Goldman Sachs sees Chinese yuan 20% undervalued, raises forecasts

Goldman Sachs thinks the Chinese yuan is sitting at a serious discount. The investment bank’s internal valuation models suggest the currency is somewhere between 20% and 30% undervalued against the US dollar, making it one of the firm’s top trade ideas heading into 2026.

The bank has revised its USD/CNY forecasts accordingly: 6.80 at the three-month mark, 6.70 at six months, and 6.50 over the next twelve months. Goldman expects the yuan to gradually strengthen against the dollar over the coming year, driven by China’s export engine and structural economic tailwinds.

What the models say

Goldman’s call rests on two proprietary frameworks. The first, known as GSDEER (Goldman Sachs Dynamic Equilibrium Exchange Rate), pegs the yuan’s fair value at roughly 5.00 USD/CNY. Compare that to where the pair has been trading, and you get a gap of about 30%.

The second model, GSFEER (Goldman Sachs Fundamental Equilibrium Exchange Rate), takes a slightly different approach by focusing on current account dynamics. That framework arrives at an estimated undervaluation of around 12%.

The analysis is led by Teresa Alves at Goldman Sachs, who has flagged a strong bullish case for the yuan versus the dollar.

Why the yuan looks cheap

China’s current account surplus is expected to widen further. Strong export performance is a big driver here. Chinese manufacturers continue to dominate global supply chains in everything from electric vehicles to solar panels to consumer electronics.

At the same time, domestic demand has been relatively soft. That dynamic, strong exports paired with weak imports, mechanically pushes the current account surplus higher.

Low inflation in China adds another layer. While the US and Europe have spent the past few years battling elevated consumer prices, China has been flirting with deflation. In purchasing power terms, that makes the yuan even more undervalued than the nominal exchange rate suggests.

The long game is still long

Even after the expected appreciation over the next twelve months, the bank’s GSDEER model projects the yuan will still be approximately 19% undervalued by 2035.

Beijing has historically managed the yuan’s exchange rate carefully, resisting sharp appreciations that could hurt exporters. The People’s Bank of China sets a daily reference rate that effectively puts a floor and ceiling on how far the currency can move.

Capital controls also play a role. China restricts how freely money can flow in and out of the country, which dampens the kind of speculative flows that might otherwise bid the yuan higher.

What this means for investors

For macro traders and currency desks, Goldman’s call sets up a clear directional bet. A move from current levels to 6.50 USD/CNY over twelve months would represent meaningful appreciation.

The risk to Goldman’s thesis is straightforward. If US-China trade tensions escalate further, or if Beijing deliberately weakens the yuan to offset tariffs, the currency could stay cheap or get cheaper.