The People’s Bank of China has issued a policy paper rejecting claims that the yuan is undervalued, arguing that China’s export performance stems from industrial competitiveness rather than currency manipulation. The document arrives as EU trade officials hold two days of talks with Chinese counterparts, with Brussels increasingly framing the bilateral trade imbalance as an exchange-rate issue. The central bank said there is no linear relationship between the exchange rate and the current account balance, and that earlier periods of yuan depreciation did not accelerate gains in export market share. It also said China will begin reporting foreign exchange operation data to the IMF from 2027.
Domestic Credit Demand and Reserves
Domestic credit demand was described as sluggish, with an investment-led policy push yet to deliver a broader rebound. China’s foreign exchange reserves fell to USD3.40tn at end-September, compared with a Bloomberg consensus of USD3.43tn, and down from USD3.44tn at end-August, partly due to valuation effects linked to weaker gold prices. In spot trading, USD/CNY fell 30 pips to 6.70, while USD/CNH was little changed at 6.70.
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