The valuation of China’s yuan remains a topic of intense debate, especially as it continues to exhibit strong nominal levels against the U.S. dollar. Despite substantial trade surpluses, the broader economic landscape reveals that outflows and low inflation contribute to its argued undervaluation. In 2021, China’s official current account surplus was $735 billion, while the trade surplus hit a record $1.2 trillion. These figures spotlight China’s global financial footprint, yet the trend of large capital outflows, partly spurred by a weakening domestic economy, presents a more complex picture of the yuan’s valuation. With combined net capital outflows of $2.85 trillion…
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