China's RMB: Structural Export Drivers Outweigh Currency - Commerzbank

Commerzbank analyst Michael Pfister's latest research indicates that a weak RMB exchange rate cannot explain China's rising share of export markets. By analyzing bilateral real exchange rates with major trading partners, he found no systematic correlation between RMB movements and market share gains, a conclusion that also applies to advanced manufacturing sectors such as electric vehicles.

**Export advantages do not stem from exchange rates**

Market views often suggest that RMB weakness is key to China's export competitiveness. However, Pfister's research challenges this notion. Data shows that despite the RMB's previous strength against the USD—with USD/CNH at 6.71917 at the time of writing—China's global export market share has continued to expand. This indicates that China's export competitiveness derives more from structural factors such as industrial upgrading and supply chain efficiency, rather than simple exchange rate drivers.

**RMB recent trends influenced by multiple factors**

Year-to-date, the RMB has recorded gains against the USD, yet the domestic economy still faces structural headwinds including overcapacity and a sluggish property market. Meanwhile, strong export performance continues to provide fundamental support for the RMB. The currency has also strengthened notably against the euro recently, with cumulative gains exceeding 2% in February, partially alleviating external criticism regarding China's use of exchange rates for trade advantages. As German Chancellor Merz visits China, these exchange rate movements may help create a more favorable atmosphere for trade negotiations.

**Structural factors are the key drivers**

Analysts argue that attributing China's export success simply to exchange rates overlooks deeper structural transformations. China's growing global market share in sectors such as electric vehicles and renewable energy stems more from technological iteration, scale effects, and a complete domestic supply chain. TD Securities strategists have also noted that moderate RMB appreciation could ease trading partners' concerns about China's exchange rate policy, but the core driver of China's export competitiveness remains industrial strength itself.