China's Yuan Under Pressure as Trade Surplus Swells and Global Tensions Rise

China's massive trade surplus and ongoing currency devaluation have sparked concerns among traders. Commerzbank has pointed out that China's exchange-rate management and gold purchases are key factors in its weak-yuan bias, rather than just undervaluation.

The bank notes that despite the yuan's depreciation against the euro over the last few years, it still offers a significant advantage to Chinese exporters. The real exchange rate of the CNY fell around 10% on a trade-weighted basis and 22% against the euro between 2019 and 2025.

China's trade surplus has ballooned to $1.18 trillion by the end of last year, supported by its highly competitive exchange rate. The central bank is likely to maintain a weak currency to protect China's market share amidst rising global trade tensions.

Traders are advised to prepare for continued pressure on the yuan in the coming weeks. A recent uptick in exports and a resilient 7% year-on-year growth in August 2026 suggest that Beijing will continue to prioritize its currency advantage.