adjustment, and that the direction of RMB exchange rate market-oriented reform has remained consistent. After years of development, China has established a multi-tiered foreign exchange market with continuously expanding depth and breadth, where enterprises and other market participants trade independently based on commercial principles.
Since 2017, the PBOC has withdrawn from routine foreign exchange intervention, does not preset exchange rate targets, and does not intervene in long-term trends. The RMB exchange rate maintains flexibility and two-way fluctuation. Since 2010, the currency has experienced three rounds of appreciation cycles and three rounds of depreciation cycles, trading within a broad range of 6.04 to 7.35 yuan per US dollar, with each cycle’s fluctuation amplitude exceeding 10%.
The Boundaries of “Managed”
Addressing external skepticism about the “managed” exchange rate regime, the PBOC explained that when facing major external shocks such as the pandemic outbreak and the tariff war in April 2025, it employs macroprudential management tools to adjust and guide expectations. In extreme circumstances, it may also directly intervene in the foreign exchange market, with the goal of correcting herd behavior and irrational expectations, and preventing excessive exchange rate volatility.
The PBOC cited July 2026 as an example, noting that the Japanese yen depreciated to a nearly 40-year low against the US dollar, prompting coordinated intervention by relevant countries. This demonstrates that such measures are consistent with international rules and practice.
Regarding policy transparency, China has published balance of payments and related foreign exchange data in accordance with the IMF’s Special Data Dissemination Standard since 2016, continuously increasing data dimensions and publication frequency. Starting in 2027, China will further report foreign exchange-related data to the IMF.
Using Historical Data to Rebut the “Depreciation Boosts Exports” Argument
On the relationship between the RMB exchange rate and trade competitiveness, the PBOC reiterated that China’s trade development is rooted in the improvement of industrial international competitiveness. There is no need, nor any intention, to gain competitive advantages through exchange rate depreciation, and China has never engaged in competitive currency devaluation.
The PBOC supported its position with historical data, showing that RMB appreciation did not hinder China’s export market share gains, nor did depreciation periods accelerate market share increases. From 2005 to 2008, 2010 to 2014, and 2020 to 2021, the RMB appreciated against the US dollar by 21%, 10%, and 9% respectively, while China’s share of global exports increased by 2.4, 2.8, and 1.7 percentage points during the same periods. In contrast, when the RMB depreciated 7% against the US dollar in 2016 and over 8% in 2022, China’s share of global exports declined by 0.7 percentage points in each period.
China’s export structure has shifted from low-end labor-intensive products to mid-to-high-end and diversified products. Over the past five years, high-tech product imports and exports grew at an average annual rate of 7.9%, with growth accelerating to 11.4% in 2025, contributing nearly 60% to overall foreign trade growth.
As exporters integrate into global supply chains, corporate bargaining power has improved, allowing them to share exchange rate costs with upstream and downstream partners. Combined with increased use of hedging instruments, trade sensitivity to exchange rate fluctuations has declined significantly. Currently, approximately 30% of trade is settled in RMB, and corporate foreign exchange hedging ratios also stand at around 30%, with room for further improvement.
The Reality of Global Foreign Exchange Markets
The PBOC stated that the global foreign exchange market is enormous in scale, making it difficult to influence medium-to-long-term trends through sustained intervention. In 2025, global foreign exchange market average daily trading volume approached $10 trillion, of which RMB trading exceeded $800 billion, with offshore trading accounting for approximately 80%. No country can persistently suppress its exchange rate to continuously enhance trade competitiveness.
The PBOC emphasized that exchange rates are influenced by multiple factors including economic growth, monetary policy, financial markets, geopolitics, and sudden risks. Analysis must consider not only goods trade but also services trade, the financial account, capital flows, and market expectations.
With the advancement of financial liberalization and globalization, the ratio of global trade volume to foreign exchange trading volume has declined from approximately 1:35 in the 1990s to 1:70 in 2025, indicating a gradually weakening correlation between trade and exchange rates. Sharp exchange rate fluctuations in emerging markets are often triggered by capital flows under the financial account.
The PBOC cited the first half of 2026 as an example: South Korea’s current account surplus increased substantially due to the AI boom, yet the Korean won continued to depreciate. Japan’s surplus also increased during the same period while the yen weakened, demonstrating that there is no simple linear relationship between current account balances and exchange rates.
Rejecting Misinterpretation of IMF Assessments
Addressing recent views that cite IMF external balance assessment results as “official evidence” to accuse the RMB of being undervalued, the PBOC considers this a misinterpretation and misuse of the assessment results. The IMF assesses the real effective exchange rate, which should not be misconstrued as a view on the nominal exchange rate. The real effective exchange rate is jointly determined by the nominal effective exchange rate and relative domestic and foreign prices, reflecting more the impact of macroeconomic and economic structural factors such as a country’s supply-demand dynamics.
The PBOC pointed out that the IMF’s policy recommendations for China primarily focus on structural adjustment policies such as actively expanding domestic demand, rather than pushing for RMB appreciation. Econometric model results can serve as references for academic discussion but cannot be used as strict evidence for assessing a country’s external imbalances and equilibrium exchange rate levels.
For China specifically, surplus inflows can flow to the rest of the world through corporate and bank overseas investments, with the balance of payments maintaining fundamental equilibrium. Therefore, surpluses do not necessarily drive RMB appreciation. Conversely, the United States has long maintained a large current account deficit, yet the US dollar has remained broadly strong.
Global Imbalances Are Not Any Single Party’s Responsibility
The PBOC believes that global economic imbalances result from the combined effects of industrial division of labor, the international monetary system, and investment-savings gaps across countries, and cannot be attributed unilaterally to surplus or deficit countries. In an international monetary system dominated by a single sovereign currency, the issuer of the primary reserve currency can sustain debt and fiscal expansion over extended periods, supporting high consumption and low savings, thereby creating long-term trade deficits.
The PBOC called on all countries to pursue structural reforms: deficit countries must consolidate their fiscal positions, raise savings rates, and enhance industrial competitiveness, while surplus countries should promote consumption and investment growth. Simplistically attributing complex problems to the RMB exchange rate does not help resolve global imbalances.
The PBOC further emphasized that countries should put forward clear medium-to-long-term policy commitments and implement them consistently. Attempting to resolve global economic structural problems within one to two years is unrealistic, and abrupt short-term policy shifts may prove counterproductive.
China is actively promoting the transformation of its economic growth model. The contribution of consumption to economic growth has risen from 37% in 2010 to 52% in 2025, strongly promoting global economic rebalancing. The PBOC stated that China will firmly implement the strategic direction and key measures set out in the 15th Five-Year Plan, persist in advancing the transformation of the economic growth model, expand domestic demand and high-level opening-up, and contribute to a new round of dynamic global economic equilibrium.
finance.biggo.com