European Central Bank President Christine Lagarde on Monday urged global leaders to address the undervaluation of the Chinese currency, framing it as a critical factor in the imbalances endangering the world economy. Her remarks came as the Group of Seven (G7) nations concluded a meeting in France last week, where chronic US deficits and Europe's economic challenges were also on the agenda.
China has consistently denied manipulating its currency for trade advantage. Yet its surging trade surpluses have become one of several macroeconomic mismatches worrying G7 leaders, according to sources familiar with the discussions. Lagarde's call signals a potential escalation in diplomatic pressure on Beijing over its exchange rate policies.
The European Central Bank chief did not provide specific estimates of yuan undervaluation or propose concrete measures. Instead, she emphasized the need for multilateral dialogue to correct the perceived imbalance. Her comments underscore growing unease among Western policymakers about the competitive edge China gains from a weaker currency.
Analysts suggest that any formal talks on the yuan could lead to demands for more transparency from China's central bank regarding its intervention in foreign exchange markets. The issue may also complicate trade negotiations between the European Union and China, which have been seeking to strengthen economic ties.
Critics argue that focusing on the yuan diverts attention from structural problems within G7 economies, such as low savings rates in the US or sluggish productivity growth in Europe. They contend that currency manipulation accusations often oversimplify complex global trade dynamics.