China Emphasizes Yuan Stability as a Key Focus for 2026

On December 12, it was emphasized that maintaining the stability of the Chinese yuan exchange rate at a reasonable and balanced level remains crucial for the fourth year in a row, as highlighted during the recent annual Central Economic Work Conference.

A statement issued after the two-day gathering in Beijing affirmed that the yuan’s exchange rate would generally stay stable within an adaptable and balanced range. The statement also noted plans to align macroeconomic policies more closely and enhance expectations management strategies to strengthen public confidence.

This conference, hosted by the Central Committee of the Communist Party of China and the State Council, marks the year’s end and acts as a key indicator for assessing the nation’s economic outlook while outlining policy measures for the upcoming year.

“Due to the combined effects of both domestic and international uncertainties, the yuan is expected to experience fluctuations both upward and downward next year,” stated Guan Tao, chief economist at a major Chinese financial institution.

The official stance indicates a policy aimed at avoiding excessive depreciation or appreciation of the yuan. Guan explained that this approach would help prevent widespread market speculation and foster a stable financial environment that supports ongoing economic recovery.

The strategy to stabilize the exchange rate centers on averting market-driven, one-sided expectations, according to Ming Ming, chief economist at a leading securities firm. Following rate cuts by the Federal Reserve, the yuan is projected to remain relatively strong against the dollar by year’s end.

Ming also noted that the exchange rate might find it difficult to drop below 7, though seasonal factors related to year-end settlements could cause temporary deviations.

The relative weakness of the U.S. Dollar Index is expected to persist into next year, potentially providing a supportive external environment for the yuan. In this context, the yuan might see moderate appreciation in 2026, Ming suggested.

If the domestic economy maintains its internal growth momentum into the following year, and external factors align favorably, it could lead to a significant move below the 7 mark against the dollar, Ming added.

Sun Binbin, the chief economist at Caitong Securities, expects the yuan to continue its appreciation trend, with an initial threshold of around 7 in the first half of next year, possibly falling further in the latter half.

He attributed this to the ongoing internationalization of the yuan and its increased adoption in areas like foreign trade and outbound investments. While a steady gain is beneficial for the long term, Sun cautioned that rapid appreciation could hamper export growth.