German Institute Urges 43% Yuan Rise or EU Duties Against China

1 articles · Updated · iwkoeln.de · Jun 19

A 43% yuan appreciation would lift 2028 real GDP by 0.2% to 0.3% in the euro area, Germany, France and the United States, while trimming China’s GDP by only about 0.2%, the IW simulation found.
IW said China’s currency is undervalued by 20% to 30%—implying a needed rise of 25% to 43%—and that Beijing’s dollar-linked exchange-rate management has amplified its current-account surplus and export price advantage.
More than 40% of the euro area’s industrial price gap versus China since January 2020 cannot be offset by efficiency gains alone, the report said, warning of added deindustrialisation pressure on Europe and Germany.
Germany and the EU should press China to rebalance through currency appreciation, lower industrial subsidies and stronger household-consumption support; if China resists, IW said Brussels should consider broad countervailing duties if distortions are proven.
The report framed China as the biggest source of worsening global imbalances, while also urging the United States to cut its fiscal deficit through higher revenues rather than tariffs and calling for Europe to keep boosting investment and competitiveness reforms.