As the year draws to a close, tension is mounting in the foreign exchange markets. All eyes are on whether the Chinese yuan will break through the critical psychological barrier of 7 against the US dollar before year-end. This development holds significant implications not only for market participants but also for the operational decisions of export-oriented enterprises. In the face of complex and volatile exchange rate movements, how should businesses assess the situation and formulate appropriate foreign exchange settlement strategies?
Annual Review of Yuan Exchange Rate: From Unilateral Depreciation to Strong Rebound
The yuan exchange rate has experienced dramatic fluctuations throughout 2025. The offshore yuan began the year at 7.27 against the US dollar and hit its annual low of 7.42879 on April 8, when market sentiment toward the yuan remained cautious. However, as expectations for Federal Reserve rate cuts grew and the US dollar retreated from its highs, the yuan staged a remarkable comeback. On September 17, the offshore yuan broke through the 7.1 threshold, marking a decisive turnaround. Despite some rebound in the US dollar index since October, the yuan has generally maintained a steady appreciation trend, demonstrating notable resilience. If this trend continues through year-end, the yuan could achieve its strongest annual performance in five years.
Year-End Settlement Peak: Key Support for Yuan Appreciation
The year-end period typically sees export-oriented enterprises engaging in concentrated foreign exchange settlement activities. To recoup funds and lock in profits, businesses usually convert their foreign exchange earnings into yuan before year-end, significantly boosting demand for the Chinese currency and providing crucial support for its exchange rate. Additionally, growing expectations of a December Fed rate cut and China's stable economic fundamentals have created favorable conditions for yuan appreciation. Market consensus suggests a high probability of the yuan breaking through 7.0 in the short term.
Long-Term Outlook: Uncertainty Amid Multiple Factors
While the short-term appreciation trend appears clear, whether the yuan can sustain levels below 7.0 in the long run remains uncertain. Global economic conditions, China-US relations, and domestic economic policies could all influence the yuan's trajectory. Export enterprises must therefore seize current favorable conditions while remaining vigilant about potential future risks when formulating their settlement strategies.
Brokerage Forecasts: Long-Term Appreciation Potential
Several brokerage firms maintain optimistic outlooks for the yuan's long-term performance. CITIC Securities suggests that Chinese manufacturers' increasing global pricing power and profit share will drive up asset values, consequently supporting sustained yuan appreciation. The firm predicts the USD/CNY rate could reach 6.8 by 2026. Soochow Securities similarly anticipates a new appreciation cycle for the yuan, forecasting a year-end 2026 rate between 6.70-6.80. Drawing parallels with the 2019-2022 appreciation period, some analysts suggest the yuan might gradually strengthen to 6.40-6.50 in the long term. Huatai Securities maintains its 2026 year-end forecast of 6.82. These projections provide valuable reference points for export enterprises.
Policy Perspective: Stabilizing the Exchange Rate
Amid heightened yuan volatility, policymakers' stance proves crucial. Miao Yanliang, Chief Strategist at CICC, believes the current environment may present a window for yuan appreciation, with the US dollar potentially entering structural weakness. Combined with enhanced competitiveness in Chinese manufacturing, this could help rebalance domestic and external demand. Meanwhile, the People's Bank of China emphasized "preventing exchange rate overshooting risks" in its Q3 2025 monetary policy report, signaling potential intervention tools such as adjustments to foreign exchange reserve requirements or macro-prudential parameters for cross-border financing if unilateral fluctuations emerge. This indicates exchange rate stability remains a key policy objective.
Strategic Recommendations for Export Enterprises
In light of current exchange rate conditions, export enterprises should consider the following strategies:
- Monitor market developments: Stay informed about domestic and international economic conditions, policy changes, and market sentiment to better anticipate exchange rate movements.
- Utilize settlement tools flexibly: Beyond spot settlement, consider employing forward contracts or foreign exchange options to hedge against rate fluctuations.
- Adopt phased settlement: Avoid concentrated one-time settlements by distributing transactions over time to mitigate risks.
- Strengthen financial management: Establish robust financial systems to optimize foreign exchange receipts and payments, minimizing profit impacts from rate volatility.
- Seek professional advice: Consult banking or brokerage experts to develop customized settlement strategies.
Given the multitude of factors influencing yuan exchange rates, export enterprises must adopt comprehensive approaches when formulating settlement strategies. While capitalizing on favorable conditions, maintaining prudent risk management remains essential for sustainable operations.