Offshore Chinese Yuan Set for Largest Annual Gain Since 2020 on Strong Economic Activity Data

Beijing | EcoPulse24

The offshore Chinese yuan is poised to achieve its largest annual gain since 2020, rising above 6.98 yuan per US dollar during Wednesday trading and staying close to its highest level in 15 months, following unexpectedly positive Chinese economic activity data.

This strong performance came after upbeat Purchasing Managers’ Index (PMI) data, which boosted market confidence in the world’s second-largest economy achieving its 2025 growth targets.

Broad Improvement in Official and Private PMI Data

Official data showed China’s composite PMI climbed to 50.7 in December 2025, its highest in six months, signaling a clearer return to expansion. The official manufacturing PMI returned to growth territory for the first time since March, reaching 50.1 (up from 49.2 in November), while the non-manufacturing PMI (services and construction) rose to 50.2, a five-month high, compared to 49.5 previously.

Similarly, a private survey revealed manufacturing PMI unexpectedly increased to 50.1 in December from 49.9 in November, which was a four-month low, reinforcing signs of a gradual industrial recovery.

Supporting Growth Targets Amid Official Caution

These positive indicators support estimates that China can achieve its roughly 5% economic growth target for 2025, directly impacting yuan performance both onshore and offshore. However, the yuan’s rapid rise prompted Chinese state media to warn against one-way bets, citing risks of excessive speculation. The People’s Bank of China reiterated its commitment to curbing “price overshooting” risks and maintaining FX market stability.

In recent weeks, the central bank has consistently set the daily yuan fixing rate lower than market expectations, aiming to temper sharp gains and ensure more balanced currency movements.

EcoPulse24 Analysis

From EcoPulse24’s perspective, the offshore yuan’s strong performance reflects a tangible improvement in market confidence toward China’s economy, driven by expansionary activity indicators and resilient domestic demand. However, the rise remains subject to clear regulatory constraints, as monetary authorities seek to prevent excessive volatility that could threaten financial stability or export competitiveness.

As a result, the yuan is likely to see a disciplined upward trajectory in the coming period, with Beijing allowing further gradual strengthening as long as it is underpinned by economic fundamentals, while intervening as needed to contain sharp moves. This balance makes the yuan one of the most closely watched Asian currencies heading into 2026, especially as global capital reallocates toward emerging markets.