Chinese Yuan: Gradual appreciation view – MUFG

MUFG analysts Lin Li and Khang Sek Lee note that July data point to weaker Chinese growth and a widening divergence between the "new" and "traditional" economy. Despite short-term production disruptions from Middle East risks and extreme weather, they highlight persistently weak demand and the need for more policy stimulus. MUFG maintains its forecast for USD/CNY to reach 6.65 by end-2026.

MUFG keeps 2026 Yuan forecast

"July data indicates a slowdown in aggregate economic momentum, with growth decline seen in IP, retail sales, FAI and main property activity indicators."

"While factors, like the renewed risk of conflict in the Middle East, and natural disasters such as typhoons, heavy rainfall, and extreme heat, exerted some short-term negative pressure on the productions of certain sectors, overall demand remained weak, necessitating further policy stimulus."

"Government may accelerate the pace of project pipeline development and the disbursement of funds. We expect infrastructure investment to pick up from September onwards."

"We maintain the view of USD/CNY to reach 6.65 by the end of 2026."

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