Report Industry Investment Rating No relevant information provided. Core Viewpoints of the Report - In September, the surplus of foreign exchange settlement and sales expanded, the supply and demand in the foreign exchange market were stable and active, enterprises' willingness to settle foreign exchange increased, and their risk management awareness improved. In the short term, the USD/CNY exchange rate will maintain a range-bound and slightly stronger trend. In the medium term, guided by the high-quality growth target of the 15th Five-Year Plan, the central parity of the RMB is expected to rise moderately [1]. Summary by Relevant Catalogs Market Supply and Demand Relationship Analysis - **Foreign Exchange Market Supply and Demand Balance**: In September 2025, the surplus of bank foreign exchange settlement and sales was $51.023 billion, an increase from the previous value of $14.648 billion. Both the scale of foreign exchange settlement and sales increased. This expansion reflected strengthened trading behavior rather than being driven by single trade, indicating that the supply and demand structure in the foreign exchange market remained basically balanced [9]. - **Forward Foreign Exchange Settlement and Purchase Intentions**: In September, the foreign exchange settlement and sales market showed a pattern of stable exchange rate expectations, increased willingness to settle foreign exchange, and a marginal decline in foreign exchange purchase demand. The spot exchange rate of USD/CNY depreciated by 0.31% compared with the end of last month, and the average volume of inter - bank spot inquiry transactions decreased to $37.517 billion. The collection and settlement exchange rate rose to 63.12%, and the payment and purchase exchange rate decreased by 3.5 percentage points. The forward foreign exchange settlement signing amount increased by about $10.375 billion, and the forward foreign exchange purchase signing amount decreased by about $4.607 billion, pushing the forward net foreign exchange settlement balance to a new high [14]. - **Analysis of Foreign Exchange Settlement and Sales Structure**: - **Bank's Own Foreign Exchange Settlement and Sales**: In September, the bank's own foreign exchange settlement and sales changed from a surplus to a deficit of $734 million, which might be related to position management and forward performance. The activities of the bank's own foreign exchange settlement and sales had limited impact on the overall trend of foreign exchange settlement and sales [12][20]. - **Bank's Agency Foreign Exchange Settlement and Sales**: In September, the difference in domestic banks' agency foreign - related payments and receipts changed from a surplus to a deficit of $308.9 million. The surplus of the current account increased from $41.113 billion to $52.879 billion, with the goods trade surplus rising to $80.481 billion. The deficit of the capital and financial account expanded from $38.8 billion to $57.791 billion [24]. - **Deconstruction of September's Foreign Exchange Settlement and Sales**: - **Securities Investment**: In September, although the deficit of the capital and financial account in agency foreign - related payments and receipts expanded, the trading activity through the Stock Connect mechanism increased. The trading volume of Northbound Stock Connect reached 3.179574 trillion yuan, and the trading volume of Southbound Stock Connect was 6.830467 trillion yuan. The custody volume of RMB bonds by overseas investors also rebounded, reaching about 2.782832 trillion yuan by the end of August [26]. - **Goods Trade**: In September, goods trade under the current account was the main contributor. The global manufacturing PMI dropped to 50.8, indicating a slowdown in expansion. The US manufacturing PMI was 52.0, while China's manufacturing PMI was 49.4, remaining below the boom - bust line for six consecutive months. The uneven global manufacturing recovery limited the driving effect of external demand on China's exports [31]. Recent Views on Exchange Rates - **Short - term**: The US government shutdown led to the delay of major economic data release. The market re - evaluated economic momentum in a "data - lacking" state, and the US dollar entered an expectation - gaming stage. The exchange rate trend reflected a range - bound pattern under the phased repair of the Sino - US expectation difference. It is expected that the USD/CNY will remain in the range of 7.10 - 7.15, and the RMB has moderate appreciation momentum in the short term [4]. - **Medium - term**: The high - quality growth target of the 15th Five - Year Plan will be an important support for the long - term stability of the RMB. If domestic policies continue the path of stable growth centered on technological innovation and industrial upgrading, and the US growth slows down under fiscal constraints and the lag effect of monetary policy, the central parity of the RMB may rise moderately to around 7.00 [6].

Core Insights - In September 2025, China's banks recorded a foreign exchange settlement surplus of $51 billion, the largest since December 2020, indicating a significant increase in the willingness of market participants to settle foreign exchange amid rising expectations for the appreciation of the Renminbi [1][4]. Group 1: Foreign Exchange Data - In September 2025, banks settled $264.7 billion in foreign exchange and sold $213.6 billion, resulting in a surplus of $51 billion, marking the highest monthly surplus in nearly five years [4]. - From January to September 2025, banks accumulated $1,853.3 billion in settlements and $1,790.1 billion in sales, leading to a cumulative surplus of $63.2 billion, which is higher than the same period last year [4]. - In September 2025, banks recorded foreign income of $681.2 billion and foreign payments of $684.3 billion, with cumulative figures from January to September being $5,870.5 billion and $5,750.8 billion respectively [4]. Group 2: Market Sentiment and Analysis - The data reflects an optimistic sentiment towards the Renminbi, with offshore Renminbi reaching its strongest level since November of the previous year, and export enterprises accelerating their foreign exchange settlements, which may further support the Renminbi [1][5]. - According to Khoon Goh, head of Asian research at Australia & New Zealand Banking Group, the net surplus in foreign exchange settlements indicates an increase in funds flowing into China, which supports the Renminbi, while the willingness of exporters to settle foreign exchange is also on the rise [5]. - With the central bank favoring a stronger Renminbi and pushing for an increase in the central parity rate, it is anticipated that the settlement ratio among exporters will further increase, leading to additional appreciation of the Renminbi for the remainder of the year [5].

Core Viewpoint - The foreign exchange market in China is showing signs of stability and balance, with significant data indicating a surplus in both bank settlement and foreign exchange transactions for August 2025 [1][2][3]. Group 1: Bank Settlement and Foreign Exchange Data - In August 2025, banks settled foreign exchange transactions amounting to 1.51 trillion yuan, with sales reaching 1.41 trillion yuan, resulting in a surplus [1]. - Cumulatively from January to August 2025, banks settled 11.39 trillion yuan and sold 11.31 trillion yuan, indicating a consistent surplus in bank settlement [1]. - The foreign exchange transactions in August, when converted to USD, showed settlements of 211.8 billion and sales of 197.1 billion, with a cumulative total of 1.59 trillion and 1.58 trillion USD respectively for the first eight months [2]. Group 2: Cross-Border Transactions - In August, the foreign exchange income from clients was 4.55 trillion yuan, while payments were 4.53 trillion yuan, also reflecting a surplus [1]. - For the first eight months, the cumulative foreign exchange income was 37.22 trillion yuan, with payments at 36.34 trillion yuan, indicating a positive balance [1]. - The non-bank sector's cross-border receipts reached 1.3 trillion USD in August, marking an 8% year-on-year increase, with both current and capital account transactions growing [2]. Group 3: Market Activity and Trends - The foreign exchange market is described as active, with a net inflow of 3.2 billion USD in August and a bank settlement surplus of 14.6 billion USD [2]. - The Shanghai region led in bank settlement with 42.6 billion USD in settlements and 50.9 billion USD in sales for August [3]. - The securities investment project recorded a settlement surplus of 4.6 billion USD in August, reversing a previous deficit, closely linked to the strong performance of the A-share market [5]. Group 4: Trade and Consumption - China's total goods trade value for the first eight months of 2025 reached 29.57 trillion yuan, reflecting a 3.5% year-on-year growth [4]. - The increase in inbound consumption is supported by policies aimed at attracting more foreign visitors, with a notable rise in the number of foreign nationals entering China [6]. - The implementation of new policies to enhance service consumption is expected to further boost inbound spending and improve the foreign exchange surplus [6].

Core Viewpoint - The recent strengthening of the RMB against the USD is driven by multiple internal and external factors, including a weak USD index, strong domestic equity market performance, and favorable monetary policy signals from the Federal Reserve [1][3][4]. External Factors - The Federal Reserve's shift in policy, particularly the indication of a potential rate cut in September, has significantly impacted the currency market, leading to a nearly 10% decline in the USD index since the beginning of the year [3]. - The RMB's appreciation is partly due to the accelerated rise in the RMB/USD central parity rate, with the central bank recently issuing 45 billion yuan in offshore RMB central bank bills, tightening offshore RMB liquidity [3][4]. Internal Factors - The recovery of China's capital market has attracted cross-border capital inflows, with significant increases in major stock indices: the Shanghai Composite Index rose by 7.97%, the Shenzhen Component Index by 15.32%, and the ChiNext Index by 24.13% in August [4]. - Continuous expansion of the trade surplus in recent months has provided real demand-side support for the RMB exchange rate [4][5]. Economic Outlook - The ongoing improvement in China's economic fundamentals, driven by structural transformation and supportive policies, is expected to provide long-term support for the stability of the RMB exchange rate [4][5]. - Analysts predict that the RMB exchange rate will likely maintain a steady trend, with expectations of a gradual convergence of onshore, offshore, and central parity rates [5].

Core Insights - The foreign exchange market in China has maintained stability despite increased volatility in the international currency market, with a notable rebound and subsequent decline in the US dollar index [1][2] Group 1: Exchange Settlement and Sales - In July, banks settled foreign exchange transactions amounting to 233.6 billion USD and sold 210.8 billion USD, resulting in a surplus of 22.8 billion USD [1] - For the first seven months of the year, cumulative bank settlements reached 1.3768 trillion USD, while cumulative sales totaled 1.3793 trillion USD, indicating a continued surplus trend [1] - The exchange rates for enterprises and individuals showed a slight increase in settlement rates and stable sales rates, reflecting stable market expectations and active trading [1] Group 2: Cross-Border Capital Flows - Cross-border income and expenditure for non-bank sectors remained at historically high levels, with a near balance in receipts and payments [1] - Net inflows from goods trade increased by 33% month-on-month, maintaining a high level of activity [1] - Outflows from service trade and investment income rose by 34% and 7% respectively, attributed to seasonal factors such as summer travel and corporate dividend distributions [1]

Report Industry Investment Rating No relevant content provided. Core View of the Report The power of bullish sentiment on the RMB exchange rate remains strong. The RMB deposit in the Hong Kong offshore market has returned to the trillion - yuan scale, and the RMB remittance related to cross - border trade settlement has increased significantly month - on - month. The RMB exchange rate is expected to continue to fluctuate strongly in the short term, and the RMB bond's allocation and trading attractiveness are expected to continue to increase [2]. Summary by Directory 1. April: Hong Kong Offshore RMB Deposit and Remittance - As of the end of April 2025, the Hong Kong RMB deposit scale was 1030.895 billion yuan, a month - on - month increase of 7.4% and a year - on - year decrease of 5.3%. The total RMB remittance related to cross - border trade settlement was 1362.144 billion yuan, a month - on - month increase of 15.0% and a year - on - year increase of 8.4%. The RMB RTGS clearing amount dropped to 58.5 trillion yuan, a month - on - month decrease of 12.7% and a year - on - year decrease of 8.1% [5]. 2. May: USD Index and RMB Exchange Rate - The USD index first rose and then fell in May. The monthly average value decreased by 0.56% compared with April, and the decline was narrower than that in April. The RMB exchange rate fluctuated upwards, and the monthly average value of the on - offshore exchange rate turned positive. In April, the foreign exchange settlement and sales surplus expanded. High - frequency data showed that the average daily trading volume of the USD/CNY spot inquiry in May increased by 13.2% month - on - month. In the short term, the RMB exchange rate is expected to continue to fluctuate strongly [2][7][11]. 3. May: Interest Rates - In May, there was no issuance of offshore RMB treasury bonds or central bank bills. The offshore RMB liquidity was abundant, and the CNH HIBOR fluctuated slightly downward. The HKD HIBOR declined significantly, and the average value of the offshore RMB - HKD interest rate spread widened. The on - shore SHIBOR continued to decline, and the average value of the on - offshore RMB interest rate spread narrowed. In the future, the SHIBOR volatility may increase stage by stage near the end of the quarter, the CNH HIBOR is expected to continue to fluctuate at a low level, and the HKD HIBOR may rise from a low level, but the probability of a significant upward trend is small [3][4]. 4. May: Swap Points and Derivatives - In May, the average values of on - and offshore RMB swap points showed different trends, and the inversion range of the on - offshore swap point spread continued to narrow. The trading volume of RMB futures on the Hong Kong Stock Exchange decreased, the open interest increased, and the settlement price strengthened. The option market continued to be bullish on the RMB exchange rate, indicating that the power of bullish sentiment on the RMB exchange rate remains strong [19][22]. 5. May - June: Offshore RMB Bonds - In May, the financing amount of offshore RMB bonds continued to decline. In April, the custody scale of overseas institutions in the inter - bank bond market rose to the highest level in nearly 7 months. Looking forward, the RMB exchange rate is expected to continue to strengthen, the probability of intensive issuance of offshore RMB treasury bonds in the short term is low, but the allocation and trading attractiveness of RMB bonds are expected to continue to increase [25][27][28].