Yuan returns to the "6" era: what does it mean for investors?

By the end of November, the yuan-dollar exchange rate definitively crossed the 7.0 threshold, marking the official return of the Chinese currency into the “6 era” for the first time in 15 months. This is not a surprise, but rather the natural completion of a trend that began months earlier. Analysts, primarily Goldman Sachs with its 2026 outlook report, had already mapped out the path: the renminbi would be undervalued by nearly 30% against the dollar according to their valuation models.

Why now?

The yuan’s revaluation is not an isolated event but the convergence of at least four simultaneous factors.

Year-end trade cycle: By December, Chinese export companies follow a well-established practice—converting dollar earnings into yuan to “close the books” and distribute seasonal bonuses. In the first 11 months of 2025, Chinese exports hit record figures, with a trade surplus exceeding 1 trillion dollars for the first time. This seasonal demand for yuan, amplified by extraordinary orders received, has significantly accelerated the appreciation process.

Structural weakening of the dollar: The Federal Reserve cut interest rates three times in 2025, causing the Dollar Index to fall 9.69% from the beginning of the year to 97.97—its worst performance in the last eight years. When the dollar weakens globally, other currencies, including the yuan, almost automatically strengthen. This phenomenon is described by Orient Securities analysts as “passive appreciation.”

Return of capital to Chinese assets: Despite the trade war initiated by Trump and Moody’s downgrade of the US sovereign rating, international funds have started seeking refuge in yuan-denominated assets and Hong Kong stocks. Between May and October 2025, Hong Kong-focused equity funds recorded net inflows of 67.7 billion HKD—completely reversing the trend of 2024.

Confidence in the Chinese economy: The World Bank and the International Monetary Fund simultaneously revised upward their Chinese GDP growth forecasts, confirming the country’s economic potential remains solid. Exports are no longer concentrated in low-cost products but have shifted toward semiconductors (+25.6%), new energy vehicles (+17.6%), and shipbuilding—high value-added sectors that ensure greater resilience of the trade surplus.

The yuan-euro exchange rate and global currency balance

A often overlooked element is that yuan appreciation does not mean “absolute” strengthening. If we look at composite indices—CFETS, BIS, SDR—the renminbi has actually lost value relative to the basket of global currencies, falling below the 100 mark on these benchmarks. This means that while the yuan surges against the dollar (and the yuan-euro exchange rate reflects this dynamic), its overall strength remains moderate. It is a situation where the dollar is the true “loser,” dragging the euro downward as well, albeit with less intensity.

Yuekai Securities experts suggest that this divergence presents an opportunity: the yuan still has room to recover, especially considering that domestic Chinese prices remain competitive while foreign inflation is high.

What does this mean for investors?

The answer depends on the sector and personal strategy.

For A-shares: The positive correlation between yuan appreciation and Chinese stock market performance has been repeatedly verified since 2017. Goldman Sachs calculated that a 0.1% increase in the exchange rate leads to stock valuations rising by 3-5%. This should further support the index’s rise, although effects will vary significantly across sectors.

For traditional export-oriented sectors (textile, appliances): Yuan appreciation makes them less competitive internationally, as their products, expressed in local currency, become more expensive. The impact on profit margins will be tangible.

For “net importer” sectors (energy, agriculture, raw materials): They will benefit directly from revaluation, as international procurement costs decrease. Similarly, companies with significant dollar-denominated debt—technology, shipping, aviation, utilities—will see their financial obligations reduced.

For foreign currency deposits: “Negative yields” are now a reality. Those who converted yuan into dollars to invest in US Treasuries find that, despite a 5% nominal return, exchange losses offset the gains. Even dollar deposits, once considered safe havens, now offer a real loss of purchasing power in yuan terms.

For cross-border consumption: Regular buyers of foreign goods benefit directly—each transaction in dollars or euros implicitly involves a 5-10% discount compared to previous months.

What future for the yuan?

Dramatic movements should not be expected. The Chinese central bank has reiterated for the fourth consecutive year its commitment to keep the yuan’s exchange rate “fundamentally stable at a reasonable and balanced level.” Goldman Sachs forecasts a “gradual and managed” appreciation, not explosive.

Projections for 2026 indicate the dollar will continue to weaken (Bloomberg expects a further 3% contraction of the Dollar Index), which will favor further passive strengthening of the yuan. The level of 6.8 against the dollar is considered a plausible reference point for the coming months.

However, given the complexity of the system—the yuan-euro exchange rate, global dynamics, monetary policy decisions—individual investors should avoid speculating on short-term oscillations. Instead, it is advisable to understand the overall trend, diversify hedging instruments, identify sectors that will benefit from appreciation and those that will suffer, and adjust their portfolios accordingly.

The key is not to predict the exact exchange rate tomorrow but to build a strategy that works in the medium to long term, when the yuan will continue its moderate cycle of revaluation.