Merz Calls for Exchange Rate Political Dialogue with China
Taylor Wilson
German Chancellor Merz declared again that the renminbi is undervalued by roughly 25%, urging Europe to open political-level currency talks with Beijing — a signal that EU-China trade friction is escalating from tariffs to exchange rates.
What exactly did Merz say?
Speaking at the University of Cologne on Monday, Merz said the renminbi has been undervalued by about 25% for years, giving Chinese exports an unfair edge.
He added that intensive discussions are already under way inside the European Council and stressed Europe must reduce its dependence on China.
This means → Currency valuation is no longer an academic debate; the leader of Europe's largest economy is treating it as a political agenda item.
Why invoke the Plaza Accord?
At last month's EU summit Merz cited the 1985 Plaza Accord — a coordinated intervention in which finance ministers from the US, Japan, Germany, France, and the UK pushed the dollar lower.
His exact words: "This is precisely what I now envisage." It was the second time he publicly linked the renminbi issue to a multilateral coordination framework.
In plain terms = Merz does not want one country pressuring China alone; he wants a coalition approach, modelled on how five nations jointly tackled the dollar forty years ago.
How has China responded?
Huang Yiping, a member of the PBOC's Monetary Policy Committee, told Bloomberg TV that the renminbi exchange rate is "on the whole" a result of market forces.
He suggested "looking at the issue from a broader perspective," while acknowledging that when outsiders examine China's trade surplus, "many people think the renminbi is undervalued."
This reflects a deliberate stance: reject the "undervalued" label, but concede the perception exists — leaving room for dialogue without conceding ground.
How large is the trade gap?
The EU's trade deficit with China now exceeds €360 billion (roughly $411 billion).
The European Commission has been asked to strengthen trade-defence tools while still seeking dialogue; all sides are working to avoid a direct confrontation.
This means → Europe's strategy is "talk with one hand, defend with the other" — keep the door open, but keep building the wall behind it.
What does this mean for markets?
Merz rarely singles out China by name, yet the renminbi has become a topic he returns to repeatedly.
Whether the EU and China can build a substantive dialogue mechanism on exchange rates will be a key marker for the trajectory of bilateral relations.
In plain terms = a "new Plaza Accord" is unlikely in the near term, but once currency becomes a political issue, the fallout won't stay in the FX market — trade policy, tariffs, and investment screening all move with it.
Content is for reference only, not financial advice.