Volkmar Baur, a prominent economist at Commerzbank, has issued a significant challenge to recent internal analyses concerning the undervaluation of the Chinese Yuan (CNY) and its impact on global exports. Baur contends that China’s exchange-rate management strategies, potentially including its substantial gold purchases, suggest a deliberate policy aimed at weakening the national currency. He highlights China’s extraordinary gains in export volumes and its burgeoning trade surplus since 2019, asserting that a real exchange-rate advantage of approximately 20% cannot be considered neutral in shaping global trade flows. This perspective reignites long-standing debates about currency manipulation and fair competition in international commerce, positioning China’s economic policies at the forefront of global economic scrutiny.
Commerzbank’s Analysis: Challenging the Status Quo on CNY Valuation
Baur’s intervention comes at a time when global trade dynamics are increasingly complex, marked by geopolitical tensions, shifting supply chains, and uneven post-pandemic recoveries. His core argument deviates from interpretations that might attribute the CNY’s weakness solely to market forces or economic fundamentals. Instead, Baur points to the strategic actions of Chinese authorities as a key driver. While the specific mechanisms of "exchange-rate management" leading to deliberate weakening are multifaceted, they typically involve interventions by the People’s Bank of China (PBOC) in currency markets, either directly buying foreign currency to suppress the CNY or implementing policies that encourage capital outflows or discourage inflows, thereby increasing the supply of CNY relative to demand.
The mention of gold purchases in this context is particularly noteworthy. While central banks acquire gold for various reasons, including diversification of foreign exchange reserves and hedging against inflation or geopolitical risk, an aggressive accumulation of gold could be interpreted as a strategic move to reduce reliance on U.S. dollar assets. If these gold purchases involve selling other foreign currency assets (like USD) and simultaneously managing the domestic currency’s value, they could indirectly contribute to or align with a broader strategy of maintaining a weaker CNY. Baur’s analysis suggests a more coordinated and intentional approach to currency valuation than commonly acknowledged in some economic circles.
China’s Unprecedented Export Dominance and Trade Surplus Growth
The most compelling evidence presented by Baur hinges on China’s remarkable performance in international trade over the past half-decade. According to his findings, China’s real exports surged by an astounding 47% between 2019 and the end of 2025. This expansion dwarfs the global trade growth of only 15% over the identical period, indicating a significant capture of market share by Chinese goods and services across the world. Such a discrepancy strongly implies that China is outcompeting other nations in export markets, a phenomenon that Baur links directly to its currency advantage.
The financial manifestation of this export prowess is equally striking. China’s trade surplus, a key indicator of its net earnings from international trade, escalated dramatically from approximately USD 400 billion in 2019 to an estimated USD 1,180 billion by 2025. This near-tripling of the trade surplus within a span of six years underscores the immense scale of China’s export-driven economic model. Such a massive accumulation of foreign exchange reserves, primarily in U.S. dollars, provides the PBOC with substantial firepower for currency market interventions, further reinforcing Baur’s argument about deliberate management.
When focusing specifically on manufactured goods, China’s dominance becomes even more pronounced. In 2025, its trade surplus in manufactured products alone is projected to reach 1.75% of global gross domestic product (GDP). To put this figure into historical perspective, Baur points out that even the combined peaks of Germany and Japan – two of the world’s most formidable export powerhouses in their respective heydays – did not collectively achieve such a high percentage relative to global GDP. This comparison highlights the unprecedented scale of China’s manufacturing export engine and its potential to reshape global industrial landscapes and trade balances.
The Exchange Rate Conundrum: CNY Depreciation in Context
A central pillar of Baur’s argument is the observed depreciation of the CNY’s real exchange rate. Between 2019 and 2025, the CNY depreciated by approximately 10% on a trade-weighted basis. This means that, when adjusted for inflation and weighted against the currencies of its major trading partners, the CNY became cheaper, making Chinese exports more competitive. The depreciation was even more pronounced against specific currencies, notably the Euro, where the CNY weakened by as much as 22% over the same period.
The real exchange rate is a critical metric because it reflects the relative price of goods and services between two countries, accounting for both nominal exchange rates and inflation. A depreciation in the real exchange rate makes a country’s exports cheaper and imports more expensive, thereby boosting its trade balance. Baur contrasts this trajectory with the experiences of the German D-Mark and the Japanese Yen (JPY) in the late 1980s. During that era, both the D-Mark and the JPY appreciated sharply against the U.S. dollar, reflecting their strong economic fundamentals and, in part, international pressure to reduce their own trade surpluses. The CNY’s inverse trajectory in recent years, despite China’s robust export performance, fuels the contention of deliberate management.
While Baur acknowledges that not every aspect of China’s export success can be attributed solely to an undervalued CNY – recognizing that economic outcomes are rarely monocausal – he firmly asserts the undeniable impact of price signals. He concedes that China has indeed pioneered and developed global export markets for certain product groups where none existed before, showcasing its innovation and industrial capabilities. However, as an economist, Baur finds it "difficult to argue that a 20% price difference has no effect on supply and demand." This statement underscores a fundamental principle of economics: price competitiveness is a powerful determinant of market share, and a substantial currency advantage provides a significant pricing edge for exporters.
Background Context: A History of Currency Debates and Trade Tensions
The debate over the CNY’s valuation is not new. For decades, particularly in the 2000s and early 2010s, the United States and European Union consistently accused China of deliberately undervaluing its currency to gain an unfair trade advantage. At that time, China maintained a tightly managed peg to the U.S. dollar, and its large trade surpluses fueled calls for a more flexible and market-determined exchange rate. Critics argued that the undervalued CNY distorted global trade, led to job losses in manufacturing sectors in developed economies, and contributed to massive global imbalances.
Following pressure, China gradually allowed the CNY to appreciate, and in 2005, it officially moved to a "managed floating exchange rate" system. However, the PBOC has retained significant control, guiding the CNY within a daily trading band against a basket of currencies. The period around 2015 saw a shift in concerns, as fears of a sharper devaluation and capital outflows emerged, prompting the PBOC to intervene to support the CNY.
The current context, however, brings new dimensions to the debate. The "since 2019" timeline highlighted by Baur coincides with a period of intense global upheaval: the U.S.-China trade war, the COVID-19 pandemic and its disruption of global supply chains, and subsequent uneven economic recoveries. During the pandemic, China’s early recovery and robust manufacturing capacity allowed it to become the "world’s factory" for essential goods, further bolstering its export machine. As global demand rebounded, China maintained its competitive edge, capitalizing on its resilient supply chains and industrial scale. Against this backdrop, Baur’s analysis suggests that strategic currency management has been a consistent, if sometimes understated, factor in China’s remarkable trade performance.
Reactions and Broader Implications
While Commerzbank’s Volkmar Baur has articulated a strong case, official reactions from Beijing are likely to adhere to established positions. China consistently maintains that its currency is largely market-determined, influenced by economic fundamentals and supply and demand dynamics, and that it refrains from competitive devaluation. Chinese officials often emphasize the nation’s productivity gains, its comprehensive industrial base, and its capacity for innovation as the true drivers of its export success, rather than an artificially weakened currency. They might also point to domestic policy priorities, such as managing inflation or ensuring financial stability, as guiding principles for currency management.
However, Baur’s findings will likely resonate strongly with policymakers in the United States and the European Union, who have increasingly voiced concerns about what they perceive as unfair trade practices by China. The U.S. Treasury Department regularly monitors currency practices of major trading partners, and a finding of "currency manipulation" can trigger various retaliatory measures. The European Union has also grown more assertive in its trade policy with China, launching anti-dumping investigations and expressing concerns about market access and industrial subsidies. Baur’s analysis provides additional ammunition for those advocating for a more level playing field in global trade and could fuel calls for increased scrutiny of China’s currency policies by international bodies like the International Monetary Fund (IMF) and the World Trade Organization (WTO).
The implications of a sustained, deliberately weakened CNY are far-reaching. Economically, it can lead to significant global trade imbalances, harming manufacturing sectors in other countries that struggle to compete with cheaper Chinese imports. This can result in job losses, reduced investment in domestic industries, and pressure on wages in affected sectors. Geopolitically, currency disputes can escalate trade tensions into broader economic conflicts, exacerbating already strained international relations. A perceived currency manipulation can be seen as a "beggar-thy-neighbor" policy, where one country seeks to boost its own economy at the expense of others, potentially triggering retaliatory tariffs or other protectionist measures.
Monetarily, a weaker CNY can influence global inflation dynamics. Cheaper Chinese goods can exert downward pressure on global prices, which might be welcomed by some central banks grappling with inflation, but could also complicate efforts to achieve domestic inflation targets in other economies. Moreover, the massive accumulation of foreign exchange reserves by China, largely in U.S. dollars, has implications for global financial stability and the international monetary system.
In conclusion, Volkmar Baur’s analysis from Commerzbank marks a significant contribution to the ongoing debate about China’s role in the global economy. By directly challenging conventional interpretations and presenting robust data on China’s export dominance and the CNY’s real exchange rate depreciation, Baur underscores the economic weight of a 20% price advantage. While the multifaceted nature of global trade means that no single factor dictates outcomes, his argument that China’s exchange-rate management constitutes a deliberate weakening strategy provides a potent framework for understanding the unprecedented scale of its trade surplus and market share gains. This perspective is likely to intensify calls for greater transparency and fairness in international trade relations, ensuring that the critical issue of currency valuation remains at the forefront of global economic discourse.
