The Chinese currency, artificially kept low by Beijing, is costing the German economy billions in growth every year, according to a new assessment by economists in Cologne.
A study by the German Economic Institute (IW), commissioned by the Federal Foreign Office, found that Germany’s price-adjusted gross domestic product (GDP) could be up to 0.3% higher in 2028 if the yuan were fairly valued.
This was calculated to amount to around €43 billion over the years 2026 to 2028, the authors said in a press release on Saturday.
For the simulation, the yuan was revalued by 40%, which the experts said reasonably corresponds to a fair valuation.
The institute concluded that Beijing does not allow a free exchange rate but instead operates a state-controlled currency management system – making Chinese exports cheaper and imports more expensive through deliberate yuan undervaluation.
This is one reason why German exports to China have fallen significantly in value, while imports of Chinese goods have risen sharply, the IW noted. The trade deficit with China grew to around €90 billion in 2025.
China would also benefit, according to the study, since a fair valuation of the yuan would also help China better balance its export-oriented economy.
While China’s GDP would initially decline due to the drop in exports, the simulation predicted a rapid rebound from increased domestic demand. Because exports become less attractive, more goods remain on the domestic market, driving prices down.
The IW experts noted that the increase in domestic demand could largely compensate for the reduced export surplus within a few years. By 2028, China’s economy would therefore almost reach the level of the initial scenario with an undervalued currency.