China Rejects Yuan Depreciation Claims as Europe Pushes for Stronger Currency

China pushed back against foreign criticism of its exchange rate policy on Thursday, saying it has never pursued competitive currency depreciation. The statement came as European policymakers call for a stronger yuan to help curb China's record trade surplus and surging exports.

The People's Bank of China (PBOC) issued a lengthy policy statement rejecting claims that Beijing keeps the yuan artificially weak to gain a trade advantage. It landed as EU Trade Commissioner Maros Sefcovic visited Beijing to discuss ways to narrow the bloc's trade deficit with China.

PBOC: no competitive devaluation

"China neither needs nor intends to obtain a trade-competitive advantage through exchange-rate depreciation, and has never engaged in competitive currency depreciation," the central bank said.

The PBOC also argued that blaming exchange rates for declining domestic industrial competitiveness, weakening fiscal and financial discipline, and other structural problems amounts to avoiding responsibility for making necessary economic adjustments.

It said China's trade strength stems from the global competitiveness of its industries, arguing that countries with large trade surpluses have historically had strong manufacturing sectors.

Europe fears a second China shock

As China's trade surplus expands, European leaders have intensified calls for a stronger yuan, fearing a renewed wave of Chinese exports could create a "China Shock 2.0." The surplus was equivalent to about 6% of gross domestic product.

Analysts expect exports of artificial intelligence-related and other advanced technology products to help keep the surplus elevated this year.

European Central Bank President Christine Lagarde called in June for global leaders to discuss the potential undervaluation of the Chinese currency as part of broader imbalances threatening the global economy.

The European Union is particularly concerned about its trade imbalance with China, which grew 15% from the previous year, according to EU data. German Chancellor Friedrich Merz has said the yuan is undervalued.

What it means for Nigeria

Nigeria is one of China's biggest trading partners in Africa, and the direction of the yuan feeds straight into the cost of finished goods, machinery and spare parts that local importers bring in. A stronger yuan makes those goods dearer in dollar terms. A yuan that stays weak keeps Chinese products competitive against Nigerian manufacturers, especially in textiles, plastics and light consumer goods.

The pressure from Brussels is unlikely to shift Beijing's position soon. For Nigerian businesses, the practical signal is that cheap Chinese supply will remain available, while any policy move in either direction will show up in import bills and local pricing.