Reported By Lee, Chen-Li（Daniel）
As China’s services trade structure continues to improve and economic data show signs of recovery, the renminbi staged a notable rebound toward the end of 2025, officially emerging from years of depreciation pressure. Market participants broadly view this appreciation not merely as a technical correction in exchange rates, but as a reflection of deeper structural adjustments within China’s economy and a gradual restoration of external confidence.
Official data show that China’s services trade deficit narrowed significantly in the first 11 months of the year, with export growth clearly outpacing imports. Knowledge-intensive services and travel-related services performed particularly well.
The strengthening momentum in services exports indicates that China is no longer relying solely on traditional manufacturing, but is steadily transitioning toward a higher value-added, consumption-oriented services economy, providing medium- to long-term support for the currency.
Against this backdrop, the renminbi appreciated by more than 4% against the U.S. dollar over the full year, marking its strongest annual performance in nearly five years. The move not only ended three consecutive years of annual depreciation, but also allowed the currency to firmly reclaim the key level of 7 per dollar. Trends in both onshore and offshore markets have become increasingly aligned, signaling more stable market expectations and improving investor sentiment toward Chinese assets.
Notably, the appreciation has not been disorderly. While the official daily fixing has continued to send moderately supportive signals, actual settings have remained below market expectations.
This suggests that policymakers are adopting a stance of “allowing appreciation while strictly managing the pace.” Such an approach helps stabilize market confidence while avoiding excessive upward pressure that could undermine export competitiveness or trigger excessive short-term capital inflows.
Recent improvements in both manufacturing and non-manufacturing indices, which have returned to expansionary territory, have further strengthened the renminbi’s fundamental support. A recovering economic outlook not only encourages higher corporate foreign-exchange settlement demand, but also reduces speculative positioning that had previously bet on one-way depreciation, helping currency fluctuations become more rational.
Overall, the significance of the renminbi’s appreciation now extends beyond the foreign-exchange market itself. It reflects a combination of services trade transformation, domestic demand recovery and enhanced policy management capacity. Looking ahead, if the economic recovery maintains momentum, the renminbi is likely to remain on a firmer footing.
However, its trajectory is expected to remain steady and gradual, as policymakers seek to balance export stability, financial conditions and cross-border capital flows.