Tan Tan: Why did the central bank issue its policy stance on the RMB exchange rate?
On the afternoon of October 8, the People's Bank of China released its policy stance on the RMB exchange rate.
This is the central bank’s systematic elaboration on exchange rate issues. The term "policy stance" refers to official texts issued in the name of the country. In external statements, it represents the official attitude.
To understand it, it needs to be seen in an international context. In recent times, some countries have clamored for an underestimation of the RMB exchange rate, and even tried to force the RMB to appreciate in a non-market manner.
China released its policy stance at this time, providing a clear basis for clarifying this issue.
It boils down to three concerns. To understand these concerns in a popular way, we need to first understand: what the international community is discussing and what the implication is.
01
"The exchange rate issue itself"
Master Tan has previously analyzed that arguments such as the RMB exchange rate being undervalued often have two presuppositions. The first is to imply that China has "manipulated" the exchange rate, and the second is to promote the appreciation of the RMB as a means to weaken China's export competitiveness.
The first concern raised by China is that all countries should respect the fact that exchange rates are the result of multiple factors.
The document makes this very clear at the beginning:
China implements a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies, and insists on letting the market play a decisive role in the formation of exchange rates.
A noteworthy expression is "managed float." "Floating" has a prerequisite: there is no preset target level and no intervention in the long-term trend.
The document gives two reference coordinates: the 2008 international financial crisis, and in July this year, the yen devalued against the US dollar to a nearly 40-year low, triggering joint intervention by relevant countries. Simply put, China governs with reference to international rules and practices.
Over the past 20 years since the exchange reform, the RMB exchange rate against the US dollar has appreciated by 23% cumulatively. Since 2010, it has experienced three appreciation cycles and three depreciation cycles.
Xu Peng, deputy director of the Situation Office of the Market Research Institute of the China Academy of Macroeconomics, told Mr. Tan that the so-called "exchange rate manipulation" is simply nonsense. This year, both the onshore and offshore RMB have exceeded the 6.7 mark against the US dollar. Under the trend of currency depreciation in neighboring countries, China has not chosen beggar-thy-neighbor or competitive devaluation measures, and is a responsible big country.
According to the logic of the United States and the West, if China's export competitive advantage comes from "deliberately devaluing the RMB," then they have a misunderstanding of China's current industrial situation.
Guo Kai, president of the China Financial Forty Research Institute, told Mr. Tan that forcibly appreciating the RMB exchange rate is putting the cart before the horse and will harm other economies around the world.
A study on enterprises found that after the RMB appreciated by 10%, export prices denominated in RMB fell by less than 0.5%.
Appreciation will weaken competitiveness, which is a short-term static logic. In a dynamic process of long-term development, especially for China, with its R&D advantages and industrial chain advantages, Chinese industries continue to promote cost reduction and efficiency improvement. While the RMB appreciates, its competitiveness becomes stronger and stronger.
China's industrial development and exchange rate situation in the past few years have proven this.
02
"Imbalance problem"
background
In July 2026, the International Monetary Fund (IMF) released the "2026 External Sector Report", assessing China's external balance in 2025 as "strong". The report stated that the median real effective exchange rate gap of the RMB was -21.3%.
One thing that needs to be pointed out is that the IMF's reports are very technical and can easily be misused. The IMF actually has different models, and the calculated results are different.
The IMF itself said that this result is calculated for reference only and cannot be used as a strict basis for evaluation.
Wang Qing, chief macro analyst of Oriental Jincheng, told Tan Zhu that if estimated according to the IMF's real effective exchange rate index method, the real effective exchange rate of the RMB at the end of 2025 will be slightly overvalued by 0.5%.
Therefore, the second concern raised by China is: We welcome international organizations to participate in discussions, but the premise is that their assessments cannot be misused. This is the premise to ensure that the international community can form an effective mechanism to negotiate and resolve new problems and new phenomena in the global economy.
The document mentioned:
Using the results of the IMF's External Balance Assessment (EBA) as the basis for the undervaluation of the RMB exchange rate is a misinterpretation and misuse of the assessment results.
And some countries only see that underestimated number.
Behind this logic is to package the decline in domestic industrial competitiveness into China's exchange rate issue. This needs further clarification.
In the past few years, the global economy has experienced the impact of the epidemic, energy crisis, inflation, rising trade protectionism and the restructuring of industrial chains. Today, a common problem faced by the United States and Europe is the lack of competitiveness of local manufacturing industries and trade imbalance.
However, "trade imbalance" is a long-standing phenomenon. The main surplus countries are constantly changing, while the main deficit countries are always the same. The problem lies in their own economic structure.
Pan Yuanyuan, an international investment expert at the Chinese Academy of Social Sciences, told Tan Zhu that the idea of these countries is to use fluctuations in financial markets and exchange rates to affect my country's external real economic flows and slow down the accumulation of my country's overseas assets. To put it simply, on the one hand, it will squeeze export earnings, and on the other hand, it may also bring uncertainty to the value of established overseas assets.
Some countries that demand RMB appreciation were once large exporters themselves. When others asked them to reduce exports, they always said they respect economic laws and international rule of law. But now that exports are declining and we are asking others to appreciate their currencies, why don’t we follow the laws of market economy? This is a double standard.
They even use this to attribute the trade imbalance problem to China. This is not an attitude to solve the problem.
03
"Surplus Problem"
background
In professional discussions, current account surplus is often used as a basis for judging whether the exchange rate is undervalued.
This premise itself has problems: there is no simple correspondence between current account surplus or deficit and the strength of the exchange rate.
Therefore, the third concern raised by China is: when discussing currency issues, we must grasp the main contradictions of the current global monetary system and cannot just focus on the current account number.
The document mentioned:
When analyzing changes in exchange rates, we must look not only at trade in goods, but also at trade in services; not only at current accounts, but also at financial accounts; we must pay attention not only to economic fundamentals, but also to expectations and other factors.
China has always been willing to make positive contributions to the dynamic balance of the global economy. From expanding global supply after joining the World Trade Organization to expanding domestic demand after the 2008 international financial crisis, China has been deeply involved in many important rounds of dynamic balancing processes in the global economy.
On the other hand, the surplus problem is fundamentally a structural problem.
Since 2007, the ratio of China's current account surplus to GDP has gradually declined from its peak of 9.9%; at the same time, in recent years, China's contribution to global economic growth has stabilized at around 30%. This shows that China is a "growth engine" and not a "source of imbalances."
What really needs adjustment are the problems of low savings, high consumption, and insufficient industrial competitiveness in deficit countries.
China has also been committed to working together to solve this problem through international cooperation.
At the recent meeting of G20 finance ministers and central bank governors, China proposed that deficit countries reduce their fiscal deficits and increase their savings rates, while surplus countries moderately promote consumption and investment growth. All countries should formulate medium- and long-term policy plans, make clear commitments and resolutely implement them.
However, some voices from abroad still simply attribute the problem to so-called "industrial subsidies" and "RMB exchange rate", as if attacking China can alleviate their own problems.
This is deliberate smearing. Relevant people involved in front-line negotiations told Mr. Tan that at last week’s G20 trade ministers’ meeting, the topics set by some countries were highly discriminatory and intended to target China. However, due to opposition or different opinions from members, its intention was ultimately not realized and no consensus was formed.
Previously, the Trade Committee meeting of the Organization for Economic Co-operation and Development issued a joint statement to deal with "the problem of overcapacity in specific areas." However, some countries packaged it as taking over the discussion results of the G20 Trade Ministers' Meeting.
Faced with this phenomenon, the international community needs effective consultation.
Solving global imbalances ultimately depends on how countries adjust, make commitments, and implement jointly.
This policy stance needs to clarify three lines:
｜｜First, the exchange rate issue cannot be politicized, let alone used to discredit others.
｜｜Secondly, the reports of some international organizations are not jointly agreed upon by the member states. In the final analysis, they are just one opinion, not a golden rule, and cannot be used selectively. Multilateral mechanisms must return to the track of consensus and equal participation.
｜｜Third, some countries cannot package the problems they have caused as problems caused by others and then blame others. You must be clear about who is responsible for your financial problems.
The central bank's systematic statement of its policy stance on the RMB exchange rate is itself a statement.
Going forward, China will continue to do its own thing well and is always willing to work with all parties to make positive contributions to the dynamic balance and sustainable growth of the global economy.
