Resilient performance of China's economy secures RMB on steady track

The central parity rate of the renminbi in the interbank foreign exchange market strengthened 30 pips to 7.0796 against the US dollar on Wednesday, following a 21-pip increase on Tuesday. Analysts said the Chinese currency is likely to retain a mildly stronger bias in the near term and maintain a stable and gradually appreciating trend over the longer run.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said the recent rapid depreciation of the Japanese yen and other factors have intensified volatility in global currency markets, with the US Dollar Index exhibiting an upward trend amid fluctuations.

Under these circumstances, the renminbi has held a steady but firm footing against the greenback. The onshore RMB closed at 7.0802 at 4:30 pm on Wednesday, strengthening by 136 pips from the previous session. During intraday trading, the onshore rate climbed above the 7.08 level, with both onshore and offshore quotes reaching their highest levels since mid-October 2024.

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Wang said the central parity rate of the RMB has recently been adjusted consistently toward a stronger level. This may be related to China's stronger-than-expected economic performance so far this year and the sharp decline in the US dollar. Although the RMB has appreciated, it has not fully caught up with the dollar's drop.

In addition, China's exports have outperformed expectations this year, and domestic capital markets have strengthened since July. Wang believes this has increased foreign-exchange settlement demand and bolstered market confidence in the RMB.

He expects the Chinese currency to maintain a mildly stronger nature in the short term.

Wang Zhiyi, president of the Cross-Border Finance Research Institute, said that externally, rising expectations of a US Federal Reserve rate cut in December have pushed the US Dollar Index into choppy trading around the 100 level, providing support for non-US currencies. Internally, the RMB central parity rate has remained stable with an upward trend, guiding expectations for RMB appreciation, while improving cross-border capital flows have moved in tandem with the strength of China's capital markets.

Zhou Ji, an analyst at Nanhua Futures, said that as China's year-end growth-stabilization policies gradually take effect — combined with the seasonal patterns of exchange-rate movements — the USD/RMB spot rate is expected to show a volatile bottoming pattern, with the bottom gradually edging lower.

Recently, the USD/RMB spot rate has repeatedly opened higher but trended lower intraday as settlement demand continued to rise, indicating that appreciation momentum for the Chinese currency is gradually accumulating, said Zhou.

Sheng Songcheng, adjunct professor of economics and finance at China Europe International Business School and president of the Research Institute of China Chief Economist Forum, said the RMB has a strong foundation for maintaining stability with a gradual upward trend over the medium to long term. This outlook is supported by China's transition into a new stage of "two-way investment", the accelerated diversification of its trading partners and rising labor productivity.

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As China's economy shifts to innovation-driven growth, patterns of cross-border capital flows have undergone profound changes. Sheng emphasized that China is transitioning from a development model focused mainly on bringing in foreign investment to one that gives equal weight to both "bringing in" and "going global".

Sheng said against the backdrop of expanding two-way investment, maintaining moderate stability in the RMB — or even allowing it to appreciate steadily over the medium to long term — will provide strong support for Chinese companies' overseas expansion, the internationalization of the RMB and the development of global trade and economic relations.

He stressed that China remains committed to keeping the RMB at a reasonable and balanced level, avoiding excessively rapid or sharp appreciation that could temporarily hurt exports, while allowing the market to play a decisive role in exchange rate formation and balancing both internal and external stability.

Contact the writers at jiangxueqing@chinadaily.com.cn