Beijing tightens capital flow rules to curb yuan strength despite a record $105.4bn trade surplus in May.
China’s yuan remains stable as authorities combine targeted monetary easing with stricter capital controls to limit currency appreciation. The measures aim to offset upward pressure from a widening trade surplus, which hit $105.4bn in May, driven by strong export growth, particularly in AI-related products.
Inflation data underscores weak domestic demand, with May CPI at 1.2% year-on-year and core CPI easing to 1.1%. Producer prices rose to 3.9%, the highest in four years, signaling margin pressures for manufacturers. Despite this, the yuan serves as a regional anchor, supported by policy efforts to retain export proceeds offshore.
Chinese bonds have shown resilience, with 10-year government bond yields rising only 5 basis points from early-June lows. Policymakers frame China’s markets as a stable allocation destination amid global volatility, emphasizing liquidity and diversification benefits.