Is China’s currency undervalued? BCA Research weighs in.

BCA Research analysts including Chester Ntonifor and Marko Papic stated in a note published on Investing.com on February 21, 2026, that the Chinese yuan is 'undervalued and highly competitive,' giving Beijing the ability to let the currency appreciate while maintaining its position as an export-driven powerhouse. This assessment comes as China's offshore yuan recently reached its strongest levels against the U.S. dollar in nearly three years before the Lunar New Year holidays, reflecting broader currency market dynamics and questions about the dollar's status as the world's reserve currency. The analysis places China's currency policy in the context of divergent approaches from global leaders, with Chinese President Xi Jinping calling for the yuan to become a 'powerful currency' used more frequently in international transactions, while U.S. President Donald Trump has expressed support for a weaker dollar to address perceived trade imbalances. According to BCA Research strategists, a stronger yuan could facilitate China's gradual economic transition from export dependence toward stronger domestic consumption, which has been undermined by the country's ongoing real estate crisis. They further suggest that currency appreciation might help narrow China's capital account deficit and support Beijing's efforts to reduce dependence on the U.S. financial system, thereby enhancing economic sovereignty. The analysts maintain that 'the global trade pie is expanding' and assert that with a competitive currency, China will maintain its export competitiveness regardless of exchange rate movements. In their currency recommendations, BCA Research advocates for being 'long Chinese yuan versus the Hong Kong dollar' as the trade for the next several years, while acknowledging they will rotate into other currency pairs as global markets increasingly recognize China's competitive advantages. The strategists suggest that even if their more optimistic scenarios only partially materialize, investors should position themselves for a potential scenario where China becomes Asia's monetary anchor, replacing the dollar in regional dominance.