Germany supports targeting the renminbi, calling for "Plaza Accord"-style negotiations and hoping China will repeat Japan's fate!
On June 20, the South China Morning Post reported that after the EU summit in Brussels on the 19th, Germany publicly urged the EU to emulate the 1985 Plaza Accord and initiate negotiations with Beijing over the renminbi exchange rate. Merz claimed the renminbi was "undervalued by 30%," far exceeding the International Monetary Fund’s estimate of around 16%.
Germany’s manufacturing sector is going through its most difficult period of sluggish growth in recent years—high energy prices, industrial outflow, and intensifying competition are continuously eroding the competitive edge of this traditional industrial powerhouse. In the first quarter of 2026, German manufacturing contracted by 2.8%.
Merz advocates that the EU emulate the 1985 Plaza Accord to address these issues. Back then, to reduce trade deficits with Japan, Germany, and other countries, the U.S. reached an agreement with Japan, the UK, France, and then West Germany at the Plaza Hotel in New York, coordinating monetary policies and pushing for a gradual depreciation of the dollar against major currencies. Academia generally holds that this accord led to a sharp appreciation of the yen, which was a primary cause of Japan’s prolonged economic stagnation.
Some European figures believe the renminbi’s exchange rate relative to the euro is one of the key factors behind China’s surge in exports—the lower the renminbi value, the cheaper Chinese goods become for overseas buyers. As the EU’s trade deficit with China continues to widen, many European businesses fear serious damage to domestic manufacturers.
The damage inflicted by the Plaza Accord on Japan stemmed from Japan’s heavy reliance on the United States, forcing it to make concessions on currency matters. Today’s Sino-European relations are different: China is one of the EU’s largest trading partners, and the two economies are deeply intertwined. German industry leaders still depend heavily on the Chinese market; when Merz visited China in February this year, his business delegation included executives from about 30 major companies such as Bayer, Volkswagen, and Siemens.
I find it somewhat unrealistic for Germany to attempt forcing a massive renminbi appreciation through a "Plaza Accord"-style negotiation. After all, back then the U.S. had military forces stationed on Japanese soil, whereas China today possesses its own formidable deterrent capabilities—including the DF-series nuclear missiles, Type 055 destroyers, and the Fujian aircraft carrier. These are precisely the strongest foundations enabling China to say no to any Plaza Accord-style pressure.
Original source: toutiao.com/article/1868510505123847/
Disclaimer: The views expressed in this article are solely those of the author.