USD/CNY set to sink further as China’s strength in ai supports growth

Although the yuan has struggled in the post-pandemic recovery, China appears to have found new resilience in its burgeoning AI prowess, helping to support ambitious infrastructure initiatives and a brighter future against a US dollar that’s been in consistent decline since the return of President Trump. 

One of the biggest headwinds that the Chinese economy has focused on how to turn the corner on the challenges caused by the collapse of Evergrande and the domestic housing market. 

When exploring the impact of the crisis across the USD/CNY trading pair, the year following the official declaration of Evergrande’s default by S&P Global on December 17, 2021, saw a strengthening process of 10.46% occur. 

The strengthening trend lasted until around the time of Trump’s inauguration, with the returning president, who famously favors a weaker greenback, triggering a reversal that saw an 8.46% declines in USD/CNY at the beginning of Q3 2026. 

6.40 on the horizon?

Analysts have anticipated a continuation of ongoing trends, with Goldman Sachs forecasts suggesting that a USD/CNY level of 6.40 will emerge over the next 12 months, representing an approximate 4.6% yuan appreciation from current levels. 

The reason for such a sustained downturn in USD/CNY levels stems from strengthening export conditions, citing real GDP growth of 4.5% year-over-year in 2026 despite headwinds from weak domestic demand. 

Although China set its GDP growth target to a record low of 4.5% to 5%, a level that hasn’t been seen since 1991, at the beginning of the year, the world’s second-largest economy has broadly benefited from an upturn in export strength that’s been brought on by its position as a leader in the fledgling AI landscape. 

Notably, the economy reached its target in the third quarter, posting 4.5% growth, which represented an increase over Q2 2026. 

The reason for the rising optimism for the yuan has been China’s growing trade surplus, which is on track to overtake the record $1.2 trillion that was seen last year. 

In forex, a higher trade surplus supports a stronger currency because it focuses on the amount of goods and services that a nation sells abroad compared to what it buys from other countries. 

This means that policymakers at the People’s Bank of China (PBoC) will have more room to tolerate and manage a stronger yuan rather than having to rely on a weaker domestic currency to encourage more trade. 

Sales of high-tech goods rallied 14.3%, supporting an explosion in export strength that stems from China’s new AI initiatives. Another major support was the production of both batteries and industrial robots, which grew by more than 29%, according to official figures. 

Critically for the future prospects of the yuan, the news this summer that China is planning a $295.43 billion AI buildout over the next five years has helped to brighten the nation’s long-term outlook for exports in the high-tech sector. 

Trade outlook brings uncertainty

One reason that predictions for a USD/CNY rate of 6.40 could be a little ambitious is the ever-changing trade outlook for China. 

“Relations between China and the US remain as frosty as ever, but the Asian powerhouse may also be facing headwinds from Europe, with the EU questioning the level of competitiveness of Chinese exports and their impact on European businesses,” said Just2Trade CMO Vsevolod Smirnov. “Recently, the EU moved to limit Chinese hybrid vehicle imports to 350,000 a year as part of a quota that would see its market share halve to around 3%.” 

“It’s fair to say that CNY is undervalued, but its long-term trajectory depends on a lot of variables in terms of trade working in China’s favor. This means that a push lower to support at 6.550 could be a major milestone in the months ahead. But after that, the trade outlook will need to provide a tailwind.” 

The yuan could also encounter interest rate pressures that adversely affect the currency’s growth. With the Federal Reserve likely to hike interest rates in the US once more before the end of 2026, we could see the dollar build in resilience. 

This, coupled with the prospect of the PBOC introducing monetary easing cycles to combat its own slow consumption rates, means that a shift in yields could drive investments back across the Pacific. 

What’s next for USD/CNY?

The Federal Reserve’s next meeting in December 2026 will be a key moment for the outlook between the dollar and yuan, with expectations high that one further interest rate hike is on the way. 

However, adopting a more long-term view, any recovery in USD/CNY is likely to be short-lived as China’s economic strategy continues to look as though it is recapturing its groove. With the growing trade surplus as a tailwind for the yuan, investors should look to interest rate volatility as an opportunity to sell the pair before a resumption of the long-term downward trend continues.