BEIJING — The renminbi is back at the center of debates about global macroeconomic imbalances. With China’s merchandise trade surplus widening to $1.2 trillion in 2025, and with its manufacturing sector becoming increasingly dominant, the near-consensus among financial and economic commentators is that the renminbi is significantly undervalued. The implication is that China should let its currency appreciate sharply, thereby shrinking its surplus, easing competitive pressure on manufacturers elsewhere, and helping rebalance the global economy. This argument is politically convenient, because it points to a seemingly painless solution. Unfortunately, it suffers from a fatal flaw. Before simply assuming that exchange-rate appreciation is appropriate for China, one must examine the underlying cause of the currency’s weakness. If it was primarily the result of deliberate interventions to expand exports, rapid appreciation would indeed be a relatively clean remedy. But if it reflects weak domestic demand, allowing the currency to appreciate without addressing the underlying weakness