China’s onshore yuan strengthened to its firmest level in more than a year on Monday, even as fresh economic data underscored the challenge policymakers face in reviving domestic demand and rebalancing the world’s second-largest economy.
The yuan rose (USD/CNY lower) to 7.0510 per dollar, its strongest level since October 8, 2024, supported by steady official guidance and confidence that authorities will continue to lean against excessive currency weakness. Retail sales, a key gauge of household demand, decelerated more sharply, rising just 1.3%, down from 2.9% the previous month and well below forecasts. The figures reinforce signs that China’s recovery remains uneven and heavily reliant on the supply side:
- Evidence of fragile consumption continues to mount. Passenger car sales slumped 8.5% in November, the steepest decline in ten months, while the extended Singles’ Day online shopping festival failed to generate the usual boost in spending.
Fixed-asset investment also disappointed, contracting 2.6% over the January–November period, deeper than expected and highlighting caution among businesses despite ample production capacity.
Policymakers remain committed to an annual growth target of around 5% next year as China prepares to launch a new five-year plan, but the path forward looks increasingly challenging. Home prices are expected to continue falling through 2026 before stabilising, prolonging the drag on sentiment. While leaders pledged a “proactive” fiscal stance at last week’s key economic meeting, they also acknowledged a “prominent” mismatch between strong supply and weak demand — a contradiction that remains unresolved.
For now, resilient exports have helped shore up growth and supported currency stability, even as trading partners criticise China’s large trade surplus
