Analysis of the Impact of Raised RMB Exchange Rate Expectations on Chinese Export Enterprises' Profits and A-Share Market Valuation

According to the latest market information, Morgan Stanley released a report on January 9, 2026, raising its RMB to USD exchange rate forecast from 7.05 to 6.85, which means the market expects the RMB to appreciate by approximately 2.8%[1]. This adjustment reflects the following core logics:

• Strong Export Support:
  China’s trade surplus in the first 11 months of 2025 hit a record $1.08 trillion, providing a solid foundation for the RMB[2]
• Weakening USD Trend:
  The USD Index fell by over 9% in 2025, and the Fed’s rate cut cycle has shaken the USD credit cycle[2]
• US-China Trade Detente:
  The two sides reached a consensus on tariff adjustments, reducing external uncertainties[2]
• Release of Foreign Exchange Settlement Demand:
  Enterprises’ seasonal foreign exchange settlement demand rises at the turn of the year, strengthening appreciation expectations[3]

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The impact of RMB appreciation on corporate profits is not a simple linear relationship, but rather has differentiated effects through multiple channels:

┌─────────────────────────────────────────────────────────────────────┐
│                Pathways of RMB Appreciation's Impact                │
│                     on Corporate Profits                            │
├─────────────────────────────────────────────────────────────────────┤
│                                                                     │
│  [Direct Impact Channels]                                            │
│  ├── Export Revenue Conversion: The amount of export revenue        │
│      denominated in foreign currency decreases when converted to RMB │
│  ├── Import Cost Changes: The cost of imported raw materials        │
│      denominated in RMB decreases                                   │
│  └── Foreign Exchange Gains/Losses: Enterprises holding foreign     │
│      currency assets/liabilities are impacted financially           │
│                                                                     │
│  [Indirect Impact Channels]                                          │
│  ├── Price Competitiveness: The relative price of export products   │
│      rises in the international market                              │
│  ├── Purchasing Power Enhancement: Domestic consumers' purchasing    │
│      power increases, improving domestic demand                     │
│  └── Global Resource Integration: Capabilities for overseas mergers  │
│      and acquisitions and R&D investment are enhanced                │
│                                                                     │
└─────────────────────────────────────────────────────────────────────┘

According to the latest industry research, export enterprises can be divided into four categories based on exchange rate sensitivity[4][5]:

Industry Characteristics	Degree of Impact	Core Risks
Textile and apparel, toys, low-value-added standard parts manufacturing	Highly Sensitive	Thin profit margins, heavily reliant on cost advantages
For every 1% appreciation of the exchange rate	May directly erase all net profits	Sharp decline in price competitiveness

• In the textile and apparel industry, export revenue accounts for over 40% of total revenue, and foreign exchange gains/losses have a significant impact on net profit[6]
• Small and medium-sized export enterprises in Jiangsu and Zhejiang reported that when the RMB rose from 7.325 to around 7.0, they incurred millions of RMB in foreign exchange losses[7]

Industry	Characteristics	Exchange Rate Impact Assessment
New energy vehicles, photovoltaic, high-end engineering machinery, leading consumer electronics enterprises	Leading technology, high brand recognition	Limited impact , able to pass on costs through price increases

• Overseas sales revenue is obtained through technology and brand premiums, rather than low-price competition[4]
• High gross profit margin (usually >25%), which can buffer the impact of exchange rate fluctuations
• RMB appreciation can instead enhance their global resource integration capabilities and reduce overseas M&A costs[4]

Industry	Benefit Mechanism	Degree of Benefit
Petrochemicals, steel, coal, papermaking, non-ferrous metals	Import cost of raw materials decreases	Significant benefit
Airlines and airports	Fuel costs denominated in RMB decrease	Significant benefit

• The RMB exchange rate has a significant positive correlation with foreign exchange gains/losses in industries such as petrochemicals and steel (appreciation reduces foreign exchange losses)[5]
• During three major appreciation cycles, import-oriented enterprises saw sequential reductions in foreign exchange losses, while gross profit margins and net profit margins still increased[6]

Industry	Benefit Mechanism	Representative Sub-Industries
Construction and real estate, electronics, transportation, home appliances	Cost of principal and interest repayment on foreign currency loans decreases	Consumer electronics, shipping ports, white goods, logistics, diversified finance[5]

• With the scale of USD loans unchanged, RMB appreciation means enterprises need fewer RMB to repay foreign currency liabilities
• Enterprises in the construction and real estate chain reduce financing costs through overseas financing, and exchange rate changes directly affect financial expenses[5]

According to recommendations from professional institutions, export enterprises should adopt the following risk hedging measures[3][8]:

Strategy Type	Specific Measures	Applicable Enterprises
Risk Neutrality Concept	Manage exchange rate risks with the goal of “preserving value” rather than “appreciating value”	All export enterprises
Financial Hedging	Adopt tools such as forward foreign exchange settlement, foreign exchange options, and cross-currency swaps	Medium and large-sized enterprises
Operational Adjustments	Advance/postpone foreign exchange settlement time, optimize foreign currency asset-liability structure	Enterprises with financial teams
Pricing Strategy	Add exchange rate fluctuation adjustment clauses to export contracts	Enterprises with pricing power

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RMB exchange rate changes affect A-share valuations through the following three main pathways:

┌──────────────────────────────────────────────────────────────────────┐
│               Mechanism of RMB Appreciation's Impact                 │
│                    on A-Share Valuations                             │
├──────────────────────────────────────────────────────────────────────┤
│                                                                      │
│  Path 1: Foreign Capital Inflow Effect                               │
│  RMB appreciation → Relative value of RMB assets increases → Willingness│
│  of foreign capital to allocate increases                            │
│  → Net inflow of northbound capital increases → Incremental capital  │
│  drives valuations upward                                            │
│                                                                      │
│  Path 2: Monetary Policy Space                                       │
│  RMB appreciation → Pressure on capital outflows eases → Central     │
│  bank's accommodative monetary policy space expands                  │
│  → Liquidity improves → Support for valuation expansion strengthens   │
│                                                                      │
│  Path 3: Profit Expectation Revision                                │
│  RMB appreciation → Some enterprises' profits are harmed/benefited  │
│  → Market profit expectations adjust                                 │
│  → Profit assumptions in valuation pricing models change              │
│                                                                      │
└──────────────────────────────────────────────────────────────────────┘

• In H1 2025, foreign capital net increased holdings of domestic stocks and funds by $10.1 billion, reversing the overall net reduction trend of the past two years[2]
• Global hedge funds currently have a net allocation ratio of approximately 7.6% to Chinese stocks, which is still significantly lower than the cyclical peak (11%-13%), leaving ample room for growth[9]

• Forecasts that the MSCI China Index and CSI 300 Index will rise by 20% and 12% respectively in 2026[9]
• Expects that over RMB 3 trillion in new domestic capital may flow into the stock market in 2026[9]

According to the latest industry research, under the background of RMB appreciation, valuation performance across industries shows significant differentiation[5][6]:

Allocation Direction	Benefit Logic	Representative Industries
Recommended	Import costs decrease	Petrochemicals, steel, coal, papermaking, non-ferrous metals
Recommended	Cost of USD-denominated debt decreases	Construction and real estate chain, consumer electronics, shipping ports, airlines and airports
Recommended	Domestic demand purchasing power increases	Duty-free, cross-border tourism, high-end consumption (cosmetics, jewelry)
Neutral	Export competitiveness comes under pressure	Textile and apparel, low-end manufacturing (need to select leading enterprises)
Focus	Resonance between AI and overseas expansion	Power grid equipment, energy storage, lithium batteries, photovoltaic, engineering machinery

• Data as of January 9, 2026 shows that the energy sector rose 2.81%, consumer staples rose 1.70%, and basic materials rose 1.61%, leading in gains[10]
• The technology sector fell 0.95% and healthcare fell 1.15%, showing relatively weak performance[10]

Indicator	Current Value	Position Relative to 10-Year Average	Valuation Evaluation
MSCI China Index Forward P/E	12.4x	Approximately 0.4 standard deviations above average	Slightly above the midpoint of the cycle
CSI 300 Index Forward P/E	14.5x	Approximately 1.5 standard deviations above average	Moderately above the midpoint of the cycle
Discount Relative to Developed Markets	38%	-	Still attractive
Discount Relative to Emerging Markets	11%	-	Has a certain discount

• CITIC Securities expects the Wind All-A Index to rise 5%-10% for the full year 2026[11]
• Goldman Sachs believes that upside opportunities such as AI monetization and more proactive fiscal policy have not been fully reflected in current valuations[9]

---

Institution/Analyst	Exchange Rate Forecast	Time Node	Core Logic
Morgan Stanley	6.85	Q1 2026	Strong exports, weakening USD
CICC	Moderate appreciation	Full year 2026	Continued foreign exchange settlement momentum, seasonal USD rebound
Tang Jianwei, Bank of Communications	6.8-7.15	Full year 2026	Moderate appreciation, two-way fluctuations
Li Zhan, China Merchants Fund	6.80-7.00	Full year 2026	Narrowing China-US interest rate gap, capital inflows
Yuekai Securities	Testing 6.8	Full year 2026	Weak USD, stable exports

• Significant interest rate cuts by the Fed (75-125 basis points expected in 2026)[2]
• Continued stronger-than-expected Chinese exports
• Further progress in US-China trade negotiations

• Tariff issue resurfacing around October 2026[7]
• Shock from geopolitical events
• Chinese economic recovery falls short of expectations

People’s Bank of China’s Core Position:

• Recently, the central parity rate has been consistently weaker than the spot exchange rate, acting as a “speed bump” to prevent excessive one-way appreciation[2]
• The central bank has sufficient policy tools and the ability to guide expectations, and will firmly correct one-way betting behavior[8]

---

┌──────────────────────────────────────────────────────────────────────┐
│                       2026 Investment Strategy Framework             │
├──────────────────────────────────────────────────────────────────────┤
│                                                                      │
│  [Core Philosophy]                                                   │
│  Shift from guessing the rise and fall of the exchange rate itself   │
│  → to identifying industrial value chain positions and enterprises'  │
│  core competitiveness                                               │
│                                                                      │
│  [Three Key Allocation Directions]                                   │
│  1. AI and Technology Growth: Benefiting from artificial intelligence│
│     development and policy support                                  │
│  2. Leading Overseas Expansion Enterprises: Equipment export chains  │
│     with global comparative advantages                               │
│  3. Domestic Demand Recovery: Consumption rebound driven by improved │
│     inbound travel and increased household income                    │
│                                                                      │
│  [Key Analysis Dimensions]                                           │
│  Add "exchange rate exposure analysis" to all thematic investments:  │
│  - Whether key links in the industrial chain rely on imports (negative│
│    exposure vs positive exposure)                                    │
│  - Whether there is an exchange rate risk hedging mechanism          │
│  - Pricing power and cost transmission capability                    │
│                                                                      │
└──────────────────────────────────────────────────────────────────────┘

According to Guojin Securities’ research framework, the screening criteria for stocks benefiting from RMB appreciation are as follows[6]:

Screening Dimension	Specific Indicator	Screening Logic
Cost Side (Import-Oriented)	The proportion of foreign exchange gains/losses to revenue in the past three years is higher than the market average	Foreign exchange losses decrease when the RMB appreciates
Financial Side (USD-Denominated Debt)	Foreign exchange losses decreased sequentially in at least two of the three appreciation cycles	The enterprise holds foreign currency liabilities, and appreciation reduces liability costs
Profit Side (Excluding Industry Factors)	Gross profit margin/net profit margin increased sequentially in at least two cycles	Appreciation truly brings about improved profitability

Communication equipment, environmental governance, airlines and airports, electronics, lithium batteries[6]

Risk Type	Specific Performance	Response Recommendations
Exchange Rate Fluctuation Risk	Two-way fluctuations are becoming the norm, and one-way betting is prone to losses	Adhere to the risk neutrality concept
Export Decline Risk	Excessively rapid RMB appreciation may weaken export competitiveness	Monitor changes in export data
Valuation Correction Risk	Current valuations are moderately above the midpoint of the cycle	Focus on profit-driven growth rather than valuation expansion
Policy Change Risk	Central bank intervention may change the trajectory of exchange rate movements	Track signals from changes in the central parity rate

---

1. Raised RMB exchange rate expectations reflect improved fundamentals
   : Morgan Stanley’s upward revision of the exchange rate forecast to 6.85 is essentially a comprehensive pricing of fundamental factors such as strong Chinese exports, weakening USD, and US-China trade detente[1].

2. Significant differentiation in the impact on export enterprises
   :
   • Pressure-Bearing Parties:
     Traditional low-value-added export enterprises (such as textile and apparel) face significant profit pressure
   • Benefiting Parties:
     Import-oriented industries (commodities, aviation) and industries with high USD-denominated debt (construction, electronics) benefit significantly
   • Buffering Parties:
     Enterprises with technology and brand premiums can pass on costs through price increases

3. A-share valuations are generally supported but differentiation intensifies
   :
   • Capital Liquidity:
     Expectations of foreign capital inflows are strengthened, supporting an incremental capital market rally
   • Industry Rotation:
     Commodities, industries with USD-denominated debt, and domestic consumer sectors are relatively dominant
   • Valuation Positioning:
     Current valuations are slightly above the midpoint of the cycle, and the 2026 rally may rely more on profit-driven growth[9]

4. Investment Implications
   :
   • Abandon the “bull market fantasy” driven by the single variable of exchange rate
   • Focus on enterprises with global comparative advantages and in industrial upgrading directions
   • Add “exchange rate exposure analysis” as an important dimension for investment decisions

---

[1] Sina Finance - “Morgan Stanley Raises Q1 RMB to USD Exchange Rate Forecast to 6.85” (https://finance.sina.com.cn/stock/usstock/c/2026-01-09/doc-inhfsfzt4661053.shtml)

[2] 36Kr - “RMB Breaks 7, How to Spend Most Cost-Effectively on Cross-Border Consumption” (https://m.36kr.com/p/3626326791767304)

[3] Sina Finance - “Tang Jianwei, Bank of Communications: RMB Has Bid Farewell to One-Way Depreciation Expectations” (https://cj.sina.com.cn/articles/view/1887344341/707e96d502001pjre)

[4] Huxiu - “RMB Breaks 7.0, But It’s Not a Get-Out-of-Jail-Free Card; The Logic of A-Shares Has Completely Changed” (https://m.huxiu.com/article/4822013.html)

[5] Industrial Securities Strategy - “Industrial Securities Strategy: How to Allocate Industries After RMB ‘Breaks 7’?” (https://finance.sina.com.cn/stock/stockzmt/2025-12-28/doc-inheirmt1266717.shtml)

[6] Guojin Securities Strategy Special Report - “The Market No Longer Focuses on a Single Narrative” (https://pdf.dfcfw.com/pdf/H3_AP202512291810381655_1.pdf)

[7] Guancha.cn - “Shen Guobing, Fudan University: RMB Appreciation Is Not Necessarily a Bad Thing” (https://www.guancha.cn/GuanJinRong/2026_01_05_802763.shtml)

[8] The Paper - “After the 2025 Surge, Where Will the RMB to USD Exchange Rate Go in 2026?” (https://m.thepaper.cn/newsDetail_forward_32292462)

[9] Securities Times - “Three Judgments, Three Reasons, Three Directions: Goldman Sachs Is Bullish on Chinese Stock Market Performance in 2026” (https://www.stcn.com/article/detail/3577488.html)

[10] Jinling API Data - Industry Performance Data (2026-01-09)

[11] Sina Finance - “Financial Morning Briefing: RRR Cuts and Rate Cuts Expected! Central Bank Sets 2026 Policy Tone” (https://finance.sina.com.cn/stock/z/2026-01-07/)