Goldman Sachs: RMB Undervalued by ~20%, Recommends Gradual Appreciation and Greater Fiscal Stimulus
Taylor Wilson
Goldman Sachs said on August 6 that the renminbi is undervalued by roughly 20%, urging China to let it appreciate gradually while ramping up fiscal spending — the core call is that export-led growth alone cannot hold, and domestic demand must pick up the slack.
What is Goldman's core call?
Economists Kamakshya Trivedi and Hui Shan argue China's economy is running on "two tracks": exports are strong, but domestic demand is weak.
This means → an export-only growth model is not sustainable; fiscal stimulus must fill the domestic-demand gap.
Their recommended policy mix: let the renminbi appreciate gradually + increase fiscal spending — both at the same time.
Undervalued by 20% — what does that number mean?
Goldman estimates the renminbi's nominal exchange rate is currently undervalued by about 20%.
In plain terms = by Goldman's model, the currency's "fair price" is roughly a fifth higher than where it trades today — meaning the current rate makes Chinese exports artificially cheap on global markets.
The report states explicitly: gradual appreciation would help ease protectionist pressure from trading partners and push toward external rebalancing.
How large is the trade surplus, and why does it matter?
China's trade surplus hit a record high last year, near $1.2 trillion; the June single-month surplus widened further to $126 billion.
Export resilience rests on two pillars: the global tech cycle and demand for renewable-energy products — both held up even against U.S. and other nations' protectionist measures.
This reflects a self-reinforcing dynamic: the larger the surplus, the stronger the backlash from trading partners — which is exactly why Goldman argues for proactive appreciation to buy goodwill.
What has Beijing signaled? Can Goldman's recommendation actually land?
After the Politburo meeting last week, Beijing called for "promoting more balanced trade development" — a direction consistent with Goldman's advice.
Whether that translates into action, and at what pace, remains the market's central variable.
This means → directional consensus exists, but the speed and scale behind the word "gradual" are what will ultimately drive the market reaction.
Content is for reference only, not financial advice.