The Bank of England couldn’t afford to keep its promises. It had committed to keeping the pound trading within a narrow radius against the German mark, requiring it to spend whatever it took to defend the currency’s value. The trouble was that the British economy was fragile—most mortgages in the UK at the time had variable rates, so raising interest rates  would devastate British homeowners. Bessent convinced his boss, George Soros, to bet against the pound. When it crashed a week later, Bessent made $1 billion for the firm and made himself and Soros famous.

The lesson Bessent learned on that “Black Wednesday” is simple: when a central bank is artificially holding its currency at a level the market wouldn’t otherwise support, eventually the market will win. Though the yuan is harder to trade than the pound—China has a number of capital controls—the same logic, more or less, should apply to China today.

Thirty-four years later, Bessent is flying to Beijing, where he will sit across from a central bank, the People’s Bank of China (PBOC), that is, by his private firm’s research, artificially holding the yuan at a level the market wouldn’t otherwise support. But Bessent isn’t working for that firm now; he’s the Treasury Secretary of the United States.

How China quietly depresses the yuan 

“China, Inc. could hold more dollars off SAFE’s balance sheet than on SAFE’s balance sheet,” Setser wrote for the Council of Foreign Relations. “Nice little trick.”

It seemed to partially work to stave off Washington. In June 2025, six months into his tenure, Bessent’s Treasury Department declined to designate China a currency manipulator, citing only the country’s “lack of transparency.”

The case for designation is, by most technical measures, stronger now than it was in 2019, when Trump’s first Treasury actually pulled the trigger. “I don’t think China met the criteria in 2019,” Setser said. “I think that was a very political designation.” At the time, he explained,  there was not a buildup of foreign exchange and China’s global trade surplus was actually much smaller. Now, he said, China actually does meet the criteria, if you consider that state regional banks are essentially doing the FSOB’s bidding off-balance sheet. So why the silence?

Bessent’s own answer came last September, in Madrid. Asked whether he had raised yuan devaluation with Chinese Vice Premier He Lifeng, the Treasury Secretary told reporters: “Well, they haven’t done it to the U.S. The RMB is actually stronger this year versus the dollar. Now it’s at an all-time low versus the euro, which is a problem for the Europeans.” Asked whether the decline was manipulation, he said only that the yuan is “a closed currency.”

Other analysts see game theory. “Xi is coming into the summit feeling confident he has solved Trump,” Jeremy Chan, a senior analyst at Eurasia Group and former U.S. diplomat, told Bloomberg. Beijing controls 90% of the world’s processed rare earths—the inputs vital for defense systems and AI chips. The U.S. ran tariffs up to 145% earlier in the year and walked them back to 30% when China retaliated by tightening export controls on those minerals; a moment that exposed a severe lack of preparedness to answer China’s points of leverage.

But really, the broader dynamic of the relationship isn’t pulling one way or the other; just stagnation. Hilsenrath likes to call it tangping, borrowing the post-Covid Chinese internet term for “lying flat.”