China's Paradox: The Currency Is Weak in the Eyes of the World – and Too Strong from Within

China faces an economic paradox: the yuan is strengthening against the dollar and the euro, making exports more expensive and hurting factory profits, while the West claims the currency is still weak and gives an unfair advantage. The central bank raised the foreign exchange reserve requirement ratio to curb the strengthening, but factory owners warn of closures and mass unemployment.

The Chinese currency, the yuan, is strengthening against the dollar and the euro, making Chinese products more expensive for overseas customers and hurting factory profitability. Factory owners warn they are losing customers and profit margins are eroding, while Western countries argue the currency is still weak and gives China an unfair advantage. Beijing is caught in a dilemma: how to protect factories without exacerbating economic tensions. The article quotes Chen Lifeng, a textile factory owner, who says the yuan's strengthening has severely hurt his ability to receive orders. Analysis of Chinese companies shows average profit margins stand at only 4.9%, compared to nearly 9% among global competitors. China's central bank raised the foreign exchange reserve requirement ratio to stop the currency's strengthening. On the other hand, German Chancellor Friedrich Merz and IMF economists argue the currency is undervalued and accuse China of indirectly subsidizing exports. The headline describes the situation as a "paradox" – the currency is weak in the eyes of the world but too strong from within.