JP Morgan's private banking expects the US dollar to fluctuate and hit bottom in the first half of this year, with a potential rebound and strengthening in the second half

JPMorgan Private Bank's Head of Asian Macro Strategy, Tang Yuxuan, stated that China's export engine continues to break through geopolitical resistance, demonstrating strong growth momentum even as global protectionist policies spread. It is expected that by 2025, China's real export growth could reach 8%, and China's market share currently accounts for 15% of global export totals. Some economists predict that this growth momentum will continue until 2030. Notably, the share of Chinese goods in markets outside the United States has significantly increased, with exports to the U.S. currently accounting for less than 10% of total global exports.

This dominance stems from China's strong cost advantages, a large and continuously expanding STEM (Science, Technology, Engineering, and Mathematics) talent pool, and policies supporting high-growth sectors such as electric vehicles, batteries, robotics, and solar energy. Despite targeted tariffs and industrial policies from the U.S., EU, and some emerging markets, China has achieved excess returns in the fastest-growing export sectors globally, thanks to its highly integrated supply chains and forward-looking demand forecasts and investments. Even as some manufacturing shifts to ASEAN and India, these new growth centers remain highly dependent on Chinese supply for production factors and capital goods, further consolidating China's core position in global trade.

For other regions globally, China's continued strong export performance signals increasing competitive pressure, making the process of industrial diversification challenging. Developed market competitors like Japan and South Korea are gradually losing their dominant positions in key industries, with South Korea's trade surplus with China turning into a deficit and Japan's export share dropping to historical lows. Meanwhile, Southeast Asian economies and India are benefiting from the advantages of supply chain diversification, but their export growth is also accompanied by significant trade deficits with China. Efforts to replicate China's manufacturing ecosystem face numerous obstacles, as most economies lack the scale, speed, and national resource mobilization capabilities that underpin China's economic success. As China continues to move upstream in the value chain and solidify its leading position in advanced manufacturing, its dominant position in global trade is expected to persist—talk of "decoupling" may remain just that, with competitors busy adjusting to cope with this backdrop.

The increasing competitiveness of China's export sector has also triggered more trade frictions. While the U.S.-China trade dispute is driven by multiple complex factors, the anti-dumping and countervailing measures taken by the EU and emerging economies such as Turkey, Brazil, and Mexico against China are also noteworthy. Since 2024, several emerging markets in the Asia region have established various trade barriers. For example, Vietnam and South Korea have imposed anti-dumping duties on the steel industry, while India has raised special tariffs on Chinese chemicals and industrial products (including electronics). These trends are key reasons why the bank expects China's export growth to slow down by 2026, which poses constraints on maintaining high-speed growth—this has been the most important growth engine for China's economy since the pandemic.

JPMorgan Private Bank believes that the threshold for a significant appreciation of the renminbi is high, with recent strength primarily driven by seasonal factors. Although short-term momentum has pushed the USD/CNH exchange rate below the 7 mark and may continue in the short term, the bank expects the currency to maintain a stable range of fluctuations in the medium term The renminbi is a currency controlled by a low-volatility foreign exchange management framework set by the central bank. If the current policy stance remains unchanged, the exchange rate against the US dollar will be dominated by fluctuations in the dollar. The bank expects that the dollar will be in a process of fluctuating and bottoming out in the first half of 2026, with a rebound expected in the second half, which means that the renminbi is unlikely to appreciate significantly against the dollar.

As for whether the policy stance will shift to support a stronger renminbi, the bank believes it is necessary to be cautious of the potential impact on export competitiveness and ongoing deflationary pressures. Given China's low dependence on imported consumer goods, the appreciation of the renminbi has limited effects on boosting consumer purchasing power. The risk to this view lies in the possibility that if foreign exchange policy becomes a core issue in negotiations between the US and China, as well as between China and other trading partners, especially when other regions impose broader and more significant trade barriers on Chinese exports, the policy stance may be adjusted