Official data from the State Administration of Foreign Exchange (SAFE) shows that the bank client FX settlement surplus stood at $25.1826 billion in July 2026, marking the lowest level since December 2025. At the same time, the renminbi's appreciation trend continues unabated, with both onshore and offshore RMB exchange rates briefly breaking through the 6.74 threshold against the US dollar on the afternoon of August 17.
As of 9:33 AM on August 18, the onshore RMB exchange rate was quoted at 6.7423, while the offshore rate stood at 6.7439. Looking at the longer timeframe, SAFE data reveals that the bank client FX settlement surplus in December 2025 reached $99.93398 billion, a month-on-month surge of more than 508%. In January 2026, while the surplus eased slightly, it remained elevated at $88.75594 billion. Since then, the monthly surplus has followed a fluctuating downward trajectory, with the cumulative decline exceeding 74% between December 2025 and July 2026.
On the RMB front, Wind data indicates that between January and July 2026, the onshore RMB appreciated over 3.3% against the US dollar, while the offshore RMB gained more than 3.2%. Yang Chao, chief strategy analyst at China Galaxy Securities, notes that cross-border capital flows in the offshore market and foreign investors' transactions in RMB assets are not fully captured in the client FX settlement data. Additionally, with market appreciation expectations already established, the potential supply from existing foreign currency deposits does not necessarily require consistently high monthly FX settlement surpluses to support a stronger exchange rate.
Notably, despite the fluctuating decline in the FX settlement surplus after 2026, SAFE data shows that the cumulative bank client FX settlement surplus from January to July 2026 exceeded $345.7 billion, approaching 1.5 times the total surplus recorded for the entire year of 2025. A July report by the RMB exchange rate trading team at the Industrial and Commercial Bank of China's financial markets department attributes this to the combined driving forces of the "flow inventory" and "stock inventory."
On the flow side, the trading team believes that AI and emerging market demand supported China's export resilience in the first half of 2026, effectively boosting supply in the domestic FX market and providing solid support for the RMB exchange rate. The General Administration of Customs stated on July 14, 2026, that global merchandise trade growth this year has been concentrated primarily in AI-related sectors. Expanding global demand for computing power, data centers, and terminal equipment has fueled China's related product exports. In the first half of 2026, exports of electronic components and computer parts both grew by double digits, collectively contributing 6.9 percentage points to overall export growth. Additionally, shipments of intelligent bionic robots deeply integrated with AI technology exceeded 10,000 units, reaching more than 90 countries and regions worldwide.
On the stock side, the trading team points out that from 2023 to 2025, a significant number of export enterprises chose to hold US dollars, with market estimates suggesting unsettled FX funds ranging from $500 billion to $800 billion. When the RMB's appreciation exceeds the interest rate differential from holding dollars, corporate expectations shift from "waiting for a pullback" to "locking in gains to avoid further losses," triggering a non-linear release of FX settlement demand.
A report from the National Institution for Finance and Development in mid-August 2026 indicates that structural changes in China's balance of payments may limit the scope for further RMB appreciation. On one hand, the current account surplus remains at a relatively high level, providing appreciation support for the RMB. On the other hand, the sustained deficit in the non-reserve financial account is expected to constrain RMB appreciation. The China-US interest rate differential remains elevated, with Wind data showing the 10-year US Treasury yield at 4.72% and the 10-year Chinese government bond yield at 1.6902% as of August 17, leaving a spread of approximately 303 basis points.
In response, the National Institution for Finance and Development report states that lower RMB financing costs are driving growth in non-resident RMB financing demand. The rapid expansion of panda bonds, dim sum bonds, and offshore RMB loan markets may lead to a persistently large deficit in other investment items. Looking ahead, Yang Chao believes the RMB will likely exhibit a pattern of overall strength with two-way fluctuations. Upward support remains intact, given the substantial goods trade surplus, the potential supply from previously accumulated corporate dollar deposits, and the unchanged direction of foreign investors increasing RMB asset allocations, all of which underpin the exchange rate's central tendency.
However, he adds that several constraints will temper any sustained sharp appreciation. For instance, uncertainties in the Federal Reserve's monetary policy—such as a resurgence of US inflation prompting a phased dollar rebound—could create correction pressure. Additionally, domestic enterprises' outbound investment and overseas dividend-related FX purchases will continuously consume foreign exchange, partially offsetting FX settlement forces. "We expect the RMB exchange rate against the US dollar to fluctuate within the 6.6–7.0 range in the second half of 2026. The scope for further RMB appreciation is limited, with the overall trend characterized by two-way fluctuations," the National Institution for Finance and Development projects, citing export resilience and current account surpluses as support, while financial account deficits and corporate outbound investment demand cap appreciation potential.
Comments