Yuan Ends Year Strong, Snapping Three-Year Losing Streak
By Wang Shiyu
The Chinese yuan closed out 2025 with its strongest performance in over two years, breaching the key 7-per-dollar threshold and logging a 4.2% annual gain — its first in four years.
The onshore yuan ended the year at 6.9890 per U.S. dollar, buoyed by a softening greenback, renewed concerns over U.S. fiscal health, and unexpectedly resilient Chinese exports. The currency’s rebound marks a notable shift in sentiment after a multiyear slump fueled by China’s property market troubles and a yawning interest-rate gap with the U.S., which saw the yuan lose nearly 14% of its value from 2022 through 2024.
On the final trading day of 2025, the currency opened at 6.9923 and broke below the 6.99 mark within the hour. It ended the session — at 4:30 p.m. local time — 11 pips stronger than the previous day’s close, which had already marked its first finish below 7 since May 2023. The more freely traded offshore yuan had crossed that level on Dec. 24, and hovered near 6.982 late Wednesday.
The recovery ends a slide that had dragged the currency from 6.37 to 7.29 against the dollar over the past three years. Zhou Junzhi, chief macro analyst at China Securities Co. Ltd., attributed the previous decline to lingering pessimism from the real estate crisis and sluggish domestic demand, which encouraged capital outflows in search of higher yields abroad.
But 2025 brought a shift. The U.S. Dollar Index slumped more than 9% to around 98.3, pressured by inflation uncertainty, widening deficits, and trade policy frictions under President Donald Trump. In contrast, China’s export engine held up, delivering a record trade surplus of more than $1 trillion in the year’s first 11 months.
That surplus has built up a reserve of foreign earnings poised for yuan conversion. Wen Bin, chief economist at China Minsheng Bank Corp. Ltd., noted that year-end typically sees increased demand for settling such earnings. He said the data suggest that large-scale conversions have yet to materialize — implying more upside potential for the yuan as exporters shift their holdings.
Looking forward, analysts see room for structural appreciation. Yi Huan, chief macro economist at Huatai Securities Co. Ltd., said the yuan’s revaluation may bolster global appetite for Chinese assets, fueling a virtuous cycle of capital inflows.
Zhou at China Securities added that markets appear to be reassessing China’s tech and manufacturing advantages as property-related drags fade. She expects the exchange rate to adjust further as domestic consumption and investment continue rebalancing.
Some remain cautious. Guan Tao, global chief economist at BOC International (China) Co. Ltd., urged restraint before declaring a new currency cycle. Speaking at the China Wealth Management 50 Forum, Guan said officials are calling for better coordination between domestic policy and “external trade struggles,” underscoring the still-volatile global environment.
Contact editor Han Wei (weihan@caixin.com)
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