JPMorgan Asset Management: RMB Could Appreciate Over 10% in the Long Term
nashnova research
JPMorgan Asset Management's Asia fixed-income CIO Julio Callegari says he is buying the renminbi, projecting at least a 10% gain in real effective exchange rate terms — his core thesis is that RMB internationalization is now irreversible, meaning currency appreciation alone can close the yield gap even with China's rates near historic lows.
The yuan is up nearly 5% this year — why can it keep climbing?
Offshore RMB has gained nearly 5% against the dollar this year, reaching its highest since 2022, driven by export resilience funneling FX inflows and Beijing's push to expand the yuan's global footprint.
This means → the rally is not speculative. It rests on trade surpluses and policy intent — both structural, both persistent.
What makes this counterintuitive: the move happened while China's inflation stayed low, growth softened, and rates fell. The 10-year yield gap between U.S. and Chinese government bonds has widened to a record — classically, that should weigh on the yuan, not lift it.
Yields are only 2% — why bother buying?
China's offshore bond yields sit around 2%–2.5% — unimpressive on their own. Callegari's math: interest income + currency appreciation = total return that can beat dollar bonds.
In plain terms = the coupon is thin, but if the yuan itself is rising, the FX gain when you convert back to dollars pulls your total return above what a U.S. bond would pay — with diversification on top.
JPMorgan Asset Management currently favors RMB-denominated credit — corporate bonds carrying a yield premium over sovereigns. On the government-bond side, the firm holds only a small position in 30-year maturities.
Where does the "10% long-term appreciation" figure come from?
Callegari's metric is the real effective exchange rate (REER) — a measure of a currency's strength against a trade-weighted basket, adjusted for inflation.
This means → he is not watching USD/CNY alone. He is assessing the yuan's overall purchasing power in global trade. A 10% gap signals a judgment that the currency is systematically undervalued today.
In July he trimmed his long-yuan position and rotated into higher-yielding currencies, but even then projected the yuan could reach 6.5 by year-end. Last Friday it stood at roughly 6.66 — still room to run.
How far along is RMB internationalization?
Callegari describes the current phase as "steady, slow, but relentless". Specific moves include: deepening yuan liquidity, launching new instruments such as 5-year futures, and encouraging countries like Kazakhstan to issue more RMB bonds.
Authorities are also widening channels for onshore capital to flow into offshore markets. This reflects a broader ambition — Beijing wants the yuan not just *used* in trade, but *held* in capital markets.
His direct quote: "There is no turning back on this road. They are not going to say, 'The market is hard right now, let's stop.'" This means → policy continuity itself is JPMorgan Asset Management's core bull case — not a bet on short-term FX swings, but a wager on an irreversible structural trend.
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