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Chinese exporters are accelerating their efforts to convert foreign currency payments as the yuan gains strength against the US dollar, recently reaching a 14-month high. The surge in year-end currency exchanges is adding upward pressure on the currency. Smaller exporters, who typically prefer to convert earnings promptly without utilizing hedging strategies, are feeling the impact of the yuan’s recent appreciation. With the yuan strengthening, converting the same dollar amount now results in fewer yuan, leading to potential foreign exchange losses. Attempts to offset these losses by raising prices could harm their competitiveness in the global market.
An international trader based in Zhejiang province mentioned that his company has sped up currency conversions to avoid losses caused by exchange rate fluctuations. “We didn’t always convert immediately, but lately, we exchange as soon as we receive the money, especially for larger orders,” he explained.
On December 15, the onshore and offshore yuan both surpassed 7.05 against the US dollar. The onshore yuan reached as high as 7.0471, while the offshore yuan touched 7.04263—its highest since October 2024. As of 9:20 a.m. today, the offshore yuan traded at 7.0305, and the onshore rate remained steady at 7.0366 from the previous day.
According to Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, the yuan’s rally is driven by two main factors. First, the US Dollar Index — which measures the dollar’s value relative to a basket of currencies — fell below 100 around the Federal Reserve’s December 11 rate decision, prompting a broad appreciation of other currencies, including the yuan.
Second, year-end tends to see an increase in corporate foreign exchange conversions, providing seasonal support to the yuan. The recent rally may also be encouraging companies to accelerate their previously delayed conversion demands.
Market watchers expect the yuan to stay relatively strong this week. However, a rapid move toward a rate of 7 per dollar seems unlikely, as the People’s Bank of China is likely to intervene to prevent sharp currency fluctuations, according to the latest weekly report from cross-border payment solution provider.
Former Chongqing mayor Huang Qifan predicted that over the next decade, the dollar-yuan exchange rate could fall from below 7 to about 6, suggesting the yuan will remain relatively strong.
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