Core Viewpoint - The offshore RMB has surpassed the 7.0 mark against the USD, reaching a high of 6.9912, marking a significant shift in the currency's valuation and indicating a new phase of volatility in the RMB exchange rate [3]. Group 1: Drivers Behind the RMB Surge - The decline of the USD index has been dramatic, with the Federal Reserve initiating a rate cut cycle, resulting in a total reduction of 150 basis points in 2025 and a 9.8% annual drop in the USD index, the largest since 2017 [4]. - There has been a concentrated release of corporate foreign exchange settlement demand, with an expected monthly settlement volume of over $200 billion in December, driven by export companies converting USD revenues into RMB [5]. - Economic fundamentals have strengthened, with a record trade surplus of over $1.08 trillion in the first 11 months of 2025, providing a solid foundation for the exchange rate [6]. Group 2: Market Impacts - There is a new pattern in cross-border capital flows, with over 600 billion yuan net inflow from foreign capital in 2025, and daily trading volume of RMB bonds exceeding 50 billion HKD [6]. - Export companies are facing pressure due to a 6% appreciation of the RMB against the USD, which has compressed profit margins by 2-3 percentage points in sectors like home appliances and textiles [7]. - The valuation of A-shares has increased, with the MSCI China Index rising 18% year-to-date, benefiting significantly from the RMB appreciation [7]. Group 3: Future Pathways - In the short term, the RMB may continue its strong performance, with the next target being 6.95, and potential testing of the 6.90 psychological level before the Lunar New Year [8]. - In the medium term, the central bank may intervene if the RMB appreciates rapidly beyond 6.8, and there is a risk of a USD rebound if the Fed's rate cut cycle ends mid-2026 [10]. - Long-term reforms may deepen the marketization of the exchange rate, with potential adjustments to the central parity formation mechanism and an acceleration of RMB internationalization [11]. Group 4: Corporate Responses - Export companies are encouraged to adopt dynamic hedging strategies, such as using forward contracts combined with options to lock in exchange rates while retaining upside potential [12]. - Companies are advised to regionalize their supply chains to reduce reliance on USD settlements and utilize local currencies for risk hedging [12]. - Financial innovation is suggested, including the trial of "currency insurance" products to incorporate exchange rate fluctuations into supply chain financing models [12].

Group 1: Report Industry Investment Rating - Not provided Group 2: Core Viewpoints of the Report - The RMB showed a significant strong performance against the US dollar at the end of 2025, with the offshore RMB exchange rate breaking through the key psychological level of 7.00, indicating a re - emergence of strong appreciation momentum [2]. - The appreciation of the RMB at the end of 2025 is driven by the resonance of internal and external factors, including the weakening of the US dollar index, the narrowing of the Sino - US interest rate spread, and the concentrated release of seasonal year - end settlement demand [5][6]. - Although there are expectations for the RMB to appreciate and break through 7 and enter the 6 range in 2026, there are also potential risks such as geopolitical black - swan events, the domestic economic recovery falling short of expectations, and central bank foreign exchange policy adjustments [13]. Group 3: Summary by Relevant Catalogs I. RMB's Strong Year - End Performance: Symbolic "Breaking 7" and Its Market Characteristics - **Offshore RMB "Breaking 7": The First Time Since September 2024** - At the end of 2025, the offshore RMB exchange rate broke through 7.00 during intraday trading on December 25, the first time since September 2024, attracting high market attention and indicating enhanced market confidence in the RMB [2]. - **Market Volatility Characteristics: Strong but Low - Volatility, Contrasting with the September 2024 Market** - The implied volatility of the RMB is at a historically low level, indicating a more rational and orderly appreciation process and providing a stable foreign - exchange environment for enterprises and investors [2]. - The RMB's strong performance at the end of 2025 is fundamentally different from the 2024 market fluctuations. The latter was driven by the global yen carry - trade unwind, while the former is based on the resonance of internal and external supply - demand factors [2][5]. II. Driving Forces for RMB Appreciation: Resonance of Internal and External Factors - **External Factors: Weakening US Dollar Index and Narrowing Sino - US Interest Rate Spread** - The Fed's interest - rate cuts led to the downward trend of the US dollar index, narrowing the Sino - US interest rate spread and providing an external environment for the RMB's appreciation [6]. - The seasonal contraction of market liquidity during the Christmas holiday exacerbated the weakness of the US dollar, contributing to the year - end situation of a weak US dollar and a strong RMB [6]. - The market is generally pessimistic about the US dollar's trend in 2026, and the divergence in the Fed's expected interest - rate cuts, the change of the Fed chairman, and the "de - dollarization" trend all add uncertainty to the long - term prospects of the US dollar [7]. - **Internal Factors: Concentrated Release of Seasonal Year - End Settlement Demand** - The concentrated settlement of foreign - trade enterprises at the end of the year is a more direct and strong driving force for the RMB's appreciation, as evidenced by the fact that the RMB's appreciation amplitude is greater than the US dollar index's depreciation amplitude [8]. - China has maintained a trade surplus for seven consecutive months, and there is still a large amount of pending settlement funds being digested, which supports the RMB's appreciation [8]. III. A Cold - Blooded Reflection under the Market's Optimistic Expectations: Appreciation Space and Potential Risks - **Appreciation Space** - Huang Qifan's view that the RMB will appreciate to 6.0 in the next ten years is based on rational deductions of China's economic fundamentals, trade - structure optimization, and RMB internationalization [9]. - The RMB's actual effective exchange rate shows significant appreciation potential, as the gap between the nominal and real effective exchange rates indicates that the RMB's real purchasing power is undervalued [10]. - The narrowing Sino - US interest rate spread, the central bank's monetary - policy stance, and the increasing attractiveness of the A - share market are all factors that support the RMB's appreciation [11][12]. - **Potential Risks** - Geopolitical black - swan events, the domestic economic recovery falling short of expectations, and central bank foreign - exchange policy adjustments are potential risks for the RMB's appreciation [13].

2025年最后一个月，人民币汇率以一场强势升值打破了市场的悲观预期。 截至12月16日，在岸、离岸人民币对美元汇率双双升破7.05关口，分别触及7.0425 和7.0382，创下14个月新高。 全年累计升值幅度超过4%，与年初一度贬至7.4的颓势形成鲜明对比。 这一轮升值并非偶然，而是美元走弱、政策托底与资本 回流三方力量共振的结果。 招商银行数据显示，汇率与美元指数的关联性减弱，自主性提升。 这种稳定性为外贸企业套期保值提供空间，12月以来超30家A股公司新增外汇套保额度， 如中国船舶额度达240亿美元，宁德时代套保规模超2600亿元。 美联储降息导致中美利差收窄，减轻了资本外流压力。 与此同时，特朗普政府的关税威胁逐步淡化：4月对华关税税率一度升至145%，但5月后降至30%， 10月虽再度威胁加征100%关税，但在中方反制后态度缓和。 2025年美元指数整体走弱，从年初高位下跌约10%，12月中旬徘徊在98.25附近。 这一趋势主要受美联储降息周期开启的影响：9月美联储重启降息25个基 点，12月再次降息，市场对2026年继续宽松的预期升温。 美元走弱通常带动非美货币升值，但人民币的反应相对克制——上半 ...

Report Summary 1) Report Industry Investment Rating - Not mentioned in the provided content 2) Core View of the Report - Recently, the RMB has experienced a continuous appreciation trend, with the USD/Offshore RMB exchange rate breaking through the 7.08 and 7.07 levels, reaching a low near 7.06. There are three main reasons behind this: the weak Q3 employment data in the US and the deteriorating private - sector job growth in the latest ADP data have increased concerns about a non - linear rise in unemployment rates in October and November, leading to a higher expectation of a Fed rate cut in December, a decline in US Treasury yields, and a narrowing of the China - US interest rate spread, which promotes RMB appreciation; the central parity rate of the RMB against the US dollar has been continuously adjusted in a stronger direction, reaching 7.0796 on November 26, a one - year high, and the positive signal from the China - US high - level call on November 24 has alleviated short - term concerns about tariff escalation; the good performance of the equity market and the continuous net inflow of northbound funds throughout the year have boosted RMB appreciation, and the expected increase in seasonal corporate settlement demand at the end of the year may further consolidate the RMB's appreciation momentum [2] 3) Summary by Related Content - **RMB Appreciation Trend**: The USD/Offshore RMB exchange rate has broken through 7.08 and 7.07, reaching around 7.06 [2] - **Reasons for RMB Appreciation**: - **US Economic Data and Fed Expectations**: Weak US Q3 employment data and deteriorating ADP data on private - sector jobs have increased concerns about unemployment rate hikes in October and November, leading to a higher expectation of a December Fed rate cut, a decline in US Treasury yields, and a narrowing of the China - US interest rate spread [2] - **Central Parity Rate and Diplomatic Signals**: The RMB central parity rate against the US dollar has been adjusted strongly, reaching 7.0796 on November 26, a one - year high. The November 24 China - US high - level call sent positive signals, alleviating short - term tariff concerns [2] - **Equity Market and Capital Flows**: The good performance of the equity market and the continuous net inflow of northbound funds throughout the year have promoted RMB appreciation, and the expected increase in year - end corporate settlement demand may further strengthen the appreciation momentum [2]

Group 1 - The Federal Reserve has lowered the federal funds rate target range from 4.25%-4.5% to 4%-4.25%, marking the fourth adjustment since the rate cut cycle began in September 2024 [2][4] - The Fed's dot plot indicates an expectation of an additional 50 basis points of rate cuts by the end of 2025, suggesting a total potential cut of 75 basis points for the year [2][7] - Following the rate cut, global capital markets experienced volatility, with U.S. stock indices initially rising before quickly retreating, and the dollar index showing mixed movements [2][8] Group 2 - The current economic conditions in the U.S. show increasing downward pressure, with market predictions suggesting the possibility of three more rate cuts within the year [3][9] - The Fed's decision to cut rates is seen as a preventive measure in response to deteriorating employment data, which has become a more pressing concern than moderate inflation [4][6] - The Fed has adjusted its GDP growth forecast for the U.S. from 1.4% to 1.6% for the year, while also lowering unemployment rate expectations, indicating some confidence in economic resilience [6][7] Group 3 - The narrowing of the interest rate differential between China and the U.S. is expected to ease external pressures on the Chinese yuan, creating a more favorable environment for the People's Bank of China to implement monetary easing [9][10] - The Fed's rate cut is anticipated to provide a window for policy adjustments in China, allowing for a focus on stimulating domestic economic growth [10][11] - Historical trends suggest that domestic equity assets in China may yield excess returns during Fed rate cut cycles, while bond prices typically rise and yields fall [11][12]

Group 1 - Federal Reserve Chairman Jerome Powell hinted at potential interest rate cuts in the coming months during his speech at the Jackson Hole Global Central Bank Conference on August 22 [3] - Following Powell's remarks, global financial markets reacted strongly, with major US stock indices surging, the Dow Jones reaching a new high, the dollar dropping over 1%, and gold prices exceeding $3,400 per ounce [3] - Powell noted that while the US economy shows some resilience, there are increasing signs of a slowdown in the labor market and economic growth, which may prompt the Fed to consider rate cuts [3][5] Group 2 - The US economy grew at a rate of only 1.2% in the first half of the year, significantly lower than the same period in 2024, with weak consumer spending contributing to this slowdown [5] - Political pressure on Powell, particularly from former President Trump, has also influenced the Fed's considerations for rate cuts [5] - Market expectations for a rate cut in September exceed 90%, although the Fed emphasizes that monetary policy decisions will depend on actual data and economic outlook [5] Group 3 - A potential rate cut by the Fed could narrow the interest rate differential between the US and China, potentially leading to capital inflows into China and providing more room for Chinese monetary policy adjustments [7] - Historically, when the Fed initiates a rate-cutting cycle, A-shares and Hong Kong stocks tend to experience upward trends, indicating a favorable environment for these markets [8] - Chinese asset prices may rise as liquidity increases, benefiting growth stocks in sectors like technology and renewable energy, while also attracting foreign investment in the bond market [9]

Core Viewpoint - The narrowing of the China-US interest rate spread is primarily driven by the surge in US Treasury yields, but the outlook for RMB assets remains positive due to their safety, yield, and liquidity attributes [1][2]. Group 1: Interest Rate Spread Dynamics - The China-US 10-year government bond yield spread has narrowed to around 30 basis points, with a reduction of nearly 50 basis points since March and over 90 basis points since the beginning of the year [1]. - The narrowing of the interest rate spread is a result of the economic cycle misalignment and differing monetary policies between China and the US, with China facing multiple pressures on economic development [1][2]. Group 2: Capital Flow Considerations - The narrowing of the interest rate spread does not necessarily indicate increased capital outflow pressure, as factors such as economic growth expectations, asset safety, and exchange rate stability also play significant roles [2]. - The current domestic economic pressures due to the pandemic necessitate a steady monetary policy, while the short-term direction of the interest rate spread will largely depend on US Treasury yield movements [2]. Group 3: Currency Resilience - Enhancing the flexibility of the RMB exchange rate can better absorb capital flow shocks, with the dual-directional fluctuation of the RMB helping to mitigate market pressures [3]. - The long-term attractiveness of RMB assets is primarily determined by China's economic fundamentals, financial market depth, and institutional development, suggesting that external shocks are likely to be temporary [3].