The Renminbi Gap: Why a Stronger Yuan Is a Global Priority

Brad Setser argues that China’s large current-account surplus and the yuan’s managed undervaluation indicate a substantial undervaluation, with the PBOC’s FX interventions sustaining an export-led model that fuels global imbalances. He contends that allowing modest yuan appreciation could help rebalance growth, though some economists urge waiting for domestic-demand reforms; inaction risks larger global disruption as reliance on China’s exports persists.