Economists at Société Générale do not expect disorderly yuan depreciation. They forecast USD/CNY at 6.80 by the third quarter of 2022.

CNY could recover in the immediate near-term

“2022 is a politically important year, with the Communist Party congress set to take place in 4Q, which means that the authorities will try to prevent disorderly price action in FX and rates. Therefore, we do not expect substantial depreciation from here.”

“We think that the CNY could recover in the immediate near term, but we see more depreciation amid persistent USD strength over the next six months.”

“We revise up our forecasts for USD/CNY to 6.6 in 2Q, 6.8 in 3Q and 6.6 in 4Q from 6.45, 6.5 and 6.5 respectively.”