China’s yuan fuelling trade deficit in Europe: study

European companies are facing increasing pressure due to China’s alleged currency manipulation to keep its yuan weak, a study by the German Economic Institute showed, as EU leaders prepared for a summit in Beijing aimed at navigating trade disputes.

- REINHARD BECKER SARAH MARSH

The yuan-euro exchange rate has remained stable in recent years despite significant shifts in cost relations between Europe and China, suggesting likely currency manipulation by the central bank, said Juergen Matthes, author of the study by the Institute (IW), which was seen by Reuters.

Extremely low prices mean more European companies are sourcing intermediate goods from China, contributing to deindustrialisation on the continent, he said, urging the EU to take action.

“The artificially low costs in China, driven by yuan undervaluation, are simply too attractive,’ Mr Matthes said.

Those companies that did not source their intermediate goods from China would lose market share to rivals who “fully exploit China's price advantages”

The Chinese central bank did not immediately respond to a request for comment.