New Delhi: China’s yuan is likely to remain supported by strong technology exports and a widening trade surplus. However, weak domestic demand, higher US bond yields, and renewed trade tensions could limit its appreciation, according to a report by ICICI Bank.
Official data released on Wednesday showed that China’s exports rose 36.3 per cent year-on-year in September, marking their fastest growth since February. Imports also increased by 31 per cent, the sharpest rise since June, compared with growth of 28.2 per cent in August.
Meanwhile, exports to the United States surged 39.6 per cent, outpacing overall export growth and pushing China’s monthly trade surplus to its highest level since January 2025. The increase was further supported by the US-China trade deal. The report also noted that “China’s diversification to destinations other than the USA remains robust”.
According to the report, the latest performance reflects “robust” overseas demand, particularly for technology products, semiconductors and advanced manufactured goods.
Additionally, “The AI investment cycle is becoming an important trade driver, with a noticeably sharp increase in integrated-circuit exports,” it added.
China’s cumulative trade surplus stood at USD 938.1 billion in the first nine months, putting it on course to cross USD 1 trillion soon. The report further noted that “September’s trade data is a strong signal of manufacturing competitiveness and technology-related export demand”.
“Strong technology exports and a widening trade surplus support China’s external sector thus supporting an appreciation bias for USD/CNY, although weak domestic demand, higher US yields or renewed trade tensions could limit yuan appreciation,” the private lender noted in its report.
It added, “We expect USD/CNY to trade in the range in of 6.65 to 6.75 with a downside bias in the near term.”
At the time of reporting, the Chinese yuan was trading at 6.6914 against the US dollar.
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According to the report, the People’s Bank of China (PBOC) may seek to prevent the currency from strengthening too much to protect exporters’ competitiveness.
ICICI Bank said China’s September trade data indicated that strong global demand for semiconductors and artificial intelligence (AI)-related equipment continued to support the country’s manufacturing sector, despite weak domestic consumption and investment.
Meanwhile, the extension of the US-China tariff truce until 10 January 2027 is expected to ease trade-related uncertainty in the near term.
“Going forward, the pace of imports would depend largely on the evolving growth outlook in the Chinese industrial sector,” the report added.
