Editor's note: Shen Jianguang is the chief economist of JD Group. The article reflects the author's opinions and not necessarily the views of CGTN.

Since April of this year, the RMB exchange rate against the US dollar has reversed its depreciation trend and recently broke through the 7 RMB to 1 USD mark. The author believes that the continued expansion of the current account surplus, easing trade conflicts, the undervaluation of the RMB's purchasing power, and the potential for continued depreciation of the US dollar are key reasons to support RMB's rebound this year. These factors are expected to strengthen in 2026, further propelling the RMB's appreciation.

Firstly, by November 2025, China's goods trade surplus, according to customs data, had exceeded $1 trillion for the first time. Meanwhile, service trade deficit in the first half of the year decreased, suggesting that China's current account surplus may reach a record high in 2025. A rising current account surplus has generally increased demand for RMB and strengthened the long-term sustainability of the balance of payments, boosting the RMB exchange rate. The International Monetary Fund predicts continued stable global economic growth in 2026, which is beneficial to China's exports. The country's trade and current account surplus will continue to expand in 2026, and the RMB is expected to continue appreciating.

Secondly, while the US-China trade friction escalated significantly in 2025, China's exports remained remarkably resilient, boosting global investor confidence in China and supporting the RMB exchange rate. Although China's exports to the US did decline sharply, import demand from economies outside the US played a crucial role in stabilizing China's aggregate demand and employment, demonstrating the competitiveness of China's supply chain. Following several high-level trade negotiations between the US and China this year, trade relations are expected to stabilize, and mutual visits by leaders are expected to further improve bilateral relations in 2026. Therefore, China's external environment may be better than that in 2025, and the RMB exchange rate is likely to continue its upward trend.

Thirdly, the support for RMB appreciation in 2026 lies in China's low price levels, which will lead to increasingly stronger purchasing power for the RMB and supporting its nominal exchange rate appreciation against the US dollar. Over the three years from 2022 to 2024, the US GDP deflator rose by 7.1 percent, 3.7 percent, and 2.5 percent, respectively, indicating persistently elevated price levels in the US economy. In contrast, price pressures in China have remained subdued in recent years, resulting in a widening inflation differential between the two economies. The misalignment of the economic cycles of the two countries has led to a depreciation of the RMB against the US dollar, and the RMB's real effective exchange rate remains low. The recent rebound in the RMB exchange rate against the US dollar may indicate that a correction of the undervaluation of the RMB's purchasing power has begun, a trend that is expected to continue in 2026.

Finally, the US dollar is likely to continue depreciating in 2026, which will also push the RMB to strengthen against the US dollar. From a perspective of economic fundamentals, the US job market has recently shown signs of weakness, and the high valuations of US stocks have triggered widespread concerns among global investors. The Federal Reserve has cut interest rates three times since September of this year; and the market generally expects the Fed to continue cutting rates in 2026, which may further weaken the US dollar. Furthermore, market concerns about the sustainability of US fiscal policy and the independence of the Federal Reserve may damage the credibility of the US dollar and increase pressure on its depreciation. The recent rise in gold and commodity prices may reflect these market concerns. A weaker dollar will benefit the RMB.

Overall, influenced by the four factors mentioned above, the RMB will continue to appreciate in 2026. In fact, if the US dollar remains weak and international commodity prices rebound, a moderate appreciation of the RMB against the US dollar will mitigate the impact of rising raw material prices on the Chinese economy. At the same time, RMB appreciation can increase the international purchasing power of Chinese residents, promoting China's external rebalancing. For example, the number of Chinese residents traveling abroad in 2026 may increase. Of course, given the uncertain recovery in domestic demand, export competitiveness remains a key policy consideration. The RMB does not have much room for significant appreciation against the US dollar; a moderate and sustained rise to around 6.8 should be the main theme of the RMB exchange rate in 2026.

（Cover via VCG）