The RMB exchange rate has risen to a three-year high

In the foreign exchange market, the RMB exchange rate has remained strong. The RMB/USD exchange rate is at a three-year high. This is due to the fact that surplus Chinese products, such as automobiles, are exported overseas at low prices, leading to a larger trade surplus and increased demand for converting foreign currency into RMB. Compared to Japan and South Korea, China has shown resilience to high oil prices, which has also driven capital inflows. However, excessive RMB appreciation could affect the domestic economy, and China has shown a zero-tolerance attitude.

At the end of February, the RMB/USD exchange rate rose to 6.831 yuan per dollar, reaching the level of RMB appreciation and dollar depreciation since April 2023. Entering March, the exchange rate has generally remained in the 6.85-6.90 range, with the RMB appreciation trend unchanged. Compared to the end of 2025, the RMB/USD exchange rate has appreciated by 1%, and compared to the end of 2024, it has appreciated by 6%.

This is driven by a trade surplus. The trade balance is calculated by subtracting imports from exports. A higher export value results in a trade surplus, while a higher import value results in a trade deficit. According to data from China’s General Administration of Customs, China’s trade surplus in 2025 increased by 20% year-on-year, reaching US$1.1889 trillion, exceeding the US$1 trillion mark for the first time.

In 2025, the tariff dispute between China and the Trump administration intensified, leading to a 20% decline in exports to the US. Against this backdrop, China increased its exports of products such as automobiles to Southeast Asia and Europe, further expanding its trade surplus.

Japan’s trade surplus peaked in 1998, at approximately US$107 billion. China’s trade surplus in 2025 is 11 times that of Japan.

In January and February 2026, China’s trade surplus continued to show positive year-on-year growth. Naoto Saito, chief researcher at Daiwa Institute of Research, analyzed: “Goods that China cannot absorb domestically are exported overseas at low prices, resulting in Chinese products having extremely strong price competitiveness in the international market.” In December 2025, the amount of foreign currency converted into RMB through banks reached $317 billion, setting a new monthly record. Goldman Sachs predicts that the RMB exchange rate still has room for appreciation in the next year, potentially reaching 6.7 yuan.

Economically, China’s resilience to rising oil prices is one reason why the RMB is more favored among East Asian currencies.

A report compiled by ING (Netherlands International Group) based on data from its Energy Institute shows that China’s dependence on crude oil and other commodities for energy consumption is only 20%, lower than Japan and South Korea, whose dependence reaches 40%. Coal, with its slow price increases, accounts for as much as 60% of China’s energy consumption, meaning the impact of rising oil prices caused by tensions in the Middle East on China is relatively small.

In fact, since the US and Israel attacked Iran at the end of February, the yen has fallen 2% against the dollar, and the won has fallen 3%. The RMB’s decline has been less than 1%, showing relative strength despite the overall strengthening of the US dollar. However, within China, the sluggish real estate market has led to a prolonged economic slowdown, resulting in weak demand from businesses and households and increasing deflationary pressures. If the RMB appreciates further, exports may decrease. Since December 2025, the People’s Bank of China (PBOC) has set the central parity rate, which serves as the benchmark for USD/CNY trading, in a direction that favors RMB depreciation on many trading days.

In over 90% of trading days since December, the central parity rate has been set at a level where the RMB is lower and the USD is higher compared to the previous day’s closing price, thus having a certain restraining effect on RMB appreciation. PBOC Governor Pan Gongsheng emphasized in March that the RMB exchange rate “will remain basically stable at a reasonable and balanced level.”

China has set its 2026 real economic growth target at “4.5%~5.0%”, a downward revision from the previous target of around 5%. Yui Tamura, senior chief economist at Mizuho Research & Technology, points out, “The revised target is not easy to achieve.” Tamura believes that considering the impact on exports, “(China’s) monetary authorities do not want the RMB to appreciate rapidly.”