Goldman Sachs predicts the Yuan will go to 6.5 against the US Dollar in about a year based on their current account surplus, which is around 3-5+% depending on how you measure it (some analysts think that the current account surplus reported by the People’s Bank of China is an underestimate, given the changes in methodology to how they calculate the current account and how they are hiding income from overseas investments). Depending on how the Trump-Xi meeting goes, they think that might also help boost the Yuan.
I’d also like to add, the Yuan rising or falling will likely be dependent on how strong/weak the USD is in terms of effective exchange rates. Historically the PBOC has always had a peg to the USD for the Yuan, hence the gradual strengthening in 2025 and 2026 against the USD when the USD was weakening against other currencies.
Another thing is that I predict this strengthening of the Yuan will primarily help other East Asian economies rather than the rest of the world since:
1. Import growth* nowadays is primarily concentrated in semiconductors, which comes from places like Taiwan and Korea, so China will buy more from these countries specifically.
2. An appreciation dents the profit margins of exporting industries but won’t necessarily reduce the volume of exports. Chinese electric vehicles, for example, are sold at a lower price than other cars, but not by so significant a margin such that Chinese EV companies will need to raise prices.
3. Even with a stronger currency, China will probably take measures to ensure they aren’t importing anything strategically from the rest of the world unless they absolutely have to. The “absolutely have to” sectors are currently primarily concentrated in, you guessed it, semiconductors and other electronics.
*I might make a post next week about China-Europe trade specifically when data comes out, but imports and exports between these two entities actually rose at a similar percentage even if they still diverged in absolute values.
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Goldman Sachs predicts the Yuan will go to 6.5 against the US Dollar in about a year based on their current account surplus, which is around 3-5+% depending on how you measure it (some analysts think that the current account surplus reported by the People’s Bank of China is an underestimate, given the changes in methodology to how they calculate the current account and how they are hiding income from overseas investments). Depending on how the Trump-Xi meeting goes, they think that might also help boost the Yuan.
I’d also like to add, the Yuan rising or falling will likely be dependent on how strong/weak the USD is in terms of effective exchange rates. Historically the PBOC has always had a peg to the USD for the Yuan, hence the gradual strengthening in 2025 and 2026 against the USD when the USD was weakening against other currencies.
Another thing is that I predict this strengthening of the Yuan will primarily help other East Asian economies rather than the rest of the world since:
1. Import growth* nowadays is primarily concentrated in semiconductors, which comes from places like Taiwan and Korea, so China will buy more from these countries specifically.
2. An appreciation dents the profit margins of exporting industries but won’t necessarily reduce the volume of exports. Chinese electric vehicles, for example, are sold at a lower price than other cars, but not by so significant a margin such that Chinese EV companies will need to raise prices.
3. Even with a stronger currency, China will probably take measures to ensure they aren’t importing anything strategically from the rest of the world unless they absolutely have to. The “absolutely have to” sectors are currently primarily concentrated in, you guessed it, semiconductors and other electronics.
*I might make a post next week about China-Europe trade specifically when data comes out, but imports and exports between these two entities actually rose at a similar percentage even if they still diverged in absolute values.
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