Why the IMF’s newest report finds that the yuan is undervalued
The Economist
February 19, 2026
AI-Generated Deep Dive Summary
The International Monetary Fund (IMF) has released a report highlighting that the yuan, China's currency, is undervalued by approximately 16%. This discrepancy between the yuan's current exchange rate and its equilibrium level is causing significant economic imbalances. The issue arises because the exchange rate that would stabilize China's domestic economy does not align with what is needed to balance global trade dynamics. This imbalance has far-reaching implications for both China and the international community, particularly in terms of trade relations and economic stability.
The undervaluation of the yuan makes Chinese exports more competitive on the global stage, contributing to trade surpluses for China and deficits for its trading partners. This situation has often led to tensions, especially with major economies like the United States, which have accused China of currency manipulation. The IMF's findings suggest that allowing the yuan to appreciate could help reduce these imbalances, fostering a more balanced global economic landscape.
For businesses, this matters because an undervalued yuan can distort international markets, making Chinese goods cheaper and foreign products more expensive in China. This dynamic can disrupt supply chains, affect pricing strategies,
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Originally published on The Economist on 2/19/2026