PBOC Rejects Yuan Undervaluation Claims, Denies Competitive Devaluation Strategy
TREE NEWS reports: The People’s Bank of China released a formal policy statement on the RMB exchange rate, clarifying that China operates a managed floating regime based on market supply and demand with reference to a basket of currencies, and has exited routine foreign exchange intervention since 2017. The central bank stated it has no intention of using currency depreciation to gain trade advantages and has never engaged in competitive devaluation, resorting to macroprudential tools only during major external shocks such as the pandemic and the April 2025 tariff escalation.
Key Data Points
- The RMB has appreciated 23% against the US dollar since the 2005 reform, with the nominal effective exchange rate up over 50%.
- In 2025 alone, the yuan has gained roughly 9% against the dollar.
- The PBOC pushed back on using IMF External Balance Assessment conclusions as an “official basis” for labeling the RMB undervalued, calling it a misapplication of the methodology.
- Resolving global imbalances requires coordinated action from both deficit and surplus countries, the statement emphasized.
Market Implications
The statement signals Beijing’s intent to anchor expectations ahead of further trade negotiations and to deflect external pressure for faster appreciation. For global markets, a firmer yuan stance reduces the risk of a destabilizing currency war, which historically correlates with risk-off moves across crypto and emerging market assets. A stronger yuan typically eases dollar pressure on Asian exporters and can support risk appetite in digital asset markets, where BTC and ETH often trade as liquidity-sensitive proxies for global macro conditions.
For crypto participants, the key takeaway is policy predictability. China’s exit from routine FX intervention and its emphasis on market-driven pricing reduce the tail risk of abrupt devaluation headlines that have previously rattled global markets. Stablecoin flows tied to CNH liquidity and offshore yuan hedging could see more two-way activity if appreciation expectations solidify.
Forward-Looking Perspective
Watch for three things: the pace of yuan appreciation against a softening dollar cycle, the PBOC’s use of macroprudential tools if volatility spikes, and how the IMF EBA debate evolves in multilateral forums. If China sustains its hands-off intervention stance, expect gradual renminbi internationalization momentum — a slow-burn tailwind for cross-border settlement infrastructure and, eventually, tokenized RMB instruments in offshore markets.
