A bank clerk is counting a stack of 100-yuan bills. (Photo/Xinhua)
Chongqing - China has “no need or intent” to weaken its currency for a trade advantage, the People’s Bank of China (PBOC) said in a seven-part statement released on October 8. It attributed trade growth to industrial competitiveness, reaffirmed the decisive role of market forces in setting the exchange rate, and said China would expand domestic demand under its 15th Five-Year Plan.
Why is the renminbi central to China's trade surplus debate?
China's trade surplus has continued to grow. It hit a record of 1.2 trillion U.S. dollars in 2025. In the first nine months of 2026, it stood at 938.1 billion U.S. dollars, on track to surpass that record. This has drawn criticism of China's industrial policies and, more recently, of its exchange rate.
Against this backdrop, Chatham House, a British think tank, said in January that China's currency "is too weak and needs to strengthen." Brad Setser, a senior fellow at the Council on Foreign Relations, an American think tank, argued on August 2 that "a weak renminbi directly led to China's latest export boom."
The U.S. Department of the Treasury kept China on its monitoring list in its July 23 report, warning that evidence of intervention "to resist RMB appreciation" could still bring a manipulator designation.
In response to the ongoing conversation about the renminbi's exchange rate, the PBOC's recent statement made the renminbi's, and by some extension, China's economic trajectory clear: the current trade surplus is based on the growing industry's comparative advantages, and China has never resorted to competitive devaluation to boost exports to offset external shocks in the past.
China's exports: what can 30 years of the renminbi tell us?
First, China's export performance over the past two decades suggests that exchange rates alone cannot explain the country's changing share of global trade. Industrial competitiveness, productivity gains, and supply-chain integration have also played crucial roles.
According to the PBOC's figures, China's share of global exports rose in three periods when the currency appreciated, whereas it fell in two periods when it depreciated.
For example, the renminbi rose 21 percent against the dollar from 2005 to 2008, and China's share of global exports rose 2.4 percentage points. Again, the renminbi rose 10 percent from 2010 to 2014 and the share rose 2.8 points. And yet again, the renminbi rose 9 percent from 2020 to 2021 and the share rose 1.7 points.
In 2016, the renminbi fell 7 percent against the dollar, and the share lost 0.7 points; in 2022, it fell more than 8 percent, and the share fell another 0.7 points.
Cross-country comparisons also suggest that exchange rates alone cannot explain trade imbalances. South Korea's current account surplus widened amid booming AI-related exports and a weaker won, while China maintained a trade surplus despite an appreciation of the renminbi.
These different experiences underscore the need to examine industrial competitiveness and other structural factors alongside exchange-rate movements.
So instead of crediting a cheap currency, the PBOC attributes China's trade growth to a complete industrial base that increasingly exports high-value goods.
China enjoys four decades of reform and opening up, a full supply chain and infrastructure network, a very large domestic market, and sustained research spending. Trade in high-tech goods rose 11.4 percent in 2025, and contributed almost 60 percent of total trade growth that year.
Second, the PBOC highlighted the renminbi's overall appreciation since the 2005 exchange-rate reform, alongside China's efforts to maintain exchange-rate stability during major external shocks.
According to the central bank, the renminbi has appreciated by 23 percent against the U.S. dollar since July 2005, from 8.27 yuan per dollar to around 6.7 yuan per dollar as of October 2026, despite several cycles of appreciation and depreciation.
In 1997, during the Asian financial crisis, the Chinese government pledged no depreciation while its neighbours' currencies fell. Nor did the 2008 financial crisis compromise the renminbi, while many currencies slid against the dollar.
What's next for the renminbi and China's economy?
Looking ahead, the PBOC reaffirmed China's commitment to a market-oriented exchange-rate system while emphasizing the need to maintain stability amid external shocks.
China has run a managed float since 1994, sets a daily reference rate without a target level, and has phased out regular intervention since 2017.
Its remaining tools are macroprudential, aimed at sharp depreciation and the one-way expectations that feed it, as in the pandemic and again in the April 2025 tariff war, with direct intervention kept for even more extreme cases.
China has reported balance of payments data under the International Monetary Fund's (IMF) Special Data Dissemination Standard since 2015 and will start reporting foreign exchange operation data to the IMF in 2027.
But exchange-rate policy alone cannot resolve concerns about China's large trade surplus. While exchange rates influence import and export prices, external imbalances also reflect the balance between national savings and investment.
Stronger domestic demand could help absorb more production at home and increase imports, contributing to a more balanced external position. This is why expanding domestic demand is also relevant to the international debate over China's trade surplus.
Against this backdrop, the PBOC reaffirmed China's commitment to expanding domestic demand, echoing the IMF's 2025 recommendation to address economic imbalances through structural adjustments.
Alongside its market-oriented exchange-rate policy, expanding domestic demand offers another way to promote more balanced economic growth and reduce reliance on external markets.
China has made progress in rebalancing its economy, although structural challenges remain. Its current account surplus declined from 9.9 percent of GDP in 2007 to 3.7 percent in 2025, while consumption's contribution to economic growth rose from 37 percent in 2010 to 52 percent in 2025.
In the first three quarters of 2026, domestic demand accounted for more than 70 percent of GDP growth, according to the National Bureau of Statistics. While these figures indicate the growing importance of domestic demand, further structural adjustments will be needed to support more balanced and sustainable growth.