PBoC Publishes Formal Yuan Policy Paper as EU-China Trade Talks Open in Beijing

The People's Bank of China published a formal policy paper on the renminbi exchange rate on 8 October 2026, timed to the opening of EU-China trade talks in Beijing. Bloomberg reported that the document — released with an English translation — constituted the central bank's most systematic written defence of its exchange-rate regime since the post-2020 surplus debate intensified. The paper argued that exchange-rate adjustments cannot resolve structural trade imbalances, that no universally accepted methodology exists for computing an equilibrium currency value, and that China's export strength reflects industrial competitiveness rather than deliberate currency management. The South China Morning Post reported that the paper was a direct response to accusations of renminbi undervaluation that European leaders, including German Chancellor Friedrich Merz, have pressed publicly for several months.

The paper's core arguments

The PBoC document laid out three principal lines of argument. First, it contested the analytical basis for undervaluation claims, stating that current-account surpluses do not automatically imply an undervalued exchange rate and that historical evidence does not demonstrate a mechanistic relationship between currency strength and export volumes. Second, it cited the yuan's own trajectory as evidence of non-manipulation: the currency has appreciated approximately 4.3 per cent against the US dollar in 2026 and has risen roughly 23 per cent against the dollar since 2005, moving from around 8.27 to around 6.7 per dollar over that period. Third, the paper attributed China's trade surplus to the competitiveness of its manufacturing sector, framing any demand for a stronger yuan as an attempt to disadvantage Chinese industry through monetary means rather than through product-level competition.

The document avoided any discussion of two mechanisms European officials have repeatedly raised in background briefings: the daily fixing process through which the PBoC sets the renminbi's central parity rate each morning, and the role of state-owned commercial banks in smoothing spot-market moves away from that fix. By omitting these instruments from its analytical framework, the paper effectively placed them outside the terms of any currency discussion the EU might seek to embed in a bilateral trade instrument.

EU-China talks and the bilateral context

EU Trade Commissioner Maroš Šefčovič was in Beijing for a two-day round of talks with Chinese Commerce Minister Wang Wentao on 8 and 9 October, Swissinfo reported citing Bloomberg. The immediate backdrop is a bilateral trade deficit that reached €360.6 billion — approximately $404 billion — in favour of China last year. European officials have intensified calls for a stronger yuan, arguing that currency policy is one driver of what some in Brussels have described as a second wave of Chinese export pressure. Chancellor Merz, who has been among the most vocal EU leaders on the issue, has publicly claimed the yuan is undervalued by 25 to 30 per cent, a figure the PBoC paper does not engage directly. ECB President Christine Lagarde has separately supported including China in Group of Seven currency discussions, according to Swissinfo.

The yuan closed the week at a four-year high on the trade-weighted CFETS RMB Index, reaching 103.9 on 9 October — a level last seen in April 2022 — Bloomberg reported. That appreciation provides the PBoC with a near-term statistical counter to manipulation claims even as the level of the fix remains under Beijing's daily discretion.

The IMF transparency commitment

The most concrete new policy element in the paper is a commitment to report additional foreign-exchange operational data to the International Monetary Fund starting from 2027. The paper did not specify which data series would be added, nor did it state whether submissions would be made publicly available through the IMF's data standards framework. China currently participates in the IMF's Special Data Dissemination Standard but has not adopted the enhanced tier. The commitment, though narrow, is the first time the PBoC has publicly linked its exchange-rate transparency to a multilateral reporting obligation in the context of bilateral trade pressure — a distinction the EU side will face pressure to define in any joint statement that emerges from the October talks.

The paper's publication marks a shift in how the PBoC has managed exchange-rate controversy: where previous responses have been brief official statements or spokesperson remarks, the 8 October document is a structured analytical text with an English translation, positioned for an audience beyond domestic media. That presentation choice signals that Beijing expects the yuan to remain a live issue in the broader EU-China negotiating framework that includes the Macron-Merz trade instrument agreed in principle at the 5 October Brussels meeting.

Sources

• Bloomberg — China Central Bank Defends Currency Policy Before EU Trade Talks
• Bloomberg — Yuan Hits Four-Year High Versus Basket as PBOC Backs FX Policy
• Swissinfo (AFP/Bloomberg) — China Defends Yuan Policy With Imbalances in Focus at EU Talks
• Gulf Times — China defends yuan policy as Europe steps up pressure over trade surplus
• Semafor — China rejects yuan manipulation claims amid EU trade dispute
• South China Morning Post — China's central bank slams currency manipulation claims as EU trade talks begin