Beijing’s latest currency manoeuvre marks a departure from the stance that it deployed during the last trade war
[BEIJING] China ramped up its support for the renminbi on Wednesday (Oct 15), underscoring its commitment to foreign-exchange stability as a trade war with the US showed few signs of letting up.
The People’s Bank of China set the renminbi’s reference rate at 7.0995 per US dollar, the strongest level in almost a year and past the 7.1 mark that authorities had sought to defend since September. The move helped boost the offshore renminbi while weighing on the US dollar.
Beijing’s latest currency manoeuvre marks a departure from the stance that it deployed during the last trade war, when authorities allowed the renminbi to weaken to offset the shocks generated by US tariffs.
A steady renminbi would minimise financial outflows, reinforce investor confidence and aid the government’s bid to internationalise the currency, according to analysts.
“A fix below 7.10 sends a strong message of strength,” said Fiona Lim, a senior foreign-exchange analyst at Malayan Banking Bhd in Singapore.
“A strong renminbi is symbolic of how China is in a position of strength for any negotiations or tit-for-tat escalations.”
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The stronger reference rate is part of a recent trend, and Goldman Sachs Group noted that the contrast with China’s approach in the last trade war marks a “markedly different” strategy that favours monetary and fiscal tools over depreciation.
“The US dollar-renminbi has held remarkably steady in 2025, despite several rounds of tariff announcements,” Goldman Sachs analysts Danny Suwanapruti and Xinquan Chen wrote in a note.
“This indicates policymakers’ preference for currency stability and that it is unlikely to change in the near term.”
The fixing limits the renminbi’s moves by 2 per cent on either side versus the US dollar.
Wednesday’s reference rate serves to push back against any depreciation expectations spurred by the latest escalation in trade tensions.
President Donald Trump chose cooking oil as a possible weapon to counter China’s refusal to buy US soybeans after Beijing sanctioned the US units of a South Korean shipping giant.
For Standard Chartered’s Becky Liu, the move to boost the renminbi’s reference rate is aimed at preserving market stability as Beijing and Washington continue to spar over trade issues.
Wednesday’s fixing will “anchor renminbi expectations and avoid a substantial rebound in volatility ahead of possibly more US-China headlines,” said Liu, head of China macro strategy at the bank.
“I tend to read the extremely strong strengthening bias in the recent fixing as one of the precautionary moves to prevent a sharp move in markets, rather than a goodwill to support trade talks.”
China’s move to fortify its currency also comes in the run-up to the Communist Party’s closed-door meeting from Oct 20 to 23 where it reviews development plans for the next five years. Beijing is known to prioritise market stability during key political events in the nation.
Looking ahead, the renminbi’s gains may be capped by China’s persistent deflationary pressures, but the currency fixing will be watched closely for any further signals.
“Our outlook is for a ranged US dollar-renminbi,” said Eddie Cheung, a senior emerging markets strategist at Credit Agricole CIB in Hong Kong.
“We don’t really see an impetus for big moves either way amid this continued desire for stability.” BLOOMBERG
