## Exchange Rate Witnesses a New Turning Point: The Internationalization Strategy Behind the Renminbi's Rise

Goldman Sachs' latest forecast has attracted market attention—The USD to RMB is expected to fall to 7.00 within the year, and continue weakening to 6.85 next year. This judgment reflects a market consensus that the RMB's appreciation trend is underway.

The current market conditions validate this view. As of the end of November, the USD onshore RMB exchange rate fell below 7.08, and the offshore USD to RMB also dropped below 7.08, both hitting a new low in over a year. More notably, the CFETS RMB Exchange Rate Index surged to 98.22 in mid-November, the highest level this year.

**Why has the RMB suddenly appreciated so rapidly?**

On the surface, the Federal Reserve entering a rate-cut cycle provides room for the RMB to appreciate. But the real driving force behind this is a carefully designed policy approach—The central bank sets the daily midpoint rate that is continuously adjusted upward, and state-owned banks frequently intervene in the dollar market to create supply pressure. This combination has established a clear unilateral upward trend in the RMB exchange rate.

Kelvin Lam, an economist at Pantheon Macroeconomics, pointed out that this approach is not unprecedented in history. During the Asian financial crisis in 1998, the RMB was used to establish its regional reserve currency status by refusing to devalue. Today’s appreciation operations can be seen as a continuation of this strategic tradition, aiming to strengthen the credibility of the RMB as an international settlement tool.

**Data speaks: International transaction volume surges**

The policy effects are significant. According to the Bank for International Settlements, the average daily trading volume of USD to RMB has skyrocketed from less than $500 billion three years ago to nearly $781 billion, an increase of 60%. In the global daily forex trading volume, USD to RMB now accounts for over 8%.

Kiyong Seong, Head of Asia Macro Strategy at Société Générale, commented that in the context of increasing global market volatility, demonstrating the robustness and appreciation trend of the RMB essentially is about "creating momentum" for the RMB internationalization. This approach reflects policy intent and has also gained recognition from market participants.

**What does this mean for investors?**

Unlike the forced devaluation of about 5% in 2018, the RMB is expected to appreciate close to 3% by 2025. This shift indicates a fundamental change in China’s policy orientation. Goldman Sachs’ analysis team believes that RMB internationalization has become a core policy goal for the Chinese government in the coming years, and the appreciation trend is likely to accelerate. It is expected that by 2026, the USD to RMB will stabilize around 6.85.

In short, this wave of RMB appreciation is not a short-term fluctuation but a medium- to long-term policy turning point.