Experts Debate RMB Exchange Rate Trends and Export Sustainability Amid K-Shaped Recovery

Recently, the CMF Macroeconomic Monthly Data Analysis Conference, jointly hosted by the National Academy of Development and Strategy at Renmin University of China, the School of Economics at Renmin University, and China Chengxin International Credit Rating Co., Ltd., was held online. Experts engaged in heated discussions on RMB exchange rate trends and the sustainability of future exports amid the K-shaped recovery.

A K-shaped recovery refers to a phenomenon in which different industries and groups experience significant divergence during the economic recovery process. Guan Tao, Global Chief Economist at BOC International, noted that the RMB is currently performing strongly on both bilateral and multilateral exchange rate bases, and the market is once again seeing discussions about a new cycle of RMB appreciation. However, looking back at the so-called "new cycle" from the second half of 2020 to early 2022, the RMB exchange rate trajectory was influenced by multiple factors including the relative economic performance of China and the U.S., U.S. dollar movements, and Federal Reserve policy — it cannot be simply extrapolated in a linear fashion.

He identified three major bullish factors for RMB appreciation this year. First, the macro narrative has notably improved, with more attention now focused on moderate price recovery, technological innovation, new consumption, and other emerging trends; the K-shaped recovery provides both sentiment and fundamental support for the RMB. Second, the external trade and economic environment has shown signs of easing. Third, external demand has been robust. China's trade surplus reached USD 576 billion in the first half of the year; although slightly lower year-on-year, it remains the second-highest for the same period in history. Global AI capital expenditure growth has driven relatively rapid growth in China's imports and exports.

At the same time, he cautioned that considerable uncertainties remain. First, the outlook for U.S. dollar interest rates and exchange rates is unclear, and the negative China-U.S. interest rate spread may persist or even widen. Second, China remains in the transition pains of shifting from old to new growth drivers — issues such as supply strength versus demand weakness, demographic structural changes, and risk prevention in key areas persist. Third, the external environment is deepening in its impact, with geopolitical and trade fragmentation risks still present. Fourth, purchasing power parity offers limited guidance for short-term exchange rate movements, and one should not simply deduce from it that long-term RMB appreciation is inevitable. Fifth, RMB appreciation has a macro tightening effect. With China currently running a trade surplus and gradually building net private external claims, RMB appreciation could generate exchange losses through both trade and financial channels, making the market more sensitive to appreciation.

Guan Tao argued that whether the RMB appreciates or depreciates, there are both advantages and disadvantages — there is no absolute good or bad, nor should excessive value judgments be made. For business entities, it is essential to strengthen risk-neutral awareness, control currency mismatches and exchange rate exposures, avoid betting on one-sided exchange rate movements, and refrain from blindly following market narratives. They should establish and improve exchange rate risk management mechanisms and make reasonable use of derivative instruments to hedge risks. For regulatory authorities, efforts should be made to enhance the resilience of the foreign exchange market, stabilize market expectations, keep the RMB exchange rate broadly stable at a reasonable and equilibrium level, strengthen capital flow monitoring and early warning systems, accelerate the development of the foreign exchange market, enrich trading instruments and participants, and better leverage the "shock absorber" role of exchange rate flexibility in absorbing internal and external shocks.

Ding Zhijie, former Dean of the School of Finance at the University of International Business and Economics, believes that given the considerable uncertainties in the global economic environment, it is not advisable to make firm judgments about the direction of the RMB exchange rate. The recent strength of the RMB has been driven by a combination of improving domestic fundamentals and a weakening U.S. dollar. Looking ahead, the resilience of China's exports, the trajectory of Fed policy, and global geopolitical developments will all affect RMB volatility.

Yan Yan, Director of Research at China Chengxin International, pointed out that China's export structure is undergoing optimization and upgrading, with the share of high-tech products steadily increasing, providing a buffer for exports to withstand external shocks. In the short term, China's export competitiveness remains strong, but attention must be paid to potential demand-side challenges posed by the global economic slowdown. At the policy level, continued efforts to stabilize foreign trade and foreign investment will help facilitate the smooth operation of cross-border capital flows, providing support for RMB exchange rate stability.