Seeing Robin J Brooks ’s chart in his latest post on the currency depreciation of major emerging markets was honestly quite shocking. The scale of depreciation in India, Brazil, and other BRICS currencies by has been enormous. It immediately made me think of China. By comparison, the renminbi has actually appreciated by roughly 25% against the U.S. dollar over the past 25 years. The irony is hard to miss: many Western commentators and governments still argue that China manipulates its exchange rate to keep the renminbi artificially undervalued in order to boost exports.

A few thoughts:

1. Many emerging-market currencies depreciate over time because they have to use the exchange rate to absorb deficits, inflation, and capital outflows. The renminbi did not go down that path because China has long had a much stronger capacity to earn dollars through manufacturing, a much larger state balance sheet, a far bigger reserve buffer, and a more tightly controlled capital account.

2. Although China is also an emerging market, over the past two decades it has operated under a fundamentally different external-account structure, industrial structure, and monetary regime from most other emerging economies. The key point is that China has not relied on a model of continually attracting foreign capital to finance a current-account deficit. Instead, the renminbi has been supported by a powerful tradable manufacturing sector, consistently strong export capacity, a broadly persistent current-account surplus, and massive foreign-exchange reserves. In 2025, China’s trade surplus reached $1.2 trillion, rising to about 3.3% of GDP. At the same time, inflation running below that of its trading partners effectively produced a real exchange-rate depreciation, which in turn reinforced export competitiveness. China’s foreign-exchange reserves have also remained overwhelming by global standards, with the World Bank putting total reserves in 2024 at around $3.2 trillion.

3. Countries like India and Brazil face a different kind of constraint. They can certainly grow, but over the long run they are much more exposed to energy imports, commodity cycles, capital flows, and domestic inflation pressures. As a result, their currencies often have to depreciate against the dollar in order to adjust. India still ran a small current-account deficit in 2024, while Brazil’s exchange rate has long been shaped by commodity prices, global risk sentiment, and domestic inflation cycles. Put differently, many emerging-market currencies weaken against the dollar because they need a weaker exchange rate to absorb external shocks and maintain external balance.

4. More importantly, the renminbi is not a fully free-floating currency priced entirely and instantaneously by cross-border capital flows. This is one of the areas where the Chinese government has shown real strategic judgment: before national power reaches a certain level, full capital-market liberalization often brings more harm than benefit for an emerging economy. China has consistently maintained relatively strong capital-account management and a much stronger public balance sheet, which means that renminbi volatility is naturally more contained than that of many other emerging-market currencies. On top of that, manufacturing accounts for a significantly larger share of China’s GDP than it does in India, and manufactured exports account for a much larger share of China’s goods exports than in many resource-driven or services-led emerging markets. That means China is much better positioned to earn dollars through real trade and industrial competitiveness, rather than relying primarily on short-term capital inflows.