Is now a good time to exchange RMB? Analysis of the buying opportunity in the second half of 2025

Don’t Wait! The Renminbi Appreciation Cycle Has Started

By the end of 2025, the renminbi exchange rate has shown a clear reversal. The USD to RMB exchange rate dropped from 7.36 at the beginning of the year to 7.0404, hitting a 14-month high. This signal is very clear: The renminbi has entered an appreciation cycle.

According to forecasts from multiple investment banks, this wave of appreciation may just be beginning. Deutsche Bank expects the renminbi to appreciate to 7.0 by the end of 2025 and further to 6.7 by the end of 2026; Goldman Sachs even straightforwardly states that the renminbi will reach 7.0 within the next 12 months, indicating the market has underestimated the speed of renminbi appreciation.

Why Is Now a Good Time to Exchange for RMB? Three Main Reasons

Reason 1: The depreciation cycle has ended

Looking back, the renminbi has been depreciating for three consecutive years since 2022. This rebound breaks that cycle. In the first half of 2025, the US dollar index fell from 109 to 98, a 10% decline—the worst performance since the 1970s. After December, the Federal Reserve began cutting interest rates, and the dollar index further fell to 97.87. Against this backdrop, the renminbi has a chance to breathe.

Reason 2: Positive signals from China-US negotiations

In the latest round of trade talks in Kuala Lumpur, the US reduced tariffs on Chinese goods related to fentanyl from 20% to 10%, and paused the 24% additional tariffs until November 2026. Both sides also agreed to temporarily suspend rare earth export controls and expand purchases of US agricultural products. While whether this ceasefire can be maintained long-term remains uncertain, in the short term, market sentiment has clearly improved, providing support for the renminbi.

Reason 3: The renminbi is undervalued by 15%

Goldman Sachs analysis indicates that the real effective exchange rate of the renminbi is undervalued by 12% compared to the ten-year average, and by 15% against the US dollar. This means there is room for the renminbi to rise, and future appreciation expectations are reasonable.

Key Data at a Glance

Recent performance of the renminbi:

• Onshore market: USD to RMB fluctuates between 7.04 and 7.3
• Offshore market: fluctuates between 7.02 and 7.4, slightly higher than onshore
• Year-to-date appreciation: about 3%
• December rebound: over 4% from the early-year high

Offshore RMB(CNH) is more sensitive to fluctuations and better reflects global market sentiment. At the start of the year, CNH briefly broke below 7.36, but recently has risen above 7.05, reaching a 13-month high.

What Will Happen if You Buy RMB Now?

In the short term (by the end of 2025):

• RMB is expected to remain relatively strong
• USD to RMB will fluctuate within a range, with a low likelihood of quickly breaking below 7.0
• Focus on three key variables: USD index trend, RMB midpoint rate adjustments, and China’s stabilizing growth policies

In the medium to long term (2026 and beyond):

• If China-US relations remain stable, the renminbi could enter a sustained appreciation trajectory
• China’s export resilience continues, attracting foreign investment into RMB assets
• The structural weakness of the US dollar index provides clear support for the renminbi

What Investors Must Know: Four Perspectives to Judge RMB Trends

1. People’s Bank of China Monetary Policy

When the PBOC cuts interest rates or reserve requirements, liquidity increases, putting downward pressure on the renminbi; conversely, rate hikes or reserve ratio increases strengthen the RMB. Looking at the 2014 case, during six consecutive rate cuts, USD/RMB rose from 6 to over 7.4, showing the significant impact of monetary policy on exchange rates.

2. China’s Economic Data

Economic improvement attracts foreign capital inflows, naturally pushing up the RMB; economic weakness does the opposite. Key indicators to watch include:

• GDP (quarterly release, reflects macroeconomic conditions)
• PMI (monthly release, manufacturing and services)
• CPI (monthly release, measures inflation)
• Fixed Asset Investment (monthly release, reflects economic activity)

3. USD Trend

The Federal Reserve and European Central Bank’s monetary policies are key drivers of the USD. In 2017, Europe’s economic recovery was strong, and the dollar index was weak, leading to a 15% decline in USD/RMB, with a high correlation.

4. Official Exchange Rate Guidance

The RMB is not fully freely convertible. The PBOC guides the exchange rate through the daily midpoint rate model (which includes counter-cyclical factors). However, in the long run, the market’s overall direction remains the dominant factor.

RMB Performance Over the Past Five Years

2020: Started the year around 6.9-7.0, briefly depreciated to 7.18 amid US-China trade tensions, then rebounded strongly to 6.50 by year-end, appreciating 6%.

2021: Strong exports and steady monetary policy kept the RMB in a narrow range of 6.35-6.58, averaging 6.45 for the year, maintaining strength.

2022: Aggressive Fed rate hikes and a soaring dollar caused RMB to depreciate from 6.35 to over 7.25, a 8% decline for the year—the largest in recent years.

2023: The dollar remained high, and China’s economic recovery was weak, with RMB fluctuating between 6.83 and 7.35, ending the year at 7.1.

2024: Weakening dollar and fiscal stimulus in China increased volatility, with RMB fluctuating between 7.1 and 7.3 throughout the year.

Final Words: Is It a Good Time to Exchange for RMB Now?

The answer is: Yes, it’s a relatively good time.

The RMB is at a turning point, shifting from long-term depreciation to appreciation. Based on similar historical cycles, this appreciation wave could last ten years, with short-term fluctuations but a clear overall trend.

Investment advice is simple:

• Seize the current opportunity when RMB is relatively cheap
• Keep an eye on USD index, China-US negotiations, and domestic policies
• Don’t rush to exchange everything at once; consider phased entry to reduce risk
• The forex market is large, with two-way trading, making it more fair and transparent than other assets

No matter how the market fluctuates, as long as you understand these four key factors, you can greatly improve your success rate in forex investing.