Subtitle: New regulation to take effect in 2026, while the Yuan strengthens and monetary policy holds steady.
Date: December 22, 2025
BEIJING – Chinese authorities have introduced a significant regulation to protect cash payments, underscoring a commitment to inclusive financial services. Concurrently, the Chinese Yuan shows robust performance against the US Dollar this year, as monetary policy remains stable amidst broader economic adjustments.
Cash Acceptance Mandate
On Friday, December 19, the People's Bank of China (PBOC), the National Development and Reform Commission, and the National Financial Regulatory Administration jointly released the Regulation on Renminbi Cash Acceptance and Services. The rule explicitly prohibits all businesses and individuals from refusing cash payments without legitimate cause, unless specific laws or regulations mandate non-cash methods. It also bans discriminatory practices against cash transactions.
The regulation, set to take effect on February 1, 2026, aims to consolidate recent efforts against cash refusal. According to state media Xinhua, the move seeks to foster a complementary payment ecosystem where cash and digital payments coexist, enhancing convenience and accessibility for all, particularly vulnerable groups in the digital economy.
Yuan's Strong Annual Performance
In currency markets, the Renminbi has demonstrated notable strength. Last Friday, it closed at its weekly high of 7.04 against the US Dollar. For December, it has appreciated approximately 0.5%, bringing its year-to-date gain to 3.7%. This positions the Yuan for its strongest annual performance since 2020, with analysts noting potential to test the 6.995 level seen in September last year.
Factors behind this short-term strength include a relatively dovish stance from the US Federal Reserve and seasonal demand from Chinese exporters converting foreign currency before the Lunar New Year. Market observers also note that the PBOC has recently set stronger daily midpoint fixings, signaling tolerance for a firmer Yuan.
Monetary Policy: Steady for Now, Easing Expected
This week, market focus turns to the PBOC's Loan Prime Rate (LPR) decision. A Reuters survey of 25 economists unanimously expects China to hold its benchmark lending rates steady for the seventh consecutive month in December. The one-year LPR is anticipated to remain at 3.0%, and the five-year rate at 3.5%, aligning with the central bank's decision earlier this month to keep its key short-term policy rate unchanged.
This consensus comes amid signs of economic moderation. Data for November showed a slowdown in industrial output and retail sales growth, impacted by persistent challenges in the property sector. Despite a record trade surplus exceeding $1 trillion in the first eleven months of 2025, exporters face headwinds heading into 2026 amid escalating trade tensions.
Economists suggest policymakers are not in a rush to cut rates, as the world's second-largest economy is still on track to meet its around 5% growth target for 2025. However, a shift toward policy easing is widely anticipated in the new year. Several major financial institutions forecast that China could restart monetary loosening as early as January 2026, with expectations of a potential policy rate cut of 20 basis points to support growth.
This report synthesizes official announcements and market analysis, reflecting current policy directions and economic indicators.
