Goldman Sachs: RMB Undervalued by 20%-25%, Appreciation Potential Severely Underestimated by the Market
nashnova research
Goldman's FX strategy head Kamakshya Trivedi estimates the renminbi is 20%-25% undervalued — a gap he calls 'conservative' — with a one-year target of 6.40 and a fair-value model pointing toward the low-6 range.
How undervalued is the renminbi, exactly?
Goldman's global head of FX, rates and EM strategy, Kamakshya Trivedi, puts the figure at 20%-25% — and calls that estimate "conservative."
This means → in a currency market that turns over roughly $9.5 trillion a day, Goldman sees the renminbi as one of the most mispriced assets on the board.
In plain terms = Goldman thinks the market's "price tag" on the renminbi is discounted by a fifth to a quarter relative to what China's economy and trade flows justify.
What does Goldman's target price imply?
Goldman forecasts the renminbi will strengthen from about 6.69 to 6.40 per dollar within a year. Its fair-value model points further — toward the low-6 range.
The last time the renminbi traded near 6 was early 2014, driven by a wave of hot-money inflows. This means → if the model plays out, the currency returns to a decade-old peak, but this time the engine is the trade surplus, not speculative capital.
The hard number behind the call: China's trade surplus hit $805.5 billion in the first eight months of this year, providing fundamental support for continued appreciation.
Why is Beijing starting to tolerate a stronger currency?
Trivedi argues that China's tolerance for renminbi appreciation is rising because maintaining stable trade relationships has moved up the priority list.
A concrete signal: China recently struck a deal with the EU on hybrid-vehicle exports, defusing broader trade friction — even as the renminbi has already gained more than 8% against the euro this year.
This reflects a deeper shift in China's export mix — exports are increasingly driven by cutting-edge technology and advanced manufacturing, which makes Beijing less resistant to a stronger currency. Put simply = the higher-end the goods you sell, the less a pricier currency hurts.
How do appreciation and renminbi internationalization reinforce each other?
Trivedi notes that gradual appreciation aligns with Beijing's strategic push to internationalize the renminbi — President Xi Jinping has pledged to build it into a global reserve currency widely used in trade, investment and FX markets.
This means → a currency on a sustained upward path is inherently more attractive to other countries as a settlement and reserve tool. Appreciation itself is an "advertisement" for internationalization.
At the same time, a stronger renminbi makes the dollar-denominated return on Chinese assets more appealing, potentially drawing in more foreign capital and reinforcing the appreciation trend.
Why does the market consensus keep falling behind?
Trivedi's own words: "Every time we revise our forecast higher, I'm surprised by how much the consensus and the forwards market still haven't caught up."
The renminbi has already hit a four-year high against the dollar — one of the few currencies still appreciating even as the dollar rebounds on geopolitical tension and sticky inflation.
This reflects pricing inertia: most traders still frame the renminbi through old lenses — hot-money driven, policy-suppressed — while Goldman's call rests on two newer variables: the trade surplus and the policy pivot. If the consensus stays behind, whether FX gains on renminbi assets get fully priced in becomes the key test for the next phase.
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