Is China keeping its renminbi (RMB) currency artificially cheap? For years, some countries have said yes, arguing the RMB is "undervalued" to give Chinese exports an unfair, cheaper edge. "Artificially" means the price is being held there by government action, not by the natural forces of supply and demand. "Cheaper" describes a weaker RMB: It takes more RMB to buy a U.S. dollar, and Chinese goods therefore look inexpensive to foreign buyers.

In late 2025, American investment bank Goldman Sachs said the RMB was undervalued by 25 percent, raising questions about global currency imbalances. German Chancellor Friedrich Merz has said China's currency may be undervalued by up to 30 percent.

On October 8, China's central bank, the People's Bank of China (PBOC), pushed back, explaining how it actually manages the currency in the foreign exchange (forex) market, the global marketplace where currencies are bought and sold.

In short, China lets the RMB's value rise and fall based on market supply and demand, rather than fixing it at a set level. The PBOC affirmed it does not target any specific exchange rate and does not try to control where it goes long term. Two-way movement, up and down, driven mainly by the market, is normal. China has largely stopped routine intervention in the forex market, though it keeps some tools to calm panic and prevent wild short-term swings. The bank added that these steps are common internationally, not "currency manipulation."

Why does this matter? A flexible exchange rate enables China to absorb external shocks more smoothly, relieving the central bank from having to defend a fixed rate. This, in turn, leads to greater monetary policy autonomy: Policymakers can focus squarely on domestic economic objectives such as growth and employment.

The PBOC also rejected the "undervalued" claim, arguing that an exchange rate is shaped by many things, including economic fundamentals, not just trade. And if the currency were the key to China's export success, then moving it up or down should change that success. It doesn't. The bank pointed out that when the RMB rose sharply in the past, Chinese exports stayed strong; when the currency faced temporary pressure, its export share did not balloon. So something else must be driving China's trade success: industrial strength, manufacturing capabilities and innovation.