A Chinese banker prepares to count a bundle of US dollars and a bundle of 100 Chinese yuan bills at a bank in Hefei, eastern China's Anhui province, on March 9, 2010.
STR/AFP | Getty Images
Chinese authorities are grappling with a weakening yuan as they expect US President-elect Donald Trump to carry out his tariff threats and global investment banks predict the currency will hit record lows.
Major investment banks and research firms expect the offshore yuan to fall to an average of 7.51 yuan to the dollar by the end of 2025, according to CNBC calculations of forecasts from 13 institutions.
This is the lowest level in the currency's history, according to LSEG data dating back to 2004.
Chinese currency prediction against US dollar
| End of 2024 | End of 2025 | |
|---|---|---|
| UBS | 7.30 | 7.60 |
| BNP Paribas | 7.70 | |
| barclays | 7.25 | 7.50 |
| JP Morgan | 7.30 | 7.50 |
| BMI | 7.30 | 7.60 |
| société generale | 7.10 | |
| morgan stanley | 7.30 | 7.60 |
| goldman sachs | 7.25 | 7.50 |
| macquarie group | 7.25 | 7.38 |
| capital economics | 7.30 | 8.00 |
| Nomura | 7.50* | |
| ING | 7.20 | 7.30 |
| oxford economics | 7.40 |
sauce: Investment bank, research company. *Expiration date: August 2025
President Trump announced on Monday that he would impose an additional 10% tariff on all Chinese goods imported into the United States. According to the post on his social media platform Truth Social. Trump had already promised during his campaign to impose tariffs of more than 60% on Chinese goods.
“All else being equal, U.S. tariffs would lead to a stronger dollar…Currencies of countries with close trade ties to the U.S. would experience the largest currency adjustment,” said Jonas Goltermann, deputy chief market economist at Capital Economics. I will accept it,” he said.
Mithul Koteka, head of Asian foreign exchange and emerging market macro strategy at Barclays, predicts that the yuan will have to rise to a level of 8.42 yuan against the dollar to fully factor in the 60% tariffs on all Chinese products. It is said that it is necessary.
The offshore yuan has fallen more than 2% since the Nov. 5 U.S. presidential election, and was last traded at 7.2514 yuan on Thursday.
There is much more uncertainty this time than there was in President Trump's first term, given the size of the tariff threat and the size of the trade imbalance.
Ju Wan
BNP Paribas, Head of Greater China Currency and Interest Rate Strategy
In 2018, the first wave of U.S. tariffs on Chinese goods during President Trump's first term caused the yuan to depreciate by about 5%. According to ReutersIt fell a further 1.5% the following year as trade tensions escalated.
China maintains strict control over the value of the renminbi onshore by setting the daily renminbi price and allowing trading within 2% of that price. Offshore trading is more market-driven.
Ju Wang, head of Greater China foreign exchange and interest rate strategy at BNP Paribas, said that given the size of the threat of tariffs and the size of the trade imbalance between China and the United States, “this time, “There's a lot of uncertainty.” .
“Perceived inconsistency in the new U.S. administration's policy statements will also increase uncertainty,” Wang said, adding that the People's Bank of Japan has “implemented countermeasures to prevent an overshoot in the domestic currency's upward value.” We hope that the government will take “cyclical measures.”
People's Bank of China conundrum
Chinese authorities face tough demands to prevent the yuan from depreciating too much while trying to get the economy back on track. Economists said a sharp depreciation of the yuan risks exacerbating capital outflows and sending shockwaves through financial markets.
BMI Chief Economist Cedric Chehab said, “The renminbi is already approaching the level of 7.3 to the dollar that the authorities are trying to protect,'' and if it breaks through this level, it will cause volatility in China's financial markets. The PBOC will probably want this to happen. avoid. “
The problem, however, is that the People's Bank of China may not want to raise interest rates to stem the decline in the yuan. Chehab added that interest rate hikes would weigh on already weak economic growth.
The central bank has supported the value of the onshore yuan this year by capping the daily benchmark rate at 7.20 to the dollar.
This month, the central bank also maintained some key policies. In order to stabilize the currency, policy interest rates will remain unchanged.
The exchange rate will remain “essentially stable at an adaptive and balanced level,” central bank officials said. statement last week.
Wei Liang Zhang, global currency and credit strategist at DBS Bank, said the stabilization efforts would to some extent stem expectations of currency depreciation and support broader Asian currency stability. If the market softens, we can expect economic recovery.”
The US dollar index narrowed its gains. The stock has broken off from a two-year high of 108.09 set last Friday after President Trump announced he would nominate Scott Bessent to be the next US Treasury secretary.
Bessent, a hedge fund manager, has supported Trump's tariffs while advocating a “layered” approach. “These policy positions should help contain trade risks, create room for negotiation, and ultimately curb excessive renminbi outflows,” Zhang added.
