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Yahoo
23-07-2025
- Business
- Yahoo
China's yuan undervaluation fuels euro zone trade deficit, German study shows
By Reinhard Becker and Sarah Marsh BERLIN (Reuters) -European companies are facing increasing pressure due to China's alleged currency manipulation to keep its yuan weak, a study by the German Economic Institute showed, as EU leaders prepared for a summit in Beijing aimed at navigating trade disputes. The yuan-euro exchange rate has remained stable in recent years despite significant shifts in cost relations between Europe and China, suggesting likely currency manipulation by the central bank, said Juergen Matthes, author of the study by the Institute (IW), which was seen by Reuters. Extremely low prices mean more European companies are sourcing intermediate goods from China, contributing to deindustrialisation on the continent, he said, urging the EU to take action. "The artificially low costs in China, driven by yuan undervaluation, are simply too attractive," Matthes said. Those companies that did not source their intermediate goods from China would lose market share to rivals who "fully exploit China's price advantages." The Chinese central bank did not immediately respond to a request for comment. EU leaders arrive in Beijing on Thursday for a top-level summit with China as both sides seek to navigate trade disputes amid broader global trade uncertainties. In response to allegations of currency manipulation, China has in the past said it was committed to implementing a managed floating exchange rate regime, based on market supply and demand. UNDER PRESSURE The study comes as European companies are under pressure from a surge in Chinese exports diverted from the United States and an appreciation of the euro against the dollar due to U.S. President Donald Trump's trade policies, economists say. Producer prices in Germany and the euro zone have surged since 2020 due to supply chain disruptions and the energy crisis, whereas prices in China have hardly increased. Yet, the exchange rate has barely moved, leading to a real appreciation of the euro against the yuan of over 40% between early 2020 and spring 2025, and deepening the euro zone trade deficit with China, the study shows. Normally, higher import purchases from the euro zone would boost the yuan as it drives up demand for the currency, but that has not been the case, said Matthes. President Trump labeled China a currency manipulator during his first term. The Treasury Department then dropped the designation in January 2020 as Chinese officials arrived in Washington to sign a trade deal with the U.S. Last month, the U.S. simply issued a stern warning to China, saying it stood out among key trading partners "in its lack of transparency around its exchange rate policies and practices." China said it upheld "multilateralism and respects multilateral consensus," was committed to keeping the renminbi exchange rate stable, and would not "engage in competitive currency devaluation." Matthes, however, said the Chinese central bank's behavior was "highly non-transparent." When adjusting the yuan exchange rate, which is only allowed to fluctuate within a narrow band, the dollar relationship plays a central role, as does a currency basket, he said. "But how this is done, exactly, no one outside China knows,' he said, and the euro is "collateral damage."
Reuters
23-07-2025
- Business
- Reuters
China's yuan undervaluation fuels euro zone trade deficit, German study shows
BERLIN, July 23 (Reuters) - European companies are facing increasing pressure due to China's alleged currency manipulation to keep its yuan weak, a study by the German Economic Institute showed, as EU leaders prepared for a summit in Beijing aimed at navigating trade disputes. The yuan-euro exchange rate has remained stable in recent years despite significant shifts in cost relations between Europe and China, suggesting likely currency manipulation by the central bank, said Juergen Matthes, author of the study by the Institute (IW), which was seen by Reuters. Extremely low prices mean more European companies are sourcing intermediate goods from China, contributing to deindustrialisation on the continent, he said, urging the EU to take action. "The artificially low costs in China, driven by yuan undervaluation, are simply too attractive," Matthes said. Those companies that did not source their intermediate goods from China would lose market share to rivals who "fully exploit China's price advantages." The Chinese central bank did not immediately respond to a request for comment. EU leaders arrive in Beijing on Thursday for a top-level summit with China as both sides seek to navigate trade disputes amid broader global trade uncertainties. In response to allegations of currency manipulation, China has in the past said it was committed to implementing a managed floating exchange rate regime, based on market supply and demand. The study comes as European companies are under pressure from a surge in Chinese exports diverted from the United States and an appreciation of the euro against the dollar due to U.S. President Donald Trump's trade policies, economists say. Producer prices in Germany and the euro zone have surged since 2020 due to supply chain disruptions and the energy crisis, whereas prices in China have hardly increased. Yet, the exchange rate has barely moved, leading to a real appreciation of the euro against the yuan of over 40% between early 2020 and spring 2025, and deepening the euro zone trade deficit with China, the study shows. Normally, higher import purchases from the euro zone would boost the yuan as it drives up demand for the currency, but that has not been the case, said Matthes. President Trump labeled China a currency manipulator during his first term. The Treasury Department then dropped the designation in January 2020 as Chinese officials arrived in Washington to sign a trade deal with the U.S. Last month, the U.S. simply issued a stern warning to China, saying it stood out among key trading partners "in its lack of transparency around its exchange rate policies and practices." China said it upheld "multilateralism and respects multilateral consensus," was committed to keeping the renminbi exchange rate stable, and would not "engage in competitive currency devaluation." Matthes, however, said the Chinese central bank's behavior was "highly non-transparent." When adjusting the yuan exchange rate, which is only allowed to fluctuate within a narrow band, the dollar relationship plays a central role, as does a currency basket, he said. "But how this is done, exactly, no one outside China knows,' he said, and the euro is "collateral damage."
Yahoo
23-07-2025
- Business
- Yahoo
China's yuan undervaluation fuels euro zone trade deficit, German study shows
By Reinhard Becker and Sarah Marsh BERLIN (Reuters) -European companies are facing increasing pressure due to China's alleged currency manipulation to keep its yuan weak, a study by the German Economic Institute showed, as EU leaders prepared for a summit in Beijing aimed at navigating trade disputes. The yuan-euro exchange rate has remained stable in recent years despite significant shifts in cost relations between Europe and China, suggesting likely currency manipulation by the central bank, said Juergen Matthes, author of the study by the Institute (IW), which was seen by Reuters. Extremely low prices mean more European companies are sourcing intermediate goods from China, contributing to deindustrialisation on the continent, he said, urging the EU to take action. "The artificially low costs in China, driven by yuan undervaluation, are simply too attractive," Matthes said. Those companies that did not source their intermediate goods from China would lose market share to rivals who "fully exploit China's price advantages." The Chinese central bank did not immediately respond to a request for comment. EU leaders arrive in Beijing on Thursday for a top-level summit with China as both sides seek to navigate trade disputes amid broader global trade uncertainties. In response to allegations of currency manipulation, China has in the past said it was committed to implementing a managed floating exchange rate regime, based on market supply and demand. UNDER PRESSURE The study comes as European companies are under pressure from a surge in Chinese exports diverted from the United States and an appreciation of the euro against the dollar due to U.S. President Donald Trump's trade policies, economists say. Producer prices in Germany and the euro zone have surged since 2020 due to supply chain disruptions and the energy crisis, whereas prices in China have hardly increased. Yet, the exchange rate has barely moved, leading to a real appreciation of the euro against the yuan of over 40% between early 2020 and spring 2025, and deepening the euro zone trade deficit with China, the study shows. Normally, higher import purchases from the euro zone would boost the yuan as it drives up demand for the currency, but that has not been the case, said Matthes. President Trump labeled China a currency manipulator during his first term. The Treasury Department then dropped the designation in January 2020 as Chinese officials arrived in Washington to sign a trade deal with the U.S. Last month, the U.S. simply issued a stern warning to China, saying it stood out among key trading partners "in its lack of transparency around its exchange rate policies and practices." China said it upheld "multilateralism and respects multilateral consensus," was committed to keeping the renminbi exchange rate stable, and would not "engage in competitive currency devaluation." Matthes, however, said the Chinese central bank's behavior was "highly non-transparent." When adjusting the yuan exchange rate, which is only allowed to fluctuate within a narrow band, the dollar relationship plays a central role, as does a currency basket, he said. "But how this is done, exactly, no one outside China knows,' he said, and the euro is "collateral damage." Sign in to access your portfolio
Russia Today
15-06-2025
- Business
- Russia Today
Russian exports surge despite Western sanctions
Russia's exports have grown considerably, compared to figures recorded prior to the escalation of the Ukraine conflict and despite sweeping Western sanctions, the German Economic Institute has reported. Back in 2022, the US, the EU, the UK, Canada, Japan and several other nations imposed massive sanctions on Russia, targeting its financial institutions, trade, and energy exports. Moscow has consistently described the punitive measures as illegitimate and counterproductive. In a report published on Friday, the German Economic Institute stated that 'despite all European efforts, [Russian President Vladimir] Putin's war chest is not emptying.' The document suggested that Moscow is 'skillfully exploiting the loopholes in the sanctions regime to expand its financial resources.' This is evidenced by an 18% increase in Russia's exports to its top 20 trade partners last year, compared to 2021, the Institute's experts wrote, estimating that the growth translated to 330 billion dollars' worth of goods. 'The preliminary data for 2025 also shows that little has changed in this regard,' the report noted. According to the analysis, China, India, Türkiye and Brazil are the main importers of Russian goods, consisting mainly of oil, gas, and other raw materials. Moscow has shifted its trade focus to the Global South, but according to the report, Hungary and Slovakia remain among 'Russia's most important trading partners' in the EU. US Senator Lindsey Graham has been spearheading a bill calling for 500% secondary tariffs on imports from countries buying Russian oil and gas. Analysts at the German Economic Institute doubt US President Donald Trump will back the measure. The report also questions whether such tariffs are even technically feasible. On Wednesday, US Treasury Secretary Scott Bessent warned lawmakers that the imposition of such high tariffs could undermine ongoing diplomatic efforts to resolve the Ukraine conflict. Speaking late last month at a meeting with business leaders, Russian President Putin hailed the country's impressive economic performance across an array of sectors, despite operating in what he described as 'far from favorable and rather difficult conditions.' The official also cited the International Monetary Fund's ratings, according to which, Russia is in fourth place globally by purchasing power parity (PPP). The macroeconomic analysis metric compares economic productivity and living standards between countries by adjusting for differences in the cost of goods and services.
Yahoo
27-05-2025
- Business
- Yahoo
Largest German union drops four-day week demands amid economic slump
Germany's largest trade union is dropping demands for a four-day week due to the country's economic struggles. "A four-day week with full wages is not currently on the union's list of demands," said Christiane Benner, chairwoman of IG Metall, on Tuesday. Benner told the Bild tabloid that the policy remains sensible. However, due to Germany's languishing economy, workers are currently facing a reduction in working hours due to employers' cost-cutting measures, she argued. Many German businesses oppose proposals to introduce a four-day week with full pay. In a March survey by the pro-business German Economic Institute, 94% of 823 companies survey said the move would hurt value creation. In addition, almost 70% said they believed that work would go undone and that Germany would be left behind compared to international competitors. IG Metall has emphasized that German companies must take responsibility to ensure their business models are viable in the future, to invest and to secure jobs. "We recognize the seriousness of the situation. But we also see that many companies lack strategies for the future and are not making the necessary investments," Benner said. Germany's economy - Europe's largest - has been in recession for two consecutive years, and experts expect the struggles to continue in 2025.
