RMB Strikes Back: Stablecoins Shifting from Shadow Dollars to Risk Assets
By Liam, Deep Wave TechFlow
Original title: The RMB fought back strongly, and stablecoins became “risky assets”
Over the past six months, the RMB has quietly completed a “counterattack.”
The offshore renminbi (CNH) rose all the way from a high of 7.4 in April to 7.06, a record high in a year. Against the backdrop of widespread global currency fluctuations, the renminbi became one of the strongest performing currencies in the Asian market.
Some people are happy and others are sad. Bears who once believed that RMB would break 7.3 were forced to close their positions and held US dollars for a long time, including investors who held shadow US dollars in USDT passively “lost” (denominated in RMB).
Why is the RMB strengthening at this point in time? Can it last?
Bought at the market
In the past, when talking about RMB appreciation, people commonly used the expression “Yang Ma took action,” but this round of RMB appreciation is different from the past, which is more policy-driven, but the result of natural market choices.
Why do you say that?
Because judging from the data, changes in the closing price are a major contributor to the increase in the central price of RMB.
Here's a quick review of science. There are two key prices for the daily RMB exchange rate:
Closing price: the final price caused by actual buy-ups and downs in the market
Middle price: The “reference price” announced by the central bank the next morning to guide the day's transactions
If this round of RMB appreciation is mainly supported by policy, then you will see that the median price was adjusted very strongly ahead of time, but the closing price is still weakening, which indicates that the market is not buying.
However, this time it was the complete opposite. The closing price itself rose first. The median price only “followed the trend” of the closing price after the increase, which indicates that market capital is actually buying RMB.
The biggest factor driving the appreciation of the RMB comes from outside. The constant decline in the US dollar has caused the RMB to passively appreciate.
Since this year, the US dollar index has fallen by nearly 10% cumulatively.
On the one hand, US employment and retail data continued to weaken; on the other hand, expectations of interest rate cuts in the US dollar continued to strengthen, triggering the concentration and liquidation of arbitrage funds.
The “passive weakening” of the US dollar has led to a general rebound in emerging market currencies around the world. Among them, the RMB performed the brightest.
As the Federal Reserve's interest rate cuts continue to deepen, there is still room for further appreciation of the RMB.
If the above is the “passive appreciation” of RMB, then changes in A-shares provide a second logical chain of “active appreciation.”
Since August of this year, A-shares have strengthened markedly, and the Shanghai Stock Exchange has broken through 4,000 points, reaching a new high of nearly ten years. In particular, technology stocks represented by chips and CPO have continued to rise amazingly.
The attractiveness of Chinese assets has risen markedly, and foreign risk appetite is returning. As Chinese assets become more attractive to global capital, the RMB will naturally appreciate more easily.
When the US dollar weakens and the RMB rises, the recovery in settlement and hedging intentions will also boost RMB demand.
Since this year, real demand for RMB has risen rapidly in foreign trade markets.
The net trade settlement exchange rate rose all the way from 23.9% at the beginning of the year to 54.8% in July, and the hedging rate (forward settlement amount/foreign currency revenue) rose to 10%, a new high in nearly a year.
What does this mean? Companies are willing to exchange US dollars for RMB, and companies are willing to lock in the future RMB exchange rate and be bullish on future trends.
In summary, the strengthening of the RMB in this round is the result of a “triple synergy”:
The US dollar entered a downward cycle, and the renminbi passively rose.
Chinese assets have entered a “valuation repair cycle,” and the RMB continues to rise from “active appreciation.”
At the entity level, there is a strong demand for corporate settlement.
These three forces reinforce each other, forming a closed loop of RMB appreciation.
Big advantage A
In the short term, the appreciation of the RMB will put pressure on exports, but it will benefit the stock market in the long run.
In the past few years, the expected devaluation of the RMB has been a “hidden cost” of suppressing overseas capital.
Now, that cost is disappearing. In particular, against the backdrop of US dollar interest rate cuts, large amounts of capital have begun to flow globally to find better investment opportunities.
According to data recently released by the State Administration of Foreign Exchange, net purchases of domestic stocks and funds by foreign investors in the first half of 2025 were US$10.1 billion, reversing the net reduction trend of the past two years.
In particular, weighted assets such as dividend state-owned enterprises, telecommunications, electricity, utilities, and AI+ semiconductor segments leaders will benefit first.
According to a Goldman Sachs report, Chinese stocks tend to perform well when the currency rises, and stock returns show a positive correlation and beta coefficient with the RMB exchange rate (under bilateral and basket conditions).
Specifically, since 2012, the average foreign/stock correlation and beta coefficient have been 35% and 1.9, respectively, indicating that stocks traded positively 66% of the time when the RMB strengthened.
RMB appreciation may benefit Chinese equities through accounting, fundamentals, risk premiums, and portfolio flow channels. Goldman Sachs estimates that under all other conditions being equal, every 1% appreciation of the RMB against the US dollar can push the Chinese stock market up 3%, including exchange gains.
There is a risk of holding U
USDT has long been the “standard currency” for Chinese retail investors to interact with the on-chain world, and it is also a long-standing shadow dollar, but the current round of RMB appreciation compounded policy trends, making holding stablecoins also at risk.
The long-term appreciation of the RMB means that holding USDT for a long time is equivalent to bearing the loss of the depreciation of the US dollar over a long period of time.
Second, recently the central bank and 13 other departments joined forces to crack down on virtual currency transactions and officially included stablecoins in the scope of virtual currency supervision, including key monitoring of financial and foreign exchange risks. Virtual currency exchange is a key direction of future crackdown. In other words, USDT has been included in the “foreign exchange management framework.”
This will lead to an increase in the cost and risk of USDT exchanging RMB off the market, and the “RMB liquidity” of USDT will decrease. Therefore, the USDT exchange rate against RMB has recently fallen below 7.
Under the crypto bear market, investors don't want to be directly exposed to volatile crypto assets, but they also want to avoid USDT regulation and exchange rate risks, so they are moving to a new field. Using stablecoins to invest in non-cryptographic assets, such as on-chain US stocks and on-chain gold, can still hedge against the dollar's decline cycle, and it is more convenient.
Large numbers of investors are being forced to transition from “stablecoin savings” to “on-chain dollar asset savings.”
This will have a profound impact on the crypto market.
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