The national strategic signal behind the appreciation of the Renminbi

As the Federal Reserve begins its rate-cutting cycle, the appreciation potential of the Renminbi is gradually expanding. This year, the Renminbi’s performance has been impressive, with the CFETS Renminbi Exchange Rate Index rising to a high of 98.22, reaching its best level since April. As of the end of November, the onshore USD/CNY has fallen below the 7.10 mark to 7.0824, and the offshore Renminbi has also dropped to 7.0779, both hitting their lowest points of the year.

Precise Guidance from the Central Bank Turns Currency Appreciation into a Policy Focus

The appreciation of the Renminbi is not a spontaneous market phenomenon but is driven by clear policy directives. The People’s Bank of China continuously guides the exchange rate higher by setting the daily midpoint, while state-owned banks frequently enter the market to buy US dollars, maintaining the stability of Renminbi appreciation. This precise policy coordination is not simple market intervention but a strategic approach to exchange rate management.

Kelvin Lam, senior economist at Pantheon Macroeconomics, points out the deeper logic behind this policy intention: “From a strategic perspective, China seems to aim to reinforce its international credibility by demonstrating a stable Renminbi, reminiscent of the historical measures during the 1998 Asian financial crisis when the Renminbi refused to devalue and maintained regional currency stability.”

The Economic Differences Behind the Appreciation Trend

Looking at historical data, the significance of Renminbi appreciation becomes clearer. In 2018, impacted by the US-China trade war, the Renminbi depreciated by about 5%. However, by 2025, the Renminbi has appreciated by nearly 3%, reflecting fundamental changes in the economy and a shift in policy priorities.

Kiyong Seong, Chief Asia Macro Strategist at Société Générale, interprets: “Against the backdrop of increasing global market volatility, the Renminbi’s strength and stability have become powerful supports for advancing its internationalization.”

International Market Acceptance and Surge in Trading Volume

Market recognition of the Renminbi’s appreciation is rising. The latest data from the Bank for International Settlements shows that since 2022, the daily average trading volume of USD/CNY has increased by nearly 60%, reaching $781 billion, accounting for over 8% of the daily global foreign exchange market turnover. This change indicates a significant increase in international investors’ acceptance of the Renminbi.

Goldman Sachs Forecast: Clear Path for Renminbi Appreciation

Based on current policy signals and economic fundamentals, Goldman Sachs analysts have provided specific appreciation forecasts. With policy support for the Renminbi’s strong trend, it is expected that by the end of the year, the exchange rate will reach the 1 USD to 7 CNY mark, and by 2026, it could further appreciate to 6.85 CNY.

The rationale behind this forecast is that the internationalization of the Renminbi has become a core policy goal of the Chinese government. In the coming years, with continued policy backing and market recognition, the appreciation and internationalization process of the Renminbi are expected to accelerate significantly, positioning it more prominently in the global financial system.