How the Global AI Boom Is Shifting Beijing’s Calculus on a Stronger Yuan

(Bloomberg) — A surge in global artificial intelligence investment is reshaping China’s export landscape, making Beijing notably more comfortable with a strengthening yuan — a shift that would have triggered forceful intervention just a few years ago.

The tightly managed onshore currency is heading for a sixth straight quarter of gains against the dollar, a streak not seen since 2013. Historically, such a rally would have prompted the People’s Bank of China to push back with verbal warnings or policy tools, wary of choking off exports and economic growth. But even as the yuan climbed to its strongest level since early 2023 and the broader economy showed signs of fragility, policymakers have shown little urgency to step in.

The reason lies in a structural transformation of China’s trade engine. The country once relied on low-cost manufacturing — garments, furniture, household goods — where razor-thin margins made even small exchange-rate swings painful. Today, an AI-driven export boom is changing that calculus. Demand for semiconductors, servers, and other AI hardware is becoming a powerful new driver of outbound shipments, easing the pressure that a stronger currency traditionally placed on Chinese producers.

Equally striking is the surge in imports. China is buying more chips and semiconductor equipment this year, with inbound shipments growing faster than exports. Deutsche Bank AG notes that the last two times this happened — in 2010–11 and 2017 — the yuan strengthened against the dollar. A firmer currency makes those imports cheaper, creating a virtuous cycle for tech-driven industries.

“What has changed is exports appear less sensitive to currency moves than previously thought, meaning the benefits of currency appreciation carry more weight in exchange rate policy,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.

Since 2013, China’s export juggernaut expanded dramatically even as the yuan weakened against the dollar. The trade surplus ballooned from roughly $260 billion in 2013 to nearly $1.2 trillion last year. Over that period, the yuan fell from around 6 per dollar to beyond 7 at various points. Beijing largely tolerated — and at times encouraged — weakness when the economy was under strain, including the 2015 devaluation and the 2018–20 trade war with the U.S. Pressure resumed from 2022 through early 2025 as China’s interest rates dipped below U.S. levels and the property slump deepened.

By contrast, when the yuan rose sharply between 2020 and late 2021, the PBOC pushed back with verbal guidance, adjusted reserve requirements, and lowered the cost of forward FX purchases. This time, even as the yuan strengthens, exports hit another record in April, with nearly half of the growth coming from semiconductors and computers. Traditional categories like clothing and furniture were flat or shrinking.

The economy has faltered after a strong first quarter, yet the PBOC has kept its daily fixing near the strongest in three years. Exporters are also converting more dollar earnings into yuan, betting the renminbi will stay stable or rise further.

“As Chinese firms continue moving up the value chain, their competitiveness is less dependent on a weak exchange rate,” said Rajeev De Mello, portfolio manager at Gama Asset Management SA.

The PBOC didn’t immediately respond to a request for comment on its exchange-rate policy.

Bullish Calls

The trend has emboldened analysts to bet on further gains. Goldman Sachs Group Inc. estimates the yuan is more than 20% undervalued and may strengthen to around 6.5 per dollar over the coming year. Others see bigger moves: Alpine Macro Inc.’s Yan Wang says it could eventually hit about 4 over the longer term. The consensus estimate compiled by Bloomberg points to a year-end level of 6.75, while the onshore yuan currently trades at 6.78. UBS Group AG’s top trade for 2026 was going long the yuan against its trade-weighted basket — a position that has returned 4% to 5% in the last six months, according to Rohit Arora, head of Asia FX and rates strategy. The bank expects another 3% to 4% gain in coming months.

Yet policymakers are unlikely to welcome an unchecked rally. Domestic demand remains weak, the property slump continues to weigh on confidence, and external risks — including trade frictions and slowing global growth — haven’t faded. A rapidly strengthening yuan could squeeze exporter margins, especially in sectors where competition is fierce. The costs are already appearing: yuan appreciation has weighed on earnings for some listed companies, and regulators have urged firms and banks to step up hedging. The PBOC has repeatedly said it will prevent overshooting.

But a stronger yuan also serves Beijing’s interests. It helps shield the economy from imported inflation as geopolitical tensions push up energy prices. It aligns with President Xi Jinping’s ambition to make the renminbi a more “powerful” currency, encouraging its use in trade, investment, and central-bank reserves to reduce reliance on the dollar-dominated system. A firmer yuan could also ease longstanding criticism from Western governments that China keeps its exchange rate artificially weak — accusations that flared during earlier trade tensions when the currency weakened past the 7-per-dollar level.

“Appreciation signal for the yuan is a sort of olive branch for trading partners who are becoming more uncomfortable with this ‘China shock 2.0’ in advanced manufacturing,” said Homin Lee, strategist at Lombard Odier Singapore Ltd.

All these forces combined may be changing Beijing’s calculus. While policymakers may have wanted a stronger exchange rate in the past, it was difficult to achieve until domestic activity stabilized, tech exports improved, and the dollar became less attractive, said Rory Green, chief China economist at TS Lombard. “Today the politics and macro are lining up, allowing China to move towards the long-standing objective of a ‘strong currency’,” he added.

— With assistance from Li Ran and Matthew Burgess.

©2026 Bloomberg L.P.