US Urges China to Let ‘Substantially Undervalued’ Yuan Rise

(Bloomberg) — The US Treasury characterized the yuan as “substantially undervalued,” and called on China to allow its exchange rate to strengthen in a timely and orderly way.

“Given China’s extremely large and growing external surpluses and now substantially undervalued exchange rate, it is important that the Chinese authorities allow the RMB exchange rate to strengthen in a timely and orderly manner in line with macroeconomic fundamentals,” the department said in a semiannual foreign-exchange report released Thursday. The RMB is the acronym for the renminbi, the official name of China’s currency.

The Treasury declined to name any major trading partner as a manipulator of its exchange rate in the report. A “monitoring list” of those with big trade surpluses and large-size interventions in the currency market saw a slight tweak, with Thailand getting added.

China, Japan, Korea, Taiwan Singapore, Vietnam, Germany, Ireland and Switzerland remain on the list, the Treasury release showed. Trading partners that meet two of three criteria under a 2015 law get assigned to a list of economies that merit close monitoring by the Treasury for their exchange-rate practices.

The last time the Treasury designated a country as a manipulator was in 2019, in Trump’s first term, when China got hit with the label. The tag was dropped five months later as a bilateral trade deal was negotiated.

The International Monetary Fund recently linked China’s booming exports and record trade surplus in part to a depreciation in its currency on an inflation-adjusted basis. Independent analysts have found the yuan to be undervalued, amid evidence of management by Beijing. Goldman Sachs Group Inc. in December estimated the currency to be 25% undervalued.

“China stands out among our major trading partners in its relative lack of transparency around its exchange rate policies and practices,” the Treasury said, echoing language from previous reports over the years.

The department also said that it remains prepared to designate China as a manipulator in future “if available evidence suggests that it is intervening through formal or informal channels to resist RMB appreciation in the future.”

The latest Treasury report covers the four quarters through June 2025 “and more recent developments where data are available.”

The dollar slumped sharply in the first half of last year amid fears of a mass exodus of foreign investors from US assets — spurred by angst over the administration’s protectionist agenda and a weakening outlook for growth.

In its last report, in June, the Treasury said it would “strengthen” its analysis of foreign nations’ currency policies, including possibly “more intensive” scrutiny of market interventions.

Since then, the department has released a number of statements on bilateral discussions, including various pledges not to use things like financial regulation and sovereign funds to target exchange rates. Most of them are now on the monitoring list.

Taiwan Malaysia Thailand South Korea Switzerland Japan “These joint statements reinforce close consultations on macroeconomic and foreign exchange matters and reaffirm each party’s commitment to avoid manipulating exchange rates to prevent effective balance of payments adjustment or to gain an unfair competitive advantage,” the Treasury said in Thursday’s release.

In its section on Japan, the Treasury report said that “even with its recent gains, the yen has been anchored near multi-decade lows.” This is “due in large part to wide policy rate differentials between Japan and its major trading partners and the prospects for more expansionary fiscal policies under a new Japanese government.”

(Updates with further comment on China and Japan starting in seventh paragraph.)

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