A surge in onshore yuan strength is hitting Chinese exporters harder than any time in the past decade. Bloomberg’s review of Q1 earnings shows almost 25% of the 5,500 listed firms flagged foreign‑exchange losses or cited currency swings as a major cost driver, double the ten‑year average. The squeeze follows years of low hedge ratios and a trade‑boom buildup of dollar holdings.

Companies from traditional manufacturers to EV giant BYD are seeing margins compress as overseas revenue converts into fewer yuan. Xuzhou Construction Machinery reported a 747% year‑on‑year jump in financial expenses tied to FX, while BYD logged about 2.1 billion yuan ($309 million) in currency charges. Goldman Sachs and JPMorgan expect further yuan gains, pressuring the People’s Bank of China to curb appreciation.

With onshore yuan up roughly 6% against the dollar over the past year—the second‑best performer among Asian currencies—low corporate hedge ratios leave exporters vulnerable. Analysts warn that continued FX losses could erode profit margins and strain the PBOC’s balancing act between stabilising the currency and sustaining growth. The immediate significant risk is a sharper policy response soon to shield exporters.