Deutsche Bank: RMB Still Undervalued by About 15% Against the Euro
Claire Weston
Deutsche Bank says the renminbi has gained 6.2% against the euro this year, yet remains roughly 15% undervalued — a gap that means Europe-China trade imbalances are unlikely to self-correct through exchange rates alone.
Up 6.2% — so why is it still "undervalued"?
Deutsche Bank strategist Shreyas Gopal ran purchasing-power parity — a method that compares what the same basket of goods costs in two countries to gauge a currency's "fair" level — and external-balance models. Result: the renminbi is still ~15% cheap versus the euro.
This means → the gap has narrowed from 20% a year ago, but the currency is still well below where fundamentals say it should trade.
In plain terms = the renminbi is climbing, but it still has a long way to go before reaching fair value.
Why is Germany hit harder than the rest of the eurozone?
The report benchmarked the renminbi against a hypothetical Deutsche Mark rate and found the undervaluation is more pronounced versus the Mark than versus the euro.
This means → Germany, Europe's largest manufacturing exporter, faces a bigger currency-driven competitive disadvantage against China than the eurozone average.
This reflects an uneven impact within the bloc: the stronger a country's manufacturing base, the more it feels the squeeze from a cheap renminbi.
Will the renminbi keep rising?
The currency hit 7.7074 against the euro last month, its strongest since March 2025 — but still about 13% weaker than its 2022 peak of 6.7260.
The People's Bank of China recently set the USD/CNY fixing at its strongest since February 2023, signaling tolerance for gradual appreciation.
This means → Beijing is not actively holding the currency down, leaving room for further gains.
Can exchange rates fix the Europe-China trade friction?
Gopal is blunt: the competitive challenges Europe faces against China are unlikely to be fully resolved just by the exchange rate returning to fair value.
German Chancellor Friedrich Merz called on the same day for a currency dialogue with China, claiming the renminbi has been "undervalued by 25% for years."
In plain terms = a stronger renminbi is a painkiller, not a cure — structural issues like industrial policy, tariffs, and market access remain.
Content is for reference only, not financial advice.