🇨🇳 IMF Flags Undervalued Yuan

An IMF official said China’s domestic stimulus has been too weak to revive demand, leaving the renminbi undervalued in real effective terms. Speaking in Bangkok during the Fund’s annual meetings, Asia-Pacific director Krishna Srinivasan said the currency’s weakness reflects deeper imbalances in China’s economy. IMF’s latest assessment puts the yuan’s undervaluation at 17.3% to 25.3%, with a midpoint of 21.3%.

Beijing has introduced demand-support measures, including a stimulus package announced last month, but Srinivasan said the scale remains insufficient. He linked the renminbi’s real depreciation to very low inflation in China, arguing that it has automatically boosted competitiveness and contributed to a trade surplus that has widened over several years.

He also warned that unresolved structural imbalances are delaying progress on other risks, including local government debt. The exchange-rate debate remains contested, with disagreement over whether misalignment is a cause or a result of broader economic distortions.

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