Following a whole year of depreciation in 2016, the renminbi reached an inflection point on January 3 2017, turning to appreciate against US dollar for the next eight months. A weaker US dollar and an improving global macro economy effectively eased the pressure on the depreciation of the renminbi.

“It is becoming increasingly clear that the improving macro fundamentals at home, have supported the renminbi and this is likely to translate into further downside on both the USDCNY and USDCNH,” notes Lukman Otunuga, research analyst at FXTM.

In the first six months of 2017, the US dollar depreciated by 2.36% against renminbi while the USD index has dropped even more significantly by 7.1% during the same period.

“Actually in 2017, we did not see a stronger renminbi,” explains Helen Zhu, head of equities and managing director of BlackRock. “It is the weaker US dollar that sets the tone.” 

In the first half of 2017, the CFETS Renminbi Index, which was introduced by China Foreign Exchange Trading System (CFETS) in 2015 as part of the renminbi reform, dropped from 95.25 to 93.29. The CFETS renminbi index is tracking 24 currencies from both major economies and emerging countries.

“There is no large appreciation against a basket of currencies, so the effect on the export sector is very limited,” says Zhu.

Statistics from General Administration of Customs indicate that exports for the first half of 2017 was 7.21 trillion renminbi, up 15% from the same period in 2016. Trade activities grew significantly with belt-road countries. Trade volume with Asean countries, India, and Russia increased by 21.9%, 30.4% and 33.1%, respectively.

While trade activities with emerging countries have increased, the export sector is still relying mostly on the large economies. “If you compare exports to Southeast Asia with exports to the US and Europe, it is still relatively small,” says Zhu. “The bigger demand still comes from developed countries.