RMB Appreciation No Barrier to Exports: A New Script for China's Exchange Rate

The global surge in artificial intelligence (AI) investment and enhanced industrial competitiveness are driving China's foreign trade to grow beyond expectations. As of May, China's monthly total import and export value has exceeded 4 trillion yuan for three consecutive months, with May's export growth maintaining double-digit expansion. Price increases in AI-related electronic products such as chips, coupled with a rebound in exports to the US, have become the main drivers of export growth. The market generally expects exports to maintain strong momentum in June.

While exports remain robust, the RMB exchange rate is telling a different story. Since the second half of last year, exports have maintained high prosperity, during which the RMB exchange rate has gradually strengthened. Year-to-date, while the US Dollar Index has oscillated at high levels, the onshore RMB against the USD has appreciated nearly 3%, and the CFETS RMB Exchange Rate Index, which measures the RMB's value against a basket of currencies, has risen nearly 3.4%. In the past, RMB appreciation often raised concerns about eroding export competitiveness, but looking at recent exchange rate cycles, exports are gradually becoming "desensitized" to exchange rate movements.

Behind the RMB exchange rate's rewriting of the old narrative lies the mutual reinforcement of trade surplus and appreciation expectations. Supported by strong exports and other factors, last year's goods trade settlement surplus reached $521.4 billion, and in the first four months of this year alone, this surplus amounted to $243.7 billion, nearly 47% of last year's total. Increased foreign exchange settlement for goods trade and stable foreign exchange sales volumes have driven RMB strengthening through shifts in forex market supply and demand. It can be anticipated that in the current appreciation cycle, export resilience and RMB strengthening are likely to move in tandem.

China's manufacturing industry has moved beyond the stage of trading low prices for market share. In high value-added product segments, technological and product advantages often outweigh price advantages, becoming the core competitiveness that enables Chinese-made mid-to-high-end products to establish themselves in global markets, and the impact of exchange rate movements on product sales continues to diminish. However, while the overall foreign trade situation is improving and the structure is being further optimized and upgraded, it should also be noted that labor-intensive industries are facing multiple pressures including rising raw material prices and RMB appreciation. Some traditional foreign trade enterprises are experiencing difficulties, which requires both enterprises themselves and industrial policies to actively address, promoting the upgrading and renewal of traditional industries under market-oriented guidance.