Why the Chinese Yuan is Expected to Rise Against the Indian Rupee
Last year, the Chinese yuan surged nearly 10% against the Indian rupee, marking its strongest performance in 12 years. Analysts believe this rally could continue. This shift may actually help India’s trade competitiveness, as both nations take different approaches to managing their currencies.
Analyst Predictions for the Yuan-Rupee Exchange Rate
Several major financial institutions expect the rupee to weaken further against the yuan:
- ANZ Bank: Predicts the rupee will drop to 13.58 per yuan by the end of the year.
- Maybank: Expects the rate to move toward 13.30 by December.
- Emkay Global Financial Services: Forecasts the rate could hit 13.30 within the next three to six months.
On Friday morning, the pair was trading at 13.12.
Why the Exchange Rate Matters for India
The value of the yuan is critical because China is India’s largest source of imports. As the yuan strengthens, the cost of Chinese goods increases for Indian importers.
However, a stronger yuan could be a silver lining for Indian exporters. It makes Indian products more competitive globally, which is vital since India’s trade deficit with China reached a record $116 billion in 2025.
Differing Economic Trends
The two countries are seeing very different economic patterns:
- Inflation Gap: India’s retail inflation is rising, while China has faced periods of falling consumer prices (deflation).
- Currency Policy: China’s central bank seems more comfortable with a stronger currency. In contrast, India may need a weaker rupee to stay competitive against other Asian economies with lower inflation.
Factors Driving the Yuan’s Strength
Last year, the yuan benefited from a surge in investment into China and a weaker US dollar. Meanwhile, the rupee hit several record lows against the dollar due to investors moving money out of India. While a recent trade deal with the US helped the rupee recover some ground, experts see limited room for further gains.
Goldman Sachs suggests that any new investments coming into India will likely be used by the Reserve Bank of India (RBI) to build up its foreign exchange reserves rather than significantly boosting the rupee’s value.
Rebuilding Economic Ties
This currency shift comes as India and China work to rebuild economic relations following the 2020 border tensions. Strategists at DBS Group believe a stronger yuan could encourage more Chinese investment into India. At the same time, the weaker rupee positions Indian firms to export more effectively to China.
The Bottom Line on Competitiveness
According to experts at Barclays, changes in the yuan’s value are more impactful for India than the other way around. A weaker rupee gives India a clear manufacturing advantage. As India and China increasingly compete in the same export markets, keeping the currency competitive will be essential for India’s economic growth.
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