Against the backdrop of heightened volatility in the U.S. Dollar Index due to geopolitical tensions, the renminbi has staged a remarkable “independent rally.” This has become the norm since the Lunar New Year: both the onshore and offshore RMB have fluctuated within a strong 6.83–6.89 range against the U.S. dollar, representing a cumulative appreciation of more than 5% from around 7.3 at the end of last year.

Looking over a longer time frame, the appreciation cycle that began in April 2025 has pushed the RMB to its highest level in nearly three years. This time, however, the focus of market discussion is no longer on “defending 7.0,” but on a different theme: the growing resilience of exports to currency appreciation.

The “Triple Drivers” of Appreciation

First Layer: A Fundamental Shift in the Central Bank’s Stance

Since 2024, the trend of the RMB midpoint has undergone three turning points:

Before April 2025: Stabilizing the currency to prevent excessive depreciation;
April 2025 to November 2025: Supporting or even proactively guiding RMB appreciation;
After November 2025: Implementing counter-cyclical adjustments to prevent overly rapid one-way appreciation.

This means that for most of 2025, the central bank not only refrained from suppressing appreciation, but at certain stages actively guided it higher.

It was not until late February this year, when appreciation accelerated too quickly, that the central bank applied a “light brake.” On February 27, it announced that effective March 2, the foreign exchange risk reserve ratio for forward FX sales would be reduced from 20% to 0%, aiming to lower corporate FX purchase costs and cool one-way appreciation expectations.

The signal was clear and consistent: the central bank does not intend to reverse the appreciation trend, but rather to temper overheated one-sided expectations and maintain a healthy pace of strengthening. As PBOC Governor Pan Gongsheng stated, China neither needs nor intends to gain trade competitiveness through currency depreciation. The country remains committed to allowing the market to play a decisive role in exchange rate formation, while using macroprudential tools when necessary to correct herd behavior in specific circumstances.

Second Layer: The Concentrated Release of Corporate “Stored FX Holdings”

During the past three years of RMB depreciation, China’s trade surplus continued to expand. However, exporters were reluctant to convert their foreign exchange earnings into RMB, resulting in the accumulation of massive “stored FX holdings.”

According to Guosheng Securities Chief Economist Xiong Yuan, since 2022, accumulated unconverted foreign exchange funds have reached approximately $1.13 trillion, with most holding costs concentrated in the 7.0–7.2 range.

Once the RMB appreciation trend became established and the exchange rate broke below the 7.0 threshold, these “dormant” foreign exchange holdings began to be converted in large volumes, forming a self-reinforcing cycle of:

Appreciation → FX settlement → Further appreciation.

Record-high foreign exchange settlement surpluses in December 2025 and January 2026 were a concentrated reflection of this dynamic.

Third Layer: External “Tailwinds” and “Disturbances”

Since early 2025, the U.S. Dollar Index has weakened significantly, ushering in a “weak dollar” trade that provided favorable external conditions for non-dollar currencies to appreciate broadly.

Recently, escalating U.S.–Iran tensions triggered a temporary rebound in the dollar and passive RMB depreciation. However, the RMB’s decline was smaller than the dollar’s gain, indicating that the fundamental appreciation trend remains intact. The dollar’s impact is likely only a marginal disturbance.

Another external variable deserves attention: tensions in the Middle East have pushed oil prices above $110 per barrel, which may influence the Federal Reserve’s rate-cut trajectory and, through movements in the Dollar Index, indirectly affect the RMB. This constitutes a variable that warrants continued monitoring.

Appreciation Is No Longer an Export Nightmare

In traditional economic theory, “currency appreciation suppresses exports” is often regarded as a rule of thumb. This time, however, China’s exports appear to have developed remarkable resilience to appreciation.

Data from the General Administration of Customs show that in 2025, China’s goods exports reached RMB 26.99 trillion, up 6.1%, with a trade surplus of RMB 8.51 trillion. Why have exports remained strong even as the onshore RMB approaches 6.83? An in-depth analysis by China Industry News provides the answer:

First, the export structure has upgraded from “low-price competition” to “technology competition.” High-end manufacturing and high-tech products — such as electronics, aerospace components, and automobile manufacturing — account for an increasing share of exports. In 2025, China’s high-tech product exports grew by 13.2%, significantly outpacing overall export growth.

Second, enterprises have significantly strengthened their foreign exchange risk management capabilities. More exporters are actively using forward contracts, options, and other financial instruments to manage currency risk. This “pre-emptive hedging” strategy effectively reduces the direct impact of exchange rate fluctuations on corporate profits.

Third, RMB internationalization provides a natural hedging channel. The proportion of cross-border trade settled in RMB continues to rise. For enterprises that use RMB for direct settlement, exchange rate volatility risks are naturally mitigated at the settlement stage.

The author believes that in 2026, the RMB is likely to trade within a range of 6.6 to 7.0, with 6.6 potentially serving as a short-term appreciation ceiling and a central level around 6.8. With the RMB currently approaching 6.8, it may continue fluctuating within this range for some time. Nevertheless, external variables should not be ignored. The duration of U.S.–Iran tensions, oil price trends, and the Federal Reserve’s rate-cut pace will all influence the Dollar Index and, in turn, be transmitted to the RMB.