Why does Goldman Sachs say the yuan is undervalued?

Goldman Sachs uses models based on China's economic fundamentals, like current account balance and growth, to determine the yuan's optimal exchange rate.

When does Goldman Sachs expect the yuan to appreciate?

Goldman Sachs forecasts significant yuan appreciation, expecting it to surpass current pricing for 2026.

What does 'undervalued' mean for the Chinese yuan?

An undervalued yuan means its current exchange rate is lower than what's needed to maintain China's economic stability and growth according to analytical models.

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Goldman Sachs: Yuan 25% Undervalued

11 Dec

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Summary

Goldman Sachs believes the yuan is significantly undervalued.
The bank projects the yuan will appreciate more than expected.
Undervaluation is based on models for economic fundamentals.

Goldman Sachs Group Inc. has declared the Chinese yuan to be 25% undervalued, positioning it as a high-conviction trade. The prominent investment bank's assessment stems from sophisticated models that evaluate the exchange rate necessary to sustain China's economic health.

These models consider key factors such as a stable current-account balance and consistent economic growth accompanied by stable price levels. Based on this comprehensive analysis, Goldman Sachs forecasts that the yuan's future appreciation will surpass what current forward contracts are indicating for the year 2026.

The bank's strong stance highlights a significant divergence from current market pricing, suggesting a substantial opportunity for investors anticipating a strengthening Chinese currency. This outlook implies potential shifts in currency markets and global trade dynamics.