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The CNY strengthened against the USD by 6.32% in 2020, with an intra-day high of 6.5153 in December. 

As China is the only major economy not to have recorded negative GDP on a calendar year basis in 2020 and, under more favourable global trade conditions under President-elect Biden, the Chinese economy is set to rebound robustly in 2021 fuelling capital inflows and CNY appreciation, per MUFG Bank.

Key quotes

“First, on the COVID-19 vaccination front, China’s State Council-the chief administrative authority-announced the vaccination is fully covered by the government’s medical insurance and showed it has begun in Beijing and Shang Dong. Second, on the US and China trade talk front, China’s foreign minister on prime time national TV signalled to President-elect Biden that China was ready for negotiations, which strengthened market’s appetite for risk. Third, the EU finally agreed to a cooperative investment program with China in principle; the countries will have to work out the finer details of the agreement. The progress strengthened the ‘Silk Road’ and CNY internationalization theme. Overall, these three factors are expected to support the CNY in January, and potentially further ahead.”

“The CNY spot level may get another chance to rally just before China releases the 4th-quarter GDP on January 18. The consensus forecast is for 2020’s real GPD growth to come in between 1.8% and 2.0% YoY; thus, the 4th-quarter GDP growth rate must have been between 5.9% and 6.7%.”

“On January 20, Joe Biden will swear in as the 46th president of the United States; we expect an old-school style presidency. We now have a markedly reduced chance of the destruction of the established order which we saw under President Trump. The move back towards global institutions must be positive for the global trading system. We expect Biden will opt for a strategic review of the relationship between the US and China, engaging dialogues. This should help reduce headline volatility and fears of de-globalisation; thus providing a favourable background for the CNY.”