Core Viewpoint - The article discusses the recent strengthening of the Chinese yuan against the US dollar, attributing it to a weaker dollar and a shift in market expectations regarding the yuan's value. The article highlights that the counter-cyclical factor's influence on the yuan's midpoint has nearly diminished, indicating less need for regulatory intervention in currency management [1][3][5]. Group 1: Currency Dynamics - As of June 9, the USD/CNY exchange rate was reported at 7.1831, with the dollar index at 98.8, reflecting a nearly 10% decline from its peak [1]. - The counter-cyclical factor's shadow variable was reported at -37 points, a significant reduction from over -100 points the previous week, indicating a decrease in regulatory influence on the yuan's midpoint [1][5]. - Goldman Sachs projects a 3% appreciation of the yuan to 7.0 within the next 12 months, alongside expectations of a 10 basis point interest rate cut in China [5]. Group 2: Trade and Economic Indicators - China's exports in May grew by 4.8% year-on-year, below the expected 6.0%, while imports fell by 3.4%, indicating a shift in trade dynamics [7]. - The decline in exports to the US has intensified, with a year-on-year drop of 35.2% in May compared to a 20.9% decline in April, suggesting a pivot towards other developed markets [7]. - The upcoming trade negotiations between China and the US remain uncertain, with potential impacts on the yuan's valuation [8]. Group 3: Market Sentiment and Investment Trends - There is a growing interest from foreign investors in the Chinese stock market, particularly in sectors like new consumption, AI, and innovative pharmaceuticals, indicating a potential for increased capital inflow [8]. - Current global active long-term funds are underweight in China by 2.4 percentage points compared to the MSCI EM benchmark, suggesting significant room for reallocation towards Chinese assets [8]. - The article notes that while the dollar is expected to weaken further, the pace of this decline may not be immediate, with potential fluctuations influenced by trade negotiations and economic conditions [9][12].