FX.co ★ CNY Weakens on Disappointing Data, US-China Trade Tensions

The offshore yuan approached a value of 7.18 per dollar on Thursday, interrupting a two-session upward trend. This shift occurred as investors reacted to underwhelming Purchasing Managers' Index (PMI) data and the persistent US-China trade tensions. A private survey revealed that China’s composite PMI dropped to its lowest point in two and a half years as of May 2025, indicating the first contraction in private sector activity since December 2022. The decline was primarily attributed to weaknesses in the manufacturing sector, which overshadowed the continued strength in the services sector. Adding to the yuan's downward pressure was the growing uncertainty surrounding US-China relations. President Donald Trump perceives direct discussions with Chinese President Xi Jinping as crucial in preventing an escalation of the trade and technological disputes. However, President Xi remains steadfast, demanding meaningful concessions before negotiations can progress—a position that has increasingly frustrated Trump. Furthermore, tensions have heightened due to China's reluctance to ease restrictions on rare earth exports and its accusations that the US is obstructing access to advanced technologies.