US demands yuan appreciation, citing ‘significant undervaluation’ and lack of transparency

The United States is pressing China to allow the yuan to appreciate, accusing Beijing of a lack of transparency and describing the currency as “significantly undervalued.”

In a report released Thursday, the US Treasury Department stated that it is “important for Chinese authorities to allow the RMB to strengthen in a timely and orderly manner, in line with market pressure and macroeconomic fundamentals.”

The department added that China’s exchange rate policies are distinguished by a “relative lack of transparency” compared to other major US trading partners, though it stopped short of formally designating Beijing a currency manipulator.

The Treasury report reflects Washington’s long-standing concern that Beijing is deliberately keeping the yuan undervalued. Most recently, in 2019 during President Donald Trump’s first term, the US officially labeled China a currency manipulator.

“This relative lack of transparency will not prevent the Treasury from designating China as a currency manipulator should evidence emerge that China is intervening through official or informal channels to prevent the RMB from appreciating in the future,” the report stated.

In contrast to the sharp devaluation seen during Trump’s first term—which fueled speculation that Beijing was allowing the yuan to weaken to offset tariffs—the currency has remained stronger during “Trade War 2.0.” Aside from a brief dip in early April following Washington’s announcement of sweeping “reciprocal tariffs” against nearly all trading partners, the yuan has maintained a stronger trajectory.

Despite this, the Chinese currency is widely viewed as undervalued. Analysts at Goldman Sachs, in a report published January 5, estimated that the yuan is trading approximately 25% below its fair value against the US dollar.

On Friday, the People’s Bank of China (PBOC) set the daily fixing rate—also known as the daily reference rate—at 6.9678 per US dollar, while offshore trading was slightly stronger in the afternoon at approximately 6.947. The currency has held above the psychological threshold of seven yuan to the US dollar since January 23, after the central bank acted to strengthen the yuan.

Analysts broadly agree that the PBOC likely favors a stronger currency but remains cautious regarding excessively rapid appreciation.

Over the past year, the yuan has gained approximately 5% against the US dollar.

In an interview published last week, PBOC Governor Pan Gongsheng stated that the bank would “continue to keep the yuan at a fundamentally reasonable and balanced level by managing expectations effectively.”

He added that during the 15th Five-Year Plan period, they would improve the exchange rate determination mechanism, ensuring markets play a decisive role while maintaining flexibility and guarding against extreme volatility.