USD/CNH dips below 7.0700 as China’s domestic demand remains subdued. Recent trade data for China in November shows a record trade surplus of $1182bn in the past year, contrasting with a narrower five-year low surplus with the US of $435bn.
China’s November exports surprised by increasing 5.9% year-on-year, surpassing the expected 4.0%, after a 1.1% decline in October. Meanwhile, imports rose only 1.9% year-on-year, failing to meet the forecasted 3.0%, reflecting ongoing weak domestic demand.
Central Economic Work Conference
The Central Economic Work Conference is set to begin, during which GDP targets and stimulus plans for 2026 will be discussed. Prior to this meeting, the Politburo reaffirmed intentions to prioritise domestic demand for growth, advocate a proactive fiscal policy, and maintain a moderately loose monetary strategy.
A stronger Chinese currency could support a shift towards consumer spending by making imports cheaper, increasing disposable income. With a still undervalued yuan, this currency appreciation might have minimal impact on the manufacturing sector. The USD/CNH trend remains downward.
With USD/CNH trading below 7.0700, the main story is China’s weak domestic demand. The latest trade data from November 2025 showed that while exports are recovering, import growth was much weaker than expected. This points to sluggish spending inside the country.
We’ve seen this weakness confirmed by other recent data points. November’s Consumer Price Index (CPI) was just 0.5%, showing very little inflationary pressure. Retail sales also disappointed, growing only 2.8%, which supports the idea that people inside China are not spending freely.
Planning for 2026 Stimulus
The upcoming Central Economic Work Conference is now the key event everyone is watching for clues about 2026. Remember, we’ve already seen the People’s Bank of China cut its key lending rates twice this year in an attempt to get things moving. This conference will show if they plan to double down with more fiscal spending to boost domestic demand as signaled.
Given this outlook, we believe positioning for a continued fall in USD/CNH makes sense as a stronger currency would make imports cheaper and help consumers. One way to approach this is by looking at put options on the currency pair. This strategy allows us to benefit from a stronger yuan while clearly defining our maximum risk.
We are focusing on contracts expiring in late January or February 2026. This timeframe should be sufficient to capture the market’s reaction to the stimulus plans announced at the conference. The goal is to be in a position to take advantage of the downward trend that we expect to continue into the new year.
