China Rejects Claims the Yuan Is Undervalued

How important is the exchange rate question when it comes to the European position? Yeah. Well, listen. It's one of the many things that we've heard criticism from Western powers on China in terms of the trade imbalance and general sort of economic structural imbalances. Obviously, the FX rate saying that basically the rate is artificially depressed in order to keep these Chinese exports competitive. But, you know, you add it to the list of intellectual property issues to trade barriers that exist in China to state subsidies that the EU and the Europe... And the Americans say, are illegal. But it's one that is gaining now some focus, now you have the PBOC coming out and effectively defending their position in this statement. And we've heard prominently from some voices within the European Union being particularly critical critical of the FX rate. Chancellor Merz comes to mind who says that the yuan is undervalued by about 25 to 30%, which is obviously monumental. We had a report from the IMF saying that last year, it was undervalued by 12 to 20%, which are obviously very, very sort of large figures. Of course, the PBOC says they don't really target the rate, that they don't have a sort of rate in mind for the long term trajectory of the yuan. But I like this statement in particular because I think it's particularly potentially stinging in this sort of veiled criticism, maybe not so veiled, of the Europeans that attributing one's decline in industrial competitiveness, weakened fiscal discipline, and complicated structural issues simply is to others' exchange rate is nothing but shifting the responsibility for adjustment onto others and dodging accountability that from the People's Bank of China. What is interesting is that potentially dodging that accountability, particularly in France, which has led to this meltdown in the bond market, has also led to a meltdown in the euro, has lost about 10% of its value, versus the yuan. So potentially some of the silver lining there for at least the exporters within the European Union to some of these issues in France. Well, indeed. Meanwhile, of course, we're watching for further developments out of these talks. The trade commissioner, Mark Cervetti, is there. He's been meeting with the Chinese commerce minister among others. What should we be expecting? We're gonna hear from Mark Cervetti later today. Yes. So the the idea here is to have some sort of great rebalancing with China from the European side. I doubt you're gonna get a wholesale sort of shift in PBOC FX policy. But what Marosef Gamal would like to achieve is to get better access to the Chinese market for European companies, potentially making it easier also for them to operate within China, but also dealing with this issue of imports from China, particularly in these critical sectors. Hybrid vehicles have been in focus over the last couple of weeks. So at 02:30 today, CET will get that press conference from the EU trade representative, and we'll begin to get an idea of whether or not there is any ball to play between the Europeans and the Chinese. That will kick the conversation into next week where we have this European council meeting here in Brussels and really expecting China to be at the top of the agenda there. The real question is if they're not willing to play ball, I think the Chinese are fairly comfortable with the hand that they hold versus the Europeans. Their response, generally speaking, to Europe has been very firm on these issues of trade, but it has been relatively measured. So we'll see if this is a sort of diplomatic way out of this.