Yuan’s Dip: China Signals Stability Amidst Dollar Surge
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early January 2025 saw the offshore Chinese Yuan (RMB) briefly breach the 7.35 mark against the US dollar, a notable intraday swing of over 100 basis points. This fluctuation follows a recent downward trend for both onshore and offshore RMB, dipping below the 7.3 threshold against the greenback. However, the People’s Bank of China (PBOC) and the State Governance of Foreign exchange (SAFE) have issued strong statements reaffirming their commitment to exchange rate stability.
“The past experience of multiple rounds of gratitude and depreciation of the RMB exchange rate shows that the People’s Bank of China has sufficient toolbox and rich experience to deal with the depreciation of the RMB exchange rate, and has the ability to keep the RMB exchange rate basically stable at a reasonable and balanced level,” noted an industry insider, highlighting China’s history of managing currency fluctuations.
PBOC Signals Commitment to Stability
The downward pressure on the Yuan in early 2025 prompted decisive action. The PBOC’s Monetary Policy Committee’s fourth-quarter 2024 meeting, along with the 2025 PBOC Work Conference and the 2025 National Foreign Exchange Administration Work Conference, delivered a clear message: stabilizing the exchange rate is a top priority.
A key shift was observed in the PBOC’s messaging. Industry analysts pointed out the removal of the phrase “enhancing exchange rate flexibility” from the fourth-quarter 2024 statement. Rather, the emphasis shifted to “strengthening market management, resolutely dealing with behavior that disrupts market order, resolutely preventing the formation of unilateral consistent expectations and self-fulfillment, and resolutely preventing the risk of exchange rate overshooting.” This renewed focus on stability, echoing previous policy statements, signals a firm commitment to maintaining the Yuan’s value.
Further solidifying this commitment, the 2025 PBOC Work Conference included “maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level and resolutely preventing the risk of exchange rate overshooting” as a key objective.The 2025 National Foreign Exchange Administration Work Conference similarly prioritized “increasing efforts to maintain the basic stability of the foreign exchange market.”
Positive outlook for the Yuan
The January 3rd dip below 7.30 Yuan per US dollar was largely attributed to the strengthening US dollar,which saw its index surge above 109,reaching a high not seen sence November 2022. this broad dollar strength put pressure on other currencies, including the Euro and the pound.
However, looking ahead, CITIC Securities’ chief economist highlighted several positive factors supporting the Yuan in 2025. “First, the central bank is expected to have a strong determination to stabilize the exchange rate, and relevant policies are expected to continue to increase; second, the deep inversion of sino-US interest rate differentials will have a negative impact on the RMB exchange rate in 2025. The impact will be limited. Domestic RRR cuts, interest rate cuts and other operations may work together with other incremental policies to help fundamentals recover,” the economist stated.
Ultimately, long-term exchange rate trends are tied to economic fundamentals. With the PBOC’s commitment to stability and a positive outlook on domestic economic factors, the Yuan is expected to remain relatively stable, albeit within a range of two-way fluctuation.
RMB Exchange rate Projected to Remain Stable in 2025
Analysts predict a stable outlook for the Renminbi (RMB) exchange rate in 2025, pointing to several key factors bolstering its resilience. These factors include a strengthening chinese macroeconomic environment, a balanced balance of payments, and a robust foreign exchange market.
Strong Macroeconomic Fundamentals
The Chinese economy is expected to experience continued growth in 2025. Stimulus measures implemented in late 2024, coupled with a proactive fiscal policy and a moderately loose monetary policy, are projected to solidify economic recovery.”International public opinion generally believes that China’s recent major decisions will inject great impetus into the Chinese economy and bring more development dividends to the world that will share China’s opportunities,” according to industry experts.
Balanced Balance of Payments
China’s robust trade performance further supports the RMB’s stability. Through November 2024, total import and export value reached 39.79 trillion yuan, a 4.9% year-on-year increase. The goods trade surplus hit a record high of US$884.6 billion, an 18.4% year-on-year increase.this strong performance, coupled with the improved resilience of Chinese foreign trade enterprises, suggests a continued current account surplus in 2025, ensuring a balanced foreign exchange supply and demand.
Resilient Foreign Exchange Market
The foreign exchange market in China demonstrates increased rationality among market participants, with businesses increasingly adopting a neutral approach to exchange rate risk. This contributes substantially to the market’s stable operation and the equilibrium of foreign exchange supply and demand.
Central Bank’s Commitment to Stability
Recent pronouncements from the People’s Bank of China (PBOC), including the 2025 PBOC Work Conference and the 2024 Fourth Quarter Regular Meeting of the Monetary Policy Committee, emphasize the importance of exchange rate stability. Reports of upcoming issuance of new Hong Kong RMB central bank bills further underscore this commitment. “this all shows the central bank’s determination to maintain a stable exchange rate,” noted industry insiders. The expectation is for the RMB exchange rate to remain fundamentally stable, with continued two-way floating.
(Editor: Wen Jing)
Yuan’s Recent Dip: Experts Weigh in on China’s Commitment to Stability
As the offshore Chinese Yuan (RMB) briefly breached the 7.35 mark against the US dollar in early January 2025, sparking concerns about potential volatility, world-today-news.com sat down with renowned economist Dr. Mei Lin to discuss the factors at play and China’s outlook for the Yuan in the year ahead.
Senior Editor: Dr. Lin, the Yuan’s recent dip has fueled market speculation. What’s your analysis of the situation, and how do you see the People’s Bank of china (PBOC) responding?
Dr. Mei Lin: Recent pressure on the Yuan is partly due to the strengthening US dollar, which has been on an upward trajectory since late 2024. However, it’s crucial to recognize the PBOC’s strong commitment to exchange rate stability. They’ve repeatedly emphasized this through official statements and policy adjustments.
Senior Editor: We saw several key PBOC conferences in late 2024 emphasizing this stability. Can you elaborate on the importance of those pronouncements?
dr. Mei Lin: Absolutely. The removal of the phrase “enhancing exchange rate flexibility” from the PBOC’s fourth-quarter 2024 statement was a clear signal. It indicated a shift in focus towards actively managing the exchange rate and preventing excessive volatility. The 2025 PBOC Work Conference and the 2025 National Foreign Exchange Administration Work Conference further reinforced this message.
Senior Editor: Some analysts suggest that china’s ongoing economic recovery might be contributing to the Yuan’s weakness. What are your thoughts on this?
Dr. Mei Lin: China’s economic recovery is indeed a key factor. As the economy strengthens, demand for imports rises, potentially putting downward pressure on the Yuan. However, the PBOC has tools to manage this.We’ve seen them strategically adjust interest rates and reserve requirements in the past to support the Yuan.
Senior Editor: Looking towards 2025, what are your overall expectations for the Yuan?
Dr. Mei Lin: I anticipate the PBOC will continue to prioritize exchange rate stability. While some fluctuations are inevitable, I believe the Yuan will remain fundamentally strong. The underlying economic fundamentals are solid, and China’s commitment to managing the exchange rate is unwavering. The recent pronouncements from the PBOC and SAFE demonstrate this commitment, reinforcing confidence in the Chinese currency.
Senior Editor: Thank you for sharing your valuable insights, Dr. Lin. This has undoubtedly provided our readers with a clearer understanding of the current situation and what lies ahead for the Yuan.
