China: Managed Yuan backed by record surplus – Commerzbank

Commerzbank’s Volkmar Baur notes that China’s Q4 2025 current account surplus hit a record USD 242 billion, or 4.9% of GDP, reinforcing the view that the Yuan remains tightly managed. Strong foreign direct investment and likely official purchases of foreign bonds suggest authorities are actively steering capital flows while awaiting more detailed portfolio data.

Record surplus and capital flow patterns

"On Friday, however, the balance of payments data for the fourth quarter of 2025 was released, and it seems to confirm our assumption that the currency continues to be very tightly managed."

"In absolute terms, China's current account surplus reached a new all-time high of USD 242 billion in the fourth quarter. However, this should come as no surprise given the already known export records."

"It is also interesting to note that foreign direct investment in China rose significantly again to USD 38.8 billion, reaching its highest level since the beginning of 2022."

"As only preliminary figures were presented on Friday, the figures for portfolio investments are still pending, but the positive development of the stock markets in China in the fourth quarter does not suggest that foreign investors have withdrawn capital from the country on a large scale."

"As we have often described, we suspect that the Chinese banking sector is intervening in the currency market and buying foreign bonds."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)