As the calendar draws to a close in 2025, the Dragon of the East is re-entering the game; but this time the table is crowded, and the moves are asynchronous. Donald Trump's return, updating himself into a second version, marked the beginning of a more difficult chapter for China. China's historical style is based on continuity and containment, like in the game of Go (Wei-Qi). Trump, however, is an actor who plays checkers, unpredictable from day to day. It's not easy for these two mindsets to synchronize. This asynchronization put the risk of the Renminbi being pushed towards the 7.50-8 range against the US dollar in the early months of the year. Indeed, on April 10th, the USD/CNY exchange rate reached 7.35, while 7.43 was tested in the offshore market (CNH). But the picture didn't stop there. The Renminbi's new movement shifted the focus of the discussion. Now the question is not "how weak will it become?" but "how strong will it become?". CNH fell below the 7 level on December 25th. This threshold was only seen once before, for four days in September 2024, following May 17, 2023.
This shift has two main pillars:
1- Trump's trade war not escalating as severely as feared,
2- The significant weakening of the US dollar.
The DXY has fallen by approximately 10% since the beginning of the year. Thus, while the Renminbi strengthened nominally, a significant portion of the risks priced in at the beginning of the year were masked behind the dollar's weakness. However, this picture is misleading. In real terms, the Renminbi, after adjusting for prices, is at its weakest level since 2012. In other words, the Chinese currency continued to depreciate in real terms in 2025; this was masked by the dollar's retreat.
China's deliberately weak currency policy has driven exports to a historic high. As of November, before the year is even over, the goods trade surplus exceeded US$1 trillion for the first time. Exports have become the main growth engine, offsetting the weakness in domestic demand. This story is not new. In the early 2010s, as the Obama administration turned its attention to the Asia-Pacific region, the US-China trade imbalance was at the center of the global agenda. As long as this structural problem remained unresolved, the political wave that brought Trump to power in 2016 also gained strength. Today, Trump's continued targeting of China as a "currency manipulator" reflects this historical continuity.
What is truly remarkable is the public expression of a rarely seen debate within China. Chinese economists and former central bank officials are speaking publicly about the need for a stronger Renminbi. According to Goldman Sachs, the Renminbi is approximately 25% undervalued compared to economic fundamentals. Some Chinese academics even suggest that, based on purchasing power parity, the exchange rate has room to strengthen to the 5-6 range. The IMF cannot remain indifferent, pointing to the link between global imbalances and currency weakness. These statements are striking in themselves for a culture built on secrecy and silence. However, such an appreciation is impossible without the explicit political approval of President Xi Jinping. China chose to sustain growth by weakening the Renminbi after 2014. IMF reserve currency status was considered a "passing grade" for this strategy. However, the structurally slowing economy after the pandemic once again relied on a devalued Renminbi.
Today, the Chinese government is caught between two unwanted realities:
1-Deflation,
2-An excessively high trade surplus.
The government wants to increase domestic consumption; however, deflation is preventing this. Retail sales are at their lowest point, excluding the pandemic period. The government's "trade-in" campaign to subsidize households has lost its effectiveness. Investment appetite is weak due to excess capacity. In theory, a stronger exchange rate could make imports cheaper and support consumption. In practice, however, an appreciation of the Renminbi risks making Chinese goods more expensive, weakening the export channel.
China needs to find a way to absorb its overproduction within its own domestic market. Currently, the deflation that China is exporting—especially in industrial and basic goods—is giving global producers breathing room. If this balance is disrupted, global inflation could rise again. Therefore, the People's Bank of China (PBOC) has recently been systematically setting the reference exchange rate on the weaker side. Keeping the official rate below market expectations within a ±2% volatility band sends a clear message: sudden strengthening is not desired. There is still no official guidance on the value of the Renminbi. However, rising calls for a "stronger Renminbi" both domestically and internationally are increasing pressure. Even the fact that this discussion is being conducted so openly is a signal in itself for China.
At this point, it's necessary to refresh our memory. The 2015 article "A Wei-Qi Move," found in the Ziraat Investment archives, perfectly captured this mindset. China doesn't make a decisive move like in chess; it gains ground, patiently encircles, and works time to its advantage. The picture hasn't changed today. In 2026 and beyond, with policies aimed at stimulating domestic demand, the Renminbi could once again become a central piece on the global chessboard. However, this path will not be a sudden leap, but a controlled and gradual one, in line with China's historical reflexes. The Go master is still at the table. Trump doesn't care about the chessboard. He plays without showing anyone when and where he's going to place his pieces.
