Economy June 22, 2026 01:48 PM

Lagarde Calls for Global Talks on Yuan Undervaluation Amid Imbalances

ECB chief points to IMF findings and urges G7 and wider discussion while rejecting a 1980s-style accord

By Sofia Navarro
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European Central Bank President Christine Lagarde urged world leaders to address what she described as currency-related imbalances centered on the Chinese renminbi, citing International Monetary Fund analysis that points to a 15-16% undervaluation. She linked the currency issue to broader global mismatches flagged by G7 leaders and dismissed the idea of recreating a Plaza Accord-style intervention.

Lagarde Calls for Global Talks on Yuan Undervaluation Amid Imbalances
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Key Points

  • Lagarde cited IMF research estimating the renminbi to be 15-16% undervalued once adjusted for international inflation differences - this speaks to currency valuation concerns.
  • G7 leaders, who met last week in France, raised multiple macroeconomic mismatches including China’s surging trade surpluses, chronic U.S. deficits, and Europe’s underinvestment - these issues were highlighted as interconnected.
  • Europe’s competitiveness in sectors it previously dominated, such as high-end automobiles, is under pressure and partly attributed to cheaper Chinese goods - an economic sector impact noted by Lagarde.

FRANKFURT, June 22 - European Central Bank President Christine Lagarde on Monday urged global leaders to take up the question of Chinese currency undervaluation as part of a wider conversation on macroeconomic imbalances that she warned threaten the global economy.

Lagarde said the Chinese currency, the renminbi, has been identified in International Monetary Fund research as being roughly 15-16% undervalued once the nominal exchange rate is adjusted for international differences in inflation. She presented that finding as one element in a set of distortions weighing on international trade and growth.

"That’s the situation as it is, which justifies completely the fact that there has been, and I hope there will be, further discussions of excessive imbalances, which include a currency aspect to it, between the G7 leaders and beyond," Lagarde said at an event in Brussels.

Leaders of the Group of Seven met last week in France and, according to Lagarde, expressed concern about a range of macroeconomic mismatches. Alongside the Chinese trade surpluses that have risen sharply, the G7 discussion also highlighted persistent U.S. deficits and what Lagarde described as underinvestment within Europe.

Lagarde noted that Europe has found it increasingly difficult to compete with China in areas it once led, citing high-end automobiles as one example. She linked that competitive pressure in part to the lower prices of some Chinese-made goods.

While urging further dialogue on imbalances that have a currency component, Lagarde explicitly rejected the idea of reviving a 1980s-style, coordinated effort to alter exchange rates. On the prospect of a new Plaza Accord - the 1985 international agreement aimed at weakening the dollar - she said the circumstances underpinning that deal were different.

"Times were different," she added, pushing back on proposals for a similar intervention today.


Lagarde's comments framed currency valuation as one of several interconnected pressures shaping international economic relations. By citing IMF analysis and the recent G7 discussions, she signaled a push for multilateral talks that would address trade balances, fiscal positions and investment gaps together rather than in isolation.

Observers will be watching whether the call for deeper discussion at the G7 level and beyond translates into concrete policy coordination or remains a diplomatic appeal aimed at drawing attention to structural imbalances.

Risks

  • Unaddressed currency and trade imbalances could exacerbate strains on the global economy - this risk affects international trade and manufacturing sectors.
  • Continued underinvestment in Europe may hinder its ability to compete with lower-cost Chinese producers in key industries such as high-end cars - a risk to European manufacturing and export performance.
  • Persistent U.S. deficits alongside large Chinese surpluses contribute to macroeconomic mismatches that may complicate policy coordination among major economies - impacting global financial and currency markets.

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