Chinese yuan Photo:VCG

The idea of creating a new Plaza Accord is being floated by some in the West as a tool to bring down the trade deficit attributed to an allegedly undervalued yuan.

The latest example came from Greg Ip, chief economics commentator for The Wall Street Journal, who claimed in a recent essay headlined "Why the world needs to force China's yuan to revalue," in which the writer said "the world needs another Plaza Accord, this one not to bring down an overvalued dollar but to push up China's undervalued yuan."

From Washington to Brussels, such narratives are not uncommon. In February, the Haut-Commissariat à la Stratégie et au Plan, a French government advisory body, said that the EU should consider either an unprecedented 30 percent across-the-board tariff on Chinese goods or a 30 percent depreciation of the euro against the yuan to counter a flood of cheap imports, Reuters reported.

Yet, the attempt to frame trade imbalance simply as a currency issue exposes Western anxiety and laziness over its slipping industrial edge. Offloading their domestic economic predicaments - ones that can only be resolved via industrial upgrading, technological innovation, market opening, and institutional reform - onto China is tempting, but it will distance the West further from any genuine solutions.

For decades, Western economies have undergone systemic de‑industrialization, with finance overshadowing production. Aging infrastructure and lagging innovation have further undermined their manufacturing capability. Today's trade deficits are an inevitable outgrowth of their domestic problems, not a consequence of China's exchange rate policy. Attributing such deep‑rooted structural weaknesses to an allegedly undervalued yuan amounts to little more than a convenient blame game.  

Moreover, attempting to resolve their current economic challenges with a decades‑old prescription lays bare a fundamental misreading of reality. It underestimates the intricacy of global supply chains and overestimates the efficacy of exchange‑rate manipulation.

If the West genuinely seeks a more balanced global trade system, a logical starting point should be to lift self-imposed export restrictions. The US and its allies maintain stringent export controls on semiconductors, advanced aerospace components, high-end machinery, and other sophisticated technologies. 

China, as the world's second largest importer, has enormous demand for high-tech products. But by blocking their own most competitive exports, Western governments artificially suppress their own sales while simultaneously complaining about the resulting trade deficits. This is contradictory and economically indefensible.

Notably, the call for a new Plaza Accord has triggered skepticism. Even the IMF is skeptical of a new Plaza Accord, arguing that lasting rebalancing requires Chinese households to spend more, the US to cut its massive budget deficit, and Europe to invest more.

China's position on its exchange rate formation has always been consistent and clear. The yuan's exchange rate is determined by market forces, based on the country's economic fundamentals. As of the end of 2025, the currency had strengthened past the 7 per dollar mark, driven by market dynamics. China has neither the need nor the intention to gain a competitive trade advantage through yuan depreciation. 

The People's Bank of China has consistently made clear its commitment to the market's decisive role in exchange rate formation, preserving exchange rate flexibility, and enhancing expectations management so as to keep the yuan basically stable at a reasonable and balanced level.

The composition of China's trade surplus has significantly shifted away from traditional labor-intensive goods toward high value-added products including semiconductors, new-energy vehicles and ships. This transformation is the product of a complete industrial system, consistent research and development investment, and the pressure of fierce domestic market competition. 

The competitiveness of Chinese companies has been built through decades of technological accumulation and industrial upgrading, not an undervalued currency. A surplus resulting from exporting high-value goods is precisely what every economy aspires to obtain. To frame this achievement as a currency "unfairness" is to misunderstand modern trade.

And, the world is not what it was in 1985. The yuan rate's trend will be shaped by China's economic fundamentals, regardless of external noise. Resorting to outdated hegemonic logic to force other economies to pay for their own governance failure is not only anachronistic but also self-defeating.



Global Times