China Greenlights Yuan Gains at Year-End With Measured Approach
By Tian Chen and Iris Ouyang
December 31, 2025
As 2025 draws to a close, China has signaled a cautious approval for the yuan’s appreciation, delivering a tacit “New Year’s gift” to yuan bulls while carefully managing the pace of gains. This approach aims to strengthen the currency without disrupting export competitiveness or provoking an influx of speculative hot-money flows.
The People’s Bank of China (PBOC) set the yuan’s daily reference rate on December 31st at its highest level since September 2024. This move followed a recent key milestone where, for the first time in nearly 16 months, the yuan breached the psychologically important 7-per-US dollar threshold in the onshore market, which is more tightly controlled by Chinese authorities.
This breakthrough in the onshore market comes shortly after the yuan exceeded the same level last week in the largely unrestricted offshore trading arena, highlighting growing demand for the Chinese currency on global markets.
By allowing the currency to appreciate steadily while maintaining oversight, Chinese regulators appear to be striking a balance: fostering confidence in the yuan’s strength as a reflection of economic resilience, while preventing sudden surges that could undermine export sectors and spark unstable capital movements.
The measured strengthening of the yuan at the year-end sets the stage for continued scrutiny of the currency’s trajectory in 2026, as China navigates complex economic conditions amid global uncertainties. Investors and exporters alike are keenly watching how this delicate management of the yuan’s value will unfold in the months ahead.
Background:
The yuan’s value is controlled through a daily reference rate set by the PBOC, which influences its trading bands in the onshore market. The controlled appreciation indicates a strategic move amid shifting global financial landscapes and domestic economic considerations.
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