Exports Support Yuan... China Curbs Overcapacity in Sectors

Strong Chinese export performance bolstered gains in the yuan, which hit its highest level in more than four years, as authorities continued measures to curb overcapacity in certain sectors, amid a decline in fuel oil imports driven by persistent pressures from weak domestic demand.

The yuan rose to 6.6789 against the dollar in morning trading, marking its strongest level since June 28, 2022, supported by the central bank’s guidance toward a stronger currency and increased corporate demand to settle export proceeds in local currency. This followed the Chinese economy’s 4.5 percent growth in the final quarter, recovering from its lowest level in three years, aided by exports and industrial production despite sluggish domestic consumption. The People’s Bank of China kept its benchmark lending rates unchanged for the 17th consecutive month in October, in line with market expectations.

Analysts at CCXI (China Chengxin International Credit Rating) said robust trade performance was the most direct factor supporting the yuan’s recent rise, noting an acceleration in corporate foreign exchange settlements as the Chinese currency continued its upward trend. They forecast a gradual and moderate appreciation for the remainder of 2026, with the currency trading in a range of 6.60 to 6.70 yuan per dollar by year-end.

Conversely, customs data showed a rebound in China’s fuel oil exports, primarily used for ship bunkering, in September after a sharp drop in August. Exports reached 2.59 million tons, equivalent to approximately 549,000 barrels per day, marking a three-month high, with a monthly increase of 115 percent and a year-on-year rise of 16 percent. Fuel oil market traders attributed this rebound to the completion of delayed deliveries from August, which had been affected by typhoons. Exports are expected to stabilize in the final quarter following the government’s issuance of a new batch of low-sulfur marine fuel oil export quotas.

Meanwhile, China’s fuel oil imports fell 12 percent month-on-month to 1.13 million tons in September, recording a year-on-year decline of 44 percent. Imports are typically used by refineries and in marine fuel blending operations, with monthly volumes during the third quarter remaining within a range of 1.1 to 1.3 million tons.

In the agricultural sector, the number of breeding pigs in China fell by 10.7 percent over three months to 36.02 million head by the end of September, according to data from the National Bureau of Statistics, reflecting authorities’ intensified efforts to curb overproduction.