Germany Advocates Plaza‑Accord‑Style Negotiations to Counter Undervalued Yuan

German Chancellor Friedrich Merz signaled a significant shift in Berlin’s economic stance toward Beijing on Friday, asserting that the Chinese currency is undervalued by roughly 30%, a figure that exceeds the International Monetary Fund’s assessment of “about 16%.”

Speaking in Brussels following a European Council summit, Merz accused China of “flooding markets” through extensive subsidies, warning that “subsidising overcapacity” together with a “currency that is not freely convertible … is unacceptable.”

Merz’s remarks represent some of his most forceful statements on Beijing since assuming the chancellorship a year ago, highlighting one of the central issues driving the discussion on industrial overcapacity.

In Europe, the yuan’s exchange rate against the euro is widely regarded as a key factor behind the surge in Chinese exports, as it renders Chinese goods more affordable to foreign buyers.

Consequently, this has contributed to a widening trade deficit, a development that has alarmed European leaders, who fear for the viability of domestic manufacturers.

Merz referenced the Plaza Accords as a model for how such issues might be tackled.

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