Chinese bank customers converted a record amount of foreign currency into yuan

Chinese banks last month recorded a record volume of foreign currency sales on behalf of clients. The seasonal increase in demand for liquidity in yuan coincided with the hopes of market participants for the strengthening of the national currency of China.

In December 2025, bank customers in mainland China exchanged $99.9 billion worth of foreign currency for yuan. This is more than six times higher than the previous month's figure. Both the corporate sector and investors were betting on the growth of the yuan, Bloomberg writes with reference to statistics of the State Administration of Foreign Exchange Control of China (SAFE).

The regulator's December data "indicate a marked shift in market expectations toward a stronger yuan," Credit Agricole economist Xiaojia Zhi told the agency. He cited "expectations of a weaker dollar and more positive sentiment toward Chinese equities, accompanied by capital rotation from the U.S. technology sector into Chinese assets."

Over the past month, the yuan has strengthened against the dollar by more than 1%, showing the best dynamics among Asian currencies and breaking the psychologically important mark of 7 yuan per dollar, notes Bloomberg. In the morning of January 16, the yuan traded around 6.96 per dollar.

The exchange rate is supported by the weakening of the US currency, an increase in China's trade surplus, as well as investor optimism about the pace of economic recovery, which contributes to the growth of the country's stock market. The seasonal factor also had an impact: at the end of the year exporters traditionally intensify conversion of foreign currency earnings to cover operating expenses.

In addition, in recent weeks, China's central bank has consistently raised the daily reference rate (fixing) of the yuan, demonstrating its willingness to allow a managed appreciation of the national currency. On January 15, the rate reached its highest level since Ma 2023.

The largest global banks are raising their forecasts for the rate of the Chinese currency amid its continued strengthening. Morgan Stanley now expects a rate of 6.85 per dollar in the first quarter of 2026, Australia & New Zealand Banking Group predicts this level by the end of the year, and Macquarie Group - 6.8, according to Trading Economics.

This article was AI-translated and verified by a human editor