The offshore yuan strengthened to around 7.29 per dollar on Wednesday, gaining momentum as renewed optimism swept through the markets following commitments from Chinese regulators to maintain market stability.
Offshore yuan strengthens
The State Administration of Foreign Exchange (SAFE) pledged to curb excessive exchange rate fluctuations and prevent abnormal cross-border money flows, signaling its intent to ensure greater control over currency dynamics. This move is part of a broader effort to stabilize the yuan amidst ongoing global uncertainties. SAFE also vowed to enhance regulatory oversight and expand its policy toolkit, focusing on countering pro-cyclical market behavior, which often exacerbates market volatility during times of economic stress.
The positive sentiment was further bolstered by comments from US President Donald Trump, who suggested that the 145% tariff on Chinese goods “will come down substantially, but it won’t be zero.” This indication of a potential easing in trade tensions between the US and China helped lift market confidence, as it signaled a potential reduction in the risk of escalating tariffs. His remarks followed statements from Treasury Secretary Scott Bessent, who expressed optimism about efforts to ease the trade standoff, though he also cautioned that negotiations with China would be long and complex, with no immediate breakthrough expected.
IMF revises global economy growth
At the same time, the International Monetary Fund (IMF) revised its 2025 GDP growth forecast for China downward to 4%, a reduction from the 4.6% projection made earlier in the year. This downgrade came amid signs of continued pressure on China’s economy, as the country grapples with structural challenges and the ongoing trade conflict. The revised forecast falls short of China’s official growth target of around 5% for 2025, which had already been set against the backdrop of slowing global demand and domestic economic challenges. While the outlook remains cautious, analysts believe that China’s focus on market stability, along with any easing of trade tensions, could provide a platform for a more stable recovery later in the year.
Overall, the offshore yuan’s strengthening was seen as a sign that market participants are cautiously optimistic that both China and the US are moving towards de-escalation, though uncertainties surrounding future trade policies and global growth remain. The currency’s performance continues to be closely tied to developments in both the global trade landscape and China’s domestic economic policies, making it a key barometer for investor sentiment in the months ahead.
