Goldman Sachs has projected that the yuan, currently valued at 6.78 per dollar, will appreciate by 3% to 5% annually, reaching 6.0 yuan by the end of 2028 and 5.5 yuan by the end of 2031. This would represent an overall increase of approximately 22.2% over the next five years.
This year, the yuan has risen about 4% against the dollar. Goldman Sachs attributes this trend not to a temporary phenomenon but to structural changes in the Chinese economy and aligned policy directions.
The primary basis for this assessment is Goldman Sachs' own evaluation of the yuan's exchange rate. Using its proprietary model, GSDEER, the firm estimates the fair value of various currencies based on economic fundamentals such as productivity and trade conditions. At the end of last year, Goldman Sachs estimated the fair value of the yuan to be around 5 yuan per dollar.
The second reason for Goldman Sachs' bullish outlook on the yuan is China's strong export competitiveness. The firm anticipates that Chinese exports will continue to grow by 5% to 6% annually. With sustained manufacturing competitiveness and a significant current account surplus, upward pressure on the yuan is expected in the foreign exchange market. Goldman Sachs believes that even with a stronger yuan, China's manufacturing competitiveness will remain intact. This year, while the yuan has appreciated, China's trade surplus is projected to reach a record high of $1.2 trillion.
Political considerations from the Chinese government also favor yuan appreciation. A stronger yuan could help alleviate criticisms from the U.S. and Europe that China is manipulating its currency to boost exports, potentially reducing trade tensions. Goldman Sachs predicts that Chinese authorities will opt for a 'managed appreciation' rather than a rapid increase.
From the perspective of yuan internationalization, a stronger yuan is advantageous. If expectations for long-term yuan strength develop, it could enhance the appeal of investments in China for foreign investors. Even with low interest rates in China, expectations of yuan appreciation could offset some of these concerns. However, the sluggish domestic economy and low interest rates pose risks of capital outflows, which could hinder yuan strength.
Meanwhile, on September 3, the People's Bank of China set the yuan's daily reference rate at 6.7807 per dollar, a decrease of 0.0022 yuan from the previous day, reflecting a 0.03% increase in yuan value.
* This article has been translated by AI.
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