Author: Ba Xiao Ling, Wu Xiaobo Channel
The suspense itself was not great, only a final push was needed.
After the expectation of "the renminbi is about to break through 7" lingered for nearly a month, an analyst from Goldman Sachs provided a key assist.
Recently, Goldman Sachs released the "2026 Global Stock Market Outlook." When mentioning the renminbi, according to its dynamic equilibrium exchange rate model (GSDEER), Goldman Sachs calculated the fair value of the renminbi, showing that the renminbi is undervalued by nearly 30% against the US dollar.
However, the slogan is more attractive than the numbers. The report stated:
The degree of undervaluation of the renminbi exchange rate relative to the US dollar is comparable to that of the mid-2000s.
In 2000, the annual average exchange rate of the US dollar to the renminbi was approximately 8.28. Subsequently, the renminbi entered a nearly ten-year appreciation cycle, with the exchange rate against the US dollar rising to around 6.1.
Goldman Sachs' calculations gave the market more confidence to "be bullish," causing the offshore renminbi, which was already in an appreciation channel, to suddenly gain momentum.
On the morning of December 25, the US dollar to offshore renminbi exchange rate quickly broke through the 7.0 mark, hitting a 15-month high and officially re-entering the "6 era."
2005—2025 USD/CNY Trend
Source: CnYES
At the same time, the onshore renminbi exchange rate touched a low of 7.0053, just one step away from "breaking 7." The renminbi to US dollar central parity rate announced by the China Foreign Exchange Trade System was also raised by 79 basis points. Now, with the "shoe dropping," we can finally ask these questions:
Why was the renminbi able to chart an independent course in 2025? What changes does the entry into the "6-era" exchange rate mean for our business operations and personal asset allocation?
Is "Breaking 7" Short-Term or Long-Term?
Throughout the year, the renminbi exchange rate has been quite unusual.
In April this year, the renminbi exchange rate hit a low of 7.429, and the market was still worried about the risk of renminbi depreciation. Unexpectedly, as the year-end approached, the renminbi exchange rate trend reversed.
This is partly due to timing.
As usual, near the end of the year, domestic export enterprises need to settle accounts with suppliers, converting the US dollars earned throughout the year into renminbi for "closing the books" and distributing year-end bonuses, etc. This triggers seasonal foreign exchange settlement demand.
When more and more people "need" renminbi, starting from the end of November, the "price" of renminbi rose, and the timeline matches.
December 24, busy operations at a foreign trade container terminal
Moreover, due to the recent "pleasing rise" of the renminbi, export enterprises that had previously hoarded US dollars, to avoid further delays and more exchange losses, more or less rushed to "settle foreign exchange," which further pushed up the appreciation of the renminbi.
It is worth mentioning that this wave of demand this year is obviously larger than in previous years.
According to data released by the General Administration of Customs, in the first 11 months of this year, China's goods trade maintained growth, with the total import and export value reaching 41.21 trillion yuan, a year-on-year increase of 3.6%. In the first 11 months, China's trade surplus exceeded 1 trillion US dollars for the first time.
This means that some export enterprises have more foreign exchange income than in previous years.
Wang Qing, chief macro analyst of Oriental Jincheng, believes that as the year-end approaches, the increase in corporate foreign exchange settlement demand is also driving the seasonal strengthening of the renminbi; especially after the recent sustained appreciation of the renminbi against the US dollar, the accumulated settlement demand from the previous high export growth may be accelerating its release.
However, Huatai Futures wrote in its "Huatai Futures - Foreign Exchange Annual Report: Gradually Improving, Renminbi Enters Appreciation Channel": Due to the impact of the inverted China-US interest rate differential, the cost-effectiveness of foreign exchange settlement and holding foreign exchange has become closer, and corporate foreign exchange settlement strategies tend to be differentiated and balanced. Therefore, although the year-end "foreign exchange settlement wave" this year will provide marginal support for the renminbi in stages, it does not constitute a trend-leading factor.
The appreciation of the renminbi also has some geographical advantages.
In 2025, the Federal Reserve implemented three interest rate cuts, which directly led to the weakening of the US dollar index. As of December 25, the US dollar index fell 9.69% this year, not only breaking below the 100 mark to close at 97.97 but also recording its largest single-year decline in nearly 8 years.
December 10, the Federal Reserve's third interest rate cut
The exchange rate is a "seesaw." When the US dollar weakens, it means that non-US currencies, including the renminbi, strengthen, and the renminbi achieves "passive appreciation."
Another contributing factor is that after Trump took office, he launched a global "tariff war," disrupting the long-running, rules-based global trading system.
When trade flows become uncertain, the cost of trade settlement and supply chain financing denominated in US dollars naturally increases, which further shakes the foundation of the US dollar as an ideal trade settlement currency.
Coupled with the 35-day shutdown of the US government and Moody's, one of the three major rating agencies, downgrading the US sovereign credit rating, global funds began to seek safe havens, and US dollar assets flowed out of the United States on a large scale—the renminbi and renminbi assets thus ushered in their own "revaluation."
According to data from global fund flow monitoring agency EPFR Global, during the period from May to October 2025, foreign capital focused on Hong Kong stock investment equity funds accumulated a net inflow of 67.7 billion Hong Kong dollars, completely reversing the net outflow trend during the same period in 2024.
The appreciation of the renminbi is, more importantly, due to human factors.
On December 11, the World Bank, in its latest China Economic Briefing, raised China's GDP growth rate by 0.4%, and the International Monetary Fund (IMF) raised China's GDP growth rate for this year by 0.2%, expecting it to reach 5%.
The simultaneous upward revision of China's economic expectations by two international institutions is clearly a full affirmation of China's current economic operation and long-term development potential.
Among them, the stability of exports provides the most fundamental confidence for the appreciation of the renminbi exchange rate.
On the one hand, the record trade surplus is a solid foundation for the renminbi exchange rate. On the other hand, the quality of exports has also improved.
Data from the General Administration of Customs also show: in the first 11 months of this year, China exported integrated circuits worth 1.29 trillion yuan, an increase of 25.6%; automobiles worth 896.91 billion yuan, an increase of 17.6%. This means that the mainstay of exports has shifted from traditional labor-intensive products to high-end manufacturing industries such as shipbuilding, integrated circuits, and new energy vehicles.
Export vehicles parked at the port
Guan Tao, global chief economist of Bank of China Securities, believes: The increase in the diversification of export markets, the acceleration of domestic manufacturing transformation and upgrading, and the enhancement of the competitiveness of export commodities have affected China's commodity exports to maintain rapid growth, providing important support for the steady increase of China's export share in the global market.
Renminbi Appreciation and Personal Investment
Next, answer a question that everyone is most concerned about—is this renminbi appreciation good or bad for A-shares?
Regarding the impact of the exchange rate on the A-share trend, there have been many studies over the years. The Xingye Securities strategy team led by Zhang Qiyao believes that after the 2015 exchange rate reform, the renminbi exchange rate and the A-share trend show a significant positive correlation.
From the chart of the correlation between the renminbi exchange rate and the A-share trend, we can also see that since 2017, the correlation between the renminbi and the A-share trend has been relatively obvious.
For example, during the "Nifty 50" period from 2017 to the first quarter of 2018, and during the renminbi appreciation period from the second quarter of 2020 to 2021, A-shares were in a bull market. Correspondingly, foreign capital became an important incremental driver of the rise of the Chinese stock market.
In addition, Goldman Sachs once conducted a study on US stocks and concluded: If the fundamentals do not diverge, a 0.1 percentage point increase in the exchange rate will increase stock valuation by 3%–5%.
Of course, because the mechanism of influence between the exchange rate and stock prices is relatively complex, we cannot assert that as long as the renminbi appreciates, individual stocks and the overall market will definitely rise. But based on various judgments, this renminbi appreciation is expected to stimulate further rises in A-shares.
However, renminbi appreciation will indeed have an impact on different industries, thereby affecting the stock prices of related listed companies.
The appreciation of the offshore renminbi means that Chinese goods denominated in the local currency become more expensive in the international market, naturally weakening price competitiveness for foreign buyers, and export orders may decrease.
Especially traditional export-oriented industries, such as home appliances and textiles, because these industries have relatively thin profit margins and are more sensitive to exchange rate fluctuations, the impact on the profits of these industries will be more obvious.
Everything has two sides. Renminbi appreciation is also a major benefit for certain industries. For example, domestic import-dependent industries can directly benefit from this appreciation.
According to the import and export data of the National Bureau of Statistics, China's "net import" industries, including energy, agriculture, materials and other fields, directly benefit from this appreciation.
At the same time, industries with relatively high US dollar debt also benefit from the renminbi appreciation, such as those in the scope of the Hong Kong Stock Connect with a high proportion of US dollar debt in short-term liabilities, such as the Internet, shipping, aviation, utilities, energy and other industries.
In addition, renminbi appreciation will also change the trading style of individual investors.
At the beginning of the year, "US dollar deposits" and US dollar treasury bonds were very popular. Some investors exchanged a lot of renminbi for US dollars for investment. As a result, with the sharp appreciation of the renminbi, US dollar deposits became "negative returns." Even if US dollar treasury bonds enjoyed a 5% yield, after accounting for exchange rate losses, it was only about the same as the one-year fixed deposit interest rate.
Of course, some people also ask, since the renminbi is strengthening now, can we take advantage of the renminbi appreciation to buy more US dollars and save them for future use?
For individuals, if it is for cross-border shopping, it may be a good choice. Renminbi appreciation is equivalent to enjoying a discount when consuming abroad, and when shopping overseas and settling in US dollars, paying in renminbi will also be 5%–10% cheaper than in the past.
But if it is purely for speculation, it is better to be cautious. Because the probability of large fluctuations in the renminbi exchange rate is not high, do not blindly chase rises and kill falls by converting renminbi into US dollar deposits for speculation.
Where to Go After "Breaking 7"?
It is worth noting that the appreciation we are talking about now mainly refers to the renminbi's appreciation against the US dollar, not a "comprehensive strengthening."
According to data from the China Foreign Exchange Trade System, from the beginning of this year to now, the renminbi exchange rate against the CFETS Renminbi Exchange Rate Index, the BIS Currency Basket Renminbi Exchange Rate Index, and the SDR Currency Basket Renminbi Exchange Rate Index have all fallen, with two major indices falling below 100.
These three indices are the "average report card" measuring the comprehensive value of the renminbi against a basket of foreign currencies.
The weakening of the indices means that although the renminbi has appreciated significantly against the US dollar, its overall value level has declined for a basket of other foreign currencies, such as the British pound and the euro.
But there is a consensus among institutions, including Goldman Sachs, that with the sustained development of China's economy and the deepening of the internationalization of the renminbi, the "moderate appreciation" of the renminbi is expected to become a major trend.
For example, Yuekai Securities believes that in the past two years, domestic prices have been low while overseas inflation has been high. The central level of the CFETS Renminbi Exchange Rate Index has even moved downward, and the renminbi exchange rate has the momentum to make up for the rise. In 2026, the renminbi exchange rate against the US dollar will remain strong, and "6.8" may be a key point.
According to a summary by Bloomberg, experts from six major international investment banks generally believe that the US dollar will continue to weaken against major currencies. By the end of 2026, the US dollar index will fall by about 3%—this will form a trend of the renminbi continuing to passively strengthen.
However, whether the renminbi continues to appreciate or fluctuates in the future, it is unlikely to show too unexpected trends.
The Central Economic Work Conference held not long ago has emphasized for four consecutive years the need to "keep the renminbi exchange rate basically stable at a reasonable and balanced level."
In addition, as the central bank stated: "The medium- and long-term renminbi exchange rate has a solid foundation. We will continue to adhere to the decisive role of the market in the formation of the exchange rate, maintain exchange rate flexibility, strengthen expectation guidance, prevent the risk of exchange rate overshooting, and keep the renminbi exchange rate basically stable at a reasonable and balanced level."
Even Goldman Sachs said: "We expect renminbi appreciation to be gradual and managed, but even so, we believe it is still expected to outperform forward pricing."
For individual investors, we should not focus on predicting the precise point of the exchange rate, but on understanding the trend,顺应产业升级 (conforming to industrial upgrading), making good use of hedging tools,既要把握升值带来的机遇 (seizing the opportunities brought by appreciation),也要防范波动带来的风险 (and also guarding against the risks brought by fluctuations).
