MNI: China's High-end Exports To Weather Yuan Appreciation

An increased focus on high-end manufacturing and technology goods is expected to cushion China’s export sector from moderate yuan appreciation, advisors and analysts told MNI, with some noting that around CNY6.7 against the U.S. dollar could mark a critical threshold.

“Moderate appreciation within the range of 6.75-7.0 should have a manageable impact on China’s overall exports, mainly affecting low-end, low-margin sectors,” said Shen Guobing, professor of world economy and international finance at Fudan University, warning any appreciation of about 6% to circa 6.7 within the year would be a critical point.

Since April 2025, the yuan has strengthened nearly 7% against the U.S. dollar to around 6.8, while the CFETS RMB Index has risen about 1.3%. This came as China’s export surplus hit a record nearly USD1.2 trillion last year, followed by 14.7% year-on-year export growth in Q1.

“The real effective exchange rate of the yuan has not risen significantly against the dollar like the nominal one due to high U.S. inflation, which has reduced the dollar’s purchasing power,” said Zhang Lin, deputy director at the Far East Credit Rating Research Institute, adding the actual price of Chinese goods in global markets has not become materially more expensive.

Tu Yonghong, finance professor and deputy director of the International Monetary Institute at Renmin University, attributed the resilience partly to the yuan’s increased use in trade settlement and companies’ improved ability to hedge FX risks through derivatives. Nearly 30% of all cross-border settlements for goods trade are conducted in yuan, with the share rising particularly in trade with countries that have signed bilateral currency agreements, such as those in Central Asia, ASEAN and BRICS economies, though still below the roughly 50% level seen in developed economies, Tu said.

STRUCTURAL ADVANTAGE

With a rising share of high-end manufacturing and high-tech exports providing greater resilience to currency fluctuations, Zhang noted ASEAN’s industrial upgrading and geopolitical instability will further strengthen China’s structural advantage in equipment manufacturing and new energy products, making it difficult to reverse over the medium to long term. 

Chinese companies’ accelerated direct investment and relocation of production capacity to Southeast Asia will continue to drive demand for Chinese intermediate goods, while the Middle East conflict creates opportunities for exports of electric vehicles and power equipment, he continued. 

Shen said the conflict and potential additional U.S. tariffs would weigh on China’s export growth in the short term, but resilient high-end manufactured goods exports, diversified markets and cost advantages would provide a strong offset. He estimated net exports would contribute 0.8-1.5 percentage points to annual GDP growth, compared with 2025’s 1.6 pp contribution. (See MNI INTERVIEW: Geopolitics Add To China Export Uncertainty)

Zhang expects marginal easing after the upcoming meeting between Xi Jinping and Donald Trump, with exports to the U.S. stabilising at 10-11% of total exports after falling below 10% in Q1. He said 70-80% of the decline in exports to the U.S. has been offset by increased shipments to Vietnam and the EU, while stronger exports to Belt and Road countries have fully absorbed the remainder of the shortfall caused by weaker U.S.-bound shipments through geographic reallocation.

Net exports will contribute about 15% to 2026 growth, down from more than 30% in 2025, due to faster import growth driven by rising global commodity prices and stronger demand for foreign high-tech products, he estimated. 

YUAN TRAJECTORY

While the elevated trade surplus will help support the currency, Tu warned that the yuan’s future path still faces uncertainty as it is mainly influenced by capital markets and expectations. (See MNI INTERVIEW: China 2026 Export Growth To Support Yuan)

In addition to the U.S. Federal Reserve’s policy stance, the duration of the war and the future direction of sovereign wealth funds in Middle Eastern countries will need close monitoring, she said, adding that the yuan is likely to fluctuate within a 6.5-7.0 range. China still lacks enough profitable industries to absorb capital inflows of that scale, while speculation in the stock market is discouraged, she added.

Shen said the yuan is unlikely to appreciate significantly over the next one-to-two years, but is likely to trend moderately stronger over the medium to long term, with difficulty breaking through the 6.5 level.