Rise of the Renminbi

• James Syme
  Senior Fund Manager der Global Emerging Markets Opportunities Strategy
  J O Hambro

China’s economy presents a compelling contradiction: while traditional engines like rail and real estate falter, market performance remains resilient. This reflects a broader transformation as global investors seek diversification from the US dollar amid rising geopolitical tensions, reinforcing the renminbi’s growing influence in international trade.

The relationship between economic growth and equity market performance is not a simple one. Sometimes, strong growth goes with weak market returns and vice versa. In 2025, China has proven an interesting example of this. The economy is not in crisis, but growth is weak – rail freight volume growth in the year to August was negative, and property sales were -7.0%. Despite this, returns have been strong, with MSCI China up 43.1% in USD.

There are several drivers of this, including the ongoing success of China’s heavyweight technology companies in attracting investors. In addition, China has emerged as the main beneficiary of global investors and governments seeking to diversify their exposure to the US dollar.

Stock of RMB-denominated loans has doubled

On the trade side, geopolitical friction with the United States and expanded use of financial sanctions have encouraged many economies to expand the use of the renminbi (RMB). The share of China’s trade invoiced in its own currency has more than doubled since 2019, and over half of cross-border receipts are now settled in RMB, up from less than 1% in 2010. Belt and Road partners in Africa and Asia are increasingly using RMB for trade and investment financing. At the same time, swap lines extended by the People’s Bank of China to over thirty central banks around the world now provides a liquidity safety net that rivals the IMF in scale.

Borrowing trends show a similar evolution. Since Western sanctions on Russia in 2022, Chinese banks have shifted most of their overseas lending from dollars into RMB, tripling the outstanding stock of RMB-denominated loans. Sovereign issuance has followed: Hungary, Russia and others have issued RMB-denominated onshore “panda” bonds, while “dim sum” RMB bond issuance in Hong Kong has surpassed its previous peaks. This is creating a deeper pool of offshore RMB assets for investors, who are attracted by record-low funding costs and a desire to diversify away from dollar assets.

Hong Kong stock market rises 150 % in the third quarter

Hong Kong sits at the centre of this transition. Some three-quarters of offshore RMB trading is conducted there. The Hong Kong stock exchange has surged back to the top of global equity IPO rankings, with more than 200 companies in the listing pipeline. Capital flows from the mainland through the Stock Connect scheme are driving record trading volumes, with the total value traded through the Hong Kong exchange in the third quarter of 2025 up 150% on a year earlier.

The result is that diversification away from the dollar does not create global financial fragmentation but rather channels more activity into China’s orbit—anchored by the RMB and mediated through Hong Kong. Accordingly, we remain defensively positioned regarding China’s economy in the portfolio but hold exposure to Chinese technology companies and to the Hong Kong capital markets industry.