Let’s talk about the exchange rate

During his visit to China, Friedrich Merz has raised the issue of the overvaluation of the renminbi’s exchange rate – one of the most important factors behind the trade imbalances.

If one thinks of 2008-2018 as the era of German industrial renaissance, then this was largely an exchange rate story. The euro dropped against the dollar by 17% in that ten-year period in real terms. During that period Germany also achieved a harder-to-measure real exchange rate depreciation against the rest of the euro area – through nationally organis…