CNY: PBoC seen resisting strong appreciation – Commerzbank

Commerzbank economists Dr. Henry Hao and Volkmar Baur say China’s industrial profits surged early in 2026, led by AI-related electronics, but this strength predates the recent energy shock. With higher Oil prices now squeezing downstream margins and ending producer-price deflation via cost-push inflation, they argue the PBoC is unlikely to allow a strong CNY appreciation that could further hurt exporters.

Energy shock complicates currency stance

"This energy shock could act as a double-edged sword."

"This results in a two-speed economy where upstream energy giants hoard profits at the expense of the broader factory floor."

"While the end of the deflationary drag removes a persistent structural headwind, the downstream margin squeeze leaves the PBoC walking a tightrope."

"This makes it even more unlikely that the PBoC will let the CNY appreciate strongly this year."

"While a stronger CNY might make imported energy a little less costly and hence deliver some respite from the cost push, it would probably hurt exporters even more as they would lose competitiveness in international markets."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)