Europe wants a new Plaza Accord for China – seriously?

Lead

German Chancellor Friedrich Merz has called attention to what he describes as a significantly undervalued Chinese currency and the use of subsidies that he says enable excess production and exports into Europe. Speaking in Brussels after a European Council summit, Merz stated that the yuan is undervalued by 30 percent and that China is “flooding markets” through high subsidies and the subsidising of overcapacities, practices he called “not acceptable.” He pointed to the 1980s Plaza Accord as a historical reference for how currency and trade imbalances might be addressed among major economies.

According to reporting in the South China Morning Post, Merz’s comments represent some of his most direct public remarks on Beijing’s economic practices since he became chancellor. European officials have linked the yuan’s exchange rate against the euro to a rise in Chinese shipments that makes goods cheaper for overseas buyers and widens Europe’s trade deficit. The International Monetary Fund has estimated the undervaluation of the Chinese currency at about 16 percent, a figure lower than the assessment offered by the German chancellor.

These statements arrived against the backdrop of a G7 gathering in France that did not produce a public agreement specifically naming or coordinating a response to Chinese industrial overcapacity and currency issues. Summit language instead emphasized cooperation on critical minerals and support for balanced growth while avoiding direct reference to China, according to the same outlet.

Coverage Comparison

Coverage from the South China Morning Post has approached the story from two related angles. One account centers on Merz’s Brussels remarks, emphasizing his estimate of a 30 percent undervaluation, the contrast with the IMF’s roughly 16 percent figure, and his criticism of subsidies and non-convertible currency features. That reporting frames the comments as a shift in Berlin’s economic posture toward Beijing and ties the yuan-euro rate to rising Chinese exports and European trade deficits that place local manufacturers under pressure.

A second account places the chancellor’s statements in the wider context of the recent G7 summit. It notes that leaders entered the meeting amid expectations of a more unified stance on what some describe as a second wave of Chinese export pressure, yet emerged without a named joint plan. The reporting highlights China’s overall trade surplus of US$1.19 trillion last year and a 17.3 percent year-on-year increase in shipments to Germany in the first five months of 2026, while imports from Germany rose only 1.5 percent according to Chinese customs data. It also records Merz’s support for a tougher European Union approach and his accusation that China is dumping goods linked to overcapacity.

Both accounts rely on the same core set of public statements and trade statistics. Differences appear mainly in emphasis: one foregrounds the currency valuation gap and the Plaza Accord reference, while the other stresses the absence of a collective G7 declaration and the scale of bilateral trade flows. Neither presents contradictory numerical claims on the surplus, the German shipment growth, or the IMF estimate. Attribution remains consistent in identifying Merz as the source of the 30 percent figure and the subsidy criticisms, and the IMF as the source of the lower undervaluation range.

Key Claims

• German Chancellor Friedrich Merz stated that the Chinese currency is undervalued by 30 percent, a claim reported across the available accounts.
• The International Monetary Fund estimates the undervaluation of the Chinese currency at about 16 percent, a figure cited in multiple reports and contrasted with Merz’s higher number.
• Merz accused China of flooding markets through high subsidies and of subsidising overcapacities, language carried in the coverage of his Brussels remarks.
• China’s trade surplus reached US$1.19 trillion last year, according to figures presented in one of the South China Morning Post accounts.
• Shipments from China to Germany increased by 17.3 percent year on year in the first five months of 2026, while imports from Germany rose 1.5 percent per Chinese customs data, as reported in the same outlet.
• The G7 nations did not reach a public agreement specifically addressing China’s economic practices, with summit statements instead referring to global imbalances and critical-minerals cooperation without naming China.
• The yuan’s rate against the euro is described in European discussions as contributing to a surge in Chinese shipments and to Europe’s trade deficit, according to the reporting on Merz’s comments.

Perspectives

From the German and broader European vantage point reflected in Merz’s statements, the combination of an undervalued currency, industrial subsidies, and resulting overcapacity is viewed as creating unsustainable competitive pressure on domestic manufacturers. The chancellor’s reference to the Plaza Accord suggests an interest in coordinated international action that could adjust exchange-rate relationships and curb what European leaders see as market distortions. Trade data showing a large Chinese surplus and rapid growth in exports to Germany are presented as evidence supporting calls for a firmer EU stance.

A more cautious reading, also present in the coverage, notes that the G7 did not coalesce around an explicit joint plan. Summit language remained general, focusing on supply-chain resilience and balanced growth rather than naming China or endorsing specific currency or subsidy remedies. This outcome is attributed in part to competing geopolitical distractions and differing national priorities among the participants. The same reporting observes that earlier unilateral efforts by the United States to reverse previous waves of Chinese export growth produced limited lasting change, raising questions about the practical leverage available to a more fragmented European or G7 response.

Chinese perspectives are not directly quoted in the provided material, but the statistical claims themselves—the size of the trade surplus and the shipment growth figures—originate from or are consistent with Chinese customs reporting. The divergence between Merz’s 30 percent undervaluation figure and the IMF’s approximately 16 percent estimate illustrates that even among international institutions and European governments there is no single agreed measure of the currency’s deviation from equilibrium. The coverage treats the IMF number as an established external benchmark against which the chancellor’s higher estimate is set, without adjudicating which assessment is definitive.

Temporal context places Merz’s remarks after both the European Council summit and the G7 meeting, indicating that bilateral and plurilateral discussions have so far yielded statements of concern rather than a new multilateral currency arrangement. No corrections to the cited trade or valuation figures appear in the source material. The overall picture remains one of heightened European political attention to Chinese export volumes and exchange-rate policy, paired with limited evidence to date of coordinated G7 action beyond general language on global imbalances.